0000836375-95-000032.txt : 19950828
0000836375-95-000032.hdr.sgml : 19950828
ACCESSION NUMBER: 0000836375-95-000032
CONFORMED SUBMISSION TYPE: N14AE24
PUBLIC DOCUMENT COUNT: 17
FILED AS OF DATE: 19950825
SROS: NONE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: FIRST UNION FUNDS/
CENTRAL INDEX KEY: 0000757440
STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000]
IRS NUMBER: 046599663
STATE OF INCORPORATION: MA
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: N14AE24
SEC ACT: 1933 Act
SEC FILE NUMBER: 033-62121
FILM NUMBER: 95567038
BUSINESS ADDRESS:
STREET 1: 99 HIGH ST
CITY: BOSTON
STATE: MA
ZIP: 02110
BUSINESS PHONE: 6173383200
MAIL ADDRESS:
STREET 1: FEDERATED INVESTORS TOWER
CITY: PITTSBURGH
STATE: PA
ZIP: 15222-3779
FORMER COMPANY:
FORMER CONFORMED NAME: FIRST UNION HIGH GRADE TAX FREE PORT
DATE OF NAME CHANGE: 19940519
FORMER COMPANY:
FORMER CONFORMED NAME: FIRST UNION FUNDS
DATE OF NAME CHANGE: 19921230
FORMER COMPANY:
FORMER CONFORMED NAME: SALEM FUNDS
DATE OF NAME CHANGE: 19920703
N14AE24
1
N-14 PROXY/PROSPECTUS/SAI
1933 Act Registration No. 33-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[ ] Pre-Effective [ ] Post-Effective
Amendment No. Amendment No.
EVERGREEN INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
Area Code and Telephone Number: (914) 694-2020
2500 WESTCHESTER AVENUE
PURCHASE, NEW YORK 10577
-------------------------------------------
(Address of Principal Executive Offices)
Joseph J. McBrien, Esq.
c/o Evergreen Asset Management Corp.
2500 WESTCHESTER AVENUE
PURCHASE, NEW YORK 10577
Copies of All Correspondence to:
John A. Dudley, Esq.
SULLIVAN & WORCESTER
1025 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036
Approximate date of proposed public offering: As soon as possible after the
effective date of this Registration Statement.
The Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f) under the Investment Company
Act of 1940 (File No. 2-94560); accordingly, no fee is payable herewith.
Registrant is filing as an exhibit to this Registration Statement a copy of an
earlier declaration under Rule 24f-2. Pursuant to Rule 429, this Registration
Statement relates to the aforementioned registration on Form N-1A. A Rule 24f-2
Notice for the Registrant's most recent fiscal year ended December 31, 1994 was
filed with the Commission on or about February 15, 1995.
It is proposed that this filing will become effective on September 25, 1995
pursuant to Rule 488 of the Securities Act of 1933.
EVERGREEN INVESTMENT TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933
Location in Prospectus/Proxy
Item of Part A of Form N-14 Statement
1. Beginning of Registration Statement Cross Reference Sheet; Cover Page
and Outside Front Cover Page
of Prospectus
2. Beginning and Outside Back Cover Page Table of Contents
of Prospectus
3. Fee Table, Synopsis and Risk Factors Cover Page; Summary; Risks
4. Information About the Transaction Summary; Reasons for the
Reorganization; Description of the
Merger; Information about the
Reorganization; Distribution of
Shares; Federal Income Tax
Consequences; Comparative
Information on Shareholders' Rights
5. Information about the Registrant Cover Page; Summary; Comparison of
Investment Objectives and Policies;
Distribution of Shares; Federal
Income Tax Consequences; Comparative
Information on Shareholders' Rights;
Additional Information
6. Information about the Company Cover Page; Summary; Comparison of
Being Acquired Investment Objective and Policies;
Distribution of Shares; Federal
Income Tax Consequences; Comparative
Information on Shareholders' Rights;
Additional Information
7. Voting Information Cover Page; Summary; Information
about the Reorganization; Voting
Information Concerning the Meeting
8. Interest of Certain Persons Financial Statements and Experts;
and Experts Legal Matters
9. Additional Information Required for Inapplicable
Reoffering by Persons Deemed to be
Underwriters
Item of Part B of Form N-14
10. Cover Page Cover Page
11. Table of Contents Omitted
12. Additional Information About the Statement of Additional Information
Registrant of the Evergreen Investment Trust -
Evergreen Treasury Money Market Fund
dated July 7, 1995
-2-
13. Additional Information about Statement of Additional Information
the Company Being Acquired of FFB Funds Trust - FFB U.S.
Government Fund, FFB Treasury Fund,
FFB 100% Treasury Fund dated June
30, 1995
14. Financial Statements Incorporated by reference; Pro Forma
Financial Statements
Item of Part C of Form N-14
15. Indemnification Incorporated by Reference to Part A
Caption - "Comparative Information
on Shareholders' Rights - Liability
and Indemnification of Trustees"
16. Exhibits Item 16. Exhibits
17. Undertakings Item 17. Undertakings
-3-
FFB FUNDS TRUST
FFB U.S. TREASURY FUND
FFB 100% TREASURY FUND AND THE
FFB U.S. GOVERNMENT FUND
237 PARK AVENUE
NEW YORK, NEW YORK 10017
September 28, 1995
Dear Shareholders:
On June 18, 1995, First Fidelity Bancorporation agreed to merge (the
"Merger") with and into a wholly-owned subsidiary of First Union Corporation.
First Fidelity Bancorporation is the parent of First Fidelity Bank, N.A. ("First
Fidelity"), the investment adviser to a group of mutual funds with assets of
$2.55 billion as of June 30, 1995. The FFB U.S. Treasury Fund, FFB 100% Treasury
Fund and the FFB U.S. Government Fund are money market funds included within the
First Fidelity family of mutual funds as series of the FFB Funds Trust.
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 the FFB Funds Trust are proposing to combine certain of the
investment companies in the First Fidelity family of mutual funds with
investment companies in the Evergreen family of mutual funds which have similar
investment objectives and policies.
The proposals contained in the accompanying Prospectus/Proxy Statement
provide following the Merger for the combination of the FFB U.S. Treasury Fund,
the FFB 100% U.S. Treasury Fund and the FFB U.S. Government Fund (the "FFB
Funds") and the Evergreen Treasury Money Market Fund (the "Evergreen Fund"). The
Evergreen Fund, a money market mutual fund advised by CMG, will be the surviving
fund. The FFB Funds and the Evergreen Fund have substantially similar investment
objectives and policies of investing in U.S. Treasury obligations and each seeks
to maintain a stable net asset value of $1.00 per share. The FFB U.S. Government
Fund may invest in obligations of the agencies and instrumentalities of the U.S.
Government, as well as obligations of the U.S. Treasury.
Under each proposed Agreement and Plan of Reorganization (the "Plan"), the
Evergreen Fund will acquire substantially all of the assets of each of the three
FFB Funds in exchange for shares of the Evergreen Fund (the "Reorganization").
As of June 30, 1995, the FFB U.S. Treasury Fund, the FFB 100% U.S. Treasury Fund
and the FFB U.S. Government Fund had net assets of approximately $1 billion,
$15.3 million and $227.6 million,
respectively, and the Evergreen Fund had approximately $1.4 billion of net
assets. If the Reorganizations had taken place as of June 30, 1995, the
Evergreen Fund's net assets would have been approximately $2.6 billion. I
believe that the combinations will achieve the goal of efficient investment
management and delivery of shareholder services.
Since the Merger will take place prior to the closing date for the
Reorganization and because the Merger by law terminates the investment advisory
contract between First Fidelity and each of the FFB Funds, the Trustees of the
FFB Funds Trust are also seeking your approval of an Interim Investment Advisory
Agreement for each FFB Fund with CMG. The Interim Investment Advisory Agreement
will have the same terms and fees as the current investment advisory agreement
between each 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.
If shareholders of the FFB Funds approve the Plan, upon consummation of the
transactions contemplated in the Plan, shareholders will receive Class A shares
of the Evergreen Fund. The proposed transactions will not result in any federal
income tax liability for you or for the FFB Funds. As a shareholder of the
Evergreen Fund you will have the ability to exchange your shares for shares of
the other funds in the Evergreen family of mutual funds comparable to your
present right to exchange among funds of the First Fidelity family of mutual
funds. Following completion of the Reorganization, your Fund will be liquidated.
The Trustees of FFB Funds Trust have called a special meeting of
shareholders of each of the FFB Funds to be held on November 13, 1995 to
consider the proposed transaction. I STRONGLY INVITE YOUR PARTICIPATION BY
ASKING YOU TO REVIEW, COMPLETE AND RETURN YOUR PROXY AS SOON AS POSSIBLE.
Detailed information about the proposed transaction is described in the
enclosed Prospectus/Proxy Statement. I thank you for your participation as a
shareholder and urge you to please exercise your right to vote by completing,
dating and signing the enclosed proxy card. A self-addressed, postage-paid
envelope has been enclosed for your convenience.
A copy of the Evergreen Fund Prospectus accompanies the Prospectus/Proxy
Statement. I urge you to read the Prospectus and retain it for future reference.
If you have any questions regarding the proposed transaction or if you
would like additional information about the Evergreen family of mutual funds,
please telephone 1-800-437-8790.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED AS SOON AS
POSSIBLE.
Sincerely,
-2-
-------------------------
Edmund A. Hajim, President
FFB Funds Trust
-3-
[SUBJECT TO COMPLETION, AUGUST 25, 1995 PRELIMINARY COPY]
FFB FUNDS TRUST
FFB U.S. TREASURY FUND
FFB 100% U.S. TREASURY FUND
FFB U.S. GOVERNMENT FUND
237 PARK AVENUE
NEW YORK, NEW YORK 10017
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 13, 1995
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of each of the FFB U.S. Treasury Fund, FFB 100% U.S. Treasury Fund,
and FFB U.S. Government Fund (each an "FFB Fund"), series of FFB Funds Trust,
will be held at the offices of FFB Funds Trust, 237 Park Avenue, New York, New
York 10017 on November 13, 1995 at 10:00 a.m. for the following purposes:
1. To consider and act upon the Agreement and Plan of Reorganization (the
"Plan") dated as of _______________, 1995, providing for the acquisition of
substantially all of the assets of the FFB Fund by the Evergreen Treasury Money
Market Fund (the "Evergreen Fund") in exchange for Class A shares of the
Evergreen Fund, and the assumption by the Evergreen Fund of certain identified
liabilities of the FFB Fund. The Plan also provides for distribution of such
shares of the Evergreen Fund to shareholders of the FFB Fund in liquidation and
subsequent termination of the FFB Fund. A vote in favor of the Plan is a vote in
favor of the liquidation and dissolution of the FFB Fund.
2. To consider and act upon the Interim Investment Advisory Agreement
between the FFB Fund and the Capital Management Group of First Union National
Bank of North Carolina.
3. To transact any other business which may properly come before the
Meeting or any adjournment or adjournments thereof.
The Trustees of FFB Funds Trust have fixed the close of business on
September , 1995 as the record date for the determination of shareholders of
each of the FFB Funds entitled to notice of and to vote at the Meeting or any
adjournment thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND IN PERSON ARE URGED WITHOUT DELAY TO SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE, SO THAT
THEIR SHARES MAY BE REPRESENTED AT THE MEETING. YOUR PROMPT ATTENTION TO THE
ENCLOSED PROXY WILL HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION.
By Order of the Board of Trustees
Joan V. Fiore
Secretary
September 28, 1995
-2-
INSTRUCTIONS FOR EXECUTING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and may help to avoid the time and expense involved in validating your vote
if you fail to sign your proxy card(s) properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in the
Registration on the proxy card(s).
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the Registration on the
proxy card(s).
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the
proxy card(s) should be indicated unless it is reflected in the form of
Registration. For example:
REGISTRATION VALID SIGNATURE
CORPORATE
ACCOUNTS
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee Jane B. Doe
u/t/d 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust. John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith, Jr. John B. Smith, Jr., Executor
-3-
PROSPECTUS/PROXY STATEMENT DATED SEPTEMBER 25, 1995
Acquisition of Assets of
FFB U.S. TREASURY FUND
FFB 100% U.S. TREASURY FUND
FFB U.S. GOVERNMENT FUND
OF
FFB FUNDS TRUST
237 Park Avenue
New York, New York 10017
By and in Exchange for Shares of
EVERGREEN TREASURY MONEY MARKET FUND
OF
EVERGREEN INVESTMENT TRUST
2500 Westchester Avenue
Purchase, New York 10577
This Prospectus/Proxy Statement is being furnished to shareholders of FFB
U.S. Treasury Fund, FFB 100% U.S. Treasury Fund, and FFB U.S. Government Fund
(individually the "FFB Fund" or collectively the "FFB Funds"), series of FFB
Funds Trust, in connection with a proposed Agreement and Plan of Reorganization
(the "Plan"), to be submitted to shareholders of each of the FFB Funds for
consideration at a Special Meeting of Shareholders to be held on November 13,
1995 at 10:00 a.m. Eastern Time, at the offices of FFB Funds Trust, 237 Park
Avenue, New York, New York 10017, and any adjournments thereof (the "Meeting").
Each Plan provides for substantially all of the assets of the FFB Fund to be
acquired by Evergreen Treasury Money Market Fund (the "Evergreen Fund"), a
series of Evergreen Investment Trust, in exchange for Class A shares of the
Evergreen Fund and the assumption by the Evergreen Fund of certain identified
liabilities of the FFB Fund (hereinafter referred to individually as the
"Reorganization" or collectively as the "Reorganizations"). Following the
Reorganizations, Class A shares of the Evergreen Fund will be distributed to
shareholders of the FFB Funds in liquidation of the FFB Funds and the FFB Funds
will be terminated. As a result of the proposed Reorganizations, shareholders of
each of the FFB Funds will receive that number of full and fractional Class A
shares of the Evergreen Fund determined by dividing the value of the assets of
each of the FFB Funds to be acquired by the ratio of the net asset value per
share of the Evergreen Fund and the particular FFB Fund. Each Reorganization is
being structured as a tax-free reorganization for federal income tax purposes.
Shareholders of the FFB Fund are also being asked to approve the
Interim Investment Advisory Agreement with the Capital Management Group of
First Union National Bank of North Carolina (the "Interim Advisory
Agreement") with the same terms and fees as the current advisory agreement
between each FFB Fund and First Fidelity Bank, N.A. The Interim Advisory
Agreement will be in effect for the period of time between the date on which the
merger of First Fidelity Bancorporation with and into a wholly-owned subsidiary
of First Union Corporation is effected (currently anticipated to be by January
1, 1996) and the date on which the Evergreen Fund and the FFB Fund are combined
together (scheduled for on or about January 19, 1996).
The FFB Funds Trust currently consists of FFB Fund and nine other series
with shares outstanding. As is the case with the FFB Fund, the shareholders of
certain of these series are being asked to approve similar Agreements and Plans
of Reorganization providing for the combination of such series with other
Evergreen Funds having similar investment objectives and policies. The FFB New
Jersey Tax-Free Income Fund and the FFB Pennsylvania Tax-Free Money Market Fund
will not be combined with any of the funds in the Evergreen family of mutual
funds and therefore shareholders of those Funds will vote on the approval of new
investment advisory agreements between the Funds and the Capital Management
Group of First Union National Bank of North Carolina and the election of new
Trustees for the FFB Funds Trust. The vote on the election of new Trustees will
take place after all the combinations of the FFB Funds and the Evergreen Funds
are effective.
Evergreen Investment Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). Evergreen Investment Trust is comprised of 17 series, one of which, the
Evergreen Fund, is a party to the Reorganizations. The Evergreen Fund is a money
market fund which seeks to achieve stability of principal and current income
consistent with stability of principal. The Evergreen Fund seeks to maintain a
stable net asset value of $1.00 per share.
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 Funds should know before voting on the Reorganizations.
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 Reorganizations,
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
Funds dated February 28, 1995 has been filed with the SEC and is incorporated by
reference in its entirety into this Prospectus/Proxy Statement. A copy of such
Statement of Additional Information is available upon request and without charge
by writing to the Evergreen Fund at 2500 Westchester Avenue, Purchase, New York
10577 or by calling toll-free 1-800-807-2940.
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,
-2-
which pertain (i) to Class Y shares and (ii) to Class A and Class B shares,
differ only insofar as they describe the separate distribution and shareholder
servicing arrangements applicable to the Classes. Shareholders of the FFB Funds
will receive, with this Prospectus/Proxy Statement, copies of the Prospectus
pertaining to the Class A shares of the Evergreen Fund that they will receive as
a result of the consummation of each 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 two Prospectuses of each of the FFB Funds (which pertain to (i)
Institutional Class shares and (ii) Service Class shares) each dated June 30,
1995 (October 7, 1994 with respect to FFB 100% U.S. Treasury Fund), insofar as
they relate to the FFB Funds only, and not to any other funds described therein,
are incorporated herein in their entirety by reference. Copies of the
Prospectuses and a Statement of Additional Information dated the same date are
available upon request without charge by writing to the FFB Fund of which you
are a shareholder at the address listed on the cover page of this
Prospectus/Proxy Statement or by calling toll-free 1-800-437-8790.
Included as Exhibit A of this Prospectus/Proxy Statement is a form 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.
AN INVESTMENT IN EVERGREEN TREASURY MONEY MARKET FUND IS NEITHER INSURED
NOR GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE
FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
-3-
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 FUNDS...........................
COMPARATIVE PERFORMANCE INFORMATION OF EACH FUND................
MANAGEMENT OF THE FUNDS.........................................
INVESTMENT ADVISERS AND ADMINISTRATORS..........................
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 AGREEMENTS........
INTRODUCTION....................................................
COMPARISON OF THE INTERIM ADVISORY AGREEMENTS
AND THE EXISTING ADVISORY AGREEMENTS.......................
INFORMATION ABOUT THE FFB FUNDS' CURRENT
AND PROPOSED INTERIM INVESTMENT ADVISERS...................
ADDITIONAL INFORMATION................................................
VOTING INFORMATION CONCERNING THE MEETING.............................
-4-
FINANCIAL STATEMENTS AND EXPERTS......................................
LEGAL MATTERS.........................................................
OTHER BUSINESS........................................................
-5-
COMPARISON OF FEES AND EXPENSES
The amounts for Class A 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, 1994. The amounts for Service Class and Institutional Class
shares of the FFB Funds set forth in the following tables and in the examples
are based on the experience of the FFB Fund Service Class and Institutional
Class shares for the fiscal year ended February 28, 1995, in each case adjusted
for voluntary expense waivers. The amounts for the Evergreen Fund Pro Forma are
based on the combined expenses expected for the twelve month period ended June
30, 1995.
The following tables show for the Evergreen Fund and the FFB Funds the
shareholder transaction expenses and annual fund operating expenses associated
with an investment in the Class A shares of the Evergreen Fund and Service Class
and Institutional Class shares of the FFB Funds, and such costs and expenses
associated with an investment in Class A shares of the Evergreen Fund assuming
consummation of the Reorganizations.
COMPARISON OF CLASS A SHARES OF THE EVERGREEN FUND WITH SERVICE CLASS
SHARES OF THE FFB FUNDS
FFB Funds EVERGREEN
SHAREHOLDER TRANSACTION EVERGREEN 100% U.S. U.S. U.S. FUND
EXPENSES FUND TREASURY TREASURY GOVERNMENT PRO-FORMA
Maximum Sales Load
Imposed on Purchases
(as a percentage of
offering price).......... None None None None None
Maximum Sales Load
Imposed on Reinvested
Dividends (as a
percentage of
offering price)....... None None None None None
Contingent Deferred Sales
Charge................ None None None None None
Exchange Fee ............. None None None None None
Redemption Fees........... None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
daily net assets)
Advisory Fees............. 0.35% 0.17%(3) 0.50%(3) 0.50%(3) 0.35%
Administrative Fees....... 0.06% 0.00% 0.00% 0.00% 0.06%
12b-1 Fees................ 0.30%(1) ---- 0.03%(4) 0.03%(4) 0.30%(1)
Other Expenses............ 0.05% 0.33% 0.28%(5) 0.30%(5) 0.03%
Annual Fund Operating
Expenses.................. 0.76%(2 0.50% 0.81%(5) 0.83%(5) 0.74%(6)(7)
-6-
(1) Evergreen Fund Class A shares can pay up to 0.75% of Class A shares' average
daily net assets as a 12b-1 fee. For at least one year, the Class A shares'
12b-1 fee will be limited to 0.30% of Class A shares' average net assets.
(2) The Evergreen Fund Class A shares Annual Fund Operating Expenses were 0.78%
for the fiscal year ended December 31, 1994. Class A shares' Annual Fund
Operating Expenses for the Evergreen Fund, absent the voluntary waiver of 0.28%
of average net assets, would have been 1.06% for the fiscal year ended December
31, 1994. The Class A shares' Annual Fund Operating Expenses for the Evergreen
Fund have been adjusted to reflect current fee arrangements.
(3) Includes Administrative Expenses of 0.15% payable to the administrator.
Certain Advisory Fees and Administrative Expenses will be waived or reimbursed
for the FFB 100% U.S. Treasury Fund's first year of operations. Absent these
waivers, Advisory Fees and Administrative Expenses would be 0.22%.
(4) Investor Class shares of the FFB U.S. Treasury Fund and FFB U.S. Government
Fund can each pay up to 0.25% of Service Class shares'average daily net assets
as a 12b-1 fee.
(5) Other Expenses include a shareholder servicing charge of 0.25%. Absent
voluntary waivers for the FFB U.S. Treasury Fund and FFB U.S. Government
Fund, shareholder servicing charges would be 0.35% for the FFB U.S. Treasury
Fund and the FFB U.S. Government Fund. Absent voluntary waivers, Other
Expenses and Annual Fund Operating Expenses would be 0.38% and 1.13%,
respectively, for the FFB U.S. Treasury Fund and 0.40% and 1.15%,
respectively, for the FFB U.S. Government Fund.
(6) The Evergreen Fund Pro Forma Operating Expenses after voluntary fee
waivers of 0.15% of average net assets would have been 0.59% for the twelve
months ended June 30, 1995.
(7) The Evergreen Fund Pro Forma Annual Fund Operating Expenses assume the
consummation of the Reorganization of the FFB 100% Treasury Money Market Fund,
FFB U.S. Government Fund and FFB U.S. Treasury Fund with the Evergreen Fund. If
one or more of these Reorganizations are not approved, the effect on the
Evergreen Fund's Pro Forma Annual Fund Operating Expenses would not be greater
than 0.02%.
COMPARISON OF CLASS A SHARES OF THE EVERGREEN FUND WITH INSTITUTIONAL
CLASS SHARES OF THE FFB FUNDS
FFB Funds EVERGREEN
SHAREHOLDER TRANSACTION EVERGREEN 100% U.S. U.S. U.S. FUND
EXPENSES FUND TREASURY TREASURY GOVERNMENT PRO-FORMA
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Maximum Sales Load
Imposed on Purchases
(as a percentage of
offering price).......... None None None None None
Maximum Sales Load
Imposed on Reinvested
Dividends (as a
percentage of offering
price)................... None None None None None
Contingent Deferred
Sales Charge............. None None None None None
Exchange Fee............... None None None None None
Redemption Fees............ None None None None None
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of
average daily net
assets)
Advisory Fees............. 0.35% 0.17%(3) 0.50%(3) 0.50%(3) 0.35%
Administrative Fees....... 0.06% 0.00% 0.00% 0.00% 0.06%
12b-1 Fees............... 0.30%(1) ---- 0.03%(4) 0.03%(4) 0.30%(1)
Other Expenses........... 0.05% 0.08% 0.08%(5) 0.12%(5) 0.03%
Annual Fund Operating
Expenses................. 0.76%(2) 0.25% 0.61%(5) 0.65%(5) 0.74%(6)(7)
(1) Evergreen Fund Class A shares can pay up to 0.75% of Class A shares' average
daily net assets as a Rule 12b-1 fee. For at least one year, the Class A shares'
12b-1 fee will be limited to 0.30% of Class A shares' average daily net assets.
(2) The Evergreen Fund Class A shares' Annual Fund Operating Expenses were 0.78%
for the fiscal year ended December 31, 1994. Class A shares' Annual Fund
Operating Expenses for the Evergreen Fund, absent the voluntary waiver of 0.28%
of average daily net assets would have been 1.06% for the fiscal year ended
December 31, 1994. Class A shares' Annual Fund Operating Expenses for the
Evergreen Fund have been adjusted to reflect current fee arrangements.
(3) Includes Administrative Expenses of 0.15% payable to the administrator.
Certain Advisory Fees and Administrative Expenses will be waived or reimbursed
for the FFB 100% U.S. Treasury Fund's first year of operations. Absent these
waivers, Advisory Fees and Administrative Expenses would be 0.22%.
(4) Institutional Class shares of the FFB U.S. Treasury Fund and FFB U.S.
Government Fund can each pay up to 0.25% of Institutional Class shares' average
daily net assets as a 12b-1 fee.
(5) Other expenses include a shareholder servicing charge of 0.05% for each
of the FFB U.S. Treasury Fund and FFB U.S. Government Fund. Absent voluntary
waivers, shareholder servicing charges would be 0.25% for the FFB U.S.
Treasury Fund and FFB U.S. Government Fund. Absent voluntary waivers, Other
Expenses and Annual Fund Operating Expenses would be 0.28% and 1.03%,
-8-
respectively, for the FFB U.S. Treasury Fund and 0.32% and 1.07%,
respectively, for the FFB U.S. Government Fund.
(6) The Evergreen Fund Pro Forma Operating Expenses after voluntary fee waivers
of 0.15% of average net assets would have been 0.59% for the twelve months ended
June 30, 1995.
(7) The Evergreen Fund Pro Forma Annual Fund Operating Expenses assume the
consummation of the Reorganization of the FFB 100% Treasury Money Market Fund,
FFB U.S. Government Fund and FFB U.S. Treasury Fund with the Evergreen Fund. If
one or more of these Reorganizations are not approved, the effect on the
Evergreen Fund's Pro Forma Annual Fund Operating Expenses would not be greater
than 0.02%.
EXAMPLES. The following tables show for each FFB Fund, and for the
Evergreen Fund, assuming consummation of the Reorganizations, examples of the
cumulative effect of shareholder transaction expenses and annual fund operating
expenses indicated above on a $1,000 investment in Class A shares of the
Evergreen Fund and Service Class and Institutional Class shares of the FFB Funds
for the periods specified, assuming (i) a 5% annual return, and (ii) redemption
at the end of such period.
EVERGREEN
EVERGREEN FFB Funds FUND
FUND U.S. 100% U.S. CLASS A
CLASS A TREASURY TREASURY GOVERNMENT SHARES
SHARES SERVICE CLASS SHARES PRO-FORMA
After 1 year.......... $8 $8 $5 $8 $8
After 3 years......... $24 $26 $16 $26 $24
After 5 years......... $42 $45 N/A $46 $41
After 10 years........ $94 $100 N/A $103 $92
EVERGREEN
EVERGREEN FFB Funds FUND
FUND U.S. 100% U.S. U.S. CLASS A
CLASS A TREASURY TREASURY GOVERNMENT SHARES
SHARES INSTITUTIONAL CLASS SHARES PRO-FORMA
After 1 year.......... $8 $6 $3 $7 $8
After 3 year.......... $24 $20 $8 $21 $24
After 5 years......... $42 $34 N/A $36 $41
After 10 years........ $94 $76 N/A $81 $92
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
A shares of the Evergreen Fund as a result of the Reorganizations would bear
directly and indirectly, as compared with the
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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.
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 PROSPECTUSES OF THE FFB FUNDS
DATED JUNE 30, 1995 AND OCTOBER 7, 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
Each Plan provides for the transfer of substantially all of the assets of
the FFB Fund in exchange for Class A shares of the Evergreen Fund and the
assumption by the Evergreen Fund of certain identified liabilities of the FFB
Fund. (The FFB Funds and the Evergreen Fund each may also be referred to in this
Prospectus/Proxy Statement as a "Fund" and together, as the "Funds"). Each Plan
also calls for the distribution of Class A shares of the Evergreen Fund to FFB
Fund's shareholders in liquidation of the FFB Fund as part of the
Reorganization. As a result of the Reorganizations, the shareholders of the FFB
Funds will become the owners of that number of full and fractional Class A
shares of the Evergreen Fund determined by dividing the value of the assets of
each of the FFB Funds to be acquired by the ratio of the net asset value per
share of the Evergreen Fund and the particular FFB Fund as of the close of
business on the date that the FFB Funds' assets are exchanged for shares of the
Evergreen Fund. See "Information About the Reorganization."
The Trustees of FFB Funds Trust, including the Trustees who are not
"interested persons," as such term is defined in the 1940 Act (the "Independent
Trustees"), have concluded that the Reorganizations would be in the best
interests of shareholders of the FFB Funds and that the interests of the
shareholders of the FFB Funds will not be economically diluted as a result of
the transactions contemplated by the Reorganizations. Accordingly, the Trustees
have submitted the Plan for the approval of FFB Funds' shareholders. THE BOARD
OF TRUSTEES OF FFB FUNDS TRUST RECOMMENDS APPROVAL BY SHAREHOLDERS OF EACH FFB
FUND OF THE PLAN EFFECTING THE REORGANIZATION.
The Trustees of Evergreen Investment Trust have also approved the Plan, and
accordingly, the Evergreen Fund's participation in the Reorganizations.
Approval of the Reorganization on the part of each FFB Fund will require
the affirmative vote of more than 50% of the outstanding voting securities of
that FFB Fund, with shares of both classes voting together as one class. See
"Voting Information Concerning the Meeting."
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Since the merger (the "Merger") of First Fidelity Bancorporation ("FFB")
with and into a wholly-owned subsidiary of First Union Corporation ("First
Union") will take place prior to the closing date for the Reorganization and
because the Merger by law terminates the investment advisory contract between
First Fidelity Bank, N.A. ("First Fidelity") and each FFB Fund, arrangements
have been made to enter into the Interim Advisory Agreement with the Capital
Management Group of First Union National Bank of North Carolina. Each Interim
Advisory Agreement will have the same terms and fees as the current investment
advisory agreement between each 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 any FFB Fund do not vote to approve the
Reorganization, the Trustees of FFB Funds Trust will consider other possible
courses of action in the best interests of shareholders. If the Merger is not
completed, the Reorganizations of the FFB Funds and the Evergreen Fund will not
be completed regardless of the vote of the FFB Funds' shareholders.
TAX CONSEQUENCES
Prior to or at the completion of the Reorganization, each 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 A 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 A 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 FUNDS
Both the Evergreen Fund and the FFB Funds have substantially similar
investment objectives. The investment objective of the Evergreen Fund is to seek
to achieve stability of principal and current income consistent with stability
of principal. The FFB Funds seek to achieve as high a level of current income as
is consistent with preserving capital and providing
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liquidity. Each Fund seeks to maintain a stable net asset value of $1.00 per
share.
The Evergreen Fund and the FFB U.S. Treasury Fund invest in short-term
direct obligations of the U.S. Treasury. The FFB 100% Treasury Fund invests
in the same securities, but, unlike the Evergreen Fund and the FFB U.S.
Treasury Fund, the FFB 100% Treasury Fund cannot invest in repurchase
agreements or when-issued securities. Neither the FFB U.S. Treasury Fund nor
the FFB U.S. Government Fund invests in when-issued securities. The FFB U.S.
Government Fund invests in short-term obligations of the U.S. Treasury and,
in addition, unlike the Evergreen Fund, invests in obligations issued or
guaranteed by agencies or instrumentalities of the U.S. Government. See
"Comparison of Investment Objectives and Policies" below.
COMPARATIVE PERFORMANCE INFORMATION OF EACH FUND
Discussions of the manner of calculation of total return and yield are
contained in the respective Prospectuses and Statements of Additional
Information of the Funds. The following table sets forth the current yield and
effective yield of the Class A Shares of the Evergreen Fund and the Service
Class and Institutional Class Shares of the FFB Funds for the 7 day period ended
June 30, 1995 and the total return of each such Class of the FFB Fund and Class
A shares of the Evergreen Fund for the one and five year periods ended June 30,
1995 and the period from inception through June 30, 1995. 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.
EFFECTIVE YIELD-
CURRENT YIELD-7 DAY 7 DAYS ENDED
ENDED 6/30/95 6/30/95
Evergreen Fund
Class A shares.................. 5.44% 5.56%
FFB Funds
U.S. Treasury
Service Class shares........ N/A N/A
Institutional Class shares.. 5.38% 5.52%
100% U.S. Treasury
Service Class shares....... N/A N/A
Institutional Class shares. 5.52% 5.67%
U.S. Government
Service Class shares....... N/A N/A
Institutional Class shares. 5.21% 5.35%
AVERAGE ANNUALIZED COMPOUNDED TOTAL RETURN*
SINCE INCEPTION
1 YEAR 5 YEAR INCEPTION DATE
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Evergreen Fund
Class A shares.............. 4.89% N/A 3.94% 3/6/91
FFB Funds
U.S. Treasury
Service Class shares.... N/A N/A N/A -----
Institutional Class shares 5.07% 9/30/86
100% U.S. Treasury
Service Class shares.... N/A N/A N/A -----
Institutional Class shares N/A N/A 3.17% 4/10/85
U.S. Government
Service Class shares.... N/A N/A N/A -----
Institutional Class shares 5.06% 7/16/86
* Reflects waiver of advisory fees and reimbursements and/or waivers of
expenses. Without such reimbursements and/or waivers, the average annual total
return during the period would have been lower.
MANAGEMENT OF THE FUNDS
The overall management of the Evergreen Investment Trust and of FFB Funds
Trust is the responsibility of, and is supervised by, their respective Board of
Trustees.
INVESTMENT ADVISERS AND ADMINISTRATORS
Evergreen Fund. The Capital Management Group ("CMG"), a division of the
First Union National Bank of North Carolina ("FUNB"), serves as investment
adviser to the Evergreen Fund. The address of FUNB is One First Union Center,
301 S. College Street, Charlotte, North Carolina 28288. FUNB is a subsidiary of
First Union, one of the ten largest banking holding companies in the United
States.
First Union is a bank holding company headquartered in Charlotte, North
Carolina, which had $83.1 billion in consolidated assets as of June 30, 1995.
First Union and its subsidiaries provide a broad range of financial services to
individuals and businesses through offices in 36 states. CMG and Evergreen Asset
Management Corp. ("Evergreen Asset"), a 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. First
Union Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a
registered broker-dealer that is principally engaged in providing retail
brokerage services consistent with its federal banking authorizations. First
Union Capital Markets Corp., a wholly-owned subsidiary of First Union, is a
registered broker-dealer principally engaged in providing, consistent with its
federal banking authorizations, private placement, securities dealing, and
underwriting services.
CMG manages investments and supervises the daily business affairs of the
Evergreen Fund. As compensation therefor, CMG is entitled to receive an annual
fee from the Evergreen Fund equal to 0.35% of the average daily net assets.
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Evergreen Asset serves as administrator to the Evergreen Fund. Evergreen
Asset, with its predecessors, has served as investment adviser and administrator
to the Evergreen family of mutual funds since 1971.
In its capacity as administrator, Evergreen Asset is entitled to receive a
fee based on the average daily net assets of the Evergreen Fund at a rate based
on the total assets of the mutual funds administered by Evergreen Asset for
which CMG or Evergreen Asset also serve as investment adviser, calculated in
accordance with the following schedule: 0.050% of the first $7 billion; 0.035%
on the next $3 billion; 0.030% on the next $5 billion; 0.020% on the next $10
billion; 0.015% on the next $5 billion; and 0.010% on assets in excess of $30
billion. Furman Selz Incorporated ("Furman Selz"), an affiliate of Evergreen
Funds Distributor, Inc., distributor for the Evergreen family of mutual funds,
serves as sub-administrator to the Evergreen Fund and is entitled to receive a
fee from the Fund calculated on the average daily net assets of the Fund at a
rate based on the total assets of the mutual funds administered by Evergreen
Asset for which CMG or Evergreen Asset also serve as investment adviser,
calculated in accordance with the following schedule: 0.0100% of the first $7
billion; 0.0075% on the next $3 billion; 0.0050% on the next $15 billion; and
0.0040% on assets in excess of $25 billion. The total assets of the mutual funds
administered by Evergreen Asset for which CMG or Evergreen Asset serve as
investment adviser as of June 30, 1995 were approximately $8.7 billion. For
further information regarding Evergreen Asset, FUNB and First Union, see
"Management of the Funds -- Investment Advisers" in the Prospectus of the
Evergreen Fund.
FFB Fund. First Fidelity Bank, N.A. ("First Fidelity") serves as the
investment adviser for the FFB Funds and provides investment guidance consistent
with each Fund's investment objective and policies and provides administrative
assistance in connection with the operation of the FFB Funds. First Fidelity
also acts as transfer agent, custodian and dividend disbursing agent for the FFB
Funds. Furman Selz acts as administrator of the FFB Funds. Furman Selz provides
personnel, office space and all management and administrative services
reasonably necessary for the operation of the FFB Funds Trust and the FFB Funds
(such as maintaining the FFB Funds' books and records, monitoring compliance
with various state and Federal laws and assisting the Trustees in the execution
of their duties) other than those services which are provided by First Fidelity.
As compensation for their investment advisory, administrative or management
services to the FFB U.S. Treasury Fund and U.S. Government Fund, First Fidelity
and Furman Selz are each paid a monthly fee at the following annual rates:
Portion of Average Daily Fee Rate
Net Assets of First Furman
each FFB Fund Fidelity Selz
Not exceeding $500 million.......................... 0.350% 0.150%
In excess of $500 million
but not exceeding $1 billion...................... 0.315% 0.135%
In excess of $1 billion
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but not exceeding $1.5 billion.................... 0.280% 0.120%
In excess of $1.5 billion........................... 0.245% 0.105%
As compensation for their investment advisory, administrative or management
services to the FFB 100% Treasury Fund, First Fidelity and Furman Selz are paid
a monthly fee at an annual rate of 0.14% and 0.08%, respectively.
DISTRIBUTION OF SHARES
Evergreen Funds Distributor, Inc. ("EFD"), an affiliate of Furman Selz,
acts as underwriter of the Evergreen Fund's shares. EFD distributes the
Evergreen Fund shares directly or through broker-dealers, banks, including FUNB,
or other financial intermediaries. The Evergreen Fund offers three classes of
shares, Class A, Class B 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 A shares of the Evergreen Fund, which will be received by the FFB
Funds' shareholders if the Reorganizations are approved, can be purchased at net
asset value without an initial sales charge. Certain broker-dealers or other
financial institutions may, however, impose a fee in connection with purchases
at net asset value. For a description of the Class A and Class B 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 Y shares of the Evergreen Fund are sold without a sales load
or distribution fee only to certain eligible investors as described in a
separate Evergreen Fund Prospectus.
Shares of the FFB Funds are offered in two classes, Service Class and
Institutional Class. Service Class shares are offered to investors who are not
purchasing shares of the FFB Funds through the Trust Department or Wholesale
Bank Division of First Fidelity or other banks or financial institutions and may
be subject to shareholder servicing charges of up to 0.35% of average daily net
assets of the FFB Fund of which the customer is a shareholder. Investors who
purchase and redeem shares of the FFB Funds through a customer account
maintained at a Participating Organization may be charged additional fees by
such Participating Organization not to exceed 0.35% on an annualized basis of
the average daily value during the month of FFB Fund shares in the subaccounts
of which the Participating Organization is record owner as nominee for its
customers. To date, no fees have been charged. Each FFB Fund other than the FFB
100% U.S. Treasury Fund has adopted for its Service Class and Institutional
Class shares a Rule 12b-1 distribution plan as described in
"Distribution-Related and Shareholder Servicing-Related Expenses" below.
Institutional Class shares are offered to investors who are customers of
the Trust Department and Wholesale Bank Division of First Fidelity or other
banks or financial institutions and are identical to Service Class shares but
include fewer individual shareholder communication services at a lower servicing
fee. Institutional Class shares may be subject to shareholder servicing charges
of up to 0.25% of average daily net assets of the FFB Fund
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of which the customer is a shareholder. Currently, 0.05% is being charged.
Investors who purchase and redeem shares of the FFB Funds through a
Participating Organization may be charged additional fees as described above by
such Participating Organization.
DISTRIBUTION-RELATED AND SHAREHOLDER SERVICING-RELATED EXPENSES.
Evergreen Fund. The Evergreen Fund has adopted for its Class A shares a
Rule 12b-1 plan (the "12b-1 Plan"). Pursuant to the 12b-1 Plan, the Evergreen
Fund may incur distribution-related and shareholder servicing- related expenses
which may not exceed an annual rate of 0.75% of the Fund's aggregate average
daily net assets attributable to Class A shares. Payments with respect to Class
A shares under the 12b-1 Plan are currently voluntarily limited to 0.30% of the
Evergreen Fund's aggregate average daily net assets attributable to Class A
shares. The 12b-1 Plan provides that a portion of the fee payable thereunder may
constitute a service fee to be used for providing ongoing personal services
and/or the maintenance of shareholder accounts. Service fee payments to
financial intermediaries for such purposes will not exceed 0.25% of the
aggregate average daily net assets attributable to any Class of shares of the
Evergreen Fund.
The Evergreen Fund has also entered into a distribution agreement (the
"Distribution Agreement") with EFD. Pursuant to the Distribution Agreement, the
Evergreen Fund will compensate EFD for its services at a rate which may not
exceed an annual rate of 0.30% of the Evergreen Fund's aggregate average daily
net assets attributable to Class A shares.
The Evergreen Fund may not pay any distribution or services fees during any
fiscal period in excess of the amounts set forth above. Since EFD's compensation
under the Distribution Agreement is not directly tied to the expenses incurred
by EFD (unlike the FFB Fund's plan described below which is a "reimbursement"
type plan), the amount of compensation received by it under the Distribution
Agreement during any year may be more or less than its actual expenses and may
result in a profit to EFD. Distribution expenses incurred by EFD in one fiscal
year that exceed the level of compensation paid to EFD for that year may be paid
from distribution fees received from a Fund in subsequent fiscal years.
FFB Funds. The FFB U.S. Treasury Fund and the FFB U.S. Government Fund have
each adopted a Master Distribution Plan (the "FFB Plan") for both the Service
Class and the Institutional Class pursuant to Rule 12b-1 of the 1940 Act. The
FFB Plan provides for a monthly payment by the FFB Fund to its distributor, FFB
Funds Distributor, Inc. ("FFB Funds Distributor"), an affiliate of Furman Selz,
in such amounts that FFB Funds Distributor may request for direct and indirect
distribution expenses, subject to periodic Board approval and to an overall
expense limitation. Each such payment is based on the average daily value of
each FFB Fund's net assets during the preceding month and is calculated at an
annual rate not to exceed 0.25% per annum. Payments under the FFB Plan are
currently at the annual rate of 0.03% of each Fund's average daily net assets.
PURCHASE AND REDEMPTION PROCEDURES
-16-
Information concerning applicable sales charges, distribution-related fees
and shareholder servicing-related fees are described above. Class A shares of
the Evergreen Fund and shares of the FFB Funds are offered at net asset value
without an initial sales charge by their respective distributors. Investments in
the Funds are not insured. The minimum initial purchase requirement for each
Class of shares of each Fund is $1,000. There is no minimum for subsequent
purchases of Evergreen Fund shares. The minimum for subsequent investments of
FFB Fund shares is $100. Each Fund provides for telephone, mail or wire
redemption of shares at net asset value as next determined after receipt of a
redemption request on each day the New York Stock Exchange is open for trading.
Additional information concerning purchases and redemptions of shares, including
how each Fund's net asset value is determined, is contained in the respective
Prospectuses for each Fund. The Evergreen Fund and the FFB Funds may
involuntarily redeem shareholders' accounts that have less than $1,000 and $500,
respectively, of invested funds. For the FFB Funds, there are no minimum
investment requirements with respect to investments effected through certain
automatic purchase and redemption arrangements on behalf of customer accounts
maintained at Participating Organizations. The minimum investment requirements
in the FFB Funds may be waived or lowered for investments effected on a group
basis by certain other institutions and their employees. All funds invested in
each Fund are invested in full and fractional shares. The Funds reserve the
right to reject any purchase order.
EXCHANGE PRIVILEGES
The FFB Funds currently permit 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
shareholders will be receiving Class A shares of the Evergreen Fund in the
Reorganizations and, accordingly, with respect to shares of the Evergreen Fund
received by FFB Fund shareholders in the Reorganizations, the exchange privilege
is limited to the Class A shares of other funds of the Evergreen mutual fund
family. In addition, exchanges in the Evergreen mutual fund family may be
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. 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
Each Fund declares income dividends daily and pays such dividends monthly.
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.
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After the Reorganizations, shareholders of the FFB Funds that have elected
(or that so elect no later than November 13, 1995), to have their dividends
and/or distributions reinvested, will have dividends and/or distributions
received from the FFB Funds reinvested in shares of the Evergreen Fund.
Shareholders of the FFB Funds that have elected (or that so elect no later than
November 13, 1995) to receive dividends and/or distributions in cash will
receive dividends and/or distributions from the Evergreen Fund in cash after the
Reorganizations, although they may, after the Reorganization, elect to have such
dividends and/or distributions reinvested in additional shares of the Evergreen
Fund.
Each Fund has qualified and intends to continue to qualify to be treated as
a regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code"). While so qualified, so long as each Fund distributes all
of its investment company taxable income and any net realized gains to
shareholders, it is expected that a Fund will not be required to pay any federal
income taxes on the amounts so distributed. A 4% nondeductible excise tax will
be imposed on amounts not distributed if a Fund does not meet certain
distribution requirements by the end of each calendar year. Each Fund
anticipates meeting such distribution requirements.
RISKS
In general, an investment in the Funds entails substantially the same
risks. The Evergreen Fund invests only in securities that have remaining
maturities of 397 days (thirteen months) or less at the date of purchase. The
Funds maintain a dollar-weighted average portfolio maturity of ninety days or
less. The Evergreen Fund, as a matter of investment strategy, intends to
maintain a dollar-weighted average maturity of 60 days or less. The Funds follow
these policies to maintain a stable net asset value of $1.00 per share, although
there is no assurance they can do so on a continuing basis.
The FFB U.S. Government Fund may invest in obligations issued by
agencies or instrumentalities of the United States Government. Some of these
obligations may not be supported by the full faith and credit of the United
States Government and, therefore, may be subject to certain risks. In
addition, the available yields on such agency or instrumentality obligations
are usually greater than direct obligations of the United States Treasury.
See "Comparison Of Investment Objectives And Policies."
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.
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Consummation of the Merger is expected to result in the nation's sixth largest
bank holding company, with assets of approximately $118.5 billion. Currently,
First Union is the nation's ninth largest bank holding company, with assets of
$83.1 billion as of June 30, 1995, and FFB is the 25th largest, having $35.4
billion in assets as of June 30, 1995.
Consummation of the Merger is subject to receipt of regulatory and
stockholder approvals, as well as other conditions set forth in the Merger
Agreement. No assurance can be given that the Merger will be consummated. In
connection with the execution of the Merger Agreement, Banco Santander, S.A.
("Santander"), the owner of approximately 30 percent of the outstanding shares
of FFB's common stock, agreed, among other things, to vote such shares in favor
of the Merger Agreement. It is anticipated that subsequent to the Merger,
Santander will own approximately 11% of First Union's outstanding shares. The
Merger is not in any way conditioned upon the approval by shareholders of any
mutual fund currently managed by First Fidelity, and it is expected that the
Merger will take place whether or not the transaction described herein is
approved by such shareholders.
As a result of the Merger, it is expected that FUNB and Evergreen Asset
will succeed to the investment advisory and administrative functions currently
performed for the FFB Funds by various units of First Fidelity. It is also
expected that First Fidelity, or its successors, will no longer provide
investment advisory or administrative services to investment companies.
REASONS FOR THE REORGANIZATION
The Board of Trustees of FFB Funds Trust has considered and approved each
Reorganization, including entry by FFB Funds Trust on behalf of each 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 each FFB
Fund.
As noted above, FFB has agreed to merge with First Union. FFB is the parent
company of First Fidelity, investment adviser to the mutual funds which comprise
FFB Funds Trust. The Merger will cause, as a matter of law, termination of the
investment advisory agreement between each of the First Fidelity Funds and First
Fidelity. Accordingly, the Trustees have considered the recommendation of First
Fidelity that the Trustees approve the proposed Reorganizations.
In making their recommendation to the Trustees, the representatives of the
respective banks reviewed with the Trustees various factors about the Funds and
the proposed Reorganizations. Except for the FFB U.S. Government Fund's ability
to invest in obligations of agencies and instrumentalities of the U.S.
Government, there are substantial similarities between the Evergreen Fund and
the FFB Funds. Specifically, the Evergreen Fund and the FFB Funds 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, U.S. Treasury Fund, FFB 100% U.S.
Treasury Fund and FFB U.S. Government Fund at June 30, 1995 had net
-19-
assets of approximately $1 billion, $15.3 million and $227.6 million,
respectively. The Evergreen Fund's net assets at such date were approximately
$1.4 billion. If the Reorganization had taken place as of June 30, 1995, the
Evergreen Fund's net assets would have been approximately $2.6 billion and First
Fidelity and FUNB expect that the substantially increased assets of the
Evergreen Fund will result in economies of scale and more efficient investment
management and shareholder services.
In addition, assuming that an alternative to the Reorganizations would be
to propose that the FFB Funds be managed by Evergreen Asset or another affiliate
of FUNB following the consummation of the Merger, the FFB Funds would thereafter
share the same investment management resources and be offered through common
distribution channels with the substantially identical Evergreen Fund. Each 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 four substantially identical
funds could result in each fund being disadvantaged due to an inability to
achieve optimum size, performance levels and the greatest possible economies of
scale. Accordingly, for the reasons noted above and recognizing that there can
be no assurance that any economies of scale or other benefits will be realized,
both First Fidelity and FUNB believe that the proposed Reorganizations would be
in the best interest of each Fund and its shareholders.
The Board of Trustees of FFB Funds Trust met and considered the
recommendation of First Fidelity and FUNB, and, in addition, considered among
other things, (i) the terms and conditions of the Reorganizations; (ii) whether
the Reorganizations would result in the economic dilution of shareholder
interests; (iii) expense ratios, fees and expenses of each FFB Fund and the
Evergreen Fund and of similar funds; the comparative performance records of each
of the Funds; compatibility of their investment objectives and policies; service
features available to shareholders in the respective funds; the investment
experience, expertise and resources of Evergreen Asset; the service and
distribution resources available to the Evergreen family of mutual funds and the
broad array of investment alternatives available to shareholders of the
Evergreen family of mutual funds, including the future marketing plans and
resources expected to be used in connection with the Evergreen family of mutual
funds; and the personnel and financial resources of First Union and its
affiliates; (iv) the fact that FUNB will bear the expenses incurred by each FFB
Fund in connection with the Reorganizations; (v) the fact that the Evergreen
Fund will assume certain identified liabilities of each FFB Fund; and (vi) the
expected federal income tax consequences of the Reorganizations.
The Trustees also considered the benefits to be derived by shareholders of
the FFB Funds 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 Funds in the combined fund. In addition, the Trustees
considered that there are alternatives available to shareholders of the FFB
Funds, including the ability to redeem their shares, as well as the option to
vote against a Reorganization.
-20-
During their consideration of the Reorganizations, the Trustees met with
Fund counsel as well as counsel to the Independent Trustees regarding the legal
issues involved. The Trustees of the Evergreen Investment Trust also concluded
at a regular meeting on July 27, 1995 that the proposed Reorganizations 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 Reorganizations.
THE TRUSTEES OF FFB FUNDS TRUST RECOMMEND THAT THE SHAREHOLDERS OF THE FFB
FUNDS APPROVE THE PROPOSED REORGANIZATIONS.
AGREEMENT AND PLAN OF REORGANIZATION
The following summary is qualified in its entirety by reference to the Plan
(Exhibit A hereto).
Each Plan provides that the Evergreen Fund will acquire substantially all
of the assets of the FFB Fund in exchange for Class A 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 A shares of the
Evergreen Fund to be received by the FFB Fund will be determined on the basis of
the relative net asset value per share of Class A shares of the Evergreen Fund
and the net asset values attributable to each Class of shares of each FFB Fund,
computed as of the close of regular trading on the NYSE on the Closing Date. The
net asset value per share of each Class will be determined by dividing assets,
less liabilities, in each case attributable to the respective Class, by the
total number of outstanding shares. Since the Evergreen Fund and the FFB Funds
each maintain a value of $1.00 per share, the number of full and fractional
Class A shares which will be received by an FFB Fund shareholder will equal the
number of FFB Fund shares owned by such shareholder.
State Street Bank and Trust Company, the custodian for the Evergreen Fund,
will compute the value of the Funds' respective portfolio securities. The method
of valuation employed will be consistent with the procedures set forth in the
Prospectuses and Statement of Additional Information of the Evergreen Fund, Rule
22c-1 under the 1940 Act, and with the interpretations of such rule by the SEC's
Division of Investment Management.
At or prior to the Closing Date, the FFB Funds 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 each FFB Fund, or
-21-
in cash, as the shareholder has previously elected) all of each 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, each 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 A shares of the
Evergreen Fund received by each FFB Fund. Such liquidation and distribution will
be accomplished by the establishment of accounts in the names of the FFB Funds'
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 A shares of the Evergreen Fund due to the FFB Funds' shareholders. All
issued and outstanding shares of the FFB Funds, 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, each FFB Fund will be terminated.
The consummation of the Reorganization is subject to the conditions set
forth in the Plan for each FFB Fund, including approval by each 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 Funds' shareholders, each 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 Funds in connection with the Reorganizations
(including the cost of any proxy soliciting agents) and the expenses of the
Evergreen Fund (other than securities registration fees) will be borne by FUNB.
Following the Reorganizations, the Evergreen Fund will not be assuming any
liabilities or making any reimbursements in connection with the 12b-1 Plan or
shareholder servicing arrangements of the FFB Funds. No portion of such expenses
shall be borne directly or indirectly by the FFB Funds or their 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 an FFB Fund, the
Board of Trustees of the FFB Funds Trust will consider other possible courses of
action in the best interests of shareholders. If the Merger is not completed,
the Reorganizations will not be completed regardless of the vote of the FFB
Funds' shareholders.
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FEDERAL INCOME TAX CONSEQUENCES
Each 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 a Reorganization, each FFB Fund will receive an opinion of
counsel to the effect that, on the basis of the existing provisions of the Code,
U.S. Treasury regulations issued thereunder, current administrative rules,
pronouncements and court decisions, for federal income tax purposes, upon
consummation of the Reorganization:
(1) The transfer of substantially all of the assets of the FFB Fund
solely in exchange for shares of the Evergreen Fund and the assumption by the
Evergreen Fund of certain identified liabilities, followed by the distribution
of the Evergreen Fund's shares by the FFB Fund in dissolution and liquidation of
the FFB Fund, will constitute a "reorganization" within the meaning of section
368(a)(1)(C) of the Code, and the Evergreen Fund and the FFB Fund will each be a
"party to a reorganization" within the meaning of section 368(b) of the Code;
(2) No gain or loss will be recognized by the FFB Fund on the transfer
of substantially all of its assets to the Evergreen Fund solely in exchange for
the Evergreen Fund's shares and the assumption by the Evergreen Fund of certain
identified liabilities of the FFB Fund or upon the distribution of the Evergreen
Fund's shares to the FFB Fund's shareholders in exchange for their shares of the
FFB Fund;
(3) The tax basis of the assets transferred will be the same to the
Evergreen Fund as the tax basis of such assets to the FFB Fund immediately prior
to the Reorganization, and the holding period of such assets in the hands of the
Evergreen Fund will include the period during which the assets were held by the
FFB Fund;
(4) No gain or loss will be recognized by the Evergreen Fund upon the
receipt of the assets from the FFB Fund solely in exchange for the shares of the
Evergreen Fund and the assumption by the Evergreen Fund of certain identified
liabilities of the FFB Fund;
(5) No gain or loss will be recognized by the FFB Fund's shareholders
upon the issuance of the shares of the Evergreen Fund to them, provided they
receive solely such shares (including fractional shares) in exchange for their
shares of the FFB Fund; and
(6) The aggregate tax basis of the shares of the Evergreen Fund,
including any fractional shares, received by each of the shareholders of the FFB
Fund pursuant to the Reorganization will be the same as the aggregate tax basis
of the shares of the FFB Fund held by such shareholder immediately prior to the
Reorganization, and the holding period of the shares of the Evergreen Fund,
including fractional shares, received by each such shareholder will include the
period during which the shares of the FFB Fund exchanged therefor were held by
such shareholder (provided that the shares of the FFB Fund were held as a
capital asset on the date of the Reorganization).
-23-
Opinions of counsel are not binding upon the Internal Revenue Service or
the courts. If a 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 and the fair market value of the Evergreen
Fund shares he or she received. Shareholders of each 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 each FFB Fund should also consult their tax advisers as to state
and local tax consequences, if any, of the Reorganization.
PRO-FORMA CAPITALIZATION
The following tables show the capitalization of the Evergreen Fund and the
FFB Funds 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 FUNDS AND THE EVERGREEN FUND
FFB FUNDS
CLASS A
SERVICE INSTITUTIONAL SHARES
CLASS SHARES CLASS SHARES EVERGREEN PRO-FORMA
100% U.S. U.S. 100% U.S. U.S. FUND CLASS FOR REOR-
Treasury Treasury Government Treasury Treasury Government A SHARES GANIZATION
Net Assets.......
Shares
Outstanding*...
Net Asset Value
per Share.......
* Had the Reorganizations been consummated on August 31, 1995, the FFB U.S.
Treasury Fund, FFB 100% U.S. Treasury Fund and FFB U.S. Government Fund would
have received respectively _____, _____, and _____ Class A shares of the
Evergreen Fund, which would then be available for distribution to shareholders.
No assurance can be given as to how many Class A shares of the Evergreen Fund
FFB Fund shareholders will receive on the date that the Reorganizations take
place, and the foregoing should not be relied upon to reflect the number of
Class A shares of the Evergreen Fund that will actually be received on or after
such date.
SHAREHOLDER INFORMATION.
As of September , 1995 (the "Record Date"), there were the following number
of each Class of shares of beneficial interest of the FFB Funds outstanding:
U.S. Treasury
Service Class
Institutional Class
-24-
100% U.S. Treasury
Service Class
Institutional Class
U.S. Government
Service Class
Institutional Class
As of the Record Date, the officers and Trustees of FFB Funds Trust
beneficially owned as a group less than 1% of the outstanding shares of each FFB
Fund. To the FFB Funds Trust's knowledge, the following persons owned
beneficially or of record more than 5% of each FFB Fund's total outstanding
shares as of the Record Date:
PERCENTAGE OF
NAME AND ADDRESS CLASS NUMBER OF SHARES PERCENTAGE OF CLASS TOTAL SHARES OUTSTANDING
[TO BE SUPPLIED]
As of September , 1995, the following number of each Class of the shares of
the Evergreen Fund were outstanding: Class A -- _____________; Class B --
___________ and Class Y -- _____________.
As of the Record Date, the officers and Trustees of the Evergreen Fund
beneficially owned as a group less than 1% of the outstanding shares of the
Evergreen Fund. To the Evergreen Fund's knowledge, the following persons owned
beneficially or of record more than 5% of the Evergreen Fund's total outstanding
shares as of the Record Date:
PERCENTAGE OF
NAME AND ADDRESS CLASS NUMBER OF SHARES PERCENTAGE OF CLASS TOTAL SHARES OUTSTANDING
[TO BE SUPPLIED]
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 Reorganizations,
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 Funds can be found
in the Prospectuses of the FFB Funds under the caption "Investment Objective and
Policies."
Evergreen Treasury Money Market Fund
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The investment objective of the Evergreen Fund, which is a matter of
fundamental policy that may not be changed without shareholder approval, is to
maintain stability of principal while earning current income. However, the Fund
will only attempt to seek income to the extent consistent with stability of
principal and, therefore, investments will only be made in short-term United
States Treasury obligations with an average dollar-weighted maturity of 90 days
or less. As a matter of investment strategy, the Fund's investment adviser
intends to maintain a dollar-weighted average maturity for the Fund of 60 days
or less.
The Evergreen Fund is suitable for conservative investors seeking high
current yields plus relative safety. The Fund provides a reasonable means of
maximizing opportunities and minimizing risks resulting from changing interest
rates.
The short-term United States Treasury obligations in which the Evergreen
Fund invests are issued by the U.S. Government and are fully guaranteed as to
principal and interest by the United States. Such securities will have a
maturity date that is 397 days or less from the date of acquisition unless they
are purchased under an agreement that provides for repurchase of the securities
from the Evergreen Fund within 397 days from the date of acquisition. The
Evergreen Fund may also retain Fund assets in cash.
The Evergreen Fund may employ certain additional investment strategies
which are discussed in the "Investment Practices and Restrictions" section of
the Evergreen Fund's Prospectus.
FFB 100% Treasury Fund
The investment objective of the FFB 100% Treasury Fund is to achieve as
high a level of current income as is consistent with preservation of capital and
liquidity by investing exclusively in the short-term, direct obligations of the
United States Treasury. The Fund does not invest in repurchase agreements or
when-issued securities, investment techniques available to the Evergreen Fund.
For a discussion of the Evergreen Fund's policy of engaging in repurchase
agreements and when-issued securities see its Prospectus under the caption
"Investment Practices and Restrictions".
FFB U.S. Treasury Fund
The investment objective of the FFB U.S. Treasury Fund is to achieve as
high a level of current income as is consistent with preservation of capital and
liquidity by investing exclusively in short-term, direct obligations of the
United States Treasury. The Fund seeks to achieve this objective by investing in
the same type of securities as the Evergreen Fund.
FFB U.S. Government Fund
The FFB U.S. Government Fund invests in obligations issued or guaranteed
by the United States Government and, in addition, (unlike the FFB Treasury
Fund and the Evergreen Fund) may also invest in obligations issued by
agencies or instrumentalities of the United States Government. If
-26-
shareholders of the FFB U.S. Government Fund vote to approve the Plan and the
Plan is consummated, the Evergreen Fund, the surviving Fund, will not be able to
invest in obligations issued by the agencies or instrumentalities of the United
States Government.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
FORM OF ORGANIZATION
FFB Funds Trust and Evergreen Investment Trust are open-end management
investment companies registered with the SEC under the 1940 Act which
continuously offer shares to the public. Each is organized as a Massachusetts
business trust and is governed by a Declaration of Trust, By-Laws and Board of
Trustees. Both are also governed by applicable Massachusetts and Federal law.
The FFB Funds are each a series of FFB Funds Trust. The Evergreen Fund is a
series of Evergreen Investment Trust.
CAPITALIZATION
The beneficial interests in the Evergreen Fund are represented by an
unlimited number of transferable shares of beneficial interest with no par value
per share. The beneficial interests in the FFB Funds are represented by an
unlimited number of transferable shares of beneficial interest with a $0.001 par
value. The respective Declarations of Trust under which each Fund has been
established permit the respective Trustees to allocate shares into an unlimited
number of series, and classes thereof, with rights determined by the Trustees,
all without shareholder approval. Fractional shares may be issued. Each Fund's
shares have equal voting rights with respect to matters affecting shareholders
of all classes of each Fund, and each series of the Trust under which the Fund
has been established, and represent equal proportionate interests in the assets
belonging to the Funds. Shareholders of each Fund are entitled to receive
dividends and other amounts as determined by FFB Funds Trust's Trustees or
Evergreen Investment Trust's Trustees. Shareholders of each Fund vote
separately, by class, as to matters, such as approval or amendments of Rule
12b-1 distribution plans, that affect only their particular class and by series
as to matters, such as approval or amendments of investment advisory agreements
or proposed reorganizations, that affect only their particular series.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders of a business trust could, under
certain circumstances, be held personally liable for the obligations of the
business trust. However, the respective Declarations of Trust under which the
Funds were established disclaim shareholder liability for acts or obligations of
the portfolio or 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
-27-
circumstances in which a disclaimer is inoperative and the series itself would
be unable to meet its obligations. A substantial number of mutual funds in the
United States are organized as Massachusetts business trusts.
SHAREHOLDER MEETINGS AND VOTING RIGHTS
Neither the Evergreen Investment Trust nor FFB Funds Trust, on behalf of
the Funds or any of their other series, is required to hold annual meetings of
shareholders. However, a meeting of shareholders for the purpose of voting upon
the question of removal of a Trustee must be called when requested in writing by
the holders of at least 10% (25% in the case of Evergreen Investment Trust) of
the outstanding shares. In addition, each is required to call a meeting of
shareholders for the purpose of electing Trustees if, at any time, less than a
majority of the Trustees then holding office were elected by shareholders. If
Trustees of the Evergreen Investment Trust fail or refuse to call a meeting as
required by its Declaration of Trust for a period of 14 days after a request in
writing by shareholders holding an aggregate of at least 25% of the shares
outstanding, then shareholders holding said 25% may call and give notice of such
meeting. Evergreen Investment Trust and FFB Funds Trust currently do not intend
to hold regular shareholder meetings. Neither permits cumulative voting. A
majority of shares entitled to vote on a matter constitutes a quorum for
consideration of such matter. In either case, a majority of the shares voting is
sufficient to act on a matter (unless otherwise specifically required by the
applicable governing documents or other law, including the 1940 Act).
LIQUIDATION OR DISSOLUTION
In the event of the liquidation of a Fund the shareholders are entitled to
receive, when, and as declared by the Trustees, the excess of the assets
belonging to such Fund or attributable to the class over the liabilities
belonging to the Fund or attributable to the class. In either case, the assets
so distributable to shareholders of the Fund will be distributed among the
shareholders in proportion to the number of shares of the Fund held by them and
recorded on the books of the Fund.
LIABILITY AND INDEMNIFICATION OF TRUSTEES
The Declaration of Trust of Evergreen Investment Trust provides that no
Trustee or officer shall be liable to the Fund or to any shareholder, Trustee,
officer, employee or agent of the Fund for any action or failure to act except
for his or her own bad faith, willful misfeasance, gross negligence or reckless
disregard of his or her duties. The Declaration of Trust provides that a Trustee
or officer is entitled to indemnification against liabilities and expenses with
respect to claims related to his or her position with Evergreen Investment Trust
unless such Trustee or officer shall have been adjudicated to have acted with
bad faith, willful misfeasance, gross negligence or reckless disregard of his or
her duties, or not to have acted in good faith that his or her action was in the
best interest of the Trust. The Declaration of Trust also provides that a
Trustee or officer is not entitled to indemnification against liabilities in the
event of
-28-
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.
The Declaration of Trust of FFB Funds Trust provides that no Trustee,
officer or agent shall be personally liable to any person for any action or
failure to act, except for his or her own bad faith, willful misfeasance, or
gross negligence, or reckless disregard of his or her duties. The Declaration of
Trust provides that a Trustee or officer is entitled to indemnification against
liabilities and expenses with respect to claims related to his or her position
with FFB Funds Trust, unless such Trustee or officer shall have been adjudicated
to have acted with bad faith, willful misfeasance, or gross negligence, or in
reckless disregard of his or her duties, or not to have acted in good faith in
the reasonable belief that his or her action was in the best interest of FFB
Funds Trust, or, in the event of settlement, unless there has been a
determination that such Trustee or officer has engaged in willful misfeasance,
bad faith, gross negligence, or reckless disregard of his or her duties.
RIGHTS OF INSPECTION
Shareholders of the respective Funds have the same right to inspect in
Massachusetts the governing documents, records of meetings of shareholders,
shareholder lists, share transfer records, accounts and books of the Fund as are
permitted shareholders of a corporation under the Massachusetts corporation law.
The purpose of inspection must be for interests of shareholders relative to the
affairs of the Fund.
The foregoing is only a summary of certain characteristics of the
operations of the Declarations of Trust, By-Laws and Massachusetts law and is
not a complete description of those documents or law. Shareholders should refer
to the provisions of such respective Declarations of Trust, By-Laws, and
Massachusetts law directly for more complete information.
INFORMATION REGARDING THE PROPOSED INTERIM
ADVISORY AGREEMENT
INTRODUCTION
In view of the Merger Agreement discussed above, and the factors discussed
below, the Board of Trustees of FFB Funds Trust recommends that shareholders of
each FFB Fund approve the proposed Interim Advisory Agreement. The Interim
Advisory Agreement would become effective as of the consummation of the Merger
which, as noted earlier, is currently anticipated to occur by January 1, 1996.
The Interim Advisory Agreement would remain in effect until the closing date for
the Reorganization. The terms of the Interim Advisory Agreement are essentially
the same as the Existing Advisory Agreement (as defined below). The only
differences between the Existing Advisory Agreement and the Interim Advisory
Agreement, if approved by shareholders, are that the investment adviser would be
CMG instead of First
-29-
Fidelity and the length of time each Agreement is in effect. A description of
the Interim Advisory Agreement pursuant to which CMG would become the investment
adviser to each FFB Fund, as well as the services to be provided by CMG pursuant
thereto is set forth below under "Advisory Services". The description of the
Interim Advisory Agreement in this Prospectus/Proxy Statement is qualified in
its entirety by reference to a Form of the Interim Advisory Agreement, which
will be used for each FFB Fund, attached hereto as Exhibit B.
First Fidelity, 765 Broad Street, Newark, New Jersey 07102, has served as
investment adviser to each FFB Fund since the commencement of operations of the
FFB Fund pursuant to a Master Advisory Contract, dated February 10, 1988 and
Advisory Contract Supplement dated February 10, 1988, February 10, 1988 and
October 13, 1994 for the FFB U.S. Treasury Fund, FFB U.S. Government Fund and
FFB 100% U.S. Treasury Fund, respectively. As used herein, the Master Advisory
Contract and the Advisory Contract Supplement for each FFB Fund, taken together,
are referred to as the FFB Fund's "Existing Advisory Agreement." At a meeting of
the Board of Trustees of the FFB Funds Trust held on August 9, 1995, the
Trustees, including all of the Independent Trustees, approved the proposed
Interim Advisory Agreement for each FFB Fund.
The Trustees have authorized FFB Funds Trust, on behalf of each 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 each 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. Each Existing Advisory Agreement for the FFB U.S.
Treasury Fund and the FFB U.S. Government Fund was approved by each Fund's sole
shareholder on June 11, 1987. The Existing Advisory Agreements for the FFB U.S.
Treasury Fund and the FFB U.S. Government Fund were last approved by the
Trustees, including a majority of the Independent Trustees, on December 8, 1994.
The Existing Advisory Agreement for the FFB 100% U.S. Treasury Fund was last
approved by the Trustees, including a majority of the Independent Trustees, on
October 13, 1994.
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.
-30-
Administrative services provided by First Fidelity include, among other things,
(i) data processing, clerical and bookkeeping services required in connection
with maintaining the financial accounts and records for the Fund, (ii) compiling
statistical and research data required for the preparation of reports and
statements which are periodically distributed to the FFB Funds Trust's officers
and the Trustees, (iii) handling general 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.
Furman Selz currently acts as administrator of the FFB Fund. Furman Selz
has its offices at 237 Park Avenue, New York, New York 10017. If the Interim
Advisory Agreement is approved by shareholders of the FFB Fund, Furman Selz will
continue during the term of the Interim Advisory Agreement as the FFB Fund's
administrator for the same compensation as currently received. See
"Summary-Investment Advisers, Sub-Adviser and Administrators."
Fees and Expenses. The investment advisory fees and expense
limitations for each FFB Fund under the Existing Advisory Agreement and the
proposed Interim Advisory Agreement are identical. See "Summary-Investment
Advisers, Sub-Adviser and Administrators."
Expense Reimbursement. The Existing Advisory Agreement includes a provision
calling for expense limitations equal to the most restrictive limitation imposed
from time to time by states where the FFB Fund's shares are qualified for sale.
Currently, the most restrictive state expense limitation provision applicable to
the FFB Fund limits the Fund's annual expenses to 2.5% of the first $30 million
of average net assets, 2.0% of the next $70 million of such assets and 1.5% of
any such assets in excess of $100 million. The Interim Advisory Agreement
contains an identical provision.
Payment of Expenses and Transaction Charges. Under the Existing Advisory
Agreement, the FFB Fund is responsible for all of its expenses and liabilities,
including compensation of the Independent Trustees of FFB Funds Trust; taxes and
governmental fees; interest charges; fees and expenses of the Fund's independent
accountants and legal counsel; trade association membership dues; fees and
expenses of any custodian (including fees and expenses for keeping books and
accounts and calculating the net asset value of shares of the Fund), transfer
agent, registrar and dividend disbursing agent of the Fund; expenses of issuing,
redeeming, registering and qualifying for sale the Fund's shares; expenses of
preparing and printing share certificates, prospectuses, shareholders' reports,
notices, proxy statements and reports to regulatory agencies; the cost of office
supplies; travel expenses of all officers, Trustees and employees; insurance
premiums; brokerage and other expenses of executing portfolio transactions;
expenses of shareholders' meetings; organizational expenses; and extraordinary
expenses.
The Interim Advisory Agreement contains an identical provision.
Limitation of Liability. The Existing Advisory Agreement provides that
First Fidelity shall not be liable to the FFB Fund for any mistake in
-31-
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 FFB Funds
Trust or its shareholders to which First Fidelity would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of First Fidelity's duties under the Agreement or by reason of First Fidelity's
reckless disregard of its obligations and duties.
The Interim Advisory Agreement contains an identical provision in terms of
CMG's liability.
Term. If approved by the shareholders of a FFB Fund, the Interim Advisory
Agreement between the FFB Fund and CMG will become effective on the consummation
of the Merger. The Interim Advisory Agreement will be in effect for the period
of time between the effective date of the Merger and the Closing Date for the
Reorganization. The Existing Advisory Agreement provides for an initial term of
two years. Thereafter, the Existing Advisory Agreement will be continued from
year to year, provided that its continuation is specifically approved at least
annually (a) by the vote of a majority of the outstanding voting securities of
the FFB Fund (as defined in the 1940 Act) or by the Board of Trustees and (b) by
the vote, cast in person at a meeting called for the purpose, of a majority of
the Independent Trustees. The Interim Advisory Agreement for the FFB Fund
contains an identical provision.
Termination; Assignment. The Interim Advisory Agreement provides that it
may be terminated without penalty by vote of a majority of the outstanding
voting securities of the FFB Fund (as defined in the 1940 Act) or by a vote of a
majority of FFB Fund Trust's entire Board of Trustees on 60 days' written notice
to CMG or by CMG on 60 days' written notice to FFB Funds Trust. Also, the
Interim Advisory Agreement will automatically terminate in the event of its
assignment (as defined in the 1940 Act). The Existing Advisory Agreement for the
FFB Fund contains identical provisions as to termination and assignment.
INFORMATION ABOUT THE FFB FUNDS' CURRENT AND PROPOSED INTERIM INVESTMENT
ADVISERS
First Fidelity. First Fidelity currently serves as the investment adviser
for each FFB Fund. First Fidelity is a national banking association which
provides commercial banking and trust business services throughout New Jersey.
It is a wholly-owned subsidiary of First Fidelity Incorporated, originally
established in 1812, which, as a result of a reorganization with Fidelcor, Inc.,
a Pennsylvania bank holding company, is now a wholly-owned subsidiary of FFB.
FFB, a New Jersey corporation, provides financial and related services through
its subsidiary organizations. The investment advisory services of First Fidelity
are provided through the Asset Management Group of the Trust Division which, as
of June 30, 1995, had approximately $15 billion of client assets under
management. First Fidelity has provided investment advisory services to
investment companies since 1986 and currently acts as investment adviser to the
First Fidelity family of mutual funds.
-32-
For the fiscal year ended August 31, 1995, First Fidelity received an
aggregate of $ , $ and $ in management fees from the FFB U.S. Treasury Fund, FFB
U.S. Government Fund and FFB 100% U.S. Treasury Fund, respectively, which is
equal to an annual fee of %, % and %, respectively, of each FFB Fund's average
daily net assets. Absent voluntary waivers, First Fidelity, for such period
would have received $ , $ , and $ , respectively, in management fees ( %, % and
%, respectively, of each FFB Fund's average daily net assets). First Fidelity
also acts as custodian and transfer agent for each FFB Fund. For these services,
First Fidelity received custodian fees of $ and transfer agent fees of $ from
the FFB U.S. Treasury Fund; custodian fees of $ and transfer agent fees of $
from the FFB U.S. Government Fund; and custodian fees of $ and transfer agent
fees of $ from the FFB 100% U.S. Treasury Fund. Absent voluntary waivers, First
Fidelity would have received custodian fees of $ and transfer agent fees of $
from the FFB U.S. Treasury Fund; custodian fees of $ and transfer agent fees of
$ from the FFB U.S. Government Fund; and custodian fees of $ and transfer agent
fees of $ from the FFB 100% U.S. Treasury Fund. First Fidelity will continue to
act as the FFB Fund's custodian and transfer agent during the term of the
Interim Advisory Agreement.
CMG. For information about CMG, FUNB, Evergreen Asset and First Union, see
"Summary-Investment Advisers, Sub-Adviser and Administrators." The name, address
and principal occupation of the principal executive officers and directors of
FUNB are set forth in Appendix A to this Prospectus/Proxy Statement.
During the term of the Interim Advisory Agreement, Evergreen Asset will
receive compensation for managing each FFB Fund at the same effective annual
rate ( % for the FFB U.S. Treasury Fund, % for the FFB U.S. Government Fund and
% for the FFB 100% U.S. Treasury Fund) 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 is entitled to receive an annual management fee equal to 0.35%
of the Evergreen Fund's average daily net assets. For the fiscal year ended
December 31, 1994, Evergreen Asset, received $2,547,955 in management fees.
Absent voluntary waivers, Evergreen Asset, for such period, would have received
$4,498,232 in management fees (0.35% of the Evergreen Fund's average daily net
assets). See "Summary- Investment Advisers, Sub-Adviser and Administrators."
The Board of Trustees considered the Interim Advisory Agreement as part of
its overall approval of the Plan. The Board of Trustees considered, among other
things, the factors set forth above in "Information about the Reorganization -
Reasons for the Reorganization." The Board of Trustees also considered the fact
that there were no material differences between the terms of the Interim
Advisory Agreement and the terms of the Existing Advisory Agreement.
ADDITIONAL INFORMATION
-33-
Evergreen Fund. Information concerning the operation and management of the
Evergreen Fund is incorporated herein by reference from the Prospectus dated
July 7, 1995, a copy of which is enclosed, and Statement of Additional
Information dated July 7, 1995. A copy of such Statement of Additional
Information is available upon request and without charge by writing to the
Evergreen Fund, at the address listed on the cover page of this Prospectus/Proxy
Statement or by calling toll-free 1-800-807-2940.
FFB Fund. Information about each FFB Fund is included in its current
Prospectuses each dated June 30, 1995, and in the Statement of Additional
Information of the same date that have been filed with the SEC, all of which are
incorporated herein by reference. A copy of each Prospectus and Statement of
Additional Information and each Fund's Annual Report dated February 28, 1995 are
available upon request and without charge by writing to the FFB Fund at the
address listed on the cover page of this Prospectus/Proxy Statement or by
calling toll-free 1-800-437-8790.
Evergreen Investment Trust and FFB Funds Trust are each subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, and in accordance therewith file reports and other information including
proxy material, and charter documents with the SEC. These items can be inspected
and copies obtained at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional
Offices located at Northwest Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661-2511 and Seven World Trade Center, Suite 1300, New York, New York
10048.
VOTING INFORMATION CONCERNING THE MEETING
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Trustees of FFB Funds Trust to be used
at each Special Meeting of Shareholders to be held at 10:00 a.m. November 13,
1995, at the offices of the FFB Funds, 237 Park Avenue, New York, New York 10017
and at any adjournments thereof. This Prospectus/Proxy Statement, along with a
Notice of the Meeting and a proxy card, is first being mailed to shareholders on
or about September 28, 1995. Only shareholders of record as of the close of
business on the Record Date will be entitled to notice of, and to vote at, the
Meeting or any adjournment thereof. The holders of a majority of the shares
outstanding at the close of business on the Record Date present in person or
represented by proxy will constitute a quorum for the Meeting. If the enclosed
form of proxy is properly executed and returned in time to be voted at the
Meeting, the proxies named therein will vote the shares represented by the proxy
in accordance with the instructions marked thereon. Unmarked proxies will be
voted FOR the proposed Reorganization and FOR any other matters deemed
appropriate. Proxies that reflect abstentions and "broker non-votes" (i.e.,
shares held by brokers or nominees as to which (i) instructions have not been
received from the beneficial owners or the persons entitled to vote or (ii) the
broker or nominee does not have discretionary voting power on a particular
matter) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum, but will have the effect of
being counted as votes against the Plan. A proxy may be revoked at
-34-
any time on or before the Meeting by written notice to the Secretary of FFB
Funds Trust, 237 Park Avenue, New York, New York 10017. Unless revoked, all
valid proxies will be voted in accordance with the specifications thereon or, in
the absence of such specifications, FOR approval of the Plan and the
Reorganization contemplated thereby.
Approval of each 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 FFB Funds Trust (who will not be paid for their solicitation
activities). has been engaged by First Fidelity to assist in soliciting proxies,
and may contact certain shareholders of the FFB Funds over the telephone.
Shareholders that are contacted by may be asked to cast their vote by telephonic
proxy. Such proxies will be recorded in accordance with the procedures set forth
below. First Fidelity believes these procedures are reasonably designed to
ensure that the identity of the shareholder casting the vote is accurately
determined and that the voting instructions of the shareholder are accurately
reflected. has received an opinion of that addresses the validity, under the
applicable law of the Commonwealth of Massachusetts, of a proxy given orally.
The opinion given by concludes that a Massachusetts court would find that there
is no Massachusetts law or Massachusetts public policy against the acceptance of
proxies signed by an orally-authorized agent.
In all cases where a telephonic proxy is solicited, the representative will
ask you for your full name, address, social security or employer identification
number, title (if you are authorized to act on behalf of an entity, such as a
corporation), and number of shares owned. If the information solicited agrees
with the information provided to by First Fidelity, then the representative will
explain the process, read the proposals listed on the proxy card and ask for
your instructions on each proposal. The representative, although he or she will
answer questions about the process, will not recommend to the shareholder how he
or she should vote, other than to read any recommendations set forth in the
proxy statement. Within 72 hours, will send you a letter or mailgram to confirm
your vote and asking you to call immediately if your instructions are not
correctly reflected in the confirmation.
If you wish to participate in the Meeting, but do not wish to give your
proxy by telephone, you may still submit the proxy card included with this
-35-
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 a Reorganization are not
received by November 13, 1995, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies. In
determining whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the information
to be provided to shareholders with respect to the reasons for the solicitation.
Any such adjournment will require an affirmative vote by the holders of a
majority of the shares present in person or by proxy and entitled to vote at the
Meeting. The persons named as proxies will vote upon such adjournment after
consideration of all circumstances which may bear upon a decision to adjourn the
Meeting.
A shareholder who objects to the proposed Reorganization will not be
entitled under either Massachusetts law or the Declaration of Trust of FFB Funds
Trust to demand payment for, or an appraisal of, his or her shares. However,
shareholders should be aware that the Reorganization as proposed is not expected
to result in recognition of gain or loss to shareholders for federal income tax
purposes and that, if the Reorganization is consummated, shareholders will be
free to redeem the shares of the Evergreen Fund which they receive in the
transaction at their then-current net asset value. Shares of the FFB Funds may
be redeemed at any time prior to the consummation of the Reorganizations. FFB
Fund shareholders may wish to consult their tax advisers as to any differing
consequences of redeeming FFB Fund shares prior to the Reorganization or
exchanging such shares in the Reorganization.
FFB Funds Trust does not hold annual shareholder meetings. If a
Reorganization is not approved, shareholders wishing to submit proposals for
consideration for inclusion in a proxy statement for a subsequent shareholder
meeting should send their written proposals to the Secretary of FFB Funds Trust
at the address set forth on the cover of this Prospectus/Proxy Statement such
that they will be received by FFB Funds Trust in a reasonable period of time
prior to any such meeting.
The votes of the shareholders of the Evergreen Fund are not being solicited
by this Prospectus/Proxy Statement and are not required to carry out the
Reorganizations.
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 each of the FFB Funds as of February
28, 1995 and financial highlights for the periods indicated therein have been
incorporated by reference into this Prospectus/Proxy Statement in
-36-
reliance on the reports of KPMG Peat Marwick LLP, independent accountants for
the FFB Funds, given on the authority of said firm as experts in accounting and
auditing.
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 KPMG Peat Marwick LLP, independent accountants for the Evergreen
Fund, given on the authority of said 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 FFB Funds Trust do not intend to present any other business
at each Meeting. If, however, any other matters are properly brought before each
Meeting, the persons named in the accompanying form of proxy will vote thereon
in accordance with their judgment.
THE BOARD OF TRUSTEES OF FFB FUNDS TRUST, INCLUDING THE INDEPENDENT
TRUSTEES, RECOMMENDS APPROVAL OF THE PLANS AND THE INTERIM ADVISORY AGREEMENTS,
AND ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN
FAVOR OF APPROVAL OF THE PLANS AND THE INTERIM ADVISORY AGREEMENTS.
September 28, 1995
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APPENDIX A
The name, address and principal occupation of the principal executive
officers and directors of First Union National Bank of North Carolina are as
follows:
Principal Occupation
Name and Address During Past 5 Years
Directors:
Ben Mayo Boddie Chairman & CEO of
Boddie-Noell Enterprises, Inc. Boddie-Noell
P.O. Box 1908 Enterprises, Inc.
Rocky Mount, NC 27802
John F.A.V. Cecil President of Biltmore
Biltmore Dairy Farms, Inc. Dairy Farms, Inc.
P.O. Box 5355
Asheville, NC 28813
John Crosland, Jr. Chairman of the Board
The Crosland Group, Inc. of The Crosland Group
135 Scaleybark Road
Charlotte, NC 28209
------------------------------------
Frank H. Dunn Chairman and CEO of
First Union National Bank of FUNB
North Carolina
One First Union Center
Charlotte, NC 28288-0006
James F. Goodmon Capitol President & Chief
Broadcasting Company, Inc. Executive Officer of
2619 Eastern Blvd. Capitol Broadcasting
Raleigh, NC 27605 Company, Inc.
Charles L. Grace President of Cummins
President Atlantic, Inc.
Cummins Atlantic, Inc.
P.O. Box 240729
Charlotte, NC 28224-0729
Daniel W. Mathis Vice Chairman of FUNB
First Union National Bank of
North Carolina
One First Union Center
Charlotte, NC 28288-0006
Raymond A. Bryan, Jr. Chairman & CEO of
T.A. Loving Company T.A. Loving Company
P.O. Drawer 919
Goldsboro, NC 27530
John W. Copeland President of Ruddick
Ruddick Corporation Corporation
2000 Two First Union Center
Charlotte, NC 28282
J. William Disher Chairman & President of
Lance Incorporated Lance Incorporated
P.O. Box 32368
Charlotte, NC 28232
Malcolm E. Everett, III President of FUNB
First Union National Bank of
North Carolina
310 S. Tryon Street
Charlotte, NC 28288-0156
Shelton Gorelick President of SGIC, Inc.
SGIC, Inc.
741 Kenilworth Ave., Suite 200
Charlotte, NC 28204
James E.S. Hynes Chairman of Hynes Sales
Hynes Sales Company, Inc. Company, Inc.
P.O. Box 220948
Charlotte, NC 28222
Earl N. Phillips, Jr. President of First
First Factors Corporation Factors Corporation
P.O. Box 2730
High Point, NC 27261
J. Gregory Poole, Jr. Chairman & President of
Gregory Poole Equipment Company Gregory Poole Equipment
P.O. Box 469 Company
Raleigh, NC 27602
Nelson Schwab, III Chairman & CEO of
Paramount Parks Paramount Parks
8720 Red Oak Boulevard
Suite 315
Charlotte, NC 28217
George Shinn Owner and Chairman of
Shinn Enterprises, Inc. Shinn Enterprises, Inc.
One Hive Drive
Charlotte, NC 28217
-2-
John P. Rostan, III Senior Vice President
Waldensian Bakeries, Inc. of Waldensian Bakeries,
P.O. Box 220 Inc.
Valdese, NC 28690
Charles M. Shelton, Sr. Chairman & CEO of The
The Shelton Companies, Inc. Shelton Companies, Inc.
3600 One First Union Center
Charlotte, NC 28202
Harley F. Shuford, Jr. President and CEO of
Shuford Industries P.O. Box 608 Shuford Industries
Hickory, NC 28603
Principal Executive
Officers:
James Maynor President of First
Union Mortgage
Corporation
Austin A. Adams Executive Vice
President
Howard L. Arthur Senior Vice President
Robert T. Atwood Executive Vice
President and Chief
Financial Officer
Marion A. Cowell, Jr. Executive Vice
President, Secretary
and General Counsel
Edward E. Crutchfield, Jr. Chairman, CEO of First
Union Corporation
Frank H. Dunn, Jr. Chairman and CEO
Malcolm E. Everett, III President
John R. Georgius President of First
Union Corporation
-3-
James Hatch Senior Vice President
and Corporate
Controller
Don R. Johnson Executive Vice
President
Mark Mahoney Senior Vice President
Barbara K. Massa Senior Vice President
Daniel W. Mathis Vice Chairman
H. Burt Melton Executive Vice
President
Malcolm T. Murray, Jr. Executive Vice
President
Alvin T. Sale Executive Vice
President
Louis A. Schmitt, Jr. Executive Vice
President
Ken Stancliff Senior Vice President
and Corporate Treasurer
Richard K. Wagoner Executive Vice
President and General
Fund Officer
Unless otherwise indicated, the address of each person listed above is
First Union National Bank of North Carolina, One First Union Center, Charlotte,
NC 28288.
-4-
FFB U.S. TREASURY
Draft: 8-18-95
Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of this
day of August, 1995, by and between Evergreen Investment Trust, a Massachusetts
business trust (the "Evergreen Trust"), with its principal place of business at
2500 Westchester Avenue, Purchase, New York 10577, with respect to its Evergreen
Treasury Money Market series(the "Acquiring Fund"), and FFB Funds Trust (the
"FFB Trust"), a Massachusetts business trust, with respect to its FFB U.S.
Treasury Fund series, with its principal place of business at 237 Park Avenue,
New York, New York 10017 (the "Selling Fund").
This Agreement is intended to be and is adopted as a plan of reorganization and
liquidation within the meaning of Section 368 (a)(1)(C) of the United States
Internal Revenue Code of 1986 (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of substantially all of the
assets of the Selling Fund in exchange solely for Class A shares of beneficial
interest, without par value, of the Acquiring Fund (the "Acquiring Fund Shares")
and the assumption by the Acquiring Fund of certain stated liabilities of the
Selling Fund and the distribution, after the Closing Date hereinafter referred
to, of the Acquiring Fund Shares to the shareholders of the Selling Fund in
liquidation of the Selling Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Selling Fund and the Acquiring Fund are separate investment series
of open-end, registered investment companies of the management type and the
Selling Fund owns securities which generally are assets of the character in
which the Acquiring Fund is permitted to invest;
WHEREAS, both Funds are authorized to issue their shares of beneficial interest;
WHEREAS, the Trustees of the Evergreen Trust have determined that the exchange
of substantially all of the assets of the Selling Fund for Acquiring Fund Shares
and the assumption of certain stated liabilities by the Acquiring Fund on the
terms and conditions hereinafter set forth is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing shareholders
of the Acquiring Fund will not be diluted as a result of the transactions
contemplated herein;
WHEREAS, the Trustees of the FFB Trust have determined that the Selling Fund
should exchange substantially all of its assets and certain of its liabilities
for Acquiring Fund Shares and that the interests of the existing shareholders of
the Selling Fund will not be diluted as a result of the transactions
contemplated herein;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND ASSUMPTION OF SELLING FUND LIABILITIES AND LIQUIDATION OF
THE SELLING FUND
1.1 The Exchange. Subject to the terms and conditions herein set forth and on
the basis of the representations and warranties contained herein, the Selling
Fund agrees to transfer the Selling Fund's assets as set forth in paragraph 1.2
to the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor (i) to
deliver to the Selling Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, determined by dividing the value of the
Selling Fund's net assets computed in the manner and as of the time and date set
forth in paragraph 2.1 by the ratio of the net asset value per share of the
shares of the Acquiring Fund and the Selling Fund computed in the manner and as
of the time and date set forth in paragraph 2.2 and (ii) to assume certain
liabilities of the Selling Fund, as set forth in paragraph 1.3. Such
transactions shall take place at the closing provided for in paragraph 3.1 (the
"Closing Date").
1.2 Assets to be Acquired. The assets of the Selling Fund to be acquired by the
Acquiring Fund shall consist of all property, including without limitation all
cash, securities, commodities and futures interests and dividends or interest
receivable, which are owned by the Selling Fund and any deferred or prepaid
expenses shown as an asset on the books of the Selling Fund on the Closing Date.
The Selling Fund has provided the Acquiring Fund with its most recent audited
financial statements which contain a list of all of Selling Fund's assets as of
the date thereof. The Selling Fund hereby represents that as of the date of the
execution of this Agreement there have been no changes in its financial position
as reflected in said financial statements other than those occurring in the
ordinary course of its business in connection with the purchase and sale of
securities and the payment of its normal operating expenses. The Selling Fund
reserves the right to sell any of such securities but will not, without the
prior written approval of the Acquiring Fund, acquire any additional securities
other than securities of the type in which the Acquiring Fund is permitted to
invest. The Acquiring Fund will, within a reasonable time prior to the Closing
Date, furnish the Selling Fund with a statement of the Acquiring Fund's
investment objectives, policies and restrictions and a list of the securities,
if any, on the Selling Fund's list referred to in the second sentence of this
paragraph which do not conform to the Acquiring Fund's investment objectives,
policies, and restrictions. In the event that the Selling Fund holds any
investments which the Acquiring Fund may not hold, the Selling Fund will dispose
of such securities prior to the Closing Date. In addition, if it is determined
that the Selling Fund and the Acquiring Fund portfolios, when aggregated, would
contain investments exceeding certain percentage limitations imposed upon the
Acquiring Fund with respect to such investments, the Selling Fund if requested
by the Acquiring Fund will dispose of a sufficient amount of such investments as
may be necessary to avoid violating such limitations as of the Closing Date.
1.3 Liabilities to be Assumed. The Selling Fund will endeavor to discharge all
of its known liabilities and obligations prior to the Closing Date. The
Acquiring Fund shall assume only those liabilities, expenses, costs, charges and
reserves reflected on a Statement of Assets and Liabilities of the Selling Fund
prepared by Furman Selz Incorporated, the administrator of the Selling Fund, as
of the Valuation Date (as defined in paragraph 2.1), in accordance with
generally accepted accounting principles consistently applied from the prior
audited period. The Acquiring Fund shall assume only those liabilities of the
Selling Fund reflected in such Statement of Assets and Liabilities and shall not
assume any other liabilities, whether absolute or contingent, known or unknown,
accrued or unaccrued, all of which shall remain the obligation of the Selling
Fund.
1.4 Liquidation and Distribution. As soon after the Closing Date as is
conveniently practicable (the "Liquidation Date"), (a) the Selling Fund will
liquidate and distribute pro rata to the Selling Fund's shareholders of record,
determined as of the close of business on the Closing Date (the "Selling Fund
Shareholders"), the Acquiring Fund Shares received by the Selling Fund pursuant
to paragraph 1.1. and (b) the Selling Fund will thereupon proceed to dissolve as
set forth in paragraph 1.8 below. Such
-2-
liquidation and distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Selling Fund on the
books of the Acquiring Fund, to open accounts on the share records of the
Acquiring Fund in the names of the Selling Fund Shareholders and representing
the respective pro rata number of the Acquiring Fund Shares due such
shareholders. All issued and outstanding shares of the Selling Fund will
simultaneously be canceled on the books of the Selling Fund. The Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with such exchange.
1.5 Ownership of Shares. Ownership of Acquiring Fund Shares will be shown on the
books of the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will
be issued in the manner described in the combined Prospectus and Proxy Statement
on Form N-14 to be distributed to shareholders of the Selling Fund as described
in Section 5.
1.6 Transfer Taxes. Any transfer taxes payable upon issuance of the Acquiring
Fund Shares in a name other than the registered holder of the Selling Fund
shares on the books of the Selling Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.7 Reporting Responsibility. Any reporting responsibility of the Selling Fund
is and shall remain the responsibility of the Selling Fund up to and including
the Closing Date and such later date on which the Selling Fund is terminated.
1.8 Termination. The Selling Fund shall be terminated promptly following the
Closing Date and the making of all distributions pursuant to paragraph 1.4.
ARTICLE II
VALUATION
2.1 Valuation of Assets. The value of the Selling Fund's assets to be acquired
by the Acquiring Fund hereunder shall be the value of such assets computed as of
the close of business on the New York Stock Exchange on the Closing Date (such
time and date being hereinafter called the "Valuation Date"), using the
valuation procedures set forth in the Evergreen Trust's Declaration of Trust and
the Acquiring Fund's then current prospectus and statement of additional
information or such other valuation procedures as shall be mutually agreed upon
by the parties.
2.2 Valuation of Shares. The net asset value of each class of Acquiring Fund
Shares shall be the net asset value per share computed as of the close of
business on the New York Stock Exchange on the Valuation Date, using the
valuation procedures set forth in the Evergreen Trust's Declaration of Trust and
the Acquiring Fund's then current prospectus and statement of additional
information.
2.3 Shares to be Issued. The number of the Acquiring Fund Shares of each class
to be issued (including fractional shares, if any) in exchange for the Selling
Fund's assets shall be determined by dividing the net asset value per share of
the Selling Fund attributable to each of its classes by the net asset value per
share of the respective classes of the Acquiring Fund determined in accordance
with paragraph 2.2.
2.4 Determination of Value. All computations of value shall be made by State
Street Bank and Trust Company in accordance with its regular practice in pricing
the shares and assets of the Acquiring Fund.
-3-
ARTICLE III
CLOSING AND CLOSING DATE
3.1 Closing Date. The Closing (the "Closing") shall take place on January 19,
1996 or such other date as the parties may agree to in writing (the "Closing
Date"). All acts taking place at the Closing shall be deemed to take place
simultaneously as of the close of business on the Closing Date unless otherwise
provided. The Closing shall be held as of 9:00 o'clock a.m. at the offices of
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577, or at such other time and/or place as the parties may agree.
3.2 Custodian's Certificate. First Fidelity Bank, N.A., as custodian for the
Selling Fund (the "Custodian"), shall deliver at the Closing a certificate of an
authorized officer stating that: (a) the Selling Fund's portfolio securities,
cash, and any other assets shall have been delivered in proper form to the
Acquiring Fund on the Closing Date and (b) all necessary taxes including all
applicable Federal and state stock transfer stamps, if any, shall have been
paid, or provision for payment shall have been made, in conjunction with the
delivery of portfolio securities by the Selling Fund.
3.3 Effect of Suspension in Trading. In the event that on the Valuation Date (a)
the New York Stock Exchange or another primary trading market for portfolio
securities of the Acquiring Fund or the Selling Fund shall be closed to trading
or trading thereon shall be restricted, or (b) trading or the reporting of
trading on said Exchange or elsewhere shall be disrupted so that accurate
appraisal of the value of the net assets of the Acquiring Fund or the Selling
Fund is impracticable, the Closing Date shall be postponed until the first
business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.4 Transfer Agent's Certificate. First Fidelity Bank, N.A., as transfer agent
for the Selling Fund shall deliver at the Closing a certificate of an authorized
officer stating that its records contain the names and addresses of the Selling
Fund Shareholders and the number and percentage ownership of outstanding shares
owned by each such shareholder immediately prior to the Closing. The Acquiring
Fund shall issue and deliver or cause its transfer agent to issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date to the Secretary of the FFB Trust , or provide evidence satisfactory to the
Selling Fund that such Acquiring Fund Shares have been credited to the Selling
Fund's account on the books of the Acquiring Fund. At the Closing each party
shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts and other documents as such other party or its
counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations of the Selling Fund. The Selling Fund represents and
warrants to the Acquiring Fund as follows:
(a) The Selling Fund is a separate investment series of a Massachusetts business
trust duly organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts;
(b) The Selling Fund is a separate investment series of a registered investment
company classified as a management company of the open-end type and its
registration with the Securities and Exchange
-4-
Commission (the "Commission") as an investment company under the Investment
Company Act of 1940, as amended (the "1940 Act") is in full force and effect;
(c) The current prospectus and statement of additional information of the
Selling Fund conform in all material respects to the applicable requirements of
the Securities Act of 1933, as amended (the "1933 Act") and the 1940 Act and the
rules and regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(d) The Selling Fund is not, and the execution, delivery and performance of this
Agreement (subject to shareholder approval) will not, result in a violation of
any provision of the FFB Trust's Declaration of Trust or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
the Selling Fund is a party or by which it is bound;
(e) The Selling Fund has no material contracts or other commitments (other than
this Agreement) which will be terminated with liability to it prior to the
Closing Date;
(f) Except as otherwise disclosed in writing to and accepted by the Acquiring
Fund, no litigation, administrative proceeding or investigation of or before any
court or governmental body is presently pending or to its knowledge threatened
against the Selling Fund or any of its properties or assets which, if adversely
determined, would materially and adversely affect its financial condition, the
conduct of its business or the ability of the Selling Fund to carry out the
transactions contemplated by this Agreement. The Selling Fund knows of no facts
which might form the basis for the institution of such proceedings and is not a
party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects its business
or its ability to consummate the transactions herein contemplated;
(g) The financial statements of the Selling Fund at February 28, 1995 have been
audited by KPMG Peat Marwick LLP, certified public accountants, and are in
accordance with generally accepted accounting principles consistently applied,
and such statements (copies of which have been furnished to the Acquiring Fund)
fairly reflect the financial condition of the Selling Fund as of such date, and
there are no known contingent liabilities of the Selling Fund as of such date
not disclosed therein;
(h) Since February 28, 1995 there has not been any material adverse change in
the Selling Fund's financial condition, assets, liabilities or business other
than changes occurring in the ordinary course of business, or any incurrence by
the Selling Fund of indebtedness maturing more than one year from the date such
indebtedness was incurred, except as otherwise disclosed to and accepted by the
Acquiring Fund. For the purposes of this subparagraph (h), a decline in the net
asset value of the Selling Fund shall not constitute a material adverse change;
(i) At the Closing Date, all Federal and other tax returns and reports of the
Selling Fund required by law to have been filed by such dates shall have been
filed, and all Federal and other taxes shown due on said returns and reports
shall have been paid, or provision shall have been made for the payment thereof
and to the best of the Selling Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns;
(j) For each fiscal year of its operation, the Selling Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company and has distributed in each
-5-
such year all net investment income and realized capital gains;
(k) All issued and outstanding shares of the Selling Fund are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the Selling Fund (except that, under Massachusetts law,
Selling Fund Shareholders could, under certain circumstances be held personally
liable for obligations of the Selling Fund). All of the issued and outstanding
shares of the Selling Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the transfer agent as
provided in paragraph 3.4. The Selling Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of the
Selling Fund shares, nor is there outstanding any security convertible into any
of the Selling Fund shares;
(l) At the Closing Date, the Selling Fund will have good and marketable title to
the Selling Fund's assets to be transferred to the Acquiring Fund pursuant to
paragraph 1.2 and full right, power, and authority to sell, assign, transfer and
deliver such assets hereunder, and upon delivery and payment for such assets,
the Acquiring Fund will acquire good and marketable title thereto, subject to no
restrictions on the full transfer thereof, including such restrictions as might
arise under the 1933 Act, other than as disclosed to the Acquiring Fund and
accepted by the Acquiring Fund;
(m) The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Selling Fund and, subject
to approval by the Selling Fund Shareholders, this Agreement constitutes a valid
and binding obligation of the Selling Fund, enforceable in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(n) The information to be furnished by the Selling Fund for use in no-action
letters, applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material respects and
shall comply in all material respects with Federal securities and other laws and
regulations thereunder applicable thereto;
(o) The proxy statement of the Selling Fund to be included in the Registration
Statement referred to in paragraph 5.7 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not misleading.
4.2 Representations of the Acquiring Fund. The Acquiring Fund represents and
warrants to the Selling Fund as follows:
(a) The Acquiring Fund is a separate investment series of a Massachusetts
business trust duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts.
(b) The Acquiring Fund is a separate investment series of a Massachusetts
business trust that is registered as an investment company classified as a
management company of the open-end type and its registration with the Commission
as an investment company under the 1940 Act is in full force and effect;
-6-
(c) The current prospectus and statement of additional information of the
Acquiring Fund conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(d) The Acquiring Fund is not, and the execution, delivery and performance of
this Agreement will not, result in a violation of Evergreen Trust's Declaration
of Trust or By-Laws or of any agreement, indenture, instrument, contract, lease
or other undertaking to which the Acquiring Fund is a party or by which it is
bound;
(e) Except as otherwise disclosed in writing to the Selling Fund and accepted by
the Selling Fund, no litigation, administrative proceeding or investigation of
or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquiring Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect its
financial condition and the conduct of its business or the ability of the
Acquiring Fund to carry out the transactions contemplated by this Agreement. The
Acquiring Fund knows of no facts which might form the basis for the institution
of such proceedings and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially and
adversely affects its business or its ability to consummate the transactions
contemplated herein;
(f) The financial statements of the Acquiring Fund at December 31, 1994, have
been audited by KPMG Peat Marwick LLP, certified public accountants, and are in
accordance with generally accepted accounting principles consistently applied,
and such statements (copies of which have been furnished to the Selling Fund)
fairly reflect the financial condition of the Acquiring Fund as of such date,
and there are no known contingent liabilities affecting the Acquiring Fund as of
such date not disclosed therein;
(g) Since December 31, 1994 there has not been any material adverse change in
the Acquiring Fund's financial condition, assets, liabilities or business other
than changes occurring in the ordinary course of business, or any incurrence by
the Acquiring Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to and accepted by
the Acquiring Fund. For the purposes of this subparagraph (g), a decline in the
net asset value of the Acquiring Fund shall not constitute a material adverse
change;
(h) At the Closing Date, all Federal and other tax returns and reports of the
Acquiring Fund required by law then to be filed by such dates shall have been
filed, and all Federal and other taxes shown due on said returns and reports
shall have been paid or provision shall have been made for the payment thereof
and to the best of the Acquiring Fund's knowledge, no such return is currently
under audit and no assessment has been asserted with respect to such returns;
(i) For each fiscal year of its operation the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company and has distributed in each such year all net
investment income and realized capital gains;
(j) All issued and outstanding Acquiring Fund Shares are, and at the Closing
Date will be, duly and validly issued and outstanding, fully paid and
non-assessable (except that, under Massachusetts law, shareholders of the
Acquiring Fund could, under certain circumstances, be held personally liable for
obligations of the Acquiring Fund). The Acquiring Fund does not have outstanding
any options, warrants or other rights to subscribe for or purchase any Acquiring
Fund Shares, nor is there
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outstanding any security convertible into any Acquiring Fund Shares;
(k) The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Acquiring Fund, and this
Agreement constitutes a valid and binding obligation of the Acquiring Fund
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;
(l) The Acquiring Fund Shares to be issued and delivered to the Selling Fund,
for the account of the Selling Fund Shareholders, pursuant to the terms of this
Agreement will at the Closing Date have been duly authorized and, when so issued
and delivered, will be duly and validly issued Acquiring Fund Shares, and will
be fully paid and non-assessable (except that, under Massachusetts law,
shareholders of the Acquiring Fund could, under certain circumstances, be held
personally liable for obligations of the Acquiring Fund);
(m) The information to be furnished by the Acquiring Fund for use in no-action
letters, applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material respects and
shall comply in all material respects with Federal securities and other laws and
regulations applicable thereto;
(n) The Prospectus and Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund ) will, on the
effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading; and
(o) The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state Blue Sky or securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE SELLING FUND
5. 1 Operation in Ordinary Course. The Acquiring Fund and the Selling Fund each
will operate its business in the ordinary course between the date hereof and the
Closing Date, it being understood that such ordinary course of business will
include customary dividends and distributions.
5.2 Approval of Shareholders. The FFB Trust will call a meeting of the Selling
Fund Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Investment Representation. The Selling Fund covenants that the Acquiring
Fund Shares to be issued hereunder are not being acquired for the purpose of
making any distribution thereof other than in accordance with the terms of this
Agreement.
5.4 Additional Information. The Selling Fund will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the
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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 Evergreen Trust's President or
Vice President and its Treasurer or Assistant Treasurer, in form and substance
reasonably satisfactory to the Selling Fund and dated as of the Closing Date, to
such effect and as to such other matters as the Selling Fund shall reasonably
request; and
6.2 The Selling Fund shall have received on the Closing Date an opinion from
Sullivan & Worcester, counsel to the Acquiring Fund, dated as of the Closing
Date, in a form reasonably satisfactory to the Selling Fund, covering the
following points:
That (a) the Acquiring Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and has the power
to own all of its properties and assets and to carry on its business as
presently conducted; (b) this Agreement has been duly authorized, executed and
delivered by the Acquiring Fund, and, assuming that the Prospectus and Proxy
Statement, and Registration Statement comply with the 1933 Act, the 1934 Act and
the 1940 Act and the rules and regulations thereunder and, assuming due
authorization, execution and delivery of this Agreement by the Selling Fund, is
a valid and binding
-9-
obligation of the Acquiring Fund enforceable against the Acquiring Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and to general equity principles; (c) assuming that a
consideration therefor not less than the net asset value thereof has been paid,
the Acquiring Fund Shares to be issued and delivered to the Selling Fund on
behalf of the Selling Fund Shareholders as provided by this Agreement are duly
authorized and upon such delivery will be legally issued and outstanding and
fully paid and non-assessable (except that, under Massachusetts law,
shareholders of the Acquiring Fund could, under certain circumstances, be held
personally liable for obligations of the Acquiring Fund), and no shareholder of
the Acquiring Fund has any preemptive rights in respect thereof; (d) the
execution and delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, result in a violation of the
Evergreen Trust's Declaration of Trust or By-Laws or any provision of any
material agreement, indenture, instrument, contract, lease or other undertaking
(in each case known to such counsel) to which the Acquiring Fund is a party or
by which it or any of its properties may be bound or to the knowledge of such
counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree to which the Acquiring Fund is
a party or by which it is bound; (e) to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the Commonwealth of Massachusetts, is required for the
consummation by the Acquiring Fund of the transactions contemplated herein,
except such as have been obtained under the 1933 Act, the 1934 Act and the 1940
Act, and such as may be required under state securities laws; (f) only insofar
as they relate to the Acquiring Fund, the descriptions in the Prospectus and
Proxy Statement of statutes, legal and governmental proceedings and material
contracts, if any, are accurate and fairly present the information required to
be shown; (g) such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Acquiring Fund, existing on or
before the effective date of the Registration Statement or the Closing Date
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement which are not described or filed as
required; (h) the Acquiring Fund is a separate investment series of a
Massachusetts business trust registered as an investment company under the 1940
Act and to such counsel's best knowledge, such registration with the Commission
as an investment company under the 1940 Act is in full force and effect; and (i)
to the knowledge of such counsel, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or threatened as to the Acquiring Fund or any of its properties or assets and
the Acquiring Fund is not a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body, which materially and
adversely affects its business, other than as previously disclosed in the
Registration Statement. In addition, such counsel shall also state that they
have participated in conferences with officers and other representatives of the
Acquiring Fund at which the contents of the Prospectus and Proxy Statement and
related matters were discussed and, although they are not passing upon and do
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Prospectus and Proxy Statement (except to the extent
indicated in paragraph (f) of their above opinion), on the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of the
Evergreen Trust's officers and other representatives of the Acquiring Fund), no
facts have come to their attention that lead them to believe that the Prospectus
and Proxy Statement as of its date, as of the date of the Selling Fund
Shareholders' meeting, and as of the Closing Date, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein regarding the Acquiring Fund or necessary, in the light of the
circumstances under which they were made, to make the statements therein
regarding the Acquiring Fund not misleading. Such opinion may state that such
counsel does not express any opinion or belief as to the financial statements or
any financial or statistical data, or as to the information relating to the
Selling Fund, contained in the Prospectus and Proxy Statement or the
Registration Statement, and that such opinion is solely for the benefit of the
-10-
FFB Trust and the Selling Fund. Such opinion shall contain such other
assumptions and limitations as shall be in the opinion of Sullivan & Worcester
appropriate to render the opinions expressed therein.
In this paragraph 6.2, references to Prospectus and Proxy Statement include
and relate to only the text of such Prospectus and Proxy Statement and not to
any exhibits or attachments thereto or to any documents incorporated by
reference therein.
6.3 The merger between First Union Corporation and First Fidelity Corporation
shall be completed prior to the Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions provided
for herein shall be subject, at its election, to the performance by the Selling
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
7.1 All representations, covenants and warranties of the Selling Fund contained
in this Agreement shall be true and correct as of the date hereof and as of the
Closing Date with the same force and effect as if made on and as of the Closing
Date, and the Selling Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by the FFB Trust's President or
Vice President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquiring Fund and, dated as of the Closing Date, to such
effect and as to such other matters as the Acquiring Fund shall reasonably
request;
7.2 The Selling Fund shall have delivered to the Acquiring Fund a statement of
the Selling Fund's assets and liabilities, together with a list of the Selling
Fund's portfolio securities showing the tax costs of such securities by lot and
the holding periods of such securities, as of the Closing Date, certified by the
Treasurer of the FFB Trust; and
7.3 The Acquiring Fund shall have received on the Closing Date an opinion of
Baker & McKenzie, counsel to the Selling Fund, in a form satisfactory to the
Acquiring Fund covering the following points:
That (a) the Selling Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and has the power
to own all of its properties and assets and to carry on its business as
presently conducted; (b) this Agreement has been duly authorized, executed and
delivered by the Selling Fund, and, assuming that the Prospectus and Proxy
Statement, and Registration Statement comply with the 1933 Act, the 1934 Act and
the 1940 Act and the rules and regulations thereunder and, assuming due
authorization, execution and delivery of this Agreement by the Acquiring Fund,
is a valid and binding obligation of the Selling Fund enforceable against the
Selling Fund in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and to general equity principles; (c) the
execution and delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, result in a violation of the FFB
Trust's Declaration of Trust or By-laws, or any provision of any material
agreement, indenture, instrument, contract, lease or other undertaking (in each
case known to such counsel) to which the Selling Fund is a party or by which it
or any of its properties may be bound or, to the knowledge of such counsel,
result in the acceleration of any obligation or the imposition of
-11-
any penalty, under any agreement, judgment, or decree to which the Selling Fund
is a party or by which it is bound; (d) to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the Commonwealth of Massachusetts is required for the
consummation by the Selling Fund of the transactions contemplated herein, except
such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act,
and such as may be required under state securities laws; (e) only insofar as
they relate to the Selling Fund, the descriptions in the Prospectus and Proxy
Statement of statutes, legal and governmental proceedings and material
contracts, if any, are accurate and fairly present the information required to
be shown; (f) such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Selling Fund existing on or
before the date of mailing of the Prospectus and Proxy Statement and the Closing
Date, required to be described in the Prospectus and Proxy Statement or to be
filed as an exhibit to the Registration Statement which are not described or
filed as required; (g) the Selling Fund is a separate investment series of a
Massachusetts business trust registered as an investment company under the 1940
Act and to such counsel's best knowledge, such registration with the Commission
as an investment company under the 1940 Act is in full force and effect; (h) to
the knowledge of such counsel, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or threatened as to the Selling Fund or any of its respective properties or
assets and the Selling Fund is neither a party to nor subject to the provisions
of any order, decree or judgment of any court or governmental body, which
materially and adversely affects its business other than as previously disclosed
in the Prospectus and Proxy Statement; (i) assuming that a consideration
therefor not less than the net asset value thereof has been paid, and assuming
that such shares were issued in accordance with the terms of the Selling Fund's
registration statement, or any amendment thereto, in effect at the time of such
issuance, all issued and outstanding shares of the Selling Fund are legally
issued and fully paid and non-assessable (except that, under Massachusetts law,
Selling Fund Shareholders could, under certain circumstances be held personally
liable for obligations of the Selling Fund). Such counsel shall also state that
they have participated in conferences with officers and other representatives of
the Selling Fund at which the contents of the Prospectus and Proxy Statement and
related matters were discussed and, although they are not passing upon and do
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Prospectus and Proxy Statement (except to the extent
indicated in paragraph (e) of their above opinion ), on the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of the
FFB Trust's officers and other representatives of the Selling Fund ), no facts
have come to their attention that lead them to believe that the Prospectus and
Proxy Statement as of its date, as of the date of the Selling Fund Shareholders'
meeting, and as of the Closing Date, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein regarding
the Selling Fund or necessary, in the light of the circumstances under which
they were made, to make the statements therein regarding the Selling Fund not
misleading. Such opinion may state that such counsel does not express any
opinion or belief as to the financial statements or any financial or statistical
data, or as to the information relating to the Acquiring Fund, contained in the
Prospectus and Proxy Statement or Registration Statement, and that such opinion
is solely for the benefit of the Evergreen Trust and the Acquiring Fund. Such
opinion shall contain such other assumptions and limitations as shall be in the
opinion of Baker & McKenzie appropriate to render the opinions expressed therein
and shall indicate, with respect to matters of Massachusetts law, that as Baker
& McKenzie are not admitted to the bar of Massachusetts, such opinions are based
either upon the review of published statutes, case and rules and regulations of
the Commonwealth of Massachusetts or upon an opinion of Massachusetts counsel.
In this paragraph 7.3, references to Prospectus and Proxy Statement include
and relate to only the text of such Prospectus and Proxy Statement and not to
any exhibits or attachments thereto or to any documents incorporated by
reference therein.
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7.4 The merger between First Union Corporation and First Fidelity Bancorporation
shall be completed prior to the Closing Date.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND
THE SELLING FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Selling Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Selling Fund in accordance with the provisions of the FFB Trust's Declaration of
Trust and By-Laws and certified copies of the resolutions evidencing such
approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, neither the Acquiring Fund nor the Selling Fund
may waive the conditions set forth in this paragraph 8.1;
8.2 On the Closing Date, the Commission shall not have issued an unfavorable
report under Section 25(b) of the 1940 Act, nor instituted any proceeding
seeking to enjoin the consummation of the transactions contemplated by this
Agreement under Section 25(c) of the 1940 Act and no action, suit or other
proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the transactions contemplated
herein;
8.3 All required consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky securities authorities. including any
necessary "no-action" positions of and exemptive orders from such Federal and
state authorities) to permit consummation of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse effect
on the assets or properties of the Acquiring Fund or the Selling Fund, provided
that either party hereto may for itself waive any of such conditions;
8.4 The Registration Statement shall have become effective under the 1933 Act
and no stop orders suspending the effectiveness thereof shall have been issued
and, to the best knowledge of the parties hereto, no investigation or proceeding
for that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act;
8.5 The Selling Fund shall have declared a dividend or dividends which, together
with all previous such dividends, shall have the effect of distributing to the
Selling Fund Shareholders all of the Selling Fund's investment company taxable
income for all taxable years ending on or prior to the Closing Date (computed
without regard to any deduction for dividends paid) and all of its net capital
gain realized in all taxable years ending on or prior to the Closing Date (after
reduction for any capital loss carryforward);
8.6 The parties shall have received a favorable opinion of Sullivan & Worcester,
addressed to the Acquiring Fund and the Selling Fund substantially to the effect
that for Federal income tax purposes:
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(a) The transfer of substantially all of the Selling Fund assets in
exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund
of certain identified liabilities of the Selling Fund followed by the
distribution of the Acquiring Fund Shares to the Selling Fund in dissolution and
liquidation of the Selling Fund, will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code and the Acquiring Fund and the
Selling Fund will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code; (b) no gain or loss will be recognized by the
Acquiring Fund upon the receipt of the assets of the Selling Fund solely in
exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund
of certain identified liabilities of the Selling Fund; (c) no gain or loss will
be recognized by the Selling Fund upon the transfer of the Selling Fund assets
to the Acquiring Fund in exchange for the Acquiring Fund Shares and the
assumption by the Acquiring Fund of certain identified liabilities of the
Selling Fund or upon the distribution ( whether actual or constructive ) of the
Acquiring Fund Shares to Selling Fund Shareholders in exchange for their shares
of the Selling Fund; (d) no gain or loss will be recognized by Selling Fund
Shareholders upon the exchange of their Selling Fund shares for the Acquiring
Fund Shares in liquidation of the Selling Fund; (e) the aggregate tax basis for
the Acquiring Fund Shares received by each Selling Fund Shareholder pursuant to
the Reorganization will be the same as the aggregate tax basis of the Selling
Fund shares held by such shareholder immediately prior to the Reorganization,
and the holding period of the Acquiring Fund Shares to be received by each
Selling Fund Shareholder will include the period during which the Selling Fund
shares exchanged therefor were held by such shareholder (provided the Selling
Fund shares were held as capital assets on the date of the Reorganization); and
(f) the tax basis of the Selling Fund assets acquired by the Acquiring Fund will
be the same as the tax basis of such assets to the Selling Fund immediately
prior to the Reorganization, and the holding period of the assets of the Selling
Fund in the hands of the Acquiring Fund will include the period during which
those assets were held by the Selling Fund. Notwithstanding anything herein to
the contrary, neither the Acquiring Fund nor the Selling Fund may waive the
conditions set forth in this paragraph 8.6.
8.7 The Acquiring Fund shall have received from KPMG Peat Marwick LLP a letter
addressed to the Acquiring Fund, in form and substance satisfactory to the
Acquiring Fund, to the effect that (i) they are independent certified public
accountants with respect to the Selling Fund within the meaning of the 1933 Act
and the applicable published rules and regulations thereunder; (ii) on the basis
of limited procedures agreed upon by the Acquiring Fund and described in such
letter (but not an examination in accordance with generally accepted auditing
standards) consisting of a reading of any unaudited pro forma financial
statements included in the Registration Statement and Prospectus and Proxy
Statement, and inquiries of appropriate officials of the FFB Trust responsible
for financial and accounting matters, nothing came to their attention which
caused them to believe that such unaudited pro forma financial statements do not
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the published rules and regulations thereunder;
or (iii) on the basis of limited procedures agreed upon by the Acquiring Fund
and described in such letter ( but not an examination in accordance with
generally accepted auditing standards), the Capitalization Table appearing in
the Registration Statement and Prospectus and Proxy Statement, has been obtained
from and is consistent with the accounting records of the Selling Fund; (iv) on
the basis of limited procedures agreed upon by the Acquiring Fund and described
in such letter (but not an examination in accordance with generally accepted
auditing standards), the pro forma financial statements which are included in
the Registration Statement and Prospectus and Proxy Statement, were prepared
based on the valuation of the Selling Fund's assets in accordance with the
Evergreen Trust's Declaration of Trust and the Acquiring Fund's then current
prospectus and statement of additional information pursuant to procedures
customarily utilized by the Acquiring Fund in valuing its own assets (such
procedures having been previously described to KPMG Peat Marwick LLP in writing
by the Acquiring Fund); and
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(v) on the basis of limited procedures agreed upon by the Acquiring Fund and
described in the letter (but not an examination in accordance with generally
accepted auditing standards) the data utilized in the calculations of the
projected expense ratio appearing in the Registration Statement and Prospectus
and Proxy Statement agree with underlying accounting records of the Selling Fund
or to written estimates by Selling Fund's management and were found to be
mathematically correct.
In addition, the Acquiring Fund shall have received from KPMG Peat Marwick
LLP a letter addressed to the Acquiring Fund dated on the Closing Date, in form
and substance satisfactory to the Acquiring Fund, to the effect that on the
basis of limited procedures agreed upon by the Acquiring Fund (but not an
examination in accordance with generally accepted auditing standards) the
calculation of net asset value per share of the Selling Fund as of the Valuation
Date was determined in accordance with generally accepted accounting practices
and the portfolio valuation practices of the Acquiring Fund.
8.8 The Selling Fund shall have received from KPMG Peat Marwick LLP a letter
addressed to the Selling Fund, in form and substance satisfactory to the Selling
Fund, to the effect that (i) they are independent certified public accountants
with respect to the Acquiring Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder; (ii) on the basis of
limited procedures agreed upon by the Selling Fund and described in such letter
(but not an examination in accordance with generally accepted auditing
standards) consisting of a reading of any unaudited pro forma financial
statements included in the Registration Statement and Prospectus and Proxy
Statement, and inquiries of appropriate officials of the Evergreen Trust
responsible for financial and accounting matters, nothing came to their
attention which caused them to believe that such unaudited pro forma financial
statements do not comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the published rules and regulations
thereunder; (iii) on the basis of limited procedures agreed upon by the Selling
Fund and described in such letter (but not an examination in accordance with
generally accepted auditing standards), the Capitalization Table appearing in
the Registration Statement and Prospectus and Proxy Statement, has been obtained
from and is consistent with the accounting records of the Acquiring Fund; and
(iv) on the basis of limited procedures agreed upon by the Selling Fund (but not
an examination in accordance with generally accepted auditing standards) the
data utilized in the calculations of the projected expense ratio appearing in
the Registration Statement and Prospectus and Proxy Statement agree with
underlying accounting records of the Acquiring Fund or to written estimates by
each Fund's management and were found to be mathematically correct.
8.9 The Acquiring Fund and the Selling Fund shall also have received from KPMG
Peat Marwick LLP a letter addressed to the Acquiring Fund and the Selling Fund,
dated on the Closing Date in form and substance satisfactory to the Funds,
setting forth the Federal income tax implications relating to capital loss
carryforwards (if any) of the Selling Fund and the related impact, if any, of
the proposed transfer of all or substantially all of the assets of the Selling
Fund to the Acquiring Fund and the ultimate dissolution of the Selling Fund,
upon the shareholders of the Selling Fund.
ARTICLE IX
BROKERAGE FEES AND EXPENSES
9.1 The Acquiring Fund and the Selling Fund each represents and warrants to the
other that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
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9.2 Except as otherwise provided for herein, all expenses of the transactions
contemplated by this Agreement incurred by the Selling Fund and the Acquiring
Fund will be borne by First Union National Bank of North Carolina ("FUNB"). Such
expenses include, without limitation, (i) expenses incurred in connection with
the entering into and the carrying out of the provisions of this Agreement; (ii)
expenses associated with the preparation and filing of the Registration
Statement under the 1933 Act covering the Acquiring Fund Shares to be issued
pursuant to the provisions of this Agreement; (iii) registration or
qualification fees and expenses of preparing and filing such forms as are
necessary under applicable state securities laws to qualify the Acquiring Fund
Shares to be issued in connection herewith in each state in which the Selling
Fund Shareholders are resident as of the date of the mailing of the Prospectus
and Proxy Statement to such shareholders; (iv) postage; (v) printing; (vi)
accounting fees; (vii) legal fees; and (viii) solicitation cost of the
transaction. Not withstanding the foregoing, the Acquiring Fund shall pay its
own Federal and state registration fees. In the event that the merger of First
Fidelity Bancorporation and First Union Corporation is not completed, this
Agreement shall terminate. In such event, all expenses of the transactions
contemplated by this Agreement incurred by the Acquiring Fund will be borne by
FUNB and all expenses of the transactions 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
Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall
survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 In addition to the termination provisions set forth in paragraph 9.2, this
Agreement may be terminated by the mutual agreement of the Acquiring Fund and
the Selling Fund. In addition, either the Acquiring Fund or the Selling Fund may
at its option terminate this Agreement at or prior to the Closing Date because:
(a) of a breach by the other of any representation, warranty or agreement
contained herein to be performed at or prior to the Closing Date, if not cured
within 30 days; or
(b) a condition herein expressed to be precedent to the obligations of the
terminating party has not been met and it reasonably appears that it will not or
cannot be met.
11.2 In the event of any such termination, in the absence of willful default,
there shall be no liability for damages on the part of either the Acquiring Fund
or the Selling Fund, the Evergreen Trust or the FFB Trust or their respective
Trustees or officers, to the other party or its, Trustees or officers, but each
shall bear the expenses incurred by it incidental to the preparation and
carrying out of this Agreement as provided in paragraph 9.2.
-16-
ARTICLE XII
AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the Selling
Fund and the Acquiring Fund; provided, however, that following the meeting of
the Selling Fund Shareholders called by the FFB Trust pursuant to paragraph 5.2
of this Agreement, no such amendment may have the effect of changing the
provisions for determining the number of the Acquiring Fund Shares to be issued
to the Selling Fund Shareholders under this Agreement to the detriment of such
shareholders without their further approval.
ARTICLE XIII
NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy, overnight courier or certified mail addressed to:
the Acquiring Fund
Evergreen Investment Trust
2500 Westchester Avenue
Purchase, New York 10577
Attention: Joseph J. McBrien, Esq.
or to the Selling Fund
FFB Funds Trust
237 Park Avenue
New York, New York 10017
Attention: Edmund A. Hajim
ARTICLE XIV
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY
14.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
14.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder
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shall be made by any party without the written consent of the other party.
Nothing herein expressed or implied is intended or shall be construed to confer
upon or give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
14.5 It is expressly agreed to that the obligations of the Selling Fund and the
Acquiring Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the FFB Trust or the
Evergreen Trust, personally, but bind only the trust property of the Selling
Fund and the Acquiring Fund, as provided in the Declarations of Trust of the FFB
Trust and the Evergreen Trust. The execution and delivery of this Agreement have
been authorized by the Trustees of the FFB Trust on behalf of the Selling Fund,
and the Evergreen Trust on behalf of the Acquiring Fund and signed by authorized
officers of the FFB Trust and the Evergreen Trust, acting as such, and neither
such authorization by such Trustees nor such execution and delivery by such
officers shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the FFB Trust and the Evergreen Trust as provided in their
Declarations of Trust.
-18-
IN WITNESS WHEREOF, the parties have duly executed and sealed this Agreement,
all as of the date first written above.
EVERGREEN INVESTMENT TRUST
on behalf of Evergreen Treasury Money Market Fund
By:/s/ John J. Pileggi
Name: John J. Pileggi
Title: President
(Seal)
FFB FUNDS TRUST
on behalf of FFB U.S. Treasury Fund
By: /s/ Edmund A. Hajim
Name: Edmund A. Hajim
Title: President
-19-
FFB 100% U.S. TREASURY
Draft: 8-18-95 Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of this
day of August, 1995, by and between Evergreen Investment Trust, a Massachusetts
business trust (the "Evergreen Trust"), with its principal place of business at
2500 Westchester Avenue, Purchase, New York 10577, with respect to its Evergreen
Treasury Money Market Fund series (the "Acquiring Fund"), and FFB Funds Trust
(the "FFB Trust"), a Massachusetts business trust, with respect to its FFB 100%
U.S. Treasury Fund series, with its principal place of business at 237 Park
Avenue, New York, New York 10017 (the "Selling Fund").
This Agreement is intended to be and is adopted as a plan of reorganization and
liquidation within the meaning of Section 368 (a)(1)(C) of the United States
Internal Revenue Code of 1986 (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of substantially all of the
assets of the Selling Fund in exchange solely for Class A shares of beneficial
interest, without par value, of the Acquiring Fund (the "Acquiring Fund Shares")
and the assumption by the Acquiring Fund of certain stated liabilities of the
Selling Fund and the distribution, after the Closing Date hereinafter referred
to, of the Acquiring Fund Shares to the shareholders of the Selling Fund in
liquidation of the Selling Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Selling Fund and the Acquiring Fund are separate investment series
of open-end, registered investment companies of the management type and the
Selling Fund owns securities which generally are assets of the character in
which the Acquiring Fund is permitted to invest;
WHEREAS, both Funds are authorized to issue their shares of beneficial interest;
WHEREAS, the Trustees of the Evergreen Trust have determined that the exchange
of substantially all of the assets of the Selling Fund for Acquiring Fund Shares
and the assumption of certain stated liabilities by the Acquiring Fund on the
terms and conditions hereinafter set forth is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing shareholders
of the Acquiring Fund will not be diluted as a result of the transactions
contemplated herein;
WHEREAS, the Trustees of the FFB Trust have determined that the Selling Fund
should exchange substantially all of its assets and certain of its liabilities
for Acquiring Fund Shares and that the interests of the existing shareholders of
the Selling Fund will not be diluted as a result of the transactions
contemplated herein;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND ASSUMPTION OF SELLING FUND LIABILITIES AND LIQUIDATION OF
THE SELLING FUND
1.1 The Exchange. Subject to the terms and conditions herein set forth and on
the basis of the representations and warranties contained herein, the Selling
Fund agrees to transfer the Selling Fund's assets as set forth in paragraph 1.2
to the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor (i) to
deliver to the Selling Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, determined by dividing the value of the
Selling Fund's net assets computed in the manner and as of the time and date set
forth in paragraph 2.1 by the ratio of the net asset value per share of the
shares of the Acquiring Fund and the Selling Fund computed in the manner and as
of the time and date set forth in paragraph 2.2 and (ii) to assume certain
liabilities of the Selling Fund, as set forth in paragraph 1.3. Such
transactions shall take place at the closing provided for in paragraph 3.1 (the
"Closing Date").
1.2 Assets to be Acquired. The assets of the Selling Fund to be acquired by the
Acquiring Fund shall consist of all property, including without limitation all
cash, securities, commodities and futures interests and dividends or interest
receivable, which are owned by the Selling Fund and any deferred or prepaid
expenses shown as an asset on the books of the Selling Fund on the Closing Date.
The Selling Fund has provided the Acquiring Fund with its most recent audited
financial statements which contain a list of all of Selling Fund's assets as of
the date thereof. The Selling Fund hereby represents that as of the date of the
execution of this Agreement there have been no changes in its financial position
as reflected in said financial statements other than those occurring in the
ordinary course of its business in connection with the purchase and sale of
securities and the payment of its normal operating expenses. The Selling Fund
reserves the right to sell any of such securities but will not, without the
prior written approval of the Acquiring Fund, acquire any additional securities
other than securities of the type in which the Acquiring Fund is permitted to
invest. The Acquiring Fund will, within a reasonable time prior to the Closing
Date, furnish the Selling Fund with a statement of the Acquiring Fund's
investment objectives, policies and restrictions and a list of the securities,
if any, on the Selling Fund's list referred to in the second sentence of this
paragraph which do not conform to the Acquiring Fund's investment objectives,
policies, and restrictions. In the event that the Selling Fund holds any
investments which the Acquiring Fund may not hold, the Selling Fund will dispose
of such securities prior to the Closing Date. In addition, if it is determined
that the Selling Fund and the Acquiring Fund portfolios, when aggregated, would
contain investments exceeding certain percentage limitations imposed upon the
Acquiring Fund with respect to such investments, the Selling Fund if requested
by the Acquiring Fund will dispose of a sufficient amount of such investments as
may be necessary to avoid violating such limitations as of the Closing Date.
1.3 Liabilities to be Assumed. The Selling Fund will endeavor to discharge all
of its known liabilities and obligations prior to the Closing Date. The
Acquiring Fund shall assume only those liabilities, expenses, costs, charges and
reserves reflected on a Statement of Assets and Liabilities of the Selling Fund
prepared by Furman Selz Incorporated, the administrator of the Selling Fund, as
of the Valuation Date (as defined in paragraph 2.1), in accordance with
generally accepted accounting principles consistently applied from the prior
audited period. The Acquiring Fund shall assume only those liabilities of the
Selling Fund reflected in such Statement of Assets and Liabilities and shall not
assume any other liabilities, whether absolute or contingent, known or unknown,
accrued or unaccrued, all of which shall remain the obligation of the Selling
Fund.
1.4 Liquidation and Distribution. As soon after the Closing Date as is
conveniently practicable (the "Liquidation Date"), (a) the Selling Fund will
liquidate and distribute pro rata to the Selling Fund's shareholders of record,
determined as of the close of business on the Closing Date (the "Selling Fund
Shareholders"), the Acquiring Fund Shares received by the Selling Fund pursuant
to paragraph 1.1. and (b) the Selling Fund will thereupon proceed to dissolve as
set forth in paragraph 1.8 below. Such
-2-
liquidation and distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Selling Fund on the
books of the Acquiring Fund, to open accounts on the share records of the
Acquiring Fund in the names of the Selling Fund Shareholders and representing
the respective pro rata number of the Acquiring Fund Shares due such
shareholders. All issued and outstanding shares of the Selling Fund will
simultaneously be canceled on the books of the Selling Fund. The Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with such exchange.
1.5 Ownership of Shares. Ownership of Acquiring Fund Shares will be shown on the
books of the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will
be issued in the manner described in the combined Prospectus and Proxy Statement
on Form N-14 to be distributed to shareholders of the Selling Fund as described
in Section 5.
1.6 Transfer Taxes. Any transfer taxes payable upon issuance of the Acquiring
Fund Shares in a name other than the registered holder of the Selling Fund
shares on the books of the Selling Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.7 Reporting Responsibility. Any reporting responsibility of the Selling Fund
is and shall remain the responsibility of the Selling Fund up to and including
the Closing Date and such later date on which the Selling Fund is terminated.
1.8 Termination. The Selling Fund shall be terminated promptly following the
Closing Date and the making of all distributions pursuant to paragraph 1.4.
ARTICLE II
VALUATION
2.1 Valuation of Assets. The value of the Selling Fund's assets to be acquired
by the Acquiring Fund hereunder shall be the value of such assets computed as of
the close of business on the New York Stock Exchange on the Closing Date (such
time and date being hereinafter called the "Valuation Date"), using the
valuation procedures set forth in the Evergreen Trust's Declaration of Trust and
the Acquiring Fund's then current prospectus and statement of additional
information or such other valuation procedures as shall be mutually agreed upon
by the parties.
2.2 Valuation of Shares. The net asset value of each class of Acquiring Fund
Shares shall be the net asset value per share computed as of the close of
business on the New York Stock Exchange on the Valuation Date, using the
valuation procedures set forth in the Evergreen Trust's Declaration of Trust and
the Acquiring Fund's then current prospectus and statement of additional
information.
2.3 Shares to be Issued. The number of the Acquiring Fund Shares of each class
to be issued (including fractional shares, if any) in exchange for the Selling
Fund's assets shall be determined by dividing the net asset value per share of
the Selling Fund attributable to each of its classes by the net asset value per
share of the respective classes of the Acquiring Fund determined in accordance
with paragraph 2.2.
2.4 Determination of Value. All computations of value shall be made by State
Street Bank and Trust Company in accordance with its regular practice in pricing
the shares and assets of the Acquiring Fund.
-3-
ARTICLE III
CLOSING AND CLOSING DATE
3.1 Closing Date. The Closing (the "Closing") shall take place on January 19,
1996 or such other date as the parties may agree to in writing (the "Closing
Date"). All acts taking place at the Closing shall be deemed to take place
simultaneously as of the close of business on the Closing Date unless otherwise
provided. The Closing shall be held as of 9:00 o'clock a.m. at the offices of
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577, or at such other time and/or place as the parties may agree.
3.2 Custodian's Certificate. First Fidelity Bank, N.A., as custodian for the
Selling Fund (the "Custodian"), shall deliver at the Closing a certificate of an
authorized officer stating that: (a) the Selling Fund's portfolio securities,
cash, and any other assets shall have been delivered in proper form to the
Acquiring Fund on the Closing Date and (b) all necessary taxes including all
applicable Federal and state stock transfer stamps, if any, shall have been
paid, or provision for payment shall have been made, in conjunction with the
delivery of portfolio securities by the Selling Fund.
3.3 Effect of Suspension in Trading. In the event that on the Valuation Date (a)
the New York Stock Exchange or another primary trading market for portfolio
securities of the Acquiring Fund or the Selling Fund shall be closed to trading
or trading thereon shall be restricted, or (b) trading or the reporting of
trading on said Exchange or elsewhere shall be disrupted so that accurate
appraisal of the value of the net assets of the Acquiring Fund or the Selling
Fund is impracticable, the Closing Date shall be postponed until the first
business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.4 Transfer Agent's Certificate. First Fidelity Bank, N.A., as transfer agent
for the Selling Fund shall deliver at the Closing a certificate of an authorized
officer stating that its records contain the names and addresses of the Selling
Fund Shareholders and the number and percentage ownership of outstanding shares
owned by each such shareholder immediately prior to the Closing. The Acquiring
Fund shall issue and deliver or cause its transfer agent to issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date to the Secretary of the FFB Trust , or provide evidence satisfactory to the
Selling Fund that such Acquiring Fund Shares have been credited to the Selling
Fund's account on the books of the Acquiring Fund. At the Closing each party
shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts and other documents as such other party or its
counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations of the Selling Fund. The Selling Fund represents and
warrants to the Acquiring Fund as follows:
(a) The Selling Fund is a separate investment series of a Massachusetts business
trust duly organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts;
(b) The Selling Fund is a separate investment series of a registered investment
company classified as a management company of the open-end type and its
registration with the Securities and Exchange
-4-
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 June 30, 1995 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 June 30, 1995 there has not been any material adverse change in the
Selling Fund's financial condition, assets, liabilities or business other than
changes occurring in the ordinary course of business, or any incurrence by the
Selling Fund of indebtedness maturing more than one year from the date such
indebtedness was incurred, except as otherwise disclosed to and accepted by the
Acquiring Fund. For the purposes of this subparagraph (h), a decline in the net
asset value of the Selling Fund shall not constitute a material adverse change;
(i) At the Closing Date, all Federal and other tax returns and reports of the
Selling Fund required by law to have been filed by such dates shall have been
filed, and all Federal and other taxes shown due on said returns and reports
shall have been paid, or provision shall have been made for the payment thereof
and to the best of the Selling Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns;
(j) For each fiscal year of its operation, the Selling Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company and has distributed in each
-5-
such year all net investment income and realized capital gains;
(k) All issued and outstanding shares of the Selling Fund are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the Selling Fund (except that, under Massachusetts law,
Selling Fund Shareholders could, under certain circumstances be held personally
liable for obligations of the Selling Fund). All of the issued and outstanding
shares of the Selling Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the transfer agent as
provided in paragraph 3.4. The Selling Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of the
Selling Fund shares, nor is there outstanding any security convertible into any
of the Selling Fund shares;
(l) At the Closing Date, the Selling Fund will have good and marketable title to
the Selling Fund's assets to be transferred to the Acquiring Fund pursuant to
paragraph 1.2 and full right, power, and authority to sell, assign, transfer and
deliver such assets hereunder, and upon delivery and payment for such assets,
the Acquiring Fund will acquire good and marketable title thereto, subject to no
restrictions on the full transfer thereof, including such restrictions as might
arise under the 1933 Act, other than as disclosed to the Acquiring Fund and
accepted by the Acquiring Fund;
(m) The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Selling Fund and, subject
to approval by the Selling Fund Shareholders, this Agreement constitutes a valid
and binding obligation of the Selling Fund, enforceable in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(n) The information to be furnished by the Selling Fund for use in no-action
letters, applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material respects and
shall comply in all material respects with Federal securities and other laws and
regulations thereunder applicable thereto;
(o) The proxy statement of the Selling Fund to be included in the Registration
Statement referred to in paragraph 5.7 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not misleading.
4.2 Representations of the Acquiring Fund. The Acquiring Fund represents and
warrants to the Selling Fund as follows:
(a) The Acquiring Fund is a separate investment series of a Massachusetts
business trust duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts.
(b) The Acquiring Fund is a separate investment series of a Massachusetts
business trust that is registered as an investment company classified as a
management company of the open-end type and its registration with the Commission
as an investment company under the 1940 Act is in full force and effect;
-6-
(c) The current prospectus and statement of additional information of the
Acquiring Fund conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(d) The Acquiring Fund is not, and the execution, delivery and performance of
this Agreement will not, result in a violation of Evergreen Trust's Declaration
of Trust or By-Laws or of any agreement, indenture, instrument, contract, lease
or other undertaking to which the Acquiring Fund is a party or by which it is
bound;
(e) Except as otherwise disclosed in writing to the Selling Fund and accepted by
the Selling Fund, no litigation, administrative proceeding or investigation of
or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquiring Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect its
financial condition and the conduct of its business or the ability of the
Acquiring Fund to carry out the transactions contemplated by this Agreement. The
Acquiring Fund knows of no facts which might form the basis for the institution
of such proceedings and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially and
adversely affects its business or its ability to consummate the transactions
contemplated herein;
(f) The financial statements of the Acquiring Fund at December 31, 1994, have
been audited by KPMG Peat Marwick LLP, certified public accountants, and are in
accordance with generally accepted accounting principles consistently applied,
and such statements (copies of which have been furnished to the Selling Fund)
fairly reflect the financial condition of the Acquiring Fund as of such date,
and there are no known contingent liabilities affecting the Acquiring Fund as of
such date not disclosed therein;
(g) Since December 31, 1994 there has not been any material adverse change in
the Acquiring Fund's financial condition, assets, liabilities or business other
than changes occurring in the ordinary course of business, or any incurrence by
the Acquiring Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to and accepted by
the Acquiring Fund. For the purposes of this subparagraph (g), a decline in the
net asset value of the Acquiring Fund shall not constitute a material adverse
change;
(h) At the Closing Date, all Federal and other tax returns and reports of the
Acquiring Fund required by law then to be filed by such dates shall have been
filed, and all Federal and other taxes shown due on said returns and reports
shall have been paid or provision shall have been made for the payment thereof
and to the best of the Acquiring Fund's knowledge, no such return is currently
under audit and no assessment has been asserted with respect to such returns;
(i) For each fiscal year of its operation the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company and has distributed in each such year all net
investment income and realized capital gains;
(j) All issued and outstanding Acquiring Fund Shares are, and at the Closing
Date will be, duly and validly issued and outstanding, fully paid and
non-assessable (except that, under Massachusetts law, shareholders of the
Acquiring Fund could, under certain circumstances, be held personally liable for
obligations of the Acquiring Fund). The Acquiring Fund does not have outstanding
any options, warrants or other rights to subscribe for or purchase any Acquiring
Fund Shares, nor is there
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outstanding any security convertible into any Acquiring Fund Shares;
(k) The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Acquiring Fund, and this
Agreement constitutes a valid and binding obligation of the Acquiring Fund
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;
(l) The Acquiring Fund Shares to be issued and delivered to the Selling Fund,
for the account of the Selling Fund Shareholders, pursuant to the terms of this
Agreement will at the Closing Date have been duly authorized and, when so issued
and delivered, will be duly and validly issued Acquiring Fund Shares, and will
be fully paid and non-assessable (except that, under Massachusetts law,
shareholders of the Acquiring Fund could, under certain circumstances, be held
personally liable for obligations of the Acquiring Fund);
(m) The information to be furnished by the Acquiring Fund for use in no-action
letters, applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material respects and
shall comply in all material respects with Federal securities and other laws and
regulations applicable thereto;
(n) The Prospectus and Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund ) will, on the
effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading; and
(o) The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state Blue Sky or securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE SELLING FUND
5. 1 Operation in Ordinary Course. The Acquiring Fund and the Selling Fund each
will operate its business in the ordinary course between the date hereof and the
Closing Date, it being understood that such ordinary course of business will
include customary dividends and distributions.
5.2 Approval of Shareholders. The FFB Trust will call a meeting of the Selling
Fund Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Investment Representation. The Selling Fund covenants that the Acquiring
Fund Shares to be issued hereunder are not being acquired for the purpose of
making any distribution thereof other than in accordance with the terms of this
Agreement.
5.4 Additional Information. The Selling Fund will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Selling Fund shares.
-8-
5.5 Further Action. Subject to the provisions of this Agreement, the Acquiring
Fund and the Selling Fund will each take, or cause to be taken, all action, and
do or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement,
including any actions required to be taken after the Closing Date.
5.6 Statement of Earnings and Profits. As promptly as practicable, but in any
case within sixty days after the Closing Date, the Selling Fund shall furnish
the Acquiring Fund, in such form as is reasonably satisfactory to the Acquiring
Fund, a statement of the earnings and profits of the Selling Fund for Federal
income tax purposes which will be carried over by the Acquiring Fund as a result
of Section 381 of the Code, and which will be certified by the FFB Trust's
President, its Treasurer and its independent auditors.
5.7 Preparation of Form N-14 Registration Statement. The Selling Fund will
provide the Acquiring Fund with information reasonably necessary for the
preparation of a prospectus which will include the proxy statement, referred to
in paragraph 4.1(o) (the "Prospectus and Proxy Statement"), all to be included
in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act") and the 1940 Act in connection
with the meeting of the Selling Fund Shareholders to consider approval of this
Agreement and the transactions contemplated herein.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING FUND
The obligations of the Selling Fund to consummate the transactions provided
for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1 All representations, covenants and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Closing Date with the same force and effect as if made on and as of
the Closing Date, and the Acquiring Fund shall have delivered to the Selling
Fund a certificate executed in its name by the Evergreen Trust's President or
Vice President and its Treasurer or Assistant Treasurer, in form and substance
reasonably satisfactory to the Selling Fund and dated as of the Closing Date, to
such effect and as to such other matters as the Selling Fund shall reasonably
request; and
6.2 The Selling Fund shall have received on the Closing Date an opinion from
Sullivan & Worcester, counsel to the Acquiring Fund, dated as of the Closing
Date, in a form reasonably satisfactory to the Selling Fund, covering the
following points:
That (a) the Acquiring Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and has the power
to own all of its properties and assets and to carry on its business as
presently conducted; (b) this Agreement has been duly authorized, executed and
delivered by the Acquiring Fund, and, assuming that the Prospectus and Proxy
Statement, and Registration Statement comply with the 1933 Act, the 1934 Act and
the 1940 Act and the rules and regulations thereunder and, assuming due
authorization, execution and delivery of this Agreement by the Selling Fund, is
a valid and binding
-9-
obligation of the Acquiring Fund enforceable against the Acquiring Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and to general equity principles; (c) assuming that a
consideration therefor not less than the net asset value thereof has been paid,
the Acquiring Fund Shares to be issued and delivered to the Selling Fund on
behalf of the Selling Fund Shareholders as provided by this Agreement are duly
authorized and upon such delivery will be legally issued and outstanding and
fully paid and non-assessable (except that, under Massachusetts law,
shareholders of the Acquiring Fund could, under certain circumstances, be held
personally liable for obligations of the Acquiring Fund), and no shareholder of
the Acquiring Fund has any preemptive rights in respect thereof; (d) the
execution and delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, result in a violation of the
Evergreen Trust's Declaration of Trust or By-Laws or any provision of any
material agreement, indenture, instrument, contract, lease or other undertaking
(in each case known to such counsel) to which the Acquiring Fund is a party or
by which it or any of its properties may be bound or to the knowledge of such
counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree to which the Acquiring Fund is
a party or by which it is bound; (e) to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the Commonwealth of Massachusetts, is required for the
consummation by the Acquiring Fund of the transactions contemplated herein,
except such as have been obtained under the 1933 Act, the 1934 Act and the 1940
Act, and such as may be required under state securities laws; (f) only insofar
as they relate to the Acquiring Fund, the descriptions in the Prospectus and
Proxy Statement of statutes, legal and governmental proceedings and material
contracts, if any, are accurate and fairly present the information required to
be shown; (g) such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Acquiring Fund, existing on or
before the effective date of the Registration Statement or the Closing Date
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement which are not described or filed as
required; (h) the Acquiring Fund is a separate investment series of a
Massachusetts business trust registered as an investment company under the 1940
Act and to such counsel's best knowledge, such registration with the Commission
as an investment company under the 1940 Act is in full force and effect; and (i)
to the knowledge of such counsel, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or threatened as to the Acquiring Fund or any of its properties or assets and
the Acquiring Fund is not a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body, which materially and
adversely affects its business, other than as previously disclosed in the
Registration Statement. In addition, such counsel shall also state that they
have participated in conferences with officers and other representatives of the
Acquiring Fund at which the contents of the Prospectus and Proxy Statement and
related matters were discussed and, although they are not passing upon and do
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Prospectus and Proxy Statement (except to the extent
indicated in paragraph (f) of their above opinion), on the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of the
Evergreen Trust's officers and other representatives of the Acquiring Fund), no
facts have come to their attention that lead them to believe that the Prospectus
and Proxy Statement as of its date, as of the date of the Selling Fund
Shareholders' meeting, and as of the Closing Date, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein regarding the Acquiring Fund or necessary, in the light of the
circumstances under which they were made, to make the statements therein
regarding the Acquiring Fund not misleading. Such opinion may state that such
counsel does not express any opinion or belief as to the financial statements or
any financial or statistical data, or as to the information relating to the
Selling Fund, contained in the Prospectus and Proxy Statement or the
Registration Statement, and that such opinion is solely for the benefit of the
-10-
FFB Trust and the Selling Fund. Such opinion shall contain such other
assumptions and limitations as shall be in the opinion of Sullivan & Worcester
appropriate to render the opinions expressed therein.
In this paragraph 6.2, references to Prospectus and Proxy Statement include
and relate to only the text of such Prospectus and Proxy Statement and not to
any exhibits or attachments thereto or to any documents incorporated by
reference therein.
6.3 The merger between First Union Corporation and First Fidelity Corporation
shall be completed prior to the Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions provided
for herein shall be subject, at its election, to the performance by the Selling
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
7.1 All representations, covenants and warranties of the Selling Fund contained
in this Agreement shall be true and correct as of the date hereof and as of the
Closing Date with the same force and effect as if made on and as of the Closing
Date, and the Selling Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by the FFB Trust's President or
Vice President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquiring Fund and, dated as of the Closing Date, to such
effect and as to such other matters as the Acquiring Fund shall reasonably
request;
7.2 The Selling Fund shall have delivered to the Acquiring Fund a statement of
the Selling Fund's assets and liabilities, together with a list of the Selling
Fund's portfolio securities showing the tax costs of such securities by lot and
the holding periods of such securities, as of the Closing Date, certified by the
Treasurer of the FFB Trust; and
7.3 The Acquiring Fund shall have received on the Closing Date an opinion of
Baker & McKenzie, counsel to the Selling Fund, in a form satisfactory to the
Acquiring Fund covering the following points:
That (a) the Selling Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and has the power
to own all of its properties and assets and to carry on its business as
presently conducted; (b) this Agreement has been duly authorized, executed and
delivered by the Selling Fund, and, assuming that the Prospectus and Proxy
Statement, and Registration Statement comply with the 1933 Act, the 1934 Act and
the 1940 Act and the rules and regulations thereunder and, assuming due
authorization, execution and delivery of this Agreement by the Acquiring Fund,
is a valid and binding obligation of the Selling Fund enforceable against the
Selling Fund in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and to general equity principles; (c) the
execution and delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, result in a violation of the FFB
Trust's Declaration of Trust or By-laws, or any provision of any material
agreement, indenture, instrument, contract, lease or other undertaking (in each
case known to such counsel) to which the Selling Fund is a party or by which it
or any of its properties may be bound or, to the knowledge of such counsel,
result in the acceleration of any obligation or the imposition of
-11-
any penalty, under any agreement, judgment, or decree to which the Selling Fund
is a party or by which it is bound; (d) to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the Commonwealth of Massachusetts is required for the
consummation by the Selling Fund of the transactions contemplated herein, except
such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act,
and such as may be required under state securities laws; (e) only insofar as
they relate to the Selling Fund, the descriptions in the Prospectus and Proxy
Statement of statutes, legal and governmental proceedings and material
contracts, if any, are accurate and fairly present the information required to
be shown; (f) such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Selling Fund existing on or
before the date of mailing of the Prospectus and Proxy Statement and the Closing
Date, required to be described in the Prospectus and Proxy Statement or to be
filed as an exhibit to the Registration Statement which are not described or
filed as required; (g) the Selling Fund is a separate investment series of a
Massachusetts business trust registered as an investment company under the 1940
Act and to such counsel's best knowledge, such registration with the Commission
as an investment company under the 1940 Act is in full force and effect; (h) to
the knowledge of such counsel, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or threatened as to the Selling Fund or any of its respective properties or
assets and the Selling Fund is neither a party to nor subject to the provisions
of any order, decree or judgment of any court or governmental body, which
materially and adversely affects its business other than as previously disclosed
in the Prospectus and Proxy Statement; (i) assuming that a consideration
therefor not less than the net asset value thereof has been paid, and assuming
that such shares were issued in accordance with the terms of the Selling Fund's
registration statement, or any amendment thereto, in effect at the time of such
issuance, all issued and outstanding shares of the Selling Fund are legally
issued and fully paid and non-assessable (except that, under Massachusetts law,
Selling Fund Shareholders could, under certain circumstances be held personally
liable for obligations of the Selling Fund). Such counsel shall also state that
they have participated in conferences with officers and other representatives of
the Selling Fund at which the contents of the Prospectus and Proxy Statement and
related matters were discussed and, although they are not passing upon and do
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Prospectus and Proxy Statement (except to the extent
indicated in paragraph (e) of their above opinion ), on the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of the
FFB Trust's officers and other representatives of the Selling Fund ), no facts
have come to their attention that lead them to believe that the Prospectus and
Proxy Statement as of its date, as of the date of the Selling Fund Shareholders'
meeting, and as of the Closing Date, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein regarding
the Selling Fund or necessary, in the light of the circumstances under which
they were made, to make the statements therein regarding the Selling Fund not
misleading. Such opinion may state that such counsel does not express any
opinion or belief as to the financial statements or any financial or statistical
data, or as to the information relating to the Acquiring Fund, contained in the
Prospectus and Proxy Statement or Registration Statement, and that such opinion
is solely for the benefit of the Evergreen Trust and the Acquiring Fund. Such
opinion shall contain such other assumptions and limitations as shall be in the
opinion of Baker & McKenzie appropriate to render the opinions expressed therein
and shall indicate, with respect to matters of Massachusetts law, that as Baker
& McKenzie are not admitted to the bar of Massachusetts, such opinions are based
either upon the review of published statutes, case and rules and regulations of
the Commonwealth of Massachusetts or upon an opinion of Massachusetts counsel.
In this paragraph 7.3, references to Prospectus and Proxy Statement include
and relate to only the text of such Prospectus and Proxy Statement and not to
any exhibits or attachments thereto or to any documents incorporated by
reference therein.
-12-
7.4 The merger between First Union Corporation and First Fidelity Bancorporation
shall be completed prior to the Closing Date.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND
THE SELLING FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Selling Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Selling Fund in accordance with the provisions of the FFB Trust's Declaration of
Trust and By-Laws and certified copies of the resolutions evidencing such
approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, neither the Acquiring Fund nor the Selling Fund
may waive the conditions set forth in this paragraph 8.1;
8.2 On the Closing Date, the Commission shall not have issued an unfavorable
report under Section 25(b) of the 1940 Act, nor instituted any proceeding
seeking to enjoin the consummation of the transactions contemplated by this
Agreement under Section 25(c) of the 1940 Act and no action, suit or other
proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the transactions contemplated
herein;
8.3 All required consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky securities authorities. including any
necessary "no-action" positions of and exemptive orders from such Federal and
state authorities) to permit consummation of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse effect
on the assets or properties of the Acquiring Fund or the Selling Fund, provided
that either party hereto may for itself waive any of such conditions;
8.4 The Registration Statement shall have become effective under the 1933 Act
and no stop orders suspending the effectiveness thereof shall have been issued
and, to the best knowledge of the parties hereto, no investigation or proceeding
for that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act;
8.5 The Selling Fund shall have declared a dividend or dividends which, together
with all previous such dividends, shall have the effect of distributing to the
Selling Fund Shareholders all of the Selling Fund's investment company taxable
income for all taxable years ending on or prior to the Closing Date (computed
without regard to any deduction for dividends paid) and all of its net capital
gain realized in all taxable years ending on or prior to the Closing Date (after
reduction for any capital loss carryforward);
8.6 The parties shall have received a favorable opinion of Sullivan & Worcester,
addressed to the Acquiring Fund and the Selling Fund substantially to the effect
that for Federal income tax purposes:
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(a) The transfer of substantially all of the Selling Fund assets in
exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund
of certain identified liabilities of the Selling Fund followed by the
distribution of the Acquiring Fund Shares to the Selling Fund in dissolution and
liquidation of the Selling Fund, will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code and the Acquiring Fund and the
Selling Fund will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code; (b) no gain or loss will be recognized by the
Acquiring Fund upon the receipt of the assets of the Selling Fund solely in
exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund
of certain identified liabilities of the Selling Fund; (c) no gain or loss will
be recognized by the Selling Fund upon the transfer of the Selling Fund assets
to the Acquiring Fund in exchange for the Acquiring Fund Shares and the
assumption by the Acquiring Fund of certain identified liabilities of the
Selling Fund or upon the distribution ( whether actual or constructive ) of the
Acquiring Fund Shares to Selling Fund Shareholders in exchange for their shares
of the Selling Fund; (d) no gain or loss will be recognized by Selling Fund
Shareholders upon the exchange of their Selling Fund shares for the Acquiring
Fund Shares in liquidation of the Selling Fund; (e) the aggregate tax basis for
the Acquiring Fund Shares received by each Selling Fund Shareholder pursuant to
the Reorganization will be the same as the aggregate tax basis of the Selling
Fund shares held by such shareholder immediately prior to the Reorganization,
and the holding period of the Acquiring Fund Shares to be received by each
Selling Fund Shareholder will include the period during which the Selling Fund
shares exchanged therefor were held by such shareholder (provided the Selling
Fund shares were held as capital assets on the date of the Reorganization); and
(f) the tax basis of the Selling Fund assets acquired by the Acquiring Fund will
be the same as the tax basis of such assets to the Selling Fund immediately
prior to the Reorganization, and the holding period of the assets of the Selling
Fund in the hands of the Acquiring Fund will include the period during which
those assets were held by the Selling Fund. Notwithstanding anything herein to
the contrary, neither the Acquiring Fund nor the Selling Fund may waive the
conditions set forth in this paragraph 8.6.
8.7 The Acquiring Fund shall have received from KPMG Peat Marwick LLP a letter
addressed to the Acquiring Fund, in form and substance satisfactory to the
Acquiring Fund, to the effect that (i) they are independent certified public
accountants with respect to the Selling Fund within the meaning of the 1933 Act
and the applicable published rules and regulations thereunder; (ii) on the basis
of limited procedures agreed upon by the Acquiring Fund and described in such
letter (but not an examination in accordance with generally accepted auditing
standards) consisting of a reading of any unaudited pro forma financial
statements included in the Registration Statement and Prospectus and Proxy
Statement, and inquiries of appropriate officials of the FFB Trust responsible
for financial and accounting matters, nothing came to their attention which
caused them to believe that such unaudited pro forma financial statements do not
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the published rules and regulations thereunder;
or (iii) on the basis of limited procedures agreed upon by the Acquiring Fund
and described in such letter ( but not an examination in accordance with
generally accepted auditing standards), the Capitalization Table appearing in
the Registration Statement and Prospectus and Proxy Statement, has been obtained
from and is consistent with the accounting records of the Selling Fund; (iv) on
the basis of limited procedures agreed upon by the Acquiring Fund and described
in such letter (but not an examination in accordance with generally accepted
auditing standards), the pro forma financial statements which are included in
the Registration Statement and Prospectus and Proxy Statement, were prepared
based on the valuation of the Selling Fund's assets in accordance with the
Evergreen Trust's Declaration of Trust and the Acquiring Fund's then current
prospectus and statement of additional information pursuant to procedures
customarily utilized by the Acquiring Fund in valuing its own assets (such
procedures having been previously described to KPMG Peat Marwick LLP in writing
by the Acquiring Fund); and
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(v) on the basis of limited procedures agreed upon by the Acquiring Fund and
described in such letter (but not an examination in accordance with generally
accepted auditing standards) the data utilized in the calculations of the
projected expense ratio appearing in the Registration Statement and Prospectus
and Proxy Statement agree with underlying accounting records of the Selling Fund
or to written estimates by Selling Fund's management and were found to be
mathematically correct.
In addition, the Acquiring Fund shall have received from KPMG Peat Marwick
LLP a letter addressed to the Acquiring Fund dated on the Closing Date, in form
and substance satisfactory to the Acquiring Fund, to the effect that on the
basis of limited procedures agreed upon by the Acquiring Fund (but not an
examination in accordance with generally accepted auditing standards) the
calculation of net asset value per share of the Selling Fund as of the Valuation
Date was determined in accordance with generally accepted accounting practices
and the portfolio valuation practices of the Acquiring Fund.
8.8 The Selling Fund shall have received from KPMG Peat Marwick LLP a letter
addressed to the Selling Fund, in form and substance satisfactory to the Selling
Fund, to the effect that (i) they are independent certified public accountants
with respect to the Acquiring Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder; (ii) on the basis of
limited procedures agreed upon by the Selling Fund and described in such letter
(but not an examination in accordance with generally accepted auditing
standards) consisting of a reading of any unaudited pro forma financial
statements included in the Registration Statement and Prospectus and Proxy
Statement, and inquiries of appropriate officials of the Evergreen Trust
responsible for financial and accounting matters, nothing came to their
attention which caused them to believe that such unaudited pro forma financial
statements do not comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the published rules and regulations
thereunder; (iii) on the basis of limited procedures agreed upon by the Selling
Fund and described in such letter (but not an examination in accordance with
generally accepted auditing standards), the Capitalization Table appearing in
the Registration Statement and Prospectus and Proxy Statement, has been obtained
from and is consistent with the accounting records of the Acquiring Fund; and
(iv) on the basis of limited procedures agreed upon by the Selling Fund (but not
an examination in accordance with generally accepted auditing standards) the
data utilized in the calculations of the projected expense ratio appearing in
the Registration Statement and Prospectus and Proxy Statement agree with
underlying accounting records of the Acquiring Fund or to written estimates by
each Fund's management and were found to be mathematically correct.
8.9 The Acquiring Fund and the Selling Fund shall also have received from KPMG
Peat Marwick LLP a letter addressed to the Acquiring Fund and the Selling Fund,
dated on the Closing Date in form and substance satisfactory to the Funds,
setting forth the Federal income tax implications relating to capital loss
carryforwards (if any) of the Selling Fund and the related impact, if any, of
the proposed transfer of all or substantially all of the assets of the Selling
Fund to the Acquiring Fund and the ultimate dissolution of the Selling Fund,
upon the shareholders of the Selling Fund.
ARTICLE IX
BROKERAGE FEES AND EXPENSES
9.1 The Acquiring Fund and the Selling Fund each represents and warrants to the
other that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
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9.2 Except as otherwise provided for herein, all expenses of the transactions
contemplated by this Agreement incurred by the Selling Fund and the Acquiring
Fund will be borne by First Union National Bank of North Carolina ("FUNB"). Such
expenses include, without limitation, (i) expenses incurred in connection with
the entering into and the carrying out of the provisions of this Agreement; (ii)
expenses associated with the preparation and filing of the Registration
Statement under the 1933 Act covering the Acquiring Fund Shares to be issued
pursuant to the provisions of this Agreement; (iii) registration or
qualification fees and expenses of preparing and filing such forms as are
necessary under applicable state securities laws to qualify the Acquiring Fund
Shares to be issued in connection herewith in each state in which the Selling
Fund Shareholders are resident as of the date of the mailing of the Prospectus
and Proxy Statement to such shareholders; (iv) postage; (v) printing; (vi)
accounting fees; (vii) legal fees; and (viii) solicitation cost of the
transaction. Not withstanding the foregoing, the Acquiring Fund shall pay its
own Federal and state registration fees. In the event that the merger of First
Fidelity Bancorporation and First Union Corporation is not completed, this
Agreement shall terminate. In such event, all expenses of the transactions
contemplated by this Agreement incurred by the Acquiring Fund will be borne by
FUNB and all expenses of the transactions contempleted by this Agreement
incurred by the Selling Fund will be borne by First Fidelity Bank, N.A.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Selling Fund agree that neither party has made
any representation, warranty or covenant not set forth herein and that the
Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall
survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 In addition to the termination provisions set forth in paragraph 9.2, this
Agreement may be terminated by the mutual agreement of the Acquiring Fund and
the Selling Fund. In addition, either the Acquiring Fund or the Selling Fund may
at its option terminate this Agreement at or prior to the Closing Date because:
(a) of a breach by the other of any representation, warranty or agreement
contained herein to be performed at or prior to the Closing Date, if not cured
within 30 days; or
(b) a condition herein expressed to be precedent to the obligations of the
terminating party has not been met and it reasonably appears that it will not or
cannot be met.
11.2 In the event of any such termination, in the absence of willful default,
there shall be no liability for damages on the part of either the Acquiring Fund
or the Selling Fund, the Evergreen Trust or the FFB Trust or their respective
Trustees or officers, to the other party or its, Trustees or officers, but each
shall bear the expenses incurred by it incidental to the preparation and
carrying out of this Agreement as provided in paragraph 9.2.
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ARTICLE XII
AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the Selling
Fund and the Acquiring Fund; provided, however, that following the meeting of
the Selling Fund Shareholders called by the FFB Trust pursuant to paragraph 5.2
of this Agreement, no such amendment may have the effect of changing the
provisions for determining the number of the Acquiring Fund Shares to be issued
to the Selling Fund Shareholders under this Agreement to the detriment of such
shareholders without their further approval.
ARTICLE XIII
NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy, overnight courier or certified mail addressed to:
the Acquiring Fund
Evergreen Investment Trust
2500 Westchester Avenue
Purchase, New York 10577
Attention: Joseph J. McBrien, Esq.
or to the Selling Fund
FFB Funds Trust
237 Park Avenue
New York, New York 10017
Attention: Edmund A. Hajim
ARTICLE XIV
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY
14.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
14.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder
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shall be made by any party without the written consent of the other party.
Nothing herein expressed or implied is intended or shall be construed to confer
upon or give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
14.5 It is expressly agreed to that the obligations of the Selling Fund and the
Acquiring Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the FFB Trust or the
Evergreen Trust, personally, but bind only the trust property of the Selling
Fund and the Acquiring Fund, as provided in the Declarations of Trust of the FFB
Trust and the Evergreen Trust. The execution and delivery of this Agreement have
been authorized by the Trustees of the FFB Trust on behalf of the Selling Fund,
and the Evergreen Trust on behalf of the Acquiring Fund and signed by authorized
officers of the FFB Trust and the Evergreen Trust, acting as such, and neither
such authorization by such Trustees nor such execution and delivery by such
officers shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the FFB Trust and the Evergreen Trust as provided in their
Declarations of Trust.
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IN WITNESS WHEREOF, the parties have duly executed and sealed this Agreement,
all as of the date first written above.
EVERGREEN INVESTMENT TRUST
on behalf of Evergreen Treasury Money Market Fund
By:/s/ John J. Pileggi
Name: John J. Pileggi
Title: President
(Seal)
FFB FUNDS TRUST
on behalf of FFB 100% U.S. Treasury Fund
By: /s/ Edmund A. Hajim
Name: Edmund A. Hajim
Title: President
-19-
FFB U.S. GOVERNMENT
Draft: 8-18-95 Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of this
day of August, 1995, by and between Evergreen Investment Trust, a Massachusetts
business trust (the "Evergreen Trust"), with its principal place of business at
2500 Westchester Avenue, Purchase, New York 10577, with respect to its Evergreen
Treasury Money Market Fund series (the "Acquiring Fund"), and FFB Funds Trust
(the "FFB Trust"), a Massachusetts business trust, with respect to its FFB U.S.
Government Fund series, with its principal place of business at 237 Park Avenue,
New York, New York 10017 (the "Selling Fund").
This Agreement is intended to be and is adopted as a plan of reorganization and
liquidation within the meaning of Section 368 (a)(1)(C) of the United States
Internal Revenue Code of 1986 (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of substantially all of the
assets of the Selling Fund in exchange solely for Class A shares of beneficial
interest, without par value, of the Acquiring Fund (the "Acquiring Fund Shares")
and the assumption by the Acquiring Fund of certain stated liabilities of the
Selling Fund and the distribution, after the Closing Date hereinafter referred
to, of the Acquiring Fund Shares to the shareholders of the Selling Fund in
liquidation of the Selling Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Selling Fund and the Acquiring Fund are separate investment series
of open-end, registered investment companies of the management type and the
Selling Fund owns securities which generally are assets of the character in
which the Acquiring Fund is permitted to invest;
WHEREAS, both Funds are authorized to issue their shares of beneficial interest;
WHEREAS, the Trustees of the Evergreen Trust have determined that the exchange
of substantially all of the assets of the Selling Fund for Acquiring Fund Shares
and the assumption of certain stated liabilities by the Acquiring Fund on the
terms and conditions hereinafter set forth is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing shareholders
of the Acquiring Fund will not be diluted as a result of the transactions
contemplated herein;
WHEREAS, the Trustees of the FFB Trust have determined that the Selling Fund
should exchange substantially all of its assets and certain of its liabilities
for Acquiring Fund Shares and that the interests of the existing shareholders of
the Selling Fund will not be diluted as a result of the transactions
contemplated herein;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND ASSUMPTION OF SELLING FUND LIABILITIES AND LIQUIDATION OF
THE SELLING FUND
1.1 The Exchange. Subject to the terms and conditions herein set forth and on
the basis of the representations and warranties contained herein, the Selling
Fund agrees to transfer the Selling Fund's assets as set forth in paragraph 1.2
to the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor (i) to
deliver to the Selling Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, determined by dividing the value of the
Selling Fund's net assets computed in the manner and as of the time and date set
forth in paragraph 2.1 by the ratio of the net asset value per share of the
shares of the Acquiring Fund and the Selling Fund computed in the manner and as
of the time and date set forth in paragraph 2.2 and (ii) to assume certain
liabilities of the Selling Fund, as set forth in paragraph 1.3. Such
transactions shall take place at the closing provided for in paragraph 3.1 (the
"Closing Date").
1.2 Assets to be Acquired. The assets of the Selling Fund to be acquired by the
Acquiring Fund shall consist of all property, including without limitation all
cash, securities, commodities and futures interests and dividends or interest
receivable, which are owned by the Selling Fund and any deferred or prepaid
expenses shown as an asset on the books of the Selling Fund on the Closing Date.
The Selling Fund has provided the Acquiring Fund with its most recent audited
financial statements which contain a list of all of Selling Fund's assets as of
the date thereof. The Selling Fund hereby represents that as of the date of the
execution of this Agreement there have been no changes in its financial position
as reflected in said financial statements other than those occurring in the
ordinary course of its business in connection with the purchase and sale of
securities and the payment of its normal operating expenses. The Selling Fund
reserves the right to sell any of such securities but will not, without the
prior written approval of the Acquiring Fund, acquire any additional securities
other than securities of the type in which the Acquiring Fund is permitted to
invest. The Acquiring Fund will, within a reasonable time prior to the Closing
Date, furnish the Selling Fund with a statement of the Acquiring Fund's
investment objectives, policies and restrictions and a list of the securities,
if any, on the Selling Fund's list referred to in the second sentence of this
paragraph which do not conform to the Acquiring Fund's investment objectives,
policies, and restrictions. In the event that the Selling Fund holds any
investments which the Acquiring Fund may not hold, the Selling Fund will dispose
of such securities prior to the Closing Date. In addition, if it is determined
that the Selling Fund and the Acquiring Fund portfolios, when aggregated, would
contain investments exceeding certain percentage limitations imposed upon the
Acquiring Fund with respect to such investments, the Selling Fund if requested
by the Acquiring Fund will dispose of a sufficient amount of such investments as
may be necessary to avoid violating such limitations as of the Closing Date.
1.3 Liabilities to be Assumed. The Selling Fund will endeavor to discharge all
of its known liabilities and obligations prior to the Closing Date. The
Acquiring Fund shall assume only those liabilities, expenses, costs, charges and
reserves reflected on a Statement of Assets and Liabilities of the Selling Fund
prepared by Furman Selz Incorporated, the administrator of the Selling Fund, as
of the Valuation Date (as defined in paragraph 2.1), in accordance with
generally accepted accounting principles consistently applied from the prior
audited period. The Acquiring Fund shall assume only those liabilities of the
Selling Fund reflected in such Statement of Assets and Liabilities and shall not
assume any other liabilities, whether absolute or contingent, known or unknown,
accrued or unaccrued, all of which shall remain the obligation of the Selling
Fund.
1.4 Liquidation and Distribution. As soon after the Closing Date as is
conveniently practicable (the "Liquidation Date"), (a) the Selling Fund will
liquidate and distribute pro rata to the Selling Fund's shareholders of record,
determined as of the close of business on the Closing Date (the "Selling Fund
Shareholders"), the Acquiring Fund Shares received by the Selling Fund pursuant
to paragraph 1.1. and (b) the Selling Fund will thereupon proceed to dissolve as
set forth in paragraph 1.8 below. Such
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liquidation and distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Selling Fund on the
books of the Acquiring Fund, to open accounts on the share records of the
Acquiring Fund in the names of the Selling Fund Shareholders and representing
the respective pro rata number of the Acquiring Fund Shares due such
shareholders. All issued and outstanding shares of the Selling Fund will
simultaneously be canceled on the books of the Selling Fund. The Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with such exchange.
1.5 Ownership of Shares. Ownership of Acquiring Fund Shares will be shown on the
books of the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will
be issued in the manner described in the combined Prospectus and Proxy Statement
on Form N-14 to be distributed to shareholders of the Selling Fund as described
in Section 5.
1.6 Transfer Taxes. Any transfer taxes payable upon issuance of the Acquiring
Fund Shares in a name other than the registered holder of the Selling Fund
shares on the books of the Selling Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.7 Reporting Responsibility. Any reporting responsibility of the Selling Fund
is and shall remain the responsibility of the Selling Fund up to and including
the Closing Date and such later date on which the Selling Fund is terminated.
1.8 Termination. The Selling Fund shall be terminated promptly following the
Closing Date and the making of all distributions pursuant to paragraph 1.4.
ARTICLE II
VALUATION
2.1 Valuation of Assets. The value of the Selling Fund's assets to be acquired
by the Acquiring Fund hereunder shall be the value of such assets computed as of
the close of business on the New York Stock Exchange on the Closing Date (such
time and date being hereinafter called the "Valuation Date"), using the
valuation procedures set forth in the Evergreen Trust's Declaration of Trust and
the Acquiring Fund's then current prospectus and statement of additional
information or such other valuation procedures as shall be mutually agreed upon
by the parties.
2.2 Valuation of Shares. The net asset value of each class of Acquiring Fund
Shares shall be the net asset value per share computed as of the close of
business on the New York Stock Exchange on the Valuation Date, using the
valuation procedures set forth in the Evergreen Trust's Declaration of Trust and
the Acquiring Fund's then current prospectus and statement of additional
information.
2.3 Shares to be Issued. The number of the Acquiring Fund Shares of each class
to be issued (including fractional shares, if any) in exchange for the Selling
Fund's assets shall be determined by dividing the net asset value per share of
the Selling Fund attributable to each of its classes by the net asset value per
share of the respective classes of the Acquiring Fund determined in accordance
with paragraph 2.2.
2.4 Determination of Value. All computations of value shall be made by State
Street Bank and Trust Company in accordance with its regular practice in pricing
the shares and assets of the Acquiring Fund.
-3-
ARTICLE III
CLOSING AND CLOSING DATE
3.1 Closing Date. The Closing (the "Closing") shall take place on January 19,
1996 or such other date as the parties may agree to in writing (the "Closing
Date"). All acts taking place at the Closing shall be deemed to take place
simultaneously as of the close of business on the Closing Date unless otherwise
provided. The Closing shall be held as of 9:00 o'clock a.m. at the offices of
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577, or at such other time and/or place as the parties may agree.
3.2 Custodian's Certificate. First Fidelity Bank, N.A., as custodian for the
Selling Fund (the "Custodian"), shall deliver at the Closing a certificate of an
authorized officer stating that: (a) the Selling Fund's portfolio securities,
cash, and any other assets shall have been delivered in proper form to the
Acquiring Fund on the Closing Date and (b) all necessary taxes including all
applicable Federal and state stock transfer stamps, if any, shall have been
paid, or provision for payment shall have been made, in conjunction with the
delivery of portfolio securities by the Selling Fund.
3.3 Effect of Suspension in Trading. In the event that on the Valuation Date (a)
the New York Stock Exchange or another primary trading market for portfolio
securities of the Acquiring Fund or the Selling Fund shall be closed to trading
or trading thereon shall be restricted, or (b) trading or the reporting of
trading on said Exchange or elsewhere shall be disrupted so that accurate
appraisal of the value of the net assets of the Acquiring Fund or the Selling
Fund is impracticable, the Closing Date shall be postponed until the first
business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.4 Transfer Agent's Certificate. First Fidelity Bank, N.A., as transfer agent
for the Selling Fund shall deliver at the Closing a certificate of an authorized
officer stating that its records contain the names and addresses of the Selling
Fund Shareholders and the number and percentage ownership of outstanding shares
owned by each such shareholder immediately prior to the Closing. The Acquiring
Fund shall issue and deliver or cause its transfer agent to issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date to the Secretary of the FFB Trust , or provide evidence satisfactory to the
Selling Fund that such Acquiring Fund Shares have been credited to the Selling
Fund's account on the books of the Acquiring Fund. At the Closing each party
shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts and other documents as such other party or its
counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations of the Selling Fund. The Selling Fund represents and
warrants to the Acquiring Fund as follows:
(a) The Selling Fund is a separate investment series of a Massachusetts business
trust duly organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts;
(b) The Selling Fund is a separate investment series of a registered investment
company classified as a management company of the open-end type and its
registration with the Securities and Exchange
-4-
Commission (the "Commission") as an investment company under the Investment
Company Act of 1940, as amended (the "1940 Act") is in full force and effect;
(c) The current prospectus and statement of additional information of the
Selling Fund conform in all material respects to the applicable requirements of
the Securities Act of 1933, as amended (the "1933 Act") and the 1940 Act and the
rules and regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(d) The Selling Fund is not, and the execution, delivery and performance of this
Agreement (subject to shareholder approval) will not, result in a violation of
any provision of the FFB Trust's Declaration of Trust or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
the Selling Fund is a party or by which it is bound;
(e) The Selling Fund has no material contracts or other commitments (other than
this Agreement) which will be terminated with liability to it prior to the
Closing Date;
(f) Except as otherwise disclosed in writing to and accepted by the Acquiring
Fund, no litigation, administrative proceeding or investigation of or before any
court or governmental body is presently pending or to its knowledge threatened
against the Selling Fund or any of its properties or assets which, if adversely
determined, would materially and adversely affect its financial condition, the
conduct of its business or the ability of the Selling Fund to carry out the
transactions contemplated by this Agreement. The Selling Fund knows of no facts
which might form the basis for the institution of such proceedings and is not a
party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects its business
or its ability to consummate the transactions herein contemplated;
(g) The financial statements of the Selling Fund at February 28, 1995 have been
audited by KPMG Peat Marwick LLP, certified public accountants, and are in
accordance with generally accepted accounting principles consistently applied,
and such statements (copies of which have been furnished to the Acquiring Fund)
fairly reflect the financial condition of the Selling Fund as of such date, and
there are no known contingent liabilities of the Selling Fund as of such date
not disclosed therein;
(h) Since February 28, 1995 there has not been any material adverse change in
the Selling Fund's financial condition, assets, liabilities or business other
than changes occurring in the ordinary course of business, or any incurrence by
the Selling Fund of indebtedness maturing more than one year from the date such
indebtedness was incurred, except as otherwise disclosed to and accepted by the
Acquiring Fund. For the purposes of this subparagraph (h), a decline in the net
asset value of the Selling Fund shall not constitute a material adverse change;
(i) At the Closing Date, all Federal and other tax returns and reports of the
Selling Fund required by law to have been filed by such dates shall have been
filed, and all Federal and other taxes shown due on said returns and reports
shall have been paid, or provision shall have been made for the payment thereof
and to the best of the Selling Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns;
(j) For each fiscal year of its operation, the Selling Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company and has distributed in each
-5-
such year all net investment income and realized capital gains;
(k) All issued and outstanding shares of the Selling Fund are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the Selling Fund (except that, under Massachusetts law,
Selling Fund Shareholders could, under certain circumstances be held personally
liable for obligations of the Selling Fund). All of the issued and outstanding
shares of the Selling Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the transfer agent as
provided in paragraph 3.4. The Selling Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of the
Selling Fund shares, nor is there outstanding any security convertible into any
of the Selling Fund shares;
(l) At the Closing Date, the Selling Fund will have good and marketable title to
the Selling Fund's assets to be transferred to the Acquiring Fund pursuant to
paragraph 1.2 and full right, power, and authority to sell, assign, transfer and
deliver such assets hereunder, and upon delivery and payment for such assets,
the Acquiring Fund will acquire good and marketable title thereto, subject to no
restrictions on the full transfer thereof, including such restrictions as might
arise under the 1933 Act, other than as disclosed to the Acquiring Fund and
accepted by the Acquiring Fund;
(m) The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Selling Fund and, subject
to approval by the Selling Fund Shareholders, this Agreement constitutes a valid
and binding obligation of the Selling Fund, enforceable in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(n) The information to be furnished by the Selling Fund for use in no-action
letters, applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material respects and
shall comply in all material respects with Federal securities and other laws and
regulations thereunder applicable thereto;
(o) The proxy statement of the Selling Fund to be included in the Registration
Statement referred to in paragraph 5.7 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not misleading.
4.2 Representations of the Acquiring Fund. The Acquiring Fund represents and
warrants to the Selling Fund as follows:
(a) The Acquiring Fund is a separate investment series of a Massachusetts
business trust duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts.
(b) The Acquiring Fund is a separate investment series of a Massachusetts
business trust that is registered as an investment company classified as a
management company of the open-end type and its registration with the Commission
as an investment company under the 1940 Act is in full force and effect;
-6-
(c) The current prospectus and statement of additional information of the
Acquiring Fund conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(d) The Acquiring Fund is not, and the execution, delivery and performance of
this Agreement will not, result in a violation of Evergreen Trust's Declaration
of Trust or By-Laws or of any agreement, indenture, instrument, contract, lease
or other undertaking to which the Acquiring Fund is a party or by which it is
bound;
(e) Except as otherwise disclosed in writing to the Selling Fund and accepted by
the Selling Fund, no litigation, administrative proceeding or investigation of
or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquiring Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect its
financial condition and the conduct of its business or the ability of the
Acquiring Fund to carry out the transactions contemplated by this Agreement. The
Acquiring Fund knows of no facts which might form the basis for the institution
of such proceedings and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially and
adversely affects its business or its ability to consummate the transactions
contemplated herein;
(f) The financial statements of the Acquiring Fund at December 31, 1994, have
been audited by KPMG Peat Marwick LLP, certified public accountants, and are in
accordance with generally accepted accounting principles consistently applied,
and such statements (copies of which have been furnished to the Selling Fund)
fairly reflect the financial condition of the Acquiring Fund as of such date,
and there are no known contingent liabilities affecting the Acquiring Fund as of
such date not disclosed therein;
(g) Since December 31, 1994 there has not been any material adverse change in
the Acquiring Fund's financial condition, assets, liabilities or business other
than changes occurring in the ordinary course of business, or any incurrence by
the Acquiring Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to and accepted by
the Acquiring Fund. For the purposes of this subparagraph (g), a decline in the
net asset value of the Acquiring Fund shall not constitute a material adverse
change;
(h) At the Closing Date, all Federal and other tax returns and reports of the
Acquiring Fund required by law then to be filed by such dates shall have been
filed, and all Federal and other taxes shown due on said returns and reports
shall have been paid or provision shall have been made for the payment thereof
and to the best of the Acquiring Fund's knowledge, no such return is currently
under audit and no assessment has been asserted with respect to such returns;
(i) For each fiscal year of its operation the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company and has distributed in each such year all net
investment income and realized capital gains;
(j) All issued and outstanding Acquiring Fund Shares are, and at the Closing
Date will be, duly and validly issued and outstanding, fully paid and
non-assessable (except that, under Massachusetts law, shareholders of the
Acquiring Fund could, under certain circumstances, be held personally liable for
obligations of the Acquiring Fund). The Acquiring Fund does not have outstanding
any options, warrants or other rights to subscribe for or purchase any Acquiring
Fund Shares, nor is there
-7-
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
-8-
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 Evergreen Trust's President or
Vice President and its Treasurer or Assistant Treasurer, in form and substance
reasonably satisfactory to the Selling Fund and dated as of the Closing Date, to
such effect and as to such other matters as the Selling Fund shall reasonably
request; and
6.2 The Selling Fund shall have received on the Closing Date an opinion from
Sullivan & Worcester, counsel to the Acquiring Fund, dated as of the Closing
Date, in a form reasonably satisfactory to the Selling Fund, covering the
following points:
That (a) the Acquiring Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and has the power
to own all of its properties and assets and to carry on its business as
presently conducted; (b) this Agreement has been duly authorized, executed and
delivered by the Acquiring Fund, and, assuming that the Prospectus and Proxy
Statement, and Registration Statement comply with the 1933 Act, the 1934 Act and
the 1940 Act and the rules and regulations thereunder and, assuming due
authorization, execution and delivery of this Agreement by the Selling Fund, is
a valid and binding
-9-
obligation of the Acquiring Fund enforceable against the Acquiring Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and to general equity principles; (c) assuming that a
consideration therefor not less than the net asset value thereof has been paid,
the Acquiring Fund Shares to be issued and delivered to the Selling Fund on
behalf of the Selling Fund Shareholders as provided by this Agreement are duly
authorized and upon such delivery will be legally issued and outstanding and
fully paid and non-assessable (except that, under Massachusetts law,
shareholders of the Acquiring Fund could, under certain circumstances, be held
personally liable for obligations of the Acquiring Fund), and no shareholder of
the Acquiring Fund has any preemptive rights in respect thereof; (d) the
execution and delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, result in a violation of the
Evergreen Trust's Declaration of Trust or By-Laws or any provision of any
material agreement, indenture, instrument, contract, lease or other undertaking
(in each case known to such counsel) to which the Acquiring Fund is a party or
by which it or any of its properties may be bound or to the knowledge of such
counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree to which the Acquiring Fund is
a party or by which it is bound; (e) to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the Commonwealth of Massachusetts, is required for the
consummation by the Acquiring Fund of the transactions contemplated herein,
except such as have been obtained under the 1933 Act, the 1934 Act and the 1940
Act, and such as may be required under state securities laws; (f) only insofar
as they relate to the Acquiring Fund, the descriptions in the Prospectus and
Proxy Statement of statutes, legal and governmental proceedings and material
contracts, if any, are accurate and fairly present the information required to
be shown; (g) such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Acquiring Fund, existing on or
before the effective date of the Registration Statement or the Closing Date
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement which are not described or filed as
required; (h) the Acquiring Fund is a separate investment series of a
Massachusetts business trust registered as an investment company under the 1940
Act and to such counsel's best knowledge, such registration with the Commission
as an investment company under the 1940 Act is in full force and effect; and (i)
to the knowledge of such counsel, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or threatened as to the Acquiring Fund or any of its properties or assets and
the Acquiring Fund is not a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body, which materially and
adversely affects its business, other than as previously disclosed in the
Registration Statement. In addition, such counsel shall also state that they
have participated in conferences with officers and other representatives of the
Acquiring Fund at which the contents of the Prospectus and Proxy Statement and
related matters were discussed and, although they are not passing upon and do
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Prospectus and Proxy Statement (except to the extent
indicated in paragraph (f) of their above opinion), on the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of the
Evergreen Trust's officers and other representatives of the Acquiring Fund), no
facts have come to their attention that lead them to believe that the Prospectus
and Proxy Statement as of its date, as of the date of the Selling Fund
Shareholders' meeting, and as of the Closing Date, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein regarding the Acquiring Fund or necessary, in the light of the
circumstances under which they were made, to make the statements therein
regarding the Acquiring Fund not misleading. Such opinion may state that such
counsel does not express any opinion or belief as to the financial statements or
any financial or statistical data, or as to the information relating to the
Selling Fund, contained in the Prospectus and Proxy Statement or the
Registration Statement, and that such opinion is solely for the benefit of the
-10-
FFB Trust and the Selling Fund. Such opinion shall contain such other
assumptions and limitations as shall be in the opinion of Sullivan & Worcester
appropriate to render the opinions expressed therein.
In this paragraph 6.2, references to Prospectus and Proxy Statement include
and relate to only the text of such Prospectus and Proxy Statement and not to
any exhibits or attachments thereto or to any documents incorporated by
reference therein.
6.3 The merger between First Union Corporation and First Fidelity Corporation
shall be completed prior to the Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions provided
for herein shall be subject, at its election, to the performance by the Selling
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
7.1 All representations, covenants and warranties of the Selling Fund contained
in this Agreement shall be true and correct as of the date hereof and as of the
Closing Date with the same force and effect as if made on and as of the Closing
Date, and the Selling Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by the FFB Trust's President or
Vice President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquiring Fund and, dated as of the Closing Date, to such
effect and as to such other matters as the Acquiring Fund shall reasonably
request;
7.2 The Selling Fund shall have delivered to the Acquiring Fund a statement of
the Selling Fund's assets and liabilities, together with a list of the Selling
Fund's portfolio securities showing the tax costs of such securities by lot and
the holding periods of such securities, as of the Closing Date, certified by the
Treasurer of the FFB Trust; and
7.3 The Acquiring Fund shall have received on the Closing Date an opinion of
Baker & McKenzie, counsel to the Selling Fund, in a form satisfactory to the
Acquiring Fund covering the following points:
That (a) the Selling Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and has the power
to own all of its properties and assets and to carry on its business as
presently conducted; (b) this Agreement has been duly authorized, executed and
delivered by the Selling Fund, and, assuming that the Prospectus and Proxy
Statement, and Registration Statement comply with the 1933 Act, the 1934 Act and
the 1940 Act and the rules and regulations thereunder and, assuming due
authorization, execution and delivery of this Agreement by the Acquiring Fund,
is a valid and binding obligation of the Selling Fund enforceable against the
Selling Fund in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and to general equity principles; (c) the
execution and delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, result in a violation of the FFB
Trust's Declaration of Trust or By-laws, or any provision of any material
agreement, indenture, instrument, contract, lease or other undertaking (in each
case known to such counsel) to which the Selling Fund is a party or by which it
or any of its properties may be bound or, to the knowledge of such counsel,
result in the acceleration of any obligation or the imposition of
-11-
any penalty, under any agreement, judgment, or decree to which the Selling Fund
is a party or by which it is bound; (d) to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the Commonwealth of Massachusetts is required for the
consummation by the Selling Fund of the transactions contemplated herein, except
such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act,
and such as may be required under state securities laws; (e) only insofar as
they relate to the Selling Fund, the descriptions in the Prospectus and Proxy
Statement of statutes, legal and governmental proceedings and material
contracts, if any, are accurate and fairly present the information required to
be shown; (f) such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Selling Fund existing on or
before the date of mailing of the Prospectus and Proxy Statement and the Closing
Date, required to be described in the Prospectus and Proxy Statement or to be
filed as an exhibit to the Registration Statement which are not described or
filed as required; (g) the Selling Fund is a separate investment series of a
Massachusetts business trust registered as an investment company under the 1940
Act and to such counsel's best knowledge, such registration with the Commission
as an investment company under the 1940 Act is in full force and effect; (h) to
the knowledge of such counsel, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or threatened as to the Selling Fund or any of its respective properties or
assets and the Selling Fund is neither a party to nor subject to the provisions
of any order, decree or judgment of any court or governmental body, which
materially and adversely affects its business other than as previously disclosed
in the Prospectus and Proxy Statement; (i) assuming that a consideration
therefor not less than the net asset value thereof has been paid, and assuming
that such shares were issued in accordance with the terms of the Selling Fund's
registration statement, or any amendment thereto, in effect at the time of such
issuance, all issued and outstanding shares of the Selling Fund are legally
issued and fully paid and non-assessable (except that, under Massachusetts law,
Selling Fund Shareholders could, under certain circumstances be held personally
liable for obligations of the Selling Fund). Such counsel shall also state that
they have participated in conferences with officers and other representatives of
the Selling Fund at which the contents of the Prospectus and Proxy Statement and
related matters were discussed and, although they are not passing upon and do
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Prospectus and Proxy Statement (except to the extent
indicated in paragraph (e) of their above opinion ), on the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of the
FFB Trust's officers and other representatives of the Selling Fund ), no facts
have come to their attention that lead them to believe that the Prospectus and
Proxy Statement as of its date, as of the date of the Selling Fund Shareholders'
meeting, and as of the Closing Date, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein regarding
the Selling Fund or necessary, in the light of the circumstances under which
they were made, to make the statements therein regarding the Selling Fund not
misleading. Such opinion may state that such counsel does not express any
opinion or belief as to the financial statements or any financial or statistical
data, or as to the information relating to the Acquiring Fund, contained in the
Prospectus and Proxy Statement or Registration Statement, and that such opinion
is solely for the benefit of the Evergreen Trust and the Acquiring Fund. Such
opinion shall contain such other assumptions and limitations as shall be in the
opinion of Baker & McKenzie appropriate to render the opinions expressed therein
and shall indicate, with respect to matters of Massachusetts law, that as Baker
& McKenzie are not admitted to the bar of Massachusetts, such opinions are based
either upon the review of published statutes, case and rules and regulations of
the Commonwealth of Massachusetts or upon an opinion of Massachusetts counsel.
In this paragraph 7.3, references to Prospectus and Proxy Statement include
and relate to only the text of such Prospectus and Proxy Statement and not to
any exhibits or attachments thereto or to any documents incorporated by
reference therein.
-12-
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:
-13-
(a) The transfer of substantially all of the Selling Fund assets in
exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund
of certain identified liabilities of the Selling Fund followed by the
distribution of the Acquiring Fund Shares to the Selling Fund in dissolution and
liquidation of the Selling Fund, will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code and the Acquiring Fund and the
Selling Fund will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code; (b) no gain or loss will be recognized by the
Acquiring Fund upon the receipt of the assets of the Selling Fund solely in
exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund
of certain identified liabilities of the Selling Fund; (c) no gain or loss will
be recognized by the Selling Fund upon the transfer of the Selling Fund assets
to the Acquiring Fund in exchange for the Acquiring Fund Shares and the
assumption by the Acquiring Fund of certain identified liabilities of the
Selling Fund or upon the distribution ( whether actual or constructive ) of the
Acquiring Fund Shares to Selling Fund Shareholders in exchange for their shares
of the Selling Fund; (d) no gain or loss will be recognized by Selling Fund
Shareholders upon the exchange of their Selling Fund shares for the Acquiring
Fund Shares in liquidation of the Selling Fund; (e) the aggregate tax basis for
the Acquiring Fund Shares received by each Selling Fund Shareholder pursuant to
the Reorganization will be the same as the aggregate tax basis of the Selling
Fund shares held by such shareholder immediately prior to the Reorganization,
and the holding period of the Acquiring Fund Shares to be received by each
Selling Fund Shareholder will include the period during which the Selling Fund
shares exchanged therefor were held by such shareholder (provided the Selling
Fund shares were held as capital assets on the date of the Reorganization); and
(f) the tax basis of the Selling Fund assets acquired by the Acquiring Fund will
be the same as the tax basis of such assets to the Selling Fund immediately
prior to the Reorganization, and the holding period of the assets of the Selling
Fund in the hands of the Acquiring Fund will include the period during which
those assets were held by the Selling Fund. Notwithstanding anything herein to
the contrary, neither the Acquiring Fund nor the Selling Fund may waive the
conditions set forth in this paragraph 8.6.
8.7 The Acquiring Fund shall have received from KPMG Peat Marwick LLP a letter
addressed to the Acquiring Fund, in form and substance satisfactory to the
Acquiring Fund, to the effect that (i) they are independent certified public
accountants with respect to the Selling Fund within the meaning of the 1933 Act
and the applicable published rules and regulations thereunder; (ii) on the basis
of limited procedures agreed upon by the Acquiring Fund and described in such
letter (but not an examination in accordance with generally accepted auditing
standards) consisting of a reading of any unaudited pro forma financial
statements included in the Registration Statement and Prospectus and Proxy
Statement, and inquiries of appropriate officials of the FFB Trust responsible
for financial and accounting matters, nothing came to their attention which
caused them to believe that such unaudited pro forma financial statements do not
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the published rules and regulations thereunder;
or (iii) on the basis of limited procedures agreed upon by the Acquiring Fund
and described in such letter ( but not an examination in accordance with
generally accepted auditing standards), the Capitalization Table appearing in
the Registration Statement and Prospectus and Proxy Statement, has been obtained
from and is consistent with the accounting records of the Selling Fund; (iv) on
the basis of limited procedures agreed upon by the Acquiring Fund and described
in such letter (but not an examination in accordance with generally accepted
auditing standards), the pro forma financial statements which are included in
the Registration Statement and Prospectus and Proxy Statement, were prepared
based on the valuation of the Selling Fund's assets in accordance with the
Evergreen Trust's Declaration of Trust and the Acquiring Fund's then current
prospectus and statement of additional information pursuant to procedures
customarily utilized by the Acquiring Fund in valuing its own assets (such
procedures having been previously described to KPMG Peat Marwick LLP in writing
by the Acquiring Fund); and
-14-
(v) on the basis of limited procedures agreed upon by the Acquiring Fund and
described in such letter (but not an examination in accordance with generally
accepted auditing standards) the data utilized in the calculations of the
projected expense ratio appearing in the Registration Statement and Prospectus
and Proxy Statement agree with underlying accounting records of the Selling Fund
or to written estimates by Selling Fund's management and were found to be
mathematically correct.
In addition, the Acquiring Fund shall have received from KPMG Peat Marwick
LLP a letter addressed to the Acquiring Fund dated on the Closing Date, in form
and substance satisfactory to the Acquiring Fund, to the effect that on the
basis of limited procedures agreed upon by the Acquiring Fund (but not an
examination in accordance with generally accepted auditing standards) the
calculation of net asset value per share of the Selling Fund as of the Valuation
Date was determined in accordance with generally accepted accounting practices
and the portfolio valuation practices of the Acquiring Fund.
8.8 The Selling Fund shall have received from KPMG Peat Marwick LLP a letter
addressed to the Selling Fund, in form and substance satisfactory to the Selling
Fund, to the effect that (i) they are independent certified public accountants
with respect to the Acquiring Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder; (ii) on the basis of
limited procedures agreed upon by the Selling Fund and described in such letter
(but not an examination in accordance with generally accepted auditing
standards) consisting of a reading of any unaudited pro forma financial
statements included in the Registration Statement and Prospectus and Proxy
Statement, and inquiries of appropriate officials of the Evergreen Trust
responsible for financial and accounting matters, nothing came to their
attention which caused them to believe that such unaudited pro forma financial
statements do not comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the published rules and regulations
thereunder; (iii) on the basis of limited procedures agreed upon by the Selling
Fund and described in such letter (but not an examination in accordance with
generally accepted auditing standards), the Capitalization Table appearing in
the Registration Statement and Prospectus and Proxy Statement, has been obtained
from and is consistent with the accounting records of the Acquiring Fund; and
(iv) on the basis of limited procedures agreed upon by the Selling Fund (but not
an examination in accordance with generally accepted auditing standards) the
data utilized in the calculations of the projected expense ratio appearing in
the Registration Statement and Prospectus and Proxy Statement agree with
underlying accounting records of the Acquiring Fund or to written estimates by
each Fund's management and were found to be mathematically correct.
8.9 The Acquiring Fund and the Selling Fund shall also have received from KPMG
Peat Marwick LLP a letter addressed to the Acquiring Fund and the Selling Fund,
dated on the Closing Date in form and substance satisfactory to the Funds,
setting forth the Federal income tax implications relating to capital loss
carryforwards (if any) of the Selling Fund and the related impact, if any, of
the proposed transfer of all or substantially all of the assets of the Selling
Fund to the Acquiring Fund and the ultimate dissolution of the Selling Fund,
upon the shareholders of the Selling Fund.
ARTICLE IX
BROKERAGE FEES AND EXPENSES
9.1 The Acquiring Fund and the Selling Fund each represents and warrants to the
other that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
-15-
9.2 Except as otherwise provided for herein, all expenses of the transactions
contemplated by this Agreement incurred by the Selling Fund and the Acquiring
Fund will be borne by First Union National Bank of North Carolina ("FUNB"). Such
expenses include, without limitation, (i) expenses incurred in connection with
the entering into and the carrying out of the provisions of this Agreement; (ii)
expenses associated with the preparation and filing of the Registration
Statement under the 1933 Act covering the Acquiring Fund Shares to be issued
pursuant to the provisions of this Agreement; (iii) registration or
qualification fees and expenses of preparing and filing such forms as are
necessary under applicable state securities laws to qualify the Acquiring Fund
Shares to be issued in connection herewith in each state in which the Selling
Fund Shareholders are resident as of the date of the mailing of the Prospectus
and Proxy Statement to such shareholders; (iv) postage; (v) printing; (vi)
accounting fees; (vii) legal fees; and (viii) solicitation cost of the
transaction. Not withstanding the foregoing, the Acquiring Fund shall pay its
own Federal and state registration fees. In the event that the merger of First
Fidelity Bancorporation and First Union Corporation is not completed, this
Agreement shall terminate. In such event, all expenses of the transactions
contemplated by this Agreement incurred by the Acquiring Fund will be borne by
FUNB and all expenses of the transactions contempleted by this Agreement
incurred by the Selling Fund will be borne by First Fidelity Bank, N.A.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Selling Fund agree that neither party has made
any representation, warranty or covenant not set forth herein and that the
Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall
survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 In addition to the termination provisions set forth in paragraph 9.2, this
Agreement may be terminated by the mutual agreement of the Acquiring Fund and
the Selling Fund. In addition, either the Acquiring Fund or the Selling Fund may
at its option terminate this Agreement at or prior to the Closing Date because:
(a) of a breach by the other of any representation, warranty or agreement
contained herein to be performed at or prior to the Closing Date, if not cured
within 30 days; or
(b) a condition herein expressed to be precedent to the obligations of the
terminating party has not been met and it reasonably appears that it will not or
cannot be met.
11.2 In the event of any such termination, in the absence of willful default,
there shall be no liability for damages on the part of either the Acquiring Fund
or the Selling Fund, the Evergreen Trust or the FFB Trust or their respective
Trustees or officers, to the other party or its, Trustees or officers, but each
shall bear the expenses incurred by it incidental to the preparation and
carrying out of this Agreement as provided in paragraph 9.2.
-16-
ARTICLE XII
AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the Selling
Fund and the Acquiring Fund; provided, however, that following the meeting of
the Selling Fund Shareholders called by the FFB Trust pursuant to paragraph 5.2
of this Agreement, no such amendment may have the effect of changing the
provisions for determining the number of the Acquiring Fund Shares to be issued
to the Selling Fund Shareholders under this Agreement to the detriment of such
shareholders without their further approval.
ARTICLE XIII
NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy, overnight courier or certified mail addressed to:
the Acquiring Fund
Evergreen Investment Trust
2500 Westchester Avenue
Purchase, New York 10577
Attention: Joseph J. McBrien, Esq.
or to the Selling Fund
FFB Funds Trust
237 Park Avenue
New York, New York 10017
Attention: Edmund A. Hajim
ARTICLE XIV
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY
14.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
14.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder
-17-
shall be made by any party without the written consent of the other party.
Nothing herein expressed or implied is intended or shall be construed to confer
upon or give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
14.5 It is expressly agreed to that the obligations of the Selling Fund and the
Acquiring Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the FFB Trust or the
Evergreen Trust, personally, but bind only the trust property of the Selling
Fund and the Acquiring Fund, as provided in the Declarations of Trust of the FFB
Trust and the Evergreen Trust. The execution and delivery of this Agreement have
been authorized by the Trustees of the FFB Trust on behalf of the Selling Fund,
and the Evergreen Trust on behalf of the Acquiring Fund and signed by authorized
officers of the FFB Trust and the Evergreen Trust, acting as such, and neither
such authorization by such Trustees nor such execution and delivery by such
officers shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the FFB Trust and the Evergreen Trust as provided in their
Declarations of Trust.
-18-
IN WITNESS WHEREOF, the parties have duly executed and sealed this Agreement,
all as of the date first written above.
EVERGREEN INVESTMENT TRUST
on behalf of Evergreen Treasury Money Market Fund
By:/s/ John J. Pileggi
Name: John J. Pileggi
Title: President
(Seal)
FFB FUNDS TRUST
on behalf of FFB U.S. Government Fund
By: /s/ Edmund A. Hajim
Name: Edmund A. Hajim
Title: President
-19-
EXHIBIT B
INTERIM MASTER ADVISORY CONTRACT
FFB FUNDS TRUST
230 Park Avenue
New York, New York l0l69
December __, 1995
First Union National Bank of
North Carolina
One First Union
Charlotte, North Carolina 28288
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and First Union National Bank of North Carolina (the "Adviser") as follows:
1. The Trust is an open-end investment company organized as a
Massachusetts business trust, and consists of one or more separate investment
portfolios as may be established and designated by the Trustees from time to
time (the "Funds"). This contract shall pertain to any Fund as shall be
designated in a Supplement to this contract ("Supplement"), as further agreed
between the Trust and the Adviser. A separate class of shares of beneficial
interest of the Trust is offered to investors with respect to each Fund. The
Trust engages in the business of investing and reinvesting the assets of the
Funds in the manner and in accordance with the investment objective and
restrictions specified in the Trust's Declaration of Trust and the currently
effective Prospectus or Prospectuses (the "Prospectus") relating to the Trust
and the Funds included in the Trust's Registration Statement, as amended from
time to time (the "Registration Statement"), filed by the Trust under the
Investment Company Act of 1940 (the "1940 Act") and the Securities Act of 1933
(the "1933 Act"). Copies of the documents referred to in the preceding sentence
have been furnished to the Adviser. Any amendments to those documents shall be
furnished to the Adviser promptly.
2. The Trust employs the Adviser to provide the investment advisory
and administrative services specified elsewhere in this contract, and the
Adviser hereby accepts such employment. Pursuant to a Master Distribution
Contract (the "Master Distribution Contract") and a Master Administrative
Services Contract (the "Master Administrative Services Contract") between the
Trust and Furman Selz Mager Dietz & Birney Incorporated (the "Sponsor"), the
Trust has employed the Sponsor
to act as distributor for the Funds and to provide to the Trust
management and other services.
3. (a) The Adviser shall, at its expense, (i) employ or associate with
itself such persons as it believes appropriate to assist it in performing its
obligations under this contract and (ii) provide all advisory, administrative,
management and shareholder services, equipment, facilities and personnel
necessary to perform its obligations under this contract. The Trust recognizes
that in those cases where the Adviser makes arrangements with its correspondent
banks to maintain a subaccount for certain of their customers who invest in
shares of the Funds, such correspondent banks may also agree to provide services
to subaccount holders of the type provided by the Adviser to shareholders of
record. The Adviser shall obtain the Trust's prior written approval to each
arrangement whereby a correspondent bank agrees to provide such services. Such
correspondent banks will be compensated for such services exclusively by the
Adviser.
(b) Except as provided in subparagraph (a) in the Master
Administrative Services Contract, the Trust shall be responsible for all of its
expenses and liabilities, including compensation of its trustees who are not
affiliated with the Sponsor; taxes and governmental fees; interest charges; fees
and expenses of the Trust's independent accountants and legal counsel; trade
association membership dues; fees and expenses of any custodian (including fees
and expenses for keeping books and accounts and calculating the net asset value
of shares of the Funds), transfer agent, registrar and dividend disbursing agent
of the Trust; expenses of issuing, redeeming, registering and qualifying for
sale the Trust's shares; expenses of preparing and printing share certificates,
prospectuses, shareholders' reports, notices, proxy statements and reports to
regulatory agencies; the cost of office supplies; travel expenses of all
officers, trustees and employees; insurance premiums; brokerage and other
expenses of executing portfolio transactions; expenses of shareholders'
meetings; organizational expenses; and extraordinary expenses.
4. (a) The Adviser shall provide to the Trust investment guidance and
policy direction in connection with the management of the portfolios of the
Funds, including oral and written research analysis, advice, statistical and
economic data and information and judgments, of both a macroeconomic and
microeconomic character, concerning, among other things, interest rate trends,
portfolio composition, credit conditions of both a general and specific nature
and, where applicable, the average maturity of the portfolio of the Fund.
- 2 -
(b) The Adviser shall also provide to the Trust's officers
administrative assistance in connection with the operation of the Trust for the
account of the Funds. Administrative services provided by the Adviser shall
include (i) data processing, clerical and bookkeeping services required in
connection with maintaining the financial accounts and records for the Trust and
the Funds, (ii) the compilation of statistical and research data required for
the preparation of periodic reports and statements of the Fund which are
distributed to the Trust's officers and Board of Trustees, (iii) handling, or
causing to be handled, general shareholder relations with Fund investors, such
as advice as to the status of their accounts, the current yield and dividends
declared to date and assistance with other questions related to their accounts,
(iv) the compilation of information required in connection with the Trust's
filings with the Securities and Exchange Commission and (v) such other services
as the Adviser shall from time to time determine, upon consultation with the
Sponsor, to be necessary or useful to the administration of the Trust and the
Funds.
(c) As manager of the assets of the Funds, the Adviser shall make
investments for the account of the Funds in accordance with the Adviser's best
judgment and within the investment objective and restrictions set forth in the
Trust's Declaration of Trust, the Prospectus, the 1940 Act and the provisions of
the Internal Revenue Code relating to regulated investment companies, subject to
policy decisions adopted by the Trust's Board of Trustees. The Adviser shall
advise the Trust's officers and Board of Trustees, at such times as the Trust's
Board of Trustees may specify, of investments made for the Funds and shall, when
requested by the Trust's officers or Board of Trustees, supply the reasons for
making particular investments. It is understood that the Adviser will not use
any inside information pertinent to investment decisions undertaken in
connection with this contract that may be in its possession or in the possession
of any of its affiliates, nor will the Adviser seek to obtain any such
information.
(d) The Adviser shall furnish to the Trust's Board of Trustees
periodic reports on the investment performance of the Funds and on the
performance of its obligations under this contract and shall supply such
additional reports and information as the Trust's officers or Board of Trustees
shall reasonably request.
(e) On occasions when the Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other customers, the
Adviser, to the extent permitted by applicable law, may aggregate the securities
to be so
- 3 -
sold or purchased in order to obtain the best execution or lower brokerage
commissions, if any. The Adviser may also on occasion purchase or sell a
particular security for one or more customers in different amounts. On either
occasion, and to the extent permitted by applicable law and regulations,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Adviser in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Funds and to such other customers.
(f) The Adviser may cause the Funds to pay a broker which
provides brokerage and research services to the Adviser a commission for
effecting a securities transaction in excess of the amount another broker might
have charged. Such higher commissions may not be paid unless the Adviser
determines in good faith that the amount paid is reasonable in relation to the
services received in terms of the particular transaction or the Adviser's
overall responsibilities to the Fund and any other of the Adviser's clients.
5. The Adviser shall give the Trust the benefit of the Adviser's best
judgment and efforts in rendering services under this contract. As an inducement
to the Adviser's undertaking to render these services, the Trust agrees that the
Adviser shall not be liable under this contract for any mistake in judgment or
in any other event whatsoever except for lack of good faith, provided that
nothing in this contract shall be deemed to protect or purport to protect the
Adviser against the liability to the Trust or its shareholders to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of the Adviser's duties under this
contract or by reason of the Adviser's reckless disregard of its obligations and
duties hereunder.
6. In consideration of the services to be rendered by the Adviser
under this contract, the Trust shall pay the Adviser a monthly fee ("fee") with
respect to each Fund on the first business day of each month, based upon the
average daily value (as determined on each business day at the time set forth in
the Prospectus for determining net asset value per share) of the net assets of
the Fund during the preceding month, at annual rates set forth in a Supplement
to this contract with respect to the Fund, provided, that no fee shall accrue or
be payable hereunder with respect to a Fund until the first day after the day
(the "Approval Date") on which this contract has been approved by the vote of a
majority of the outstanding voting securities of that Fund (as defined in the
1940 Act). If the fees payable to the Adviser pursuant to this paragraph 6 begin
to accrue before the end of any month or if this contract terminates before the
end of any month, the fees for the period from that date to the end of that
month or
- 4 -
from the beginning of that month to the date of termination, as the case may be,
shall be prorated according to the proportion which the period bears to the full
month in which the effectiveness or termination occurs. For purposes of
calculating the monthly fees, the value of the net assets of a Fund shall be
computed in the manner specified in the Prospectus for the computation of net
asset value. For purposes of this contract, a "business day" is any day the New
York Stock Exchange is open for trading.
7. If the aggregate expenses of every character incurred by, or
allocated to, a Fund in any fiscal year, other than interest, taxes, brokerage
commissions and other portfolio transaction expenses, other expenditures which
are capitalized in accordance with generally accepted accounting principles and
any extraordinary expenses, but including the fees payable under the
Distribution Contract and the fees provided for in paragraph 6 ("includable
expenses") shall exceed the expense limitations applicable to the Fund imposed
by state securities laws or regulations thereunder, as these limitations may be
raised or lowered from time to time, the Adviser shall pay the Fund an amount
equal to 70% of that excess. With respect to portions of a fiscal year in which
this contract shall be in effect, the foregoing limitations shall be prorated
according to the proportion which that portion of the fiscal year bears to the
full fiscal year. At the end of each month of the Trust's fiscal year, the
Sponsor will review the includable expenses accrued during that fiscal year to
the end of the period and shall estimate the contemplated includable expenses
for the balance of that fiscal year. If as a result of that review and
estimation it appears likely that the includable expenses will exceed the
limitations referred to in this paragraph 7 for a fiscal year with respect to
the Fund, the monthly fees relating to the Fund payable to the Adviser under
this contract for such month shall be reduced, subject to a later adjustment, by
an amount equal to 70% of a pro rata portion (prorated on the basis of the
remaining months of the fiscal year, including the month just ended) of the
amount by which the includable expenses for the fiscal year (less an amount
equal to the aggregate of actual reductions made pursuant to this provision with
respect to prior months of the fiscal year) are expected to exceed the
limitations provided for in this paragraph 7. For purposes of the foregoing, the
value of the net assets of the Fund shall be computed in the manner specified in
the penultimate sentence of paragraph 6, and any payments required to be made by
the Adviser shall be made once a year promptly after the end of the Trust's
fiscal year.
- 5 -
8. This contract and any Supplement shall become effective with
respect to a Fund on the date specified in the Supplement, and shall thereafter
continue in effect with respect to the Fund until the earlier of the Closing
Date defined in the Agreement and Plan of Reorganization dated September __,
1995 approved by shareholders of the Fund or two years from such date only so
long as the continuance is specifically approved at least annually (a) by the
vote of a majority of the outstanding voting securities of the Fund (as defined
in the 1940 Act) or by the Trust's Board of Trustees and (b) by the vote, cast
in person at a meeting called for the purpose, of a majority of the Trust's
Trustees who are not parties to this contract or "interested persons" (as
defined in the 1940 Act) of any such party.
This contract and any Supplement thereto may be terminated with
respect to a Fund at any time, without the payment of any penalty, by a vote of
a majority of the outstanding voting securities of the Fund (as defined in the
1940 Act) or by a vote of a majority of the Trust's entire Board of Trustees on
60 days' written notice to the Adviser or by the Adviser on 60 days' written
notice to the Trust. This contract shall terminate automatically in the event of
its assignment (as defined in the 1940 Act).
9. Except to the extent necessary to perform the Adviser's obligations
under this contract, nothing herein shall be deemed to limit or restrict the
right of the Adviser, or any affiliate of the Adviser, or any employee of the
Adviser, to engage in any other business, whether of a similar or dissimilar
nature, or to render services of any kind to any other corporation, firm,
individual or association.
10. This contract shall be construed and its provisions
interpreted in accordance with the laws of the state of New York.
11. This contract may be executed in counterparts, but
all of the copies, together, shall constitute one contract.
12. Any notice given by a party to this Agreement shall be
sufficiently given when sent by registered or certified mail to the other party
at the address of such party set forth above or at such other address as such
party may from time to time specify in writing to the other party.
13. The Declaration of Trust establishing the Trust, filed on March
25, 1987, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the Office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "FFB Funds Trust" refers to the trustees
under the
- 6 -
Declaration collectively as trustees and not as individuals or personally, and
that no shareholder, trustee, officer, employee or agent of the Trust shall be
subject to claims against or obligations of the Trust to any extent whatsoever,
but that the Trust estate only shall be liable.
If the foregoing correctly sets forth the agreement between the Trust
and the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
FFB FUNDS TRUST
By: __________________________
Title:
ACCEPTED:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: ________________________
Title:
- 7 -
EXHIBIT C
INTERIM ADVISORY CONTRACT SUPPLEMENT
FFB Funds Trust
237 Park Avenue
New York, NY 10017
December __, 1995
First Union National Bank of
North Carolina
One First Union
Charlotte, North Carolina 28288
Re: FFB 100% U.S. Treasury Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust") and
First Union National Bank of North Carolina (the "Adviser") as follows:
1. The Trust is an open-end management investment company organized as a
Massachusetts business trust and consists of such separate investment portfolios
as have been or may be established by the Trustees of the Trust from time to
time. A separate class of shares of beneficial interest of the Trust is offered
to investors with respect to each investment portfolio. FFB 100% U.S. Treasury
Fund (the "Fund") is a separate investment portfolio of the Trust.
2. The Trust and the Adviser have entered into an Interim Master Advisory
Contract (the "Interim Master Advisory Contract") pursuant to which the Trust
has employed the Adviser to provide investment advisory and other services
specified in that contract, and the Adviser has accepted such employment.
3. As provided for in paragraph 1 of the Interim Master Advisory Contract,
the Trust hereby adopts the Interim Master Advisory Contract with respect to the
Fund, and the Adviser hereby acknowledges that the Interim Master Advisory
Contract shall pertain to the Fund, the terms and conditions of such Interim
Master Advisory Contract being hereby incorporated herein by reference.
4. The term "Fund" as used in the Interim Master Advisory Contract shall
for purposes of this Supplement pertain to the Fund.
5. As provided for in paragraph 6 of the Interim Master Advisory Contract
and subject to further conditions as set forth therein, the Trust shall with
respect to the Fund pay the adviser a monthly fee on the first business day of
each month based upon the average daily value (as determined on each business
day at
the time set forth in the Prospectus for determining net asset value per share)
of the net assets of the Fund during the preceding month, at the following
annual rates:
Portion of Average Daily Value of
Net Assets of the Fund Fee Rate
Assets up to $500 million 0.350%
Assets over $500 million up to $1 billion 0.315%
Assets over $1 billion up to $1.5 billion 0.280%
Assets over $1.5 billion 0.245%
6. (a) If the aggregate expenses of every character incurred by, or
allocated to, the Fund in any fiscal year, other than interest, taxes, expenses
under the Plan, brokerage commissions and other portfolio transaction expenses,
other expenditures which are capitalized in accordance with generally accepted
accounting principles and any extraordinary expenses, (including, without
limitation, litigation and indemnification expenses), but including the fees
payable under the Administrative Services Contract and the fees provided for in
paragraph 6 of the Interim Master Advisory Contract ("includable expenses"),
shall exceed the expense limitations applicable to the Fund imposed by state
securities laws or regulations thereunder, as these limitations may be raised or
lowered from time to time, the Adviser shall pay the Fund an amount equal to 77%
of that excess.
(b) With respect to portions of a fiscal year in which this Contract
shall be in effect, the limitation specified in paragraph 6(a) above shall be
prorated according to the proportion which that portion of the fiscal year bears
to the full fiscal year. At the end of each month of the Trust's fiscal year,
the Sponsor will review the includable expenses accrued during that fiscal year
to the end of the period and shall estimate the contemplated includable expenses
for the balance of that fiscal year. If, as a result of that review and
estimation, it appears likely that the includable expenses will exceed such
limitation for a fiscal year with respect to the Fund, the monthly fees relating
to the Fund payable to the Adviser under this Contract for such month shall be
reduced, subject to later adjustments at the end of each month through the end
of the fiscal year to reflect actual expenses, by an amount equal to 77% of a
pro rata portion (prorated on the basis of the remaining months of the fiscal
year, including the month just ended) of the amount by which the includable
expenses for the fiscal year (less an amount equal to the aggregate of actual
reductions made pursuant to this provision with respect to prior months of the
fiscal year) are expected to exceed such limitation. For purposes of the
foregoing, the value of the net assets of the
- 2 -
Fund shall be computed in the manner specified in the penultimate sentence of
paragraph 6 of the Interim Master Advisory Contract, and any payments required
to be made by the Adviser shall be made once a year promptly after the end of
the Trust's fiscal year.
7. This Supplement and the Interim Master Advisory Contract (together, the
"Contract") shall become effective with respect to the Fund on December __, 1995
and shall thereafter continue in effect with respect to the Fund until the
earlier of the Closing Date defined in the Agreement and Plan of Reorganization
dated September __, 1995, approved by shareholders of the Fund or two years from
such date only so long as the continuance is specifically approved at least
annually (a) by the vote of a majority of the outstanding voting securities of
the Fund (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), or by the Trust's Board of Trustees and (b) by the vote, cast in
person at a meeting called for that purpose, of a majority of the Trust's
Trustees who are not parties to this Contact or "interested persons" (as defined
in the 1940 Act) of any such party. This Contract may be terminated with respect
to the Fund at any time, without the payment of any penalty, by vote of a
majority of the outstanding voting securities of the Fund (as defined in the
1940 Act) or by a vote of a majority of the Trust's entire Board of Trustees on
60 days' written notice to the Trust. This Contract shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
If the foregoing correctly sets forth the agreement between the Trust and
the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
FFB FUNDS TRUST
By:______________________
Accepted:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By:___________________________
- 3 -
INTERIM ADVISORY CONTRACT SUPPLEMENT
FFB Funds Trust
237 Park Avenue
New York, NY 10017
December __, 1995
First Union National Bank of
North Carolina
One First Union
Charlotte, North Carolina 28288
Re: FFB U.S. Government Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust") and
First Union National Bank of North Carolina (the "Adviser") as follows:
1. The Trust is an open-end management investment company organized as a
Massachusetts business trust and consists of such separate investment portfolios
as have been or may be established by the Trustees of the Trust from time to
time. A separate class of shares of beneficial interest of the Trust is offered
to investors with respect to each investment portfolio. FFB U.S. Government Fund
(the "Fund") is a separate investment portfolio of the Trust.
2. The Trust and the Adviser have entered into an Interim Master Advisory
Contract (the "Interim Master Advisory Contract") pursuant to which the Trust
has employed the Adviser to provide investment advisory and other services
specified in that contract, and the Adviser has accepted such employment.
3. As provided for in paragraph 1 of the Interim Master Advisory Contract,
the Trust hereby adopts the Interim Master Advisory Contract with respect to the
Fund, and the Adviser hereby acknowledges that the Interim Master Advisory
Contract shall pertain to the Fund, the terms and conditions of such Interim
Master Advisory Contract being hereby incorporated herein by reference.
4. The term "Fund" as used in the Interim Master Advisory Contract shall
for purposes of this Supplement pertain to the Fund.
5. As provided for in paragraph 6 of the Interim Master Advisory Contract
and subject to further conditions as set forth therein, the Trust shall with
respect to the Fund pay the Adviser a monthly fee on the first business day of
each month based upon the average daily value (as determined on each business
day at
the time set forth in the Prospectus for determining net asset value per share)
of the net assets of the Fund during the preceding month, at the following
annual rates:
Portion of Average Daily Value of
Net Assets of the Fund Fee Rate
Assets up to $500 million 0.350%
Assets over $500 million up to $1 billion 0.315%
Assets over $1 billion up to $1.5 billion 0.028%
Assets over $1.5 billion 0.245%
6. This Supplement and the Interim Master Advisory Contract (together, the
"Contract") shall become effective with respect to the Fund on December __, 1995
and shall thereafter continue in effect with respect to the Fund until the
earlier of the Closing Date defined in the Agreement and Plan of Reorganization
dated September __, 1995, approved by shareholders of the Fund or than two years
from the date hereof only so long as the continuance is specifically approved at
least annually (a) by the vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act, or by the Trust's Board of
Trustees and (b) by the vote, cast in person at a meeting called for that
purpose, of a majority of the Trust's Trustees who are not parities to this
Contact or "interested persons" (as defined in the 1940 Act) of any such party.
This Supplement and the Interim Master Advisory Contract may be terminated with
respect to the Fund at any time, without the payment of any penalty, by vote of
a majority of the outstanding voting securities of the Fund (as defined in the
1940 Act) or by a vote of a majority of the Trust's entire Board of Trustees on
60 days' written notice to the Trust. This Contract shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
If the foregoing correctly sets forth the agreement between the Trust and
the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
FFB FUNDS TRUST
By:_______________________
Accepted:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By:____________________________
- 2 -
INTERIM ADVISORY CONTRACT SUPPLEMENT
FFB Funds Trust
237 Park Avenue
New York, NY 10017
December __, 1995
First Union National Bank of
North Carolina
One First Union
Charlotte, North Carolina 28288
Re: FFB U.S. Treasury Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust") and
First Union National Bank of North Carolina (the "Adviser") as follows:
1. The Trust is an open-end management investment company organized as a
Massachusetts business trust and consists of such separate investment portfolios
as have been or may be established by the Trustees of the Trust from time to
time. A separate class of shares of beneficial interest of the Trust is offered
to investors with respect to each investment portfolio. FFB U.S. Treasury Fund
(the "Fund") is a separate investment portfolio of the Trust.
2. The Trust and the Adviser have entered into an Interim Master Advisory
Contract (the "Interim Master Advisory Contract") pursuant to which the Trust
has employed the Adviser to provide investment advisory and other services
specified in that contract, and the Adviser has accepted such employment.
3. As provided for in paragraph 1 of the Interim Master Advisory Contract,
the Trust hereby adopts the Interim Master Advisory Contract with respect to the
Fund, and the Adviser hereby acknowledges that the Interim Master Advisory
Contract shall pertain to the Fund, the terms and conditions of such Interim
Master Advisory Contract being hereby incorporated herein by reference.
4. The term "Fund" as used in the Interim Master Advisory Contract shall
for purposes of this Supplement pertain to the Fund.
5. As provided for in paragraph 6 of the Interim Master Advisory Contract
and subject to further conditions as set forth therein, the Trust shall with
respect to the Fund pay the Adviser a monthly fee on the first business day of
each month based upon the average daily value (as determined on each business
day at
the time set forth in the Prospectus for determining net asset value per share)
of the net assets of the Fund during the preceding month, at the following
annual rates:
Portion of Average Daily Value of
Net Assets of the Fund Fee Rate
Assets up to $500 million 0.350%
Assets over $500 million up to $1 billion 0.315%
Assets over $1 billion up to $1.5 billion 0.028%
Assets over $1.5 billion 0.245%
6. This Supplement and the Interim Master Advisory Contract (together, the
"Contract") shall become effective with respect to the Fund on December __, 1995
and shall thereafter continue in effect with respect to the Fund until the
earlier of the Closing Date defined in the Agreement and Plan of Reorganization
dated September __, 1995, approved by shareholders of the Fund ortwo years from
the date hereof only so long as the continuance is specifically approved at
least annually (a) by the vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act, or by the Trust's Board of
Trustees and (b) by the vote, cast in person at a meeting called for that
purpose, of a majority of the Trust's Trustees who are not parities to this
Contact or "interested persons" (as defined in the 1940 Act) of any such party.
This Supplement and the Interim Master Advisory Contract may be terminated with
respect to the Fund at any time, without the payment of any penalty, by vote of
a majority of the outstanding voting securities of the Fund (as defined in the
1940 Act) or by a vote of a majority of the Trust's entire Board of Trustees on
60 days' written notice to the Trust. This Contract shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
If the foregoing correctly sets forth the agreement between the Trust and
the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
FFB FUNDS TRUST
By:____________________
Accepted:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:__________________________
- 2 -
STATEMENT OF ADDITIONAL INFORMATION DATED SEPTEMBER 25, 1995
Acquisition of the Assets of
FFB U.S. TREASURY FUND, FFB 100% U.S. TREASURY FUND
AND FFB U.S. GOVERNMENT FUND
OF
FFB FUNDS TRUST
237 Park Avenue
New York, New York 10017
1-800-437-8790
By and in Exchange for Shares of
EVERGREEN TREASURY MONEY MARKET FUND
OF
EVERGREEN INVESTMENT TRUST
2500 Westchester Avenue
Purchase, NY 10577
1-800-807-2940
This Statement of Additional Information, relating specifically to the
proposed transfer of the assets of the FFB U.S. Treasury Fund, FFB 100% U.S.
Treasury Fund and FFB U.S. Government Fund, each a series of FFB Funds Trust, in
exchange for Class A shares of Evergreen Treasury Money Market Fund, a series of
Evergreen Investment Trust, and the assumption by Evergreen Treasury Money
Market Fund of certain identified liabilities of the FFB U.S. Treasury Fund, FFB
100% U.S. Treasury Fund and FFB U.S. Government Fund, is not a prospectus. A
Prospectus/Proxy Statement dated September 25, 1995 relating to the
above-referenced matter may be obtained from Evergreen Treasury Money Market
Fund, 2500 Westchester Avenue, Purchase, New York 10577 or by calling toll-free
1-800-807-2940. This Statement of Additional Information relates to and should
be read in conjunction with such Prospectus/Proxy Statement.
This Statement of Additional Information incorporates by reference the
following documents, a copy of each of which accompanies this Statement of
Additional Information:
1. The Prospectus of the Evergreen Treasury Money Market
Fund dated July 7, 1995.
2. The Statement of Additional Information of the
Evergreen Treasury Money Market Fund dated July 7,
1995.
3. The Annual Report of the First Union Treasury Money
Money Market Fund (now known as Evergreen Treasury Money Market Fund)
dated December 31, 1994.
4. The Semi-Annual Report of the First Union Treasury Money Market Fund
(now known as Evergreen Treasury Money Market Fund) dated June 30,
1995.
5. The Prospectus of the FFB U.S. Treasury Fund and FFB
U.S. Government Fund dated June 30, 1995.
6. The Prospectus of the FFB 100% U.S. Treasury Fund dated
October 7, 1994.
7. The Statement of Additional Information of the FFB
U.S. Treasury Fund and FFB U.S. Government Fund dated
June 30, 1995.
8. The Statement of Additional Information of the FFB 100%
U.S. Treasury Fund dated October 7, 1994.
9. The Annual Report of the FFB U.S. Treasury Fund and
FFB U.S. Government Fund dated February 28, 1995.
The following pro forma financial information relates to the FFB U.S.
Treasury Fund, FFB 100% U.S. Treasury Fund and FFB U.S. Government Fund and the
Evergreen Treasury Money Market Fund:
EVERGREEN TREASURY MONEY MARKET FUND
Pro Forma Combining Financial Statements - June 30, 1995
EVERGREEN TREASURY U.S. GOVERNMENT
MONEY MARKET FUND FUND
June 30, 1995 June 30, 1995
Principal Principal
SECURITY DESCRIPTION Amount Value Amount Value
Mutual Fund Shares 1.3%
Fidelity U.S. Treasury,
Inc. Portfolio 34,366,376 34,366,376
Total Mutual Fund Shares $34,366,376
Repurchase Agreements * 58.3%
Aubrey G. Lanston & Co.,
Inc. 6.05%, dated 6/30/95,
due 7/3/95
Barclays Bank PLC, 5.90%,
dated 6/30/95, due 7/5/95 60,000,000 60,000,000
BZW Securities, Inc.
5.90%, dated 6/30/95,
due 7/3/95
Chemical Bank, 6.10%,
dated 6/30/95, due 7/3/95
Dean Witter Reynolds, Inc.,
6.00%, dated 6/30/95, due 7/5/95 60,000,000 60,000,000
Donaldson, Lufkin & Jenrette
Securities Inc., 6.00%,
dated 6/30/95, due 7/3/95 50,045,000 50,045,000
Donaldson, Lufkin & Jenrette
Securities, Inc., 6.05%,
dated 6/30/95, due 7/3/95
First Boston Corp. 5.95%,
dated 6/30/95, due 7/3/95 60,000,000 60,000,000
Fuji Securities, Inc., 6.05%,
dated 6/26/95, due 7/5/95 100,000,000 100,000,000
Goldman, Sachs & Co., 6.00%,
dated 6/30/95, due 7/3/95
Goldman, Sachs & Co., 5.95%,
dated 6/30/95, due 7/5/95 60,000,000 60,000,000
HSBC Securities, Inc. 5.90%,
dated 6/30/95, due 7/5/95 60,000,000 60,000,000
Lehman Brothers, 6.15%,
dated 6/30/95, due 7/3/95
Merrill Lynch, 5.75%, dated
6/30/95, due 7/5/95 60,000,000 60,000,000
Morgan Guaranty Trust Co.
of New York, 6.00%,
dated 6/26/95 due 7/5/95 100,000,000 100,000,000
Morgan Stanley, 6.1%,
dated 6/30/95, due 7/7/95
NationsBank, Charlotte NC
6.18%, dated 6/30/95,
due 7/5/95 100,000,000 100,000,000
Nikko Securities Co.
International, Inc. 6.10%,
dated 6/26/95, due 7/5/95 100,000,000 100,000,000
Prudential Securities, Inc.
6.01%, dated 6/22/95,
due 7/3/95
Shearson Lehman Brothers
6.10%, dated 6/30/95,
due 7/5/95 100,000,000 100,000,000
Smith Barney & Co.
6.1%, dated 6/30/95,
due 7/3/95
Smith Barney Securities, Inc
6.25%, dated 6/30/95,
due 7/3/95 18,977,000 18,977,000
State Street Bank,
5.85%, dated 6/30/95,
due 7/5/95 60,000,000 60,000,000
UBS Securities Inc.,
6.05%, dated 6/28/95,
due 7/5/95
UBS Securities Inc.,
6.1%, dated 6/30/95,
due 7/3/95
UBS Securities, Inc.
6.35%, dated 6/30/95,
due 7/3/95 20,000,000 20,000,000
Total Repurchase
Agreements $970,045,000 $38,977,000
U.S. Agency Obligations 7.2%
Federal Farm Credit
Bank Bonds 5.91% 7/5/95** 10,000,000 9,993,556
Federal Farm Credit
Bank Bonds 5.87% 7/6/95** 10,000,000 9,992,000
Federal Farm Credit
Bank Bonds 6.08% 7/5/95** 5,000,000 5,000,000
Federal Farm Credit
Bank Bonds 6.76% 7/5/95** 5,000,000 5,000,000
Federal Farm Credit
Bank Bonds 5.98% 9/1/95** 10,000,000 10,000,000
Federal Home Loan
Bank 5.84% 9/6/95** 5,000,000 4,947,144
Federal Home Loan
Bank 6.22% 11/2/95** 10,000,000 9,795,056
Fed. Home Loan Mtge.
Corp. Disc. Note 6.08% 7/13/95** 5,000,000 4,990,150
Fed. Home Loan Mtge.
Corp. Disc. Note 6% 8/3/95** 10,000,000 9,946,467
Fed. Home Loan Mtge.
Corp. Disc. Note 6.12% 8/10/95** 5,000,000 4,899,350
Fed. Home Loan Mtge.
Corp. Disc. Note 6.03% 8/11/95** 7,000,000 6,953,283
Fed. Home Loan Mtge.
Corp. Disc. Note 5.74% 8/2/95** 10,000,000 9,950,133
Fed. Home Loan Mtge.
Corp. Disc. Note 6.03% 8/22/95** 5,000,000 4,957,678
Fed. Home Loan Mtge.
Corp. Disc. Note 6.01% 9/7/95** 5,000,000 4,946,167
Federal National
Mortgage Association
6.03% 7/11/95** 5,000,000 4,991,833
Federal National
Mortgage Association
6.04% 7/19/95** 5,000,000 4,985,300
Federal National
Mortgage Association
6.03% 8/4/95** 3,000,000 2,983,368
Federal National
Mortgage Association
5.98% 8/14/95** 5,000,000 4,964,311
Federal National
Mortgage Association
6.09% 8/22/95** 10,000,000 9,915,066
Federal National
Mortgage Association
6.21% 8/25/95** 10,000,000 10,000,000
Federal National
Mortgage Association
5.92% 8/28/95** 5,000,000 4,953,439
Federal National
Mortgage Association
5.94% 9/1/95** 10,000,000 9,900,628
Federal National
Mortgage Association
5.91% 9/5/95** 5,000,000 4,947,292
Federal National
Mortgage Association
5.97% 9/14/95** 5,000,000 4,939,583
Federal National
Mortgage Association
6.28% 9/26/95** 5,000,000 4,927,500
Federal National
Mortgage Association
6.01% 2/16/96** 10,000,000 10,000,000
Student Loan
Marketing Association
5.63% 11/9/95** 10,000,000 10,000,000
Total U.S.
Agency Obligations 0 0 $188,879,304
100% U.S. TREASURY
SECURITIES PRO FORMA
June 30, 1995 COMBINED
ADJUSTMENTS
Principal Principal
SECURITY DESCRIPTION Amount Value Amount Value
Mutual Fund Shares
Fidelity U.S. Treasury,
Inc. Portfolio 34,366,376 34,366,376
Total Mutual Fund Shares $34,366,376
Repurchase Agreements *
Aubrey G. Lanston & Co.,
Inc. 6.05%, dated 6/30/95,
due 7/3/95 60,000,000 60,000,000 60,000,000 60,000,000
Barclays Bank PLC, 5.90%,
dated 6/30/95, due 7/5/95 60,000,000 60,000,000
BZW Securities, Inc.
5.90%, dated 6/30/95,
due 7/3/95 40,000,000 40,000,000 40,000,000 40,000,000
Chemical Bank, 6.10%,
dated 6/30/95, due 7/3/95 45,000,000 45,000,000 45,000,000 45,000,000
Dean Witter Reynolds, Inc.,
6.00%, dated 6/30/95, due 60,000,000 60,000,000
Donaldson, Lufkin & Jenrette
Securities Inc., 6.00%,
dated 6/30/95, due 7/3/95 50,045,000 50,045,000
Donaldson, Lufkin & Jenrette
Securitities, Inc., 6.05%,
dated 6/30/95, due 7/3/95 41,818,000 41,818,000 41,818,000 41,818,000
First Boston Corp. 5.95%,
dated 6/30/95, due 7/3/95 60,000,000 60,000,000
Fuji Securities, Inc., 6.05%,
dated 6/26/95, due 7/5/95 100,000,000 100,000,000
Goldman, Sachs & Co., 6.00%,
dated 6/30/95, due 7/3/95 50,000,000 50,000,000 50,000,000 50,000,000
Goldman, Sachs & Co., 5.95%,
dated 6/30/95, due 7/5/9 60,000,000 60,000,000
HSBC Securities, Inc. 5.90%,
dated 6/30/95, due 7/5/9 60,000,000 60,000,000
Lehman Brothers, 6.15%,
dated 6/30/95, due 7/3/95 50,000,000 50,000,000 50,000,000 50,000,000
Merrill Lynch, 5.75%, dated
6/30/95, due 7/5/95 60,000,000 60,000,000
Morgan Guaranty Trust Co.
of New York, 6.00%,
dated 626/96 due 7/5/95 100,000,000 100,000,000
Morgan Stanley, 6.1%,
dated 6/30/95, due 7/7/95 60,000,000 60,000,000 60,000,000 60,000,000
NationsBank, Charlotte NC
6.18%, dated 6/30/95,
due 7/5/95 100,000,000 100,000,000
Nikko Securities Co.
International, Inc. 6.10%,
dated 6/26/95, due 7/5/95 100,000,000 100,000,000
Prudential Securities, Inc.
6.01%, dated 6/22/95,
due 7/3/95 50,000,000 50,000,000 50,000,000 50,000,000
Shearson Lehman Brothers
6.10%, dated 6/30/95,
due 7/5/95 100,000,000 100,000,000
Smith Barney & Co.
6.1%, dated 6/30/95,
due 7/3/95 50,000,000 50,000,000 50,000,000 50,000,000
Smith Barney Securities, Inc
6.25%, dated 6/30/95,
due 7/3/95 18,977,000 18,977,000
State Street Bank,
5.85%, dated 6/30/95,
due 7/5/95 60,000,000 60,000,000
UBS Securities Inc.,
6.05%, dated 6/28/95,
due 7/5/95 44,771,000 44,771,000 44,771,000 44,771,000
UBS Securities Inc.,
6.1%, dated 6/30/95,
due 7/3/95 30,000,000 30,000,000 30,000,000 30,000,000
UBS Securities, Inc.
6.35%, dated 6/30/95,
due 7/3/95 20,000,000 20,000,000
Total Repurchase
Agreements $521,589,000 0 0 0 $1,530,611,000
U.S. Agency Obligations
Federal Farm Credit
Bank Bonds 5.91% 7/5/95** 10,000,000 9,993,556
Federal Farm Credit
Bank Bonds 5.87% 7/6/95** 10,000,000 9,992,000
Federal Farm Credit
Bank Bonds 6.08% 7/5/95** 5,000,000 5,000,000
Federal Farm Credit
Bank Bonds 6.76% 7/5/95** 5,000,000 5,000,000
Federal Farm Credit
Bank Bonds 5.98% 9/1/95** 10,000,000 10,000,000
Federal Home Loan
Bank 5.84% 9/6/95** 5,000,000 4,947,144
Federal Home Loan
Bank 6.22% 11/2/95** 10,000,000 9,795,056
Fed. Home Loan Mtge.
Corp. Disc. Note 6.08% 7/13/95** 5,000,000 4,990,150
Fed. Home Loan Mtge.
Corp. Disc. Note 6% 8/3/95** 10,000,000 9,946,467
Fed. Home Loan Mtge.
Corp. Disc. Note 6.12% 8/10/95** 5,000,000 4,899,350
Fed. Home Loan Mtge.
Corp. Disc. Note 6.03% 8/11/95** 7,000,000 6,953,283
Fed. Home Loan Mtge.
Corp. Disc. Note 5.74% 8/2/95** 10,000,000 9,950,133
Fed. Home Loan Mtge.
Corp. Disc. Note 6.03% 8/22/95** 5,000,000 4,957,678
Fed. Home Loan Mtge.
Corp. Disc. Note 6.01% 9/7/95** 5,000,000 4,946,167
Federal National
Mortgage Association
6.03% 7/11/95** 5,000,000 4,991,833
Federal National
Mortgage Association
6.04% 7/19/95** 5,000,000 4,985,300
Federal National
Mortgage Association
6.03% 8/4/95** 3,000,000 2,983,368
Federal National
Mortgage Association
5.98% 8/14/95** 5,000,000 4,964,311
Federal National
Mortgage Association
6.09% 8/22/95** 10,000,000 9,915,066
Federal National
Mortgage Association
6.21% 8/25/95** 10,000,000 10,000,000
Federal National
Mortgage Association
5.92% 8/28/95** 5,000,000 4,953,439
Federal National
Mortgage Association
5.94% 9/1/95** 10,000,000 9,900,628
Federal National
Mortgage Association
5.91% 9/5/95** 5,000,000 4,947,292
Federal National
Mortgage Association
5.97% 9/14/95** 5,000,000 4,939,583
Federal National
Mortgage Association
6.28% 9/26/95** 5,000,000 4,927,500
Federal National
Mortgage Association
6.01% 2/16/96** 10,000,000 10,000,000
Student Loan
Marketing Association
5.63% 11/9/95** 10,000,000 10,000,000
Total U.S.
Agency Obligations 0 0 0 0 0 0 $188,879,304
U.S.Treasury Bills 15.1%
U.S. Treasury Bills 5.38% 5/30/96 70,000 66,498
U.S. Treasury Bills 5.51%, 9/21/95
U.S. Treasury Bills 5.57%, 11/02/95 20,000,000
U.S. Treasury Bills 5.61%, 10/12/95
U.S. Treasury Bills 5.62%, 10/12/95 10,000,000
U.S. Treasury Bills 5.62%, 12/07/95 20,000,000
U.S. Treasury Bills 5.63%, 8/31/95
U.S. Treasury Bills 5.63%, 12/14/95
U.S. Treasury Bills 5.63%, 9/14/95 20,000,000
U.S. Treasury Bills 5.63%, 9/21/95 35,000,000
U.S. Treasury Bills 5.65%, 8/31/95 30,000,000
U.S. Treasury Bills 5.68%, 9/07/95 25,000,000
U.S. Treasury Bills 5.75%, 7/6/95
U.S. Treasury Bills 5.76%, 11/24/95
U.S. Treasury Bills 5.77%, 8/24/95
U.S. Treasury Bills 5.77%, 11/24/95 25,000,000
U.S. Treasury Bills 5.78%, 5/30/96 55,000
U.S. Treasury Bills 5.78%, 7/27/95 25,000,000
U.S. Treasury Bills 5.79%, 5/30/96
U.S. Treasury Bills 5.8%, 8/03/95 40,000,000
U.S. Treasury Bills 5.81%, 7/27/95
U.S. Treasury Bills 5.82%, 8/3/95
U.S. Treasury Bills 5.83%, 8/10/95
U.S. Treasury Bills 5.84%, 8/10/95 40,000,000
U.S. Treasury Bills 5.84%, 8/17/95 40,000,000
U.S. Treasury Bills 5.84%, 9/7/95
U.S. Treasury Bills 5.85%, 8/24/95 25,000,000
U.S. Treasury Bills 5.94%, 10/19/95
U.S. Treasury Bills 6.08%, 7/20/95 20,000,000
U.S. Treasury Bills 6.48%, 4/04/96 10,000,000
Total U.S. Treasury Bills 70,000 $66,498 385,055,000
U.S. Treasury Notes 18.1%
U.S. Treasury Notes, 3.75%, 8/15/95 50,000,000
U.S. Treasury Notes, 3.89%, 9/30/95 25,000,000
U.S. Treasury Notes, 4.25%, 7/31/95 25,000,000 24,961,825
U.S. Treasury Notes, 4.25%, 7/31/95 50,000,000 49,913,720
U.S. Treasury Notes, 4.25%, 8/15/95 30,000,000 29,937,059
U.S. Treasury Notes, 4.31%, 7/31/95 30,000,000
U.S. Treasury Notes, 4.625%, 2/29/96 50,000,000 49,498,184
U.S. Treasury Notes, 6.10%, 11/30/95 20,000,000
U.S. Treasury Notes, 7.375%, 5/15/95 40,000,000 40,536,330
U.S. Treasury Notes, 8.50%, 11/15/95 25,000,000 25,182,633
U.S. Treasury Notes, 8.875%, 2/15/96 25,000,000 25,439,307
U.S. Treasury Notes, 9.25%, 1/15/96 25,000,000 25,372,151
U.S. Treasury Notes, 9.25%, 1/15/96 20,000,000 20,298,181
U.S. Treasury Notes, 9.25%, 1/15/96 40,000,000 40,543,293
U.S. Treasury Notes, 10.50%, 8/15/95 20,000,000 20,096,917
Total U.S. Treasury Notes $351,779,600 0 0
Total Investments (Cost $2,626,957,875)*** 100.0% 1,356,190,976 227,922,802 0
Other Assets & Liabilities -0.0% 3,042,592 (343,859)
Net Assets 100.0% 1,359,233,567 227,578,944
* The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio.
**This investment does not comply with the investment objective of the
Evergreen Treasury Money Market Fund. Such investment will be sold
prior to the date of the merger. In its place, securities will be
purchased that comply with the investment objectives of the Evergreen
Treasury Money Market Fund.
*** Also represents cost for federal tax purposes.
(See Notes which are an integral part of the Pro-Forma Financial
Statements)
U.S.Treasury Bills
U.S. Treasury Bills 5.38% 5/30/96 70,000 66,498
U.S. Treasury Bills 5.51%, 9/21/95 2,350,000 2,321,330 2,350,000 2,321,330
U.S. Treasury Bills 5.57%, 11/02/95 19,629,033 20,000,000 19,629,033
U.S. Treasury Bills 5.61%, 10/12/95 486,000 478,422 486,000 478,422
U.S. Treasury Bills 5.62%, 10/12/95 9,843,783 10,000,000 9,843,783
U.S. Treasury Bills 5.62%, 12/07/95 19,523,000 20,000,000 19,523,000
U.S. Treasury Bills 5.63%, 8/31/95 721,000 714,312 721,000 714,312
U.S. Treasury Bills 5.63%, 12/14/95 1,100,000 1,072,610 1,100,000 1,072,610
U.S. Treasury Bills 5.63%, 9/14/95 19,772,292 20,000,000 19,772,292
U.S. Treasury Bills 5.63%, 9/21/95 34,563,692 35,000,000 34,563,692
U.S. Treasury Bills 5.65%, 8/31/95 29,720,417 30,000,000 29,720,417
U.S. Treasury Bills 5.68%, 9/07/95 24,739,333 25,000,000 24,739,333
U.S. Treasury Bills 5.75%, 7/6/95 621,000 620,516 621,000 620,516
U.S. Treasury Bills 5.76%, 11/24/95 576,000 563,063 576,000 563,063
U.S. Treasury Bills 5.77%, 8/24/95 529,000 524,549 529,000 524,549
U.S. Treasury Bills 5.77%, 11/24/95 24,438,306 25,000,000 24,438,306
U.S. Treasury Bills 5.78%, 5/30/96 52,250 55,000 52,250
U.S. Treasury Bills 5.78%, 7/27/95 24,898,094 25,000,000 24,898,094
U.S. Treasury Bills 5.79%, 5/30/96 10,000 9,500 10,000 9,500
U.S. Treasury Bills 5.8%, 8/03/95 39,793,017 40,000,000 39,793,017
U.S. Treasury Bills 5.81%, 7/27/95 981,000 976,983 981,000 976,983
U.S. Treasury Bills 5.82%, 8/3/95 2,667,000 2,653,179 2,667,000 2,653,179
U.S. Treasury Bills 5.83%, 8/10/95 2,523,000 2,507,094 2,523,000 2,507,094
U.S. Treasury Bills 5.84%, 8/10/95 39,747,667 40,000,000 39,747,667
U.S. Treasury Bills 5.84%, 8/17/95 39,703,117 40,000,000 39,703,117
U.S. Treasury Bills 5.84%, 9/7/95 1,739,000 1,720,449 1,739,000 1,720,449
U.S. Treasury Bills 5.85%, 8/24/95 24,786,812 25,000,000 24,786,812
U.S. Treasury Bills 5.94%, 10/19/95 1,221,000 1,199,735 1,221,000 1,199,737
U.S. Treasury Bills 6.08%, 7/20/95 19,938,107 20,000,000 19,938,107
U.S. Treasury Bills 6.48%, 4/04/96 9,536,667 10,000,000 9,536,667
Total U.S. Treasury Bills 380,685,587 15,361,742 396,113,827
U.S. Treasury Notes
U.S. Treasury Notes, 3.75%, 8/15/95 49,912,517 50,000,000 49,912,517
U.S. Treasury Notes, 3.89%, 9/30/95 24,871,798 25,000,000 24,871,798
U.S. Treasury Notes, 4.25%, 7/31/95 25,000,000 24,961,825
U.S. Treasury Notes, 4.25%, 7/31/95 50,000,000 49,913,720
U.S. Treasury Notes, 4.25%, 8/15/95 30,000,000 29,937,059
U.S. Treasury Notes, 4.31%, 7/31/95 29,955,528 30,000,000 29,955,528
U.S. Treasury Notes, 4.625%, 2/29/96 50,000,000 49,498,184
U.S. Treasury Notes, 6.10%, 11/30/95 19,852,623 20,000,000 19,852,623
U.S. Treasury Notes, 7.375%, 5/15/95 40,000,000 40,536,330
U.S. Treasury Notes, 8.50%, 11/15/95 25,000,000 25,182,633
U.S. Treasury Notes, 8.875%, 2/15/96 25,000,000 25,439,307
U.S. Treasury Notes, 9.25%, 1/15/96 25,000,000 25,372,151
U.S. Treasury Notes, 9.25%, 1/15/96 20,000,000 20,298,181
U.S. Treasury Notes, 9.25%, 1/15/96 40,000,000 40,543,293
U.S. Treasury Notes, 10.50%, 8/15/95 20,000,000 20,096,917
Total U.S. Treasury Notes 124,592,466 0 476,372,066
Total Investments (Cost $2,626,342,573)*** 1,026,867,053 15,361,742 2,626,342,573
Other Assets & Liabilities (2,667,382) (65,805) (34,452)
Net Assets $1,024,199,671 $15,295,939 $2,626,308,121
* The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio.
** This investment does not comply with the investment objective of the
Evergreen Treasury Money Market Fund. Such investment will be sold
prior to the date of the merger. In its place, securities will be
purchased that comply with the investment objectives of the Evergreen
Treasury Money Market Fund.
*** Also represents cost for federal tax purposes.
(See Notes which are an integral part of the Pro-Forma Financial
Statements)
Evergreen FFB US FFB US FFB 100% US
Treasury Money Government Treasury Treasury Pro Forma
Market Fund Fund Fund Fund Adjustments Combined
ASSETS
Investments in securities, at
amortized cos
(Cost $2,626,342,573) $1,356,190,976 $227,922,802 $1,026,867,053 $ 15,361,742 $2,626,342,573
Cash (2,300) 0 211,878 933 441,733 (1) 652,244
Interest receivable 9,062,233 516,483 1,885,586 0 11,464,302
Receivable for investment securities 0 0 0 0 0
Receivable for fund shares sold 0 0 0 0 0
Unamortized organizational costs 0 0 0 48,438 (48,438)(1) 0
Other assets 0 26,336 10,838 0 37,174
Prepaid expenses 8,363 241,269 123,586 129 (443,295)(1) (69,948)
TOTAL ASSETS 1,365,259,272 228,706,890 1,029,098,941 15,411,242 (50,000) 2,638,426,345
LIABILITIES:
purchased 0 0 0 0
Organizational payable 0 0 0 50,000 (50,000)(1) 0
Payable for fund shares repurchased 0 0 0 0 0
Dividends payable 5,831,825 946,303 4,213,062 64,169 11,055,359
Accrued advisory fee 0 63,439 259,507 0 322,946
Accrued expenses 193,880 118,204 426,701 1,134 739,919
TOTAL LIABILITIES 6,025,705 1,127,946 4,899,270 115,303 (50,000) 12,118,224
NET ASSETS $1,359,233,567 $227,578,944 $1,024,199,671 $15,295,939 0 $2,626,308,121
NET ASSETS CONSIST OF:
Paid in capital 1,359,233,567 227,578,944 1,024,199,671 15,295,545 2,626,307,727
Accumulated net realized gain on
investments 0 0 0 394 394
NET ASSETS 1,359,233,567 227,578,944 1,024,199,671 15,295,939 0 2,626,308,121
Net asset value and offering price per share:
Class A $1.00 $1.00 $1.00 $1.00 $1.00
Class Y $1.00 - - - $1.00
Net Assets:
Class A 1,046,706,925 227,578,944 1,024,199,671 15,295,939 2,313,781,479
Class Y 312,526,642 - - - 312,526,642
Shares outstanding:
Class A 1,046,706,925 227,578,944 1,024,199,671 15,295,939 2,313,781,479
Class Y 312,526,642 - - - 312,526,642
(See Notes which are an integral part of the Pro Forma Financial Statements)
(1)To eliminate deferred organizational costs and prepaid expenses that will
not be utillized by the combined fund
Evergreen FFB US FFB US FFB 100% US
Treasury Money Government Treasury Treasury Pro Forma
Market Fund Fund Fund Fund(1) Adjustments Combined
INVESTMENT INCOME
Interest income $52,849,204 $11,640,018 $37,089,425 $149,578 $101,728,225
EXPENSES:
Investment advisory fee 3,368,887 749,918 2,321,196 3,592 68,074 (2) 6,511,667
Trustees' fees 16,913 6,340 6,339 739 (662)(3) 29,669
Administrative personnel and
service fees 800,629 310,153 974,613 2,052 (1,145,674)(2) 941,773
Custodian and portfolio accounting
fees 217,016 64,153 192,451 0 (23,404)(4) 450,216
Shareholder servicing fees 0 62,406 220,730 0 (283,136)(6) 0
Transfer and dividend disbursing a 75,550 8,265 6,871 422 2,289 (8) 93,397
Distribution services fees - Class A 2,257,858 25,487 88,732 0 2,606,103 (5) 4,978,180
Fund share registration costs 72,441 65,961 124,238 360 (143,055)(3) 119,945
Professional fees 19,074 17,522 51,284 720 (59,989)(3) 28,611
Printing and postage 19,348 7,393 17,114 729 (7,697)(7) 36,887
Insurance premiums 12,042 7,265 23,185 31 (27,481)(7) 15,042
Organizational exp 0 0 0 1,562 (1,562)(7) 0
Miscellaneous 12,183 42,911 84,285 1,867 (122,971)(7) 18,275
TOTAL EXPENSES 6,871,941 1,367,774 4,111,038 12,074 860,835 13,223,662
Less fee waiver and expense
reimbursements (1,826,946) (13,580) (13,278) (5,644) (1,670,894)(9) (3,530,342)
NET EXPENSES 5,044,995 1,354,194 4,097,760 6,430 (810,059) 9,693,320
NET INVESTMENT INCOME 47,804,209 10,285,824 32,991,665 143,148 810,059 92,034,905
(See Notes which are an integral part of the Pro Forma Financial Statements)
(1)For the period from April 10, 1995 (Commencement of operations) to June 30,
1995.
(2)Reflects an increase in investment advisory fee and a decrease in
administrative personnel and service fees based on the surviving Fund's
fee schedule.
(3)Reflects elimination of duplicate service fees.
(4)Based on surviving Fund's contract in effect for custodian and portfolio
accounting services.
(5)Reflects an increase in distribution service fees for Class A shares
based on the surviving Fund's fee schedule and combined Class A net assets
(6)Reflects the elimination of a shareholder service fee that is not
applicable under the surviving Fund's fee structure
(7)Adjustment reflects the anticipated cost savings when the Fund's combine.
(8)Reflects anticipated expenses of the combined Fund.
(9)Reflects an increase in waiver of investment advisory fee based on the
surviving Fund's voluntary advisory fee waiver in effect for the year
ended June 30, 1995.
Evergreen Treasury Money Market Fund
Notes to Pro Forma Combining Financial Statements (Unaudited)
June 30, 1995
1. Basis of Combination - The Pro forma Statement of Assets and
Liabilities, including the Pro Forma Portfolio of Investments, and the
related Pro Forma Statement of Operations ("Pro forma Statements") reflects
the accounts of Evergreen Treasury Money Market Fund ("Evergreen"),
FFB U.S. Government Fund, FFB U.S. Treasury Fund and FFB 100% U.S.
Treasury Fund (collectively referred to as FFB Funds ) at June 30,
1995 and for the year then ended.
The Pro forma Statements give effect to the proposed transfer of
all assets and liabilities of each of the FFB Funds in exchange for
shares of Evergreen. The Pro forma Statements do not reflect the
expense of any of the Funds in carrying out their obligations under
the Agreement and Plan of Reorganization. The actual fiscal year
end of the combined Fund will be August 31, the fiscal year end of
Evergreen.
The Reorganization will be accomplished through a series of
acquisitions of substantially all of the assets of each of the FFB
Funds by Evergreen, and the assumption by Evergreen of certain
identified liabilities of each of the FFB Funds. Thereafter there
will be a distribution of such shares of Evergreen to
shareholders of each of the FFB Funds in liquidation of and
subsequent termination of each of the FFB Funds. The information
contained herein is based on the experience of each Fund for the year
or period ended June 30, 1995 and is designed to permit shareholders
of the FFB Funds to evaluate the financial effect of the proposed
Reorganization. The expenses of Evergreen in connection with the
Reorganization (including the cost of any proxy soliciting agents),
will be borne by Capital Management Group of First Union National
Bank of North Carolina (the "Adviser"). The expenses of each of
the FFB Funds incurred in connection with the Reorganization will
be borne by the
Adviser. No portion of such expenses shall be borne directly or
indirectly by the FFB Funds or their shareholders.
The Pro forma Statements should be read in conjunction with the
historical financial statements of each Fund incorporated by reference
in the Statement of Additional Information.
2. Shares of Beneficial Interest - The pro forma net asset value per
share assumes the issuance of additional shares of Evergreen Class
A which would have been issued at June 30, 1995 in connection
with the proposed reorganization. The amount of additional shares
assumed to be issued was calculated based on the June 30,
1995 net assets of each of the FFB Funds as shown below and the net
asset value per share of Evergreen of $1:
Net Assets
FFB U.S. Government Fund $ 227,578,944
FFB U.S. Treasury Fund 1,024,199,671
FFB 100% U.S. Treasury Fund 15,295,939
The pro forma shares outstanding of 2,626,308,121 consist of
1,267,074,554 additional shares to be issued in proposed
reorganization, as calculated above, plus 1,359,233,567 shares of
Evergreen outstanding as of June 30, 1995.
3. Pro Forma Operations - The Pro Forma Statement of Operations
assumes similar rates of gross investment income for the
investments of each Fund. Accordingly, the combined gross
investment income is equal to the sum of each Fund's gross
investment income. Pro forma operating expenses include the actual
expenses of the Funds and the combined Fund, with certain expenses
adjusted to reflect the expected expenses of the combined entity.
The investment advisory fee, administrative personnel and service
fees, and distribution service fees have been charged to the
combined Fund based on the fee schedule in effect for Evergreen at
the combined level of average net assets for the year ended June
30, 1995. The Adviser
may, at its discretion, waive its fee or reimburse the Fund for
certain of its expenses in order to reduce the Fund's expense
ratio. An adjustment has been made to the combined Fund expenses
to increase the waiver of investment advisory fee based on the
voluntary advisory fee waiver in effect for Evergreen for the year ended
June 30, 1995. The Adviser may, at its discretion, revise or cease this
voluntary fee waiver at any time.
-2-
EVERGREEN INVESTMENT TRUST
PART C
OTHER INFORMATION
Item 15. Indemnification.
The response to this item is incorporated by reference to
"Liability and Indemnification of Trustees" under the caption "Comparative
Information on Shareholders' Rights" in Part A of this Registration Statement.
Item 16. Exhibits:
1(a). Declaration of Trust. Incorporated by reference to the Registrant's
Registration Statement on Form N-1A filed on November 13, 1984 -
Registration No. 33-16706 ("Form N-1A Registration Statement")
1(b). Certificate of Amendment to Declaration of Trust. Incorporated by
reference to Post-Effective Amendment No. 28 to the Registrant's Form N-1A
Registration Statement filed on April 15, 1993.
1(c). Instrument providing for the Establishment and Designation of
Classes. Incorporated by reference to Post-Effective Amendment No. 28 to
the Registrant's Form N-1A Registration Statement filed on April 15, 1993.
1(d). Certificate of Amendment to Declaration of Trust. Incorporated by
reference to Post-Effective Amendment No. 40 to the Registrant's Form N-1A
Registration Statement filed on July 6, 1995.
2(a). Bylaws. Incorporated by reference to the Form N-1A Registration
Statement.
2(b). Amendment to the Bylaws. Incorporated by reference to Post-
Effective Amendment No. 3 to the Registrant's Form N-1A Registration
Statement filed on July 30, 1987.
3. Not applicable.
4. Agreement and Plan of Reorganization. Exhibit A to Prospectus
contained in Part A of this Registration Statement.
5. Not applicable.
6(a). Investment advisory agreement between First Union National Bank of
North Carolina and the Registrant. Incorporated by reference to Post-
Effective Amendment No. 38 to the Registrant's Form N-1A Registration
Statement filed on December 30, 1994.
6(b). Exhibit to Investment Advisory Agreement. Incorporated by reference
to Post-Effective Amendment No. 38 to the Registrant's Form N-1A
Registration Statement filed on December 30, 1994.
6(c). Form of Interim Investment Advisory Agreement for FFB U.S. Treasury
Fund. Exhibit B to Prospectus contained in part A of this Registration
Statement.
6(d). Form of Interim Investment Advisory Agreement for FFB U.S.
Government Fund. Exhibit B to Prospectus contained in Part A of this
Registration Statement.
6(e). Form of Interim Investment Advisory Agreement for FFB 100% U.S.
Treasury Fund. Exhibit B to Prospectus contained in Part A to this
Registration Statement.
7. Distribution Agreement between Evergreen Funds Distributor, Inc. and
the Registrant. Incorporated by reference to Post-Effective Amendment No.
40 to the Registrant's Form N-1A Registration Statement filed on July 6,
1995.
8. Not applicable.
9(a). Custody Agreement between State Street Bank and Trust Company and
Registrant. Incorporated by reference to Post-Effective Amendment No. 38
to the Registrant's Form N-1A Registration Statement filed on December 30,
1994.
9(b). Amendment to Custody Agreement. Incorporated by reference to Post-
Effective No. 38 to the Registrant's From N-1A Registration Statement filed
on December 30, 1994.
10. Not Applicable.
11. Opinion and consent of Sullivan & Worcester. Filed herewith.
12. Tax opinion and consent of Sullivan & Worcester. Filed herewith.
13. Not applicable.
14(a). Consent of KPMG Peat Marwick LLP, independent accountants, as to the use
of their report dated February 13, 1995 concerning the financial statements of
the Evergreen Treasury Money Market Fund for the fiscal year ended December 31,
1994. Filed herewith.
14(b). Consent of KPMG Peat Marwick LLP, independent accountants, as to the use
of their report dated April 27, 1995 concerning the financial statements of the
FFB U.S. Treasury Fund and FFB U.S. Government Fund for the fiscal year ended
February 28, 1995. Filed herewith.
15. Not applicable.
-2-
17(a). Form of Proxy Card. Filed herewith.
17(b). Registrant's Rule 24f-2 Declaration. Filed herewith.
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which is
a part of this Registration Statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act, the
reoffering prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
-3-
SIGNATURES
As required by the Securities Act of 1933, this Registration
Statement has been signed on behalf of the Registrant, in the City of New York
and State of New York, on the 20th day of August, 1995.
Evergreen Investment Trust
By: /s/ John J. Pileggi
----------------------
Name: John J. Pileggi
Title: President
Each person whose signature appears below hereby authorizes John J.
Pileggi, Joan V. Fiore and Joseph J. McBrien, as attorney-in-fact, to sign on
his behalf, any amendments to this Registration Statement and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission and any
state securities commission.
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
/s/John J. Pileggi President (Principal August 20, 1995
------------------ Executive Officer)
John J. Pileggi and Treasurer
(Principal Financial
and Accounting Officer)
/s/James Howell Trustee August 20, 1995
---------------
James Howell
/s/Gerald McDonnell Trustee August 20, 1995
-------------------
Gerald McDonnell
/s/Thomas L. McVerry Trustee August 20, 1995
--------------------
Thomas L. McVerry
/s/William W. Pettit Trustee August 20, 1995
--------------------
William W. Pettit
/s/Russell A Salton, III Trustee August 20, 1995
------------------------
Russell A. Salton, III
/s/Michael S. Scofield Trustee August 20, 1995
----------------------
Michael S. Scofield
-4-
INDEX TO EXHIBITS
N-14 EXHIBIT NO. Page
11. Opinion and Consent of Sullivan & Worcester.
12. Tax Opinion and Consent of Sullivan & Worcester
14(a). Consent of KPMG Peat Marwick LLP
14(b). Consent of KPMG Peat Marwick LLP
17(a) Form of Proxy
17(b) Registrant's Rule 24f-2 Declaration
OTHER EXHIBITS*
Prospectus dated June 30, 1995 offering Service Class shares of
FFB U.S. Treasury Fund and FFB U.S. Government Fund.
Prospectus dated June 30, 1995 offering Instititutional Class
shares of FFB Treasury Fund and FFB U.S. Government Fund.
Prospectus dated October 7, 1994 offering Service Class shares of
FFB 100% U.S. Treasury Fund.
Prospectus dated October 7, 1994 offering Institutional Class
shares of FFB 100% U.S. Treasury Fund.
Statement of Additional Information dated June 30, 1995 of FFB
U.S. Treasury Fund and FFB U.S. Government Fund.
Statement of Additional Information dated October 7, 1994 of FFB
100% U.S. Treasury Fund.
Annual Report of FFB U.S. Treasury Fund and FFB U.S. Government Fund
dated February 28, 1995.
-------------------
*Incorporated by Reference into Form N-14 Registration Statement.
EX-99.11
2
OPINION AS TO LEGALITY OF SHARES OFFERED
SULLIVAN & WORCESTER
1025 CONNECTICUT AVENUE. N.W.
WASHINGTON, D.C. 20038
(202) 775-8190
TELECOPIER NO. 202-293-2275
IN BOSTON, MASSACHUSETTS IN NEW YORK CITY
ONE POST OFFICE SQUARE 767 THIRD AVENUE
BOSTON, MASSACHUSETTS 02100 NEW YORK, NEW YORK 10017
(617) 338-2800 (212) 486-8200
TELECOPIER NO. 617-338-2880 TELECOPIER NO. 212-756-2151
TWX: 710-321-1976
August 23, 1995
Evergreen Investment Trust
2500 Westchester Avenue
Purchase, NY 10577
Ladies and Gentlemen:
We have been requested by the Evergreen Investment Trust, a Massachusetts
business trust with transferable shares and currently consisting of 15 series
(the "Trust") established under a Declaration of Trust dated August 30, 1984 as
amended (the "Declaration"), for our opinion with respect to certain matters
relating to the Evergreen Treasury Money Market Fund (the "Acquiring Fund"), a
series of the Trust. We understand that the Trust is about to file a
Registration Statement on Form N-14 for the purpose of registering shares of the
Trust under the Securities Act of 1933, as amended (the "1933 Act"), in
connection with the proposed acquisitions by the Acquiring Fund of substantially
all of the assets of the FFB U.S. Treasury Fund, FFB U.S. Government Fund and
FFB 100% U.S. Treasury Fund (each an "Acquired Fund"), each a series of FFB
Funds Trust, a Massachusetts business trust with transferable shares, in
exchange solely for shares of the Acquiring Fund and the assumption by the
Acquiring Fund of certain liabilities of the Acquired Fund pursuant to an
Agreement and Plan of Reorganization the form of which is included in the Form
N-14 Registration Statement (the "Plan").
We have, as counsel, participated in various business and other proceedings
relating to the Trust. We have examined copies of either certified or otherwise
proved to be genuine to our satisfaction, of the Trust's Declaration and
By-Laws, and other documents relating to its organization, operation, and
proposed operation, including the proposed Plan and we have made such other
investigations as, in our judgment, are necessary or appropriate to enable us to
render the opinion expressed below.
Based upon the foregoing, and assuming the approval by shareholders of each
Acquired Fund of certain matters scheduled for their consideration at a meeting
presently anticipated to be held on November 13, 1995, it is our opinion that
the shares of the Acquiring Fund currently being registered, when issued in
Evergreen Investment Trust
August 23, 1995
Page 2
accordance with the Plan and the Trust's Declaration and By-Laws, will be
legally issued, fully paid and non-assessable by the Trust, subject to
compliance with the 1933 Act, the Investment Company Act of 1940, as amended and
applicable state laws regulating the offer and sale of securities.
With respect to the opinion stated in the paragraph above, we note that
shareholders of a Massachusetts business trust may under some circumstances be
subject to assessment at the instance of creditors to pay the obligations of
such trust in the event that its assets are insufficient for the purpose.
We hereby consent to the filing of this opinion with and as a part of the
Registration Statement on Form N-14 and to the reference to our firm under the
caption "Legal Matters" in the Prospectus/Proxy Statement filed as part of the
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the 1933 Act or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ SULLIVAN & WORCESTER
------------------------
SULLIVAN & WORCESTER
EX-99.12
3
TAX OPINION OF SULLIVAN & WORCESTER
SULLIVAN & WORCESTER
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
(617) 338-2800
TELECOPIER NO. 617-338-2880
TWX: 710-321-1976
IN WASHINGTON, D.C. IN NEW YORK CITY
1025 CONNECTICUT AVENUE. N.W. 767 THIRD AVENUE
WASHINGTON, D.C. 20038 NEW YORK, NEW YORK 10017
(202) 775-8190 (212) 486-8200
TELECOPIER NO. 202-293-2275 TELECOPIER NO. 212-756-2151
August 23, 1995
Evergreen Treasury Money Market Fund
2500 Westchester Avenue
Purchase, New York 10577
FFB 100% U.S. Treasury Fund
237 Park Avenue
New York, New York 10017
Re: Acquisition of Assets of FFB 100% U.S. Treasury Fund
Ladies and Gentlemen:
You have asked for our opinion as to certain tax
consequences of the proposed acquisition of assets of FFB 100%
U.S. Treasury Fund ("Selling Fund"), a series of FFB Funds
Trust, a Massachusetts business trust, by Evergreen Treasury
Money Market Fund ("Acquiring Fund"), a series of Evergreen
Investment Trust, a Massachusetts business trust, in exchange
for voting shares of Acquiring Fund (the "Reorganization").
In rendering our opinion, we have reviewed and relied
upon the draft Prospectus/Proxy Statement and associated form
of Agreement and Plan of Reorganization (the "Reorganization
Agreement") expected to be filed with the Securities and
Exchange Commission on or about August 23, 1995. We have
relied, without independent verification, upon the factual
statements made therein, and assume that there will be no
change in material facts disclosed therein between the date of
this letter and the date of closing of the Reorganization. We
further assume that the Reorganization will be carried out in
accordance with the Reorganization Agreement. We have also
relied upon the following representations, each of which has
been made to us by officers of Evergreen Investment Trust on
behalf of Acquiring Fund or of FFB Funds Trust on behalf of
Selling Fund:
The Reorganization will be consummated
substantially as described in the Reorganization Agreement.
Acquiring Fund will acquire from Selling
Fund at least 90% of the fair market value of the net assets
and at least 70% of the fair market value of the gross assets
held by Selling Fund immediately prior to the Reorganization.
For purposes of this
Evergreen Treasury Money Market Fund
FFB 100% U.S. Treasury Fund
August 23, 1995
Page 2
representation, assets of Selling Fund used to pay
reorganization expenses, cash retained to pay liabilities, and
redemptions and distributions (except for regular and normal
distributions) made by Selling Fund immediately preceding the
transfer which are part of the plan of reorganization, will be
considered as assets held by Selling Fund immediately prior to
the transfer.
To the best of the knowledge of management
of Selling Fund, there is no plan or intention on the part of
the shareholders of Selling Fund to sell, exchange, or
otherwise dispose of a number of Acquiring Fund shares
received in the Reorganization that would reduce the former
Selling Fund shareholders' ownership of Acquiring Fund shares
to a number of shares having a value, as of the date of the
Reorganization (the "Closing Date"), of less than 50 percent
of the value of all of the formerly outstanding shares of
Selling Fund as of the same date. For purposes of this
representation, Selling Fund shares exchanged for cash or
other property will be treated as outstanding Selling Fund
shares on the Closing Date. There are no dissenters' rights in
the Reorganization, and no cash will be exchanged for Selling
Fund shares in lieu of fractional shares of Acquiring Fund.
Moreover, shares of Selling Fund and shares of Acquiring Fund
held by Selling Fund shareholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the
Reorganization will be considered in making this
representation.
Selling Fund has not redeemed and will not
redeem the shares of any of its shareholders in connection
with the Reorganization except to the extent necessary to
comply with its legal obligation to redeem its shares.
The management of Acquiring Fund has no plan
or intention to redeem or reacquire any of the Acquiring Fund
shares to be received by Selling Fund shareholders in
connection with the Reorganization, except to the extent
necessary to comply with its legal obligation to redeem its
shares.
The management of Acquiring Fund has no plan
or intention to sell or dispose of any of the assets of
Selling Fund which will be acquired by Acquiring Fund in the
Reorganization, except for dispositions made in the ordinary
course of business, and to the extent necessary to enable
Acquiring Fund to comply with its legal obligation to redeem
its shares.
Following the Reorganization, Acquiring Fund
will continue the historic business of Selling Fund in a
substantially unchanged manner as part of the regulated
investment company business of Acquiring Fund, or will use a
significant portion of Selling Fund's historic business assets
in a business.
Evergreen Treasury Money Market Fund
FFB 100% U.S. Treasury Fund
August 23, 1995
Page 3
There is no intercorporate indebtedness
between Acquiring Fund and Selling Fund.
Acquiring Fund does not own, directly or
indirectly, and has not owned in the last five years, directly
or indirectly, any shares of Selling Fund. Acquiring Fund will
not acquire any shares of Selling Fund prior to the Closing
Date.
Acquiring Fund will not make any payment of
cash or of property other than shares to Selling Fund or to
any shareholder of Selling Fund in connection with the
Reorganization.
Pursuant to the Reorganization Agreement,
the shareholders of Selling Fund will receive solely Acquiring
Fund voting shares in exchange for their voting shares of
Selling Fund.
The fair market value of the Acquiring Fund
shares to be received by the Selling Fund shareholders will be
approximately equal to the fair market value of the Selling
Fund shares surrendered in exchange therefor.
Subsequent to the transfer of Selling Fund's
assets to Acquiring Fund pursuant to the Reorganization
Agreement, Selling Fund will distribute the shares of
Acquiring Fund, together with other assets it may have, in
final liquidation as expeditiously as possible.
Selling Fund is not under the jurisdiction
of a court in a Title 11 or similar case within the meaning of
ss. 368(a)(3)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
Selling Fund is treated as a corporation for
federal income tax purposes and at all times in its existence
has qualified as a regulated investment company, as defined in
ss. 851 of the Code.
Acquiring Fund is treated as a corporation
for federal income tax purposes and at all times in its
existence has qualified as a regulated investment company, as
defined in ss. 851 of the Code.
The sum of the liabilities of Selling Fund
to be assumed by Acquiring Fund and the expenses of the
Reorganization does not exceed twenty percent of the fair
market value of the assets of Selling Fund.
The foregoing representations are true on
the date of this letter and will be true on the date of
closing of the Reorganization.
Evergreen Treasury Money Market Fund
FFB 100% U.S. Treasury Fund
August 23, 1995
Page 4
Based on and subject to the foregoing, and our
examination of the legal authority we have deemed to be
relevant, it is our opinion that for federal income tax
purposes:
The acquisition by Acquiring Fund of substantially
all of the assets of Selling Fund solely in exchange for
voting shares of Acquiring Fund followed by the distribution
by Selling Fund of said Acquiring Fund shares to the
shareholders of Selling Fund in exchange for their Selling
Fund shares will constitute a reorganization within the
meaning of ss. 368(a)(1)(C) of the Code, and Acquiring Fund
and Selling Fund will each be "a party to a reorganization"
within the meaning of ss. 368(b) of the Code.
No gain or loss will be recognized to Selling Fund
upon the transfer of substantially all of its assets to
Acquiring Fund solely in exchange for Acquiring Fund voting
shares and assumption by Acquiring Fund of certain identified
liabilities of Selling Fund, or upon the distribution of such
Acquiring Fund voting shares to the shareholders of Selling
Fund in exchange for all of their Selling Fund shares.
No gain or loss will be recognized by Acquiring
Fund upon the receipt of the assets of Selling Fund (including
any cash retained initially by Selling Fund to pay liabilities
but later transferred) solely in exchange for Acquiring Fund
voting shares and assumption by Acquiring Fund of certain
identified liabilities of Selling Fund.
The basis of the assets of Selling Fund acquired by
Acquiring Fund will be the same as the basis of those assets
in the hands of Selling Fund immediately prior to the
transfer, and the holding period of the assets of Selling Fund
in the hands of Acquiring Fund will include the period during
which those assets were held by Selling Fund.
The shareholders of Selling Fund will recognize no
gain or loss upon the exchange of all of their Selling Fund
shares solely for Acquiring Fund voting shares. Gain, if any,
will be realized by Selling Fund shareholders who in exchange
for their Selling Fund shares receive other property or money
in addition to Acquiring Fund shares, and will be recognized,
but not in excess of the amount of cash and the value of such
other property received. If the exchange has the effect of the
distribution of a dividend, then the amount of gain recognized
that is not in excess of the ratable share of undistributed
earnings and profits of Selling Fund will be treated as a
dividend.
The basis of the Acquiring Fund voting shares to be
received by the Selling Fund shareholders will be the same as
the basis of the Selling Fund shares surrendered in exchange
therefor.
Evergreen Treasury Money Market Fund
FFB 100% U.S. Treasury Fund
August 23, 1995
Page 5
The holding period of the Acquiring Fund voting
shares to be received by the Selling Fund shareholders will
include the period during which the Selling Fund shares
surrendered in exchange therefor were held, provided the
Selling Fund shares were held as a capital asset on the date
of the exchange.
This opinion letter is delivered to you in
satisfaction of the requirements of Paragraph 8.6 of the
Reorganization Agreement. We hereby consent to the filing of
this opinion as an exhibit to the Registration Statement on
Form N-14 and to use of our name and any reference to our firm
in the Registration Statement or in the Prospectus/Proxy
Statement constituting a part thereof. In giving such consent,
we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/ SULLIVAN & WORCESTER
------------------------
SULLIVAN & WORCESTER
EX-99.12
4
TAX OPINION OF SULLIVAN & WORCESTER
SULLIVAN & WORCESTER
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
(617) 338-2800
TELECOPIER NO. 617-338-2880
TWX: 710-321-1976
IN WASHINGTON, D.C. IN NEW YORK CITY
1025 CONNECTICUT AVENUE. N.W. 767 THIRD AVENUE
WASHINGTON, D.C. 20038 NEW YORK, NEW YORK 10017
(202) 775-8190 (212) 486-8200
TELECOPIER NO. 202-293-2275 TELECOPIER NO. 212-756-2151
August 23, 1995
Evergreen Treasury Money Market Fund
2500 Westchester Avenue
Purchase, New York 10577
FFB U.S. Treasury Fund
237 Park Avenue
New York, New York 10017
Re: Acquisition of Assets of FFB U.S. Treasury Fund
Ladies and Gentlemen:
You have asked for our opinion as to certain tax
consequences of the proposed acquisition of assets of FFB U.S.
Treasury Fund ("Selling Fund"), a series of FFB Funds Trust, a
Massachusetts business trust, by Evergreen Treasury Money
Market Fund ("Acquiring Fund"), a series of Evergreen
Investment Trust, a Massachusetts business trust, in exchange
for voting shares of Acquiring Fund (the "Reorganization").
In rendering our opinion, we have reviewed and relied
upon the draft Prospectus/Proxy Statement and associated form
of Agreement and Plan of Reorganization (the "Reorganization
Agreement") expected to be filed with the Securities and
Exchange Commission on or about August 23, 1995. We have
relied, without independent verification, upon the factual
statements made therein, and assume that there will be no
change in material facts disclosed therein between the date of
this letter and the date of closing of the Reorganization. We
further assume that the Reorganization will be carried out in
accordance with the Reorganization Agreement. We have also
relied upon the following representations, each of which has
been made to us by officers of Evergreen Investment Trust on
behalf of Acquiring Fund or of FFB Funds Trust on behalf of
Selling Fund:
The Reorganization will be consummated
substantially as described in the Reorganization Agreement.
Acquiring Fund will acquire from Selling
Fund at least 90% of the fair market value of the net assets
and at least 70% of the fair market value of the gross assets
held by Selling Fund immediately prior to the Reorganization.
For purposes of this
Evergreen Treasury Money Market Fund
FFB U.S. Treasury Fund
August 23, 1995
Page 2
representation, assets of Selling Fund used to pay
reorganization expenses, cash retained to pay liabilities, and
redemptions and distributions (except for regular and normal
distributions) made by Selling Fund immediately preceding the
transfer which are part of the plan of reorganization, will be
considered as assets held by Selling Fund immediately prior to
the transfer.
To the best of the knowledge of management
of Selling Fund, there is no plan or intention on the part of
the shareholders of Selling Fund to sell, exchange, or
otherwise dispose of a number of Acquiring Fund shares
received in the Reorganization that would reduce the former
Selling Fund shareholders' ownership of Acquiring Fund shares
to a number of shares having a value, as of the date of the
Reorganization (the "Closing Date"), of less than 50 percent
of the value of all of the formerly outstanding shares of
Selling Fund as of the same date. For purposes of this
representation, Selling Fund shares exchanged for cash or
other property will be treated as outstanding Selling Fund
shares on the Closing Date. There are no dissenters' rights in
the Reorganization, and no cash will be exchanged for Selling
Fund shares in lieu of fractional shares of Acquiring Fund.
Moreover, shares of Selling Fund and shares of Acquiring Fund
held by Selling Fund shareholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the
Reorganization will be considered in making this
representation.
Selling Fund has not redeemed and will not
redeem the shares of any of its shareholders in connection
with the Reorganization except to the extent necessary to
comply with its legal obligation to redeem its shares.
The management of Acquiring Fund has no plan
or intention to redeem or reacquire any of the Acquiring Fund
shares to be received by Selling Fund shareholders in
connection with the Reorganization, except to the extent
necessary to comply with its legal obligation to redeem its
shares.
The management of Acquiring Fund has no plan
or intention to sell or dispose of any of the assets of
Selling Fund which will be acquired by Acquiring Fund in the
Reorganization, except for dispositions made in the ordinary
course of business, and to the extent necessary to enable
Acquiring Fund to comply with its legal obligation to redeem
its shares.
Following the Reorganization, Acquiring Fund
will continue the historic business of Selling Fund in a
substantially unchanged manner as part of the regulated
investment company business of Acquiring Fund, or will use a
significant portion of Selling Fund's historic business assets
in a business.
Evergreen Treasury Money Market Fund
FFB U.S. Treasury Fund
August 23, 1995
Page 3
There is no intercorporate indebtedness
between Acquiring Fund and Selling Fund.
Acquiring Fund does not own, directly or
indirectly, and has not owned in the last five years, directly
or indirectly, any shares of Selling Fund. Acquiring Fund will
not acquire any shares of Selling Fund prior to the Closing
Date.
Acquiring Fund will not make any payment of
cash or of property other than shares to Selling Fund or to
any shareholder of Selling Fund in connection with the
Reorganization.
Pursuant to the Reorganization Agreement,
the shareholders of Selling Fund will receive solely Acquiring
Fund voting shares in exchange for their voting shares of
Selling Fund.
The fair market value of the Acquiring Fund
shares to be received by the Selling Fund shareholders will be
approximately equal to the fair market value of the Selling
Fund shares surrendered in exchange therefor.
Subsequent to the transfer of Selling Fund's
assets to Acquiring Fund pursuant to the Reorganization
Agreement, Selling Fund will distribute the shares of
Acquiring Fund, together with other assets it may have, in
final liquidation as expeditiously as possible.
Selling Fund is not under the jurisdiction
of a court in a Title 11 or similar case within the meaning of
ss. 368(a)(3)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
Selling Fund is treated as a corporation for
federal income tax purposes and at all times in its existence
has qualified as a regulated investment company, as defined in
ss. 851 of the Code.
Acquiring Fund is treated as a corporation
for federal income tax purposes and at all times in its
existence has qualified as a regulated investment company, as
defined in ss. 851 of the Code.
The sum of the liabilities of Selling Fund
to be assumed by Acquiring Fund and the expenses of the
Reorganization does not exceed twenty percent of the fair
market value of the assets of Selling Fund.
The foregoing representations are true on
the date of this letter and will be true on the date of
closing of the Reorganization.
Evergreen Treasury Money Market Fund
FFB U.S. Treasury Fund
August 23, 1995
Page 4
Based on and subject to the foregoing, and our
examination of the legal authority we have deemed to be
relevant, it is our opinion that for federal income tax
purposes:
The acquisition by Acquiring Fund of substantially
all of the assets of Selling Fund solely in exchange for
voting shares of Acquiring Fund followed by the distribution
by Selling Fund of said Acquiring Fund shares to the
shareholders of Selling Fund in exchange for their Selling
Fund shares will constitute a reorganization within the
meaning of ss. 368(a)(1)(C) of the Code, and Acquiring Fund
and Selling Fund will each be "a party to a reorganization"
within the meaning of ss. 368(b) of the Code.
No gain or loss will be recognized to Selling Fund
upon the transfer of substantially all of its assets to
Acquiring Fund solely in exchange for Acquiring Fund voting
shares and assumption by Acquiring Fund of certain identified
liabilities of Selling Fund, or upon the distribution of such
Acquiring Fund voting shares to the shareholders of Selling
Fund in exchange for all of their Selling Fund shares.
No gain or loss will be recognized by Acquiring
Fund upon the receipt of the assets of Selling Fund (including
any cash retained initially by Selling Fund to pay liabilities
but later transferred) solely in exchange for Acquiring Fund
voting shares and assumption by Acquiring Fund of certain
identified liabilities of Selling Fund.
The basis of the assets of Selling Fund acquired by
Acquiring Fund will be the same as the basis of those assets
in the hands of Selling Fund immediately prior to the
transfer, and the holding period of the assets of Selling Fund
in the hands of Acquiring Fund will include the period during
which those assets were held by Selling Fund.
The shareholders of Selling Fund will recognize no
gain or loss upon the exchange of all of their Selling Fund
shares solely for Acquiring Fund voting shares. Gain, if any,
will be realized by Selling Fund shareholders who in exchange
for their Selling Fund shares receive other property or money
in addition to Acquiring Fund shares, and will be recognized,
but not in excess of the amount of cash and the value of such
other property received. If the exchange has the effect of the
distribution of a dividend, then the amount of gain recognized
that is not in excess of the ratable share of undistributed
earnings and profits of Selling Fund will be treated as a
dividend.
The basis of the Acquiring Fund voting shares to be
received by the Selling Fund shareholders will be the same as
the basis of the Selling Fund shares surrendered in exchange
therefor.
Evergreen Treasury Money Market Fund
FFB U.S. Treasury Fund
August 23, 1995
Page 5
The holding period of the Acquiring Fund voting
shares to be received by the Selling Fund shareholders will
include the period during which the Selling Fund shares
surrendered in exchange therefor were held, provided the
Selling Fund shares were held as a capital asset on the date
of the exchange.
This opinion letter is delivered to you in
satisfaction of the requirements of Paragraph 8.6 of the
Reorganization Agreement. We hereby consent to the filing of
this opinion as an exhibit to the Registration Statement on
Form N-14 and to use of our name and any reference to our firm
in the Registration Statement or in the Prospectus/Proxy
Statement constituting a part thereof. In giving such consent,
we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/ SULLIVAN & WORCESTER
------------------------
SULLIVAN & WORCESTER
EX-99.12
5
TAX OPINION OF SULLIVAN & WORCESTER
SULLIVAN & WORCESTER
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
(617) 338-2800
TELECOPIER NO. 617-338-2880
TWX: 710-321-1976
IN WASHINGTON, D.C. IN NEW YORK CITY
1025 CONNECTICUT AVENUE. N.W. 767 THIRD AVENUE
WASHINGTON, D.C. 20038 NEW YORK, NEW YORK 10017
(202) 775-8190 (212) 486-8200
TELECOPIER NO. 202-293-2275 TELECOPIER NO. 212-756-2151
August 23, 1995
Evergreen Treasury Money Market Fund
2500 Westchester Avenue
Purchase, New York 10577
FFB U.S. Government Fund
237 Park Avenue
New York, New York 10017
Re: Acquisition of Assets of FFB U.S. Government Fund
Ladies and Gentlemen:
You have asked for our opinion as to certain tax
consequences of the proposed acquisition of assets of FFB U.S.
Government Fund ("Selling Fund"), a series of FFB Funds Trust,
a Massachusetts business trust, by Evergreen Treasury Money
Market Fund ("Acquiring Fund"), a series of Evergreen
Investment Trust, a Massachusetts business trust, in exchange
for voting shares of Acquiring Fund (the "Reorganization").
In rendering our opinion, we have reviewed and relied
upon the draft Prospectus/Proxy Statement and associated form
of Agreement and Plan of Reorganization (the "Reorganization
Agreement") expected to be filed with the Securities and
Exchange Commission on or about August 23, 1995. We have
relied, without independent verification, upon the factual
statements made therein, and assume that there will be no
change in material facts disclosed therein between the date of
this letter and the date of closing of the Reorganization. We
further assume that the Reorganization will be carried out in
accordance with the Reorganization Agreement. We have also
relied upon the following representations, each of which has
been made to us by officers of Evergreen Investment Trust on
behalf of Acquiring Fund or of FFB Funds Trust on behalf of
Selling Fund:
The Reorganization will be consummated
substantially as described in the Reorganization Agreement.
Acquiring Fund will acquire from Selling
Fund at least 90% of the fair market value of the net assets
and at least 70% of the fair market value of the gross assets
held by Selling Fund immediately prior to the Reorganization.
For purposes of this
Evergreen Treasury Money Market Fund
FFB U.S. Government Fund
August 23, 1995
Page 2
representation, assets of Selling Fund used to pay
reorganization expenses, cash retained to pay liabilities, and
redemptions and distributions (except for regular and normal
distributions) made by Selling Fund immediately preceding the
transfer which are part of the plan of reorganization, will be
considered as assets held by Selling Fund immediately prior to
the transfer.
To the best of the knowledge of management
of Selling Fund, there is no plan or intention on the part of
the shareholders of Selling Fund to sell, exchange, or
otherwise dispose of a number of Acquiring Fund shares
received in the Reorganization that would reduce the former
Selling Fund shareholders' ownership of Acquiring Fund shares
to a number of shares having a value, as of the date of the
Reorganization (the "Closing Date"), of less than 50 percent
of the value of all of the formerly outstanding shares of
Selling Fund as of the same date. For purposes of this
representation, Selling Fund shares exchanged for cash or
other property will be treated as outstanding Selling Fund
shares on the Closing Date. There are no dissenters' rights in
the Reorganization, and no cash will be exchanged for Selling
Fund shares in lieu of fractional shares of Acquiring Fund.
Moreover, shares of Selling Fund and shares of Acquiring Fund
held by Selling Fund shareholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the
Reorganization will be considered in making this
representation.
Selling Fund has not redeemed and will not
redeem the shares of any of its shareholders in connection
with the Reorganization except to the extent necessary to
comply with its legal obligation to redeem its shares.
The management of Acquiring Fund has no plan
or intention to redeem or reacquire any of the Acquiring Fund
shares to be received by Selling Fund shareholders in
connection with the Reorganization, except to the extent
necessary to comply with its legal obligation to redeem its
shares.
The management of Acquiring Fund has no plan
or intention to sell or dispose of any of the assets of
Selling Fund which will be acquired by Acquiring Fund in the
Reorganization, except for dispositions made in the ordinary
course of business, and to the extent necessary to enable
Acquiring Fund to comply with its legal obligation to redeem
its shares.
Following the Reorganization, Acquiring Fund
will continue the historic business of Selling Fund in a
substantially unchanged manner as part of the regulated
investment company business of Acquiring Fund, or will use a
significant portion of Selling Fund's historic business assets
in a business.
Evergreen Treasury Money Market Fund
FFB U.S. Government Fund
August 23, 1995
Page 3
There is no intercorporate indebtedness
between Acquiring Fund and Selling Fund.
Acquiring Fund does not own, directly or
indirectly, and has not owned in the last five years, directly
or indirectly, any shares of Selling Fund. Acquiring Fund will
not acquire any shares of Selling Fund prior to the Closing
Date.
Acquiring Fund will not make any payment of
cash or of property other than shares to Selling Fund or to
any shareholder of Selling Fund in connection with the
Reorganization.
Pursuant to the Reorganization Agreement,
the shareholders of Selling Fund will receive solely Acquiring
Fund voting shares in exchange for their voting shares of
Selling Fund.
The fair market value of the Acquiring Fund
shares to be received by the Selling Fund shareholders will be
approximately equal to the fair market value of the Selling
Fund shares surrendered in exchange therefor.
Subsequent to the transfer of Selling Fund's
assets to Acquiring Fund pursuant to the Reorganization
Agreement, Selling Fund will distribute the shares of
Acquiring Fund, together with other assets it may have, in
final liquidation as expeditiously as possible.
Selling Fund is not under the jurisdiction
of a court in a Title 11 or similar case within the meaning of
368(a)(3)(A) of the Internal Revenue Code of 1986, as amended
(the "Code").
Selling Fund is treated as a corporation for
federal income tax purposes and at all times in its existence
has qualified as a regulated investment company, as defined in
851 of the Code.
Acquiring Fund is treated as a corporation
for federal income tax purposes and at all times in its
existence has qualified as a regulated investment company, as
defined in 851 of the Code.
The sum of the liabilities of Selling Fund
to be assumed by Acquiring Fund and the expenses of the
Reorganization does not exceed twenty percent of the fair
market value of the assets of Selling Fund.
The foregoing representations are true on
the date of this letter and will be true on the date of
closing of the Reorganization.
Evergreen Treasury Money Market Fund
FFB U.S. Government Fund
August 23, 1995
Page 4
Based on and subject to the foregoing, and our
examination of the legal authority we have deemed to be
relevant, it is our opinion that for federal income tax
purposes:
The acquisition by Acquiring Fund of substantially
all of the assets of Selling Fund solely in exchange for
voting shares of Acquiring Fund followed by the distribution
by Selling Fund of said Acquiring Fund shares to the
shareholders of Selling Fund in exchange for their Selling
Fund shares will constitute a reorganization within the
meaning of 368(a)(1)(C) of the Code, and Acquiring Fund and
Selling Fund will each be "a party to a reorganization" within
the meaning of 368(b) of the Code.
No gain or loss will be recognized to Selling Fund
upon the transfer of substantially all of its assets to
Acquiring Fund solely in exchange for Acquiring Fund voting
shares and assumption by Acquiring Fund of certain identified
liabilities of Selling Fund, or upon the distribution of such
Acquiring Fund voting shares to the shareholders of Selling
Fund in exchange for all of their Selling Fund shares.
No gain or loss will be recognized by Acquiring
Fund upon the receipt of the assets of Selling Fund (including
any cash retained initially by Selling Fund to pay liabilities
but later transferred) solely in exchange for Acquiring Fund
voting shares and assumption by Acquiring Fund of certain
identified liabilities of Selling Fund.
The basis of the assets of Selling Fund acquired by
Acquiring Fund will be the same as the basis of those assets
in the hands of Selling Fund immediately prior to the
transfer, and the holding period of the assets of Selling Fund
in the hands of Acquiring Fund will include the period during
which those assets were held by Selling Fund.
The shareholders of Selling Fund will recognize no
gain or loss upon the exchange of all of their Selling Fund
shares solely for Acquiring Fund voting shares. Gain, if any,
will be realized by Selling Fund shareholders who in exchange
for their Selling Fund shares receive other property or money
in addition to Acquiring Fund shares, and will be recognized,
but not in excess of the amount of cash and the value of such
other property received. If the exchange has the effect of the
distribution of a dividend, then the amount of gain recognized
that is not in excess of the ratable share of undistributed
earnings and profits of Selling Fund will be treated as a
dividend.
The basis of the Acquiring Fund voting shares to be
received by the Selling Fund shareholders will be the same as
the basis of the Selling Fund shares surrendered in exchange
therefor.
Evergreen Treasury Money Market Fund
FFB U.S. Government Fund
August 23, 1995
Page 5
The holding period of the Acquiring Fund voting
shares to be received by the Selling Fund shareholders will
include the period during which the Selling Fund shares
surrendered in exchange therefor were held, provided the
Selling Fund shares were held as a capital asset on the date
of the exchange.
This opinion letter is delivered to you in
satisfaction of the requirements of Paragraph 8.6 of the
Reorganization Agreement. We hereby consent to the filing of
this opinion as an exhibit to the Registration Statement on
Form N-14 and to use of our name and any reference to our firm
in the Registration Statement or in the Prospectus/Proxy
Statement constituting a part thereof. In giving such consent,
we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/ SULLIVAN & WORCESTER
------------------------
SULLIVAN & WORCESTER
EX-99.14
6
CONSENT OF EVERGREEN TREASURY AUDITORS
Consent of Independent Accountants
The Board of Trustees
Evergreen Investment Trust:
We consent to the use of our report dated February 13, 1995, on the
Evergreen Treasury Money Market Fund (formerly First Union Treasury Money
Market Portfolio of First Union Funds) incorporated herein by reference, to the
reference to our firm under the heading "Financial Statements and Experts" in
the Registration Statement on Form N-14 and to the references to our firm under
the heading "Financial Highlights" in the prospectus filed with the Securities
and Exchange Commission, incorporated herein by reference, in this Registration
Statement on Form N-14.
/s/KPMG Peat Marwick
KPMG Peat Marwick
Pittsburgh, Pennsylvania
August 23, 1995
EX-99.14
7
CONSENT OF FFB U.S. TREASURY & GOVERNMENT AUDITORS
Consent of Independent Accountants
The Board of Trustees
FFB Funds Trust:
We consent to the use of our report dated April 27, 1995, with respect to
the FFB U.S. Treasury Fund and FFB U.S. Government Fund of FFB Funds Trust
incorporated herein by reference in the Prospectus/Proxy Statement and included
in the Registration Statement on Form N-14. We also consent to the reference to
our firm under the heading "Financial Statements and Experts" in the
Prospectus/Proxy Statement, "Financial Highlights" in the Prospectus, and
"Independent Accountants" and "Financial Statements" in the Statement of
Additional Information incorporated herein by reference.
/s/KPMG Peat Marwick
KPMG Peat Marwick
New York, New York
August 23, 1995
EX-99.17
8
FORM OF PROXY
U.S. GOV'T
Draft: 8-18-95
VOTE THIS PROXY CARD TODAY
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
................................................................
FFB FUNDS TRUST - FFB U.S. GOVERNMENT FUND
SPECIAL MEETING OF SHAREHOLDERS -- NOVEMBER 13, 1995
The undersigned hereby appoints , and
and each of them, attorneys and proxies for the
undersigned, with full powers of substitution and revocation, to represent the
undersigned and to vote on behalf of the undersigned all shares of the FFB U.S.
Government Fund (the "Fund"), which the undersigned is entitled to vote at a
Meeting of Shareholders of the Fund to be held at 237 Park Avenue, New York, New
York, 10017 on November 13, 1995, at 10:00 a.m. and any adjournments thereof
(the "Meeting"). The undersigned hereby acknowledges receipt of the Notice of
Meeting and Prospectus/Proxy Statement, and hereby instructs said attorneys and
proxies to vote said shares as indicated hereon. In their discretion, the
proxies are authorized to vote upon such other matters as may properly come
before the Meeting. A majority of the proxies present and acting at the Meeting
in person or by substitute (or, if only one shall be so present, then that one)
shall have and may exercise all of the powers and authority of said proxies
hereunder. The undersigned hereby revokes any proxy previously given.
NOTE: Please sign exactly as your name appears on this Proxy. If joint owners,
EITHER may sign this Proxy. When signing as attorney, executor, administrator,
trustee, guardian, or corporate officer, please give your full title.
DATE:______________, 1995 _____________________________
------------------------------
Signature(s)
------------------------------
Title(s), if applicable
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
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 Treasury Money Market Fund.
o YES o NO o ABSTAIN
2. To approve the proposed Interim Investment Adivsory
Agreement with the Capital Management Group of First Union
National Bank of North Carolina.
o YES o NO o ABSTAIN
3. To consider and vote upon such other matters as may properly come before said
meeting or any adjournments thereof.
o YES o NO o ABSTAIN
These items are discussed in greater detail in the attached
Prospectus/Proxy Statement. The Board of Trustees of the FFB Funds Trust has
fixed the close of business on September , 1995, as the record date for the
determination of shareholders entitled to notice of and to vote at the meeting.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE SPECIAL MEETING ARE REQUESTED
TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE WHICH
NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. INSTRUCTIONS FOR THE PROPER
EXECUTION OF PROXIES ARE SET FORTH ON THE INSIDE COVER.
Joan V. Fiore
Secretary
September 28, 1995
In their discretion, the Proxies, and each of them, are authorized to vote
upon any other business that may properly come before the meeting, or any
adjournment(s) thereof, including any adjournment(s) necessary to obtain the
requisite quorums and for approvals.
EX-99.17
9
FORM OF PROXY
VOTE THIS PROXY CARD TODAY
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
................................................................
FFB FUNDS TRUST - FFB 100% U.S. TREASURY FUND
SPECIAL MEETING OF SHAREHOLDERS -- NOVEMBER 13, 1995
The undersigned hereby appoints , and
and each of them, attorneys and proxies for the
undersigned, with full powers of substitution and revocation, to represent the
undersigned and to vote on behalf of the undersigned all shares of the FFB 100%
U.S. Treasury Fund (the "Fund"), which the undersigned is entitled to vote at a
Meeting of Shareholders of the Fund to be held at 237 Park Avenue, New York, New
York, 10017 on November 13, 1995, at 10:00 a.m. and any adjournments thereof
(the "Meeting"). The undersigned hereby acknowledges receipt of the Notice of
Meeting and Prospectus/Proxy Statement, and hereby instructs said attorneys and
proxies to vote said shares as indicated hereon. In their discretion, the
proxies are authorized to vote upon such other matters as may properly come
before the Meeting. A majority of the proxies present and acting at the Meeting
in person or by substitute (or, if only one shall be so present, then that one)
shall have and may exercise all of the powers and authority of said proxies
hereunder. The undersigned hereby revokes any proxy previously given.
NOTE: Please sign exactly as your name appears on this Proxy. If joint owners,
EITHER may sign this Proxy. When signing as attorney, executor, administrator,
trustee, guardian, or corporate officer, please give your full title.
DATE:______________, 1995 _____________________________
------------------------------
Signature(s)
------------------------------
Title(s), if applicable
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
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 Treasury Money Market Fund.
o YES o NO o ABSTAIN
2. To approve the proposed Interim Investment Advisory
Agreement with the Capital Management Group of First Union
National Bank of North Carolina.
o YES o NO o ABSTAIN
3. To consider and vote upon such other matters as may properly come before said
meeting or any adjournments thereof.
o YES o NO o ABSTAIN
These items are discussed in greater detail in the attached
Prospectus/Proxy Statement. The Board of Trustees of the FFB Funds Trust has
fixed the close of business on September , 1995, as the record date for the
determination of shareholders entitled to notice of and to vote at the meeting.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE SPECIAL MEETING ARE REQUESTED
TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE WHICH
NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. INSTRUCTIONS FOR THE PROPER
EXECUTION OF PROXIES ARE SET FORTH ON THE INSIDE COVER.
Joan V. Fiore
Secretary
September 28, 1995
In their discretion, the Proxies, and each of them, are authorized to vote
upon any other business that may properly come before the meeting, or any
adjournment(s) thereof, including any adjournment(s) necessary to obtain the
requisite quorums and for approvals.
EX-99.17
10
FORM OF PROXY
VOTE THIS PROXY CARD TODAY
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
................................................................
FFB FUNDS TRUST - FFB U.S. TREASURY FUND
SPECIAL MEETING OF SHAREHOLDERS -- NOVEMBER 13, 1995
The undersigned hereby appoints , and
and each of them, attorneys and proxies for the
undersigned, with full powers of substitution and revocation, to represent the
undersigned and to vote on behalf of the undersigned all shares of the FFB U.S.
Treasury Fund (the "Fund"), which the undersigned is entitled to vote at a
Meeting of Shareholders of the Fund to be held at 237 Park Avenue, New York, New
York, 10017 on November 13, 1995, at 10:00 a.m. and any adjournments thereof
(the "Meeting"). The undersigned hereby acknowledges receipt of the Notice of
Meeting and Prospectus/Proxy Statement, and hereby instructs said attorneys and
proxies to vote said shares as indicated hereon. In their discretion, the
proxies are authorized to vote upon such other matters as may properly come
before the Meeting. A majority of the proxies present and acting at the Meeting
in person or by substitute (or, if only one shall be so present, then that one)
shall have and may exercise all of the powers and authority of said proxies
hereunder. The undersigned hereby revokes any proxy previously given.
NOTE: Please sign exactly as your name appears on this Proxy. If joint owners,
EITHER may sign this Proxy. When signing as attorney, executor, administrator,
trustee, guardian, or corporate officer, please give your full title.
DATE:______________, 1995 _____________________________
------------------------------
Signature(s)
------------------------------
Title(s), if applicable
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
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 Treasury Money Market Fund.
o YES o NO o ABSTAIN
2. To Approve the Proposed Interim Investment Advisory
Agreement with the Capital Management Group of First Union
National Bank of North Carolina.
o YES o NO o ABSTAIN
3. To consider and vote upon such other matters as may properly come before said
meeting or any adjournments thereof.
o YES o NO o ABSTAIN
These items are discussed in greater detail in the attached
Prospectus/Proxy Statement. The Board of Trustees of FFB Funds Trust has fixed
the close of business on September , 1995, as the record date for the
determination of shareholders entitled to notice of and to vote at the meeting.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE SPECIAL MEETING ARE REQUESTED
TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE WHICH
NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. INSTRUCTIONS FOR THE PROPER
EXECUTION OF PROXIES ARE SET FORTH ON THE INSIDE COVER.
Joan V. Fiore
Secretary
September 28, 1995
In their discretion, the Proxies, and each of them, are authorized to vote
upon any other business that may properly come before the meeting, or any
adjournment(s) thereof, including any adjournment(s) necessary to obtain the
requisite quorums and for approvals.
EX-99.17
11
EVERGREEN INVESTMENT TRUST RULE 24F-2 DECLARATION
As filed with the Securities and Exchange Commission on November 13, 1984
File No.
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 x
Pre-Effective Amendment No.
Post-Effective Amendment No.
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 x
Amendment No.
SALEM FUNDS
(Exact name of Registrant as specified in Charter)
99 High Street Boston Massachusetts
Address of Principal Executive Offices) (zip code)
Registrant's Telephone Number, including Area Code:
Roger T. Wickers, Esq., 99 High Street, Boston, Massachusetts 02110
(Name and Address of Agent for Service)
It is proposed that this filing will become effective immediately upon
filing pursuant to paragraph (b) on (date) pursuant to paragraph (b) 60
days after filing pursuant to paragraph (a) on (date) pursuant to
paragraph (a) of rule 485
Approximate date of proposed Public offering : As soon as possible after the
effective date of this Registration statement.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Proposed
Maximum Proposed
Offering Maximum
Title of Price Aggregate Amount of
securities Amount Being Per Offering Registration
Being Registered Registered Unit Price Fee
Shares of bene- * $1.00 * $500
ficial Interest,
without par value
Registrant seeks to hereby register an indefinite number of securities of
Registrant.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
File a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
EX-99
12
FFB MONEY MARKET ANNUAL REPORT
----------------------------------------------------
THE FFB MONEY MARKET FUNDS
----------------------------------------------------
ANNUAL REPORT
AS OF FEBRUARY 28, 1995
--------------------------------------------------------------------------------
U.S. Treasury Fund
U.S. Government Fund
Cash Management Fund
Tax-Free Money Market Fund
Pennsylvania Tax-Free Money Market Fund
INVESTMENT
--------------------------------------------------------------------------------
STRATEGIES
--------------------------------------------------------------------------------
FOR
--------------------------------------------------------------------------------
THE '90S
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INVESTMENT ADVISER
First Fidelity Bank, National Association, New Jersey
765 Broad Street
Newark, New Jersey 07101
ADMINISTRATOR
Furman Selz Incorporated
237 Park Avenue
New York, New York 10017
CUSTODIAN, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
First Fidelity Bank, National Association, New Jersey
765 Board Street
Newark, New Jersey 07101
DISTRIBUTOR
FFB Funds Distributor, Inc.
237 Park Avenue
New York, New York 10017
LEGAL COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
--------------------------------------------------------------------------------
This report is for the information of the shareholders of The FFB Funds Trust.
Its use in connection with any offering of the Trust's shares is authorized only
in case of a concurrent or prior delivery of the Trust's current prospectus.
--------------------------------------------------------------------------------
The FFB Funds are not deposits, guaranteed by or obligations of First
Fidelity Bank or its affiliates and are not insured by the FDIC, the
Federal Reserve Board or any other government agency. Shares of The FFB
Funds involve investment risks, including the possible loss of principal.
For information call 1-800-437-8790.
--------------------------------------------------------------------------------
THE FFB FUNDS
April 27, 1995
Dear Shareholder:
We are pleased to present the annual report for the FFB Money Market Funds for
the year ended February 28, 1995. The combined net assets of the U.S. Treasury
Fund, U.S. Government Fund, Cash Management Fund, Tax-Free Money Market Fund and
Pennsylvania Tax-Free Money Market Fund were $1,777,406,201.
The U.S. Treasury Fund's portfolio of investments is limited to U.S. Treasury
obligations and repurchase agreements collateralized by such obligations and/or
Government National Mortgage Association Bonds. The Fund's net assets were
$671,781,271 on February 28, 1995 with the weighted average maturity at 36 days.
Net assets of the U.S. Government Fund were $224,314,403 on February 28, 1995,
and the weighted average maturity was 33 days. The portfolio was composed
entirely of U.S. Treasury and Government Agency obligations, and repurchase
agreements collateralized by such securities.
Cash Management Fund's net assets were $729,707,217 at the close of fiscal year,
and the portfolio's weighted average maturity stood at 44 days.
Net assets of the Tax-Free Money Market Fund were $108,064,218 on February 28,
1995, and the weighted average maturity was 43 days.
The Pennsylvania Tax-Free Money Market Fund had net assets of $43,539,092 on
February 28, 1995, and the weighted average maturity was 54 days.
Audited financial statements and each Money Market Fund's portfolio of
investments follow. We appreciate your continued support.
[Sig]
Edmund A. Hajim
Chairman of the Board
and President
1
FFB FUNDS TRUST
U.S. TREASURY FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1995
YIELD TO
MATURITY
ON DATE PRINCIPAL VALUE
OF PURCHASE AMOUNT (NOTE 1A)
----------- ----------- ------------
U.S. TREASURY OBLIGATIONS -- 45.8%
U.S. TREASURY BILLS -- 25.0%
03/09/95............................................................. 5.38% $15,000,000 $ 14,982,650
03/16/95............................................................. 5.34 25,000,000 24,946,354
04/06/95............................................................. 5.59 10,000,000 9,946,250
05/04/95............................................................. 6.24 10,000,000 9,893,333
05/18/95............................................................. 6.04 25,000,000 24,686,917
05/25/95............................................................. 6.28 25,000,000 24,641,111
06/01/95++........................................................... 6.34 40,055,000 39,430,680
06/08/95............................................................. 6.26 20,000,000 19,667,525
------------
168,194,820
------------
U.S. TREASURY NOTES -- 20.8%
5.875%, 05/15/95..................................................... 5.47 20,000,000 20,017,918
8.50%, 05/15/95...................................................... 6.52 50,000,000 50,219,072
4.125%, 05/31/95..................................................... 6.31 25,000,000 24,867,452
3.875%, 03/31/95..................................................... 6.31 25,000,000 24,961,011
4.625%, 08/15/95..................................................... 5.82 20,000,000 19,853,496
------------
139,918,949
------------
TOTAL INVESTMENTS -- (cost $308,113,769)...............................
308,113,769
------------
REPURCHASE AGREEMENTS -- 54.2%
Aubrey G. Lanston & Co., Inc........................................... 6.13 50,000,000 50,000,000
dated 02/28/95, 6.05%, 03/01/95 (Proceeds at maturity $50,008,403),
collateralized by: $30,000,000 U.S. Treasury Bill 04/13/95;
$20,800,000 U.S. Treasury Bonds 7.625% -- 7.875%,
02/15/21 -- 02/15/25
Barclays de Zoete Wedd Securities, Inc................................. 6.13 50,000,000
50,000,000
dated 02/28/95, 6.05%, 03/01/95 (Proceeds at maturity $50,008,403),
collateralized by $49,609,000 U.S. Treasury Notes 7.25% -- 11.25%,
05/15/95 -- 11/30/96
Dean Witter Reynolds, Inc.............................................. 6.13 35,000,000 35,000,000
dated 02/28/95, 6.05%, 03/01/95 (Proceeds at maturity $35,005,882),
collateralized by: $17,983,000 U.S. Treasury Bill 05/25/95;
$17,968,000 U.S. Treasury Notes 5.125% -- 6.75%, 05/15/95 -- 11/30/98
Donaldson Lufkin & Jenrette Securities, Inc............................ 6.13 40,000,000
40,000,000
dated 02/28/95, 6.05%, 03/01/95 (Proceeds at maturity $40,006,722),
collateralized by $16,163,000 U.S. Treasury Bond 11.75%, 11/15/14;
$17,000,000 U.S. Treasury Note 9.375%, 04/15/16
Morgan Stanley & Co.................................................... 6.04 50,000,000 50,000,000
dated 02/24/95, 5.96%, 03/03/95 (Proceeds at maturity $50,057,944)
collateralized by $53,675,000 Government National Mortgage
Association Bonds 6.00%, 05/20/24
Prudential Securities Inc.............................................. 5.98 50,000,000 50,000,000
dated 02/16/95, 5.90%, 03/02/95 (Proceeds at maturity $50,114,722)
collateralized by $68,715,000 Government National Mortgage Association Bonds
6.125% -- 9.00%, 12/15/08 -- 09/20/24
Smith Barney Incorporated.............................................. 6.13 38,959,000 38,959,000
dated 02/28/95, 6.05%, 03/01/95 (Proceeds at maturity $38,965,547)
collateralized by $108,949,000 U.S. Treasury Strips
08/15/98 -- 11/15/20
See footnotes to portfolios of investments and accompanying notes to financial
statements.
2
FFB FUNDS TRUST
U.S. TREASURY FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
FEBRUARY 28, 1995
YIELD TO
MATURITY
ON DATE PRINCIPAL VALUE
OF PURCHASE AMOUNT (NOTE 1A)
----------- ----------- ------------
REPURCHASE AGREEMENTS -- (CONTINUED)
UBS Securities, Inc.................................................... 6.03% $50,000,000 $ 50,000,000
dated 02/28/95, 5.95%, 03/07/95 (Proceeds at maturity $50,057,847)
collateralized by $53,669,138 Government National Mortgage Association Bonds 2
5.150% -- 6.125%, 11/20/21 -- 05/20/24
------------
TOTAL REPURCHASE AGREEMENTS -- (cost $363,959,000).....................
363,959,000
------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS -- 100.0%
(cost $672,072,769)+................................................. 672,072,769
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.0%)........................
(291,498)
------------
NET ASSETS -- 100.0%................................................... $671,781,271
============
See footnotes to portfolios of investments and accompanying notes to financial
statements.
3
FFB FUNDS TRUST
U.S. GOVERNMENT FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1995
YIELD TO
MATURITY
ON DATE PRINCIPAL VALUE
OF PURCHASE AMOUNT (NOTE 1A)
----------- ----------- ------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 73.3%
FEDERAL FARM CREDIT BANK -- 24.5%
DEBENTURES -- 15.6%
5.85%, 05/01/95...................................................... 6.88% $10,000,000 $ 9,991,335
6.20%, 05/01/95...................................................... 6.73 10,000,000 10,000,000
6.05%, 06/01/95...................................................... 6.05 10,000,000 10,000,000
6.67%, 07/05/95...................................................... 7.25 5,000,000 5,000,000
------------
34,991,335
------------
DISCOUNT NOTES -- 8.9%
03/24/95............................................................. 6.18 10,000,000 9,961,667
05/15/95............................................................. 6.06 5,000,000 4,939,584
06/01/95............................................................. 6.68 5,000,000 5,000,000
------------
19,901,251
------------
TOTAL FEDERAL FARM CREDIT BANK.........................................
54,892,586
------------
FEDERAL HOME LOAN BANK DISCOUNT NOTES -- 8.9%
04/05/95............................................................. 6.26 10,000,000 9,941,181
06/05/95(a).......................................................... 5.94 10,000,000 9,998,154
------------
19,939,335
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
DISCOUNT NOTES -- 8.9%
03/06/95............................................................. 6.27 10,000,000 9,991,528
04/05/95............................................................. 6.23 10,000,000 9,940,889
------------
19,932,417
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT NOTES -- 26.5%
04/18/95............................................................. 6.11 10,000,000 9,920,533
05/09/95............................................................. 6.18 10,000,000 9,885,383
05/17/95............................................................. 6.16 10,000,000 9,872,094
05/31/95............................................................. 6.08 10,000,000 9,850,861
08/25/95(a).......................................................... 6.04 10,000,000 10,000,000
02/16/96(a).......................................................... 6.01 10,000,000 10,000,000
------------
59,528,871
------------
STUDENT LOAN MARKETING ASSOCIATION -- 4.5%
05/11/95(a).......................................................... 5.87 10,000,000 10,000,000
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS -- (COST $164,293,209)........
164,293,209
------------
U.S. TREASURY BILL -- 0.0%
06/01/95++ -- (cost $69,098)......................................... 5.49 70,000 69,098
------------
TOTAL INVESTMENTS -- (COST $164,362,307)............................... 164,362,307
------------
REPURCHASE AGREEMENTS -- 31.1%
Dean Witter Reynolds, Inc.............................................. 6.18 35,000,000 35,000,000
dated 02/28/95, 6.10%, 03/01/95 (Proceeds at maturity $35,005,931),
collateralized by $35,703,685 Federal Home Mortgage Association
5.927% -- 12.00%, 10/01/97 -- 01/01/25
See footnotes to portfolios of investments and accompanying notes to financial
statements.
4
FFB FUNDS TRUST
U.S. GOVERNMENT FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
FEBRUARY 28, 1995
YIELD TO
MATURITY
ON DATE PRINCIPAL VALUE
OF PURCHASE AMOUNT (NOTE 1A)
----------- ----------- ------------
REPURCHASE AGREEMENTS -- (CONTINUED)
Smith Barney Incorporated.............................................. 6.18% $34,743,000 $
34,743,000
dated 02/28/95, 6.10%, 03/01/95 (Proceeds at maturity $34,748,887),
collateralized by $35,437,860 Federal National Mortgage Association
5.617% -- 9.00%, 11/01/17 -- 09/01/24
------------
TOTAL REPURCHASE AGREEMENTS -- (cost $69,743,000)...................... 69,743,000
------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS -- 104.4%
(cost $234,105,307)+................................................. 234,105,307
LIABILITIES IN EXCESS OF OTHER ASSETS -- (4.4%)........................ (9,790,904)
------------
NET ASSETS -- 100.0%................................................... $224,314,403
============
See footnotes to portfolios of investments and accompanying notes to financial
statements.
5
FFB FUNDS TRUST
CASH MANAGEMENT FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1995
YIELD TO
MATURITY
CREDIT ON DATE PRINCIPAL VALUE
RATING* OF PURCHASE AMOUNT (NOTE
1A)
------------ ----------- ----------- ------------
CERTIFICATES OF DEPOSIT -- 22.7%
EURODOLLAR -- 11.5%
A-1+/P-1 Bank of Nova Scotia 5.32%, 03/15/95........................ 5.37% $10,000,000 $10,000,076
A-1+/P-1 Caisse Nationale de Credit Agricole Inc. 5.73%, 04/13/95... 6.30 11,000,000 10,993,764
A-1+/P-1 Deutsche Bank 6.66%, 07/17/95.............................. 6.65 13,000,000 13,005,031
A-1+/P-1 Deutsche Bank 6.71%, 07/24/95.............................. 6.43 10,000,000 10,014,608
A-1+/P-1 Mitsubishi Bank, Ltd. 6.28%, 04/27/95...................... 6.36 20,000,000 20,000,312
A-1+/P-1 Morgan Guaranty Trust Company 6.61%, 07/31/95.............. 6.70 10,000,000 10,000,110
A-1+/P-1 Nordeutsche Landesbank 6.60%, 07/31/95..................... 6.60 10,000,000 10,003,731
------------
84,017,632
------------
YANKEE -- 11.2%
A-1+/P-1 Banque Nationale de Paris 6.02%, 04/03/95.................. 6.08 10,000,000 10,000,182
A-1+/P-1 Banque Nationale de Paris 5.83%, 04/24/95.................. 6.33 10,000,000 9,993,894
A-1+/P-1 Canadian Imperial Bank of Commerce 6.00%, 04/03/95......... 6.08 10,000,000 10,000,000
A-1+/P-1 Commerzbank 6.43%, 08/07/95................................ 6.36 15,000,000 15,010,372
A-1+/P-1 National Westminster PLC 6.50%, 04/28/95................... 6.50 10,000,000 10,001,385
A-1+/P-1 Rabobank Nederland 6.43%, 04/20/95......................... 6.51 7,000,000 7,000,123
A-1+/P-1 Sanwa Bank, Ltd. 6.27%, 05/05/95........................... 6.34 15,000,000 15,000,517
A-1+/P-1 Societe Generale 6.30%, 05/02/95........................... 6.37 5,000,000 5,000,160
------------
82,006,633
------------
TOTAL CERTIFICATES OF DEPOSIT -- (cost $166,024,265)....... 166,024,265
------------
COMMERCIAL PAPER -- 36.1%
ASSET-BACKED -- 4.9%
Asset Securitization Cooperative Corp.:
A-1+/P-1 04/17/95................................................. 6.20 10,000,000 9,921,406
A-1+/P-1 04/24/95................................................. 6.33 6,000,000 5,944,650
A-1+/P-1 Sceptre International, Ltd., 03/21/95...................... 5.41 20,000,000 19,940,986
------------
35,807,042
------------
BANKING -- 20.3%
A-1+/P-1 American Express Credit Corp., 04/03/95.................... 6.18 10,000,000
9,944,634
A-1+/P-1 ANZ Delaware Inc., 03/02/95................................ 5.68 15,000,000 14,997,709
Banco Espirito Santo North American Capital
A-1+/P-1 Corp., 06/26/95.......................................... 6.30 20,000,000 19,604,150
A-1+/P-1 Bankers Trust Company 04/06/95............................. 6.42 15,000,000 14,906,400
A-1+/P-1 BTR Dunlop Finance Inc., 08/21/95.......................... 6.43 20,000,000 19,408,917
A-1+/P-1 Ciesco 03/01/95............................................ 6.11 10,000,000 10,000,000
Compagnie Bancaire U.S.A. Finance Corp.
A-1+/P-1 03/31/95................................................. 6.33 10,000,000 9,948,750
A-1+/P-1 Ford Credit Receivable 05/19/95............................ 6.54 10,000,000
9,861,531
A-1/P-1 Ford Motor Credit Corp. 05/22/95........................... 6.42 15,000,000 14,788,167
A-1+/P-1 General Electric Company 07/25/95.......................... 6.69 15,000,000 14,610,667
A-1/P-1 Transamerica Finance Corp. 05/01/95........................ 6.34 10,000,000 9,895,792
------------
147,966,717
------------
FINANCIAL SERVICES -- 1.4%
A-1/P-1 Prudential Home Mortgage Co., Inc., 03/01/95............... 5.71 10,000,000 10,000,000
------------
See footnotes to portfolios of investments and accompanying notes to financial
statements.
6
FFB FUNDS TRUST
CASH MANAGEMENT FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
FEBRUARY 28, 1995
YIELD TO
MATURITY
CREDIT ON DATE PRINCIPAL VALUE
RATING* OF PURCHASE AMOUNT (NOTE
1A)
------------ ----------- ----------- ------------
COMMERCIAL PAPER -- (CONTINUED)
FOREIGN BANKING -- 8.2% Amro North America Finance:
A-1+/P-1 04/10/95................................................. 6.42% $10,000,000 $ 9,930,779
A-1+/P-1 04/17/95................................................. 6.21 5,000,000 4,960,508
A-1+/P-1 04/28/95................................................. 6.30 10,000,000 9,901,400
A-1+/P-1 05/25/95................................................. 6.20 5,000,000 4,928,814
A-1+/P-1 Barclays U.S. Funding PLC 03/03/95......................... 6.12 15,000,000 14,994,992
A-1+/P-1 National Westminster 04/24/95.............................. 6.28 15,000,000 14,862,750
------------
59,579,243
------------
INVESTMENT SERVICES -- 1.3%
A-1+/P-1 Morgan (J.P.) & Co., Inc., 05/31/95........................ 6.21 10,000,000 9,847,575
------------
TOTAL COMMERCIAL PAPER -- (cost $263,200,577).............. 263,200,577
------------
BANKERS' ACCEPTANCES -- 2.0%
A-1+/P-1 Bank of Nova Scotia 07/10/95............................... 6.57 5,000,000 4,885,375
A-1/P-1 Republic New York 06/12/95................................. 6.21 10,000,000 9,828,047
------------
TOTAL BANKERS' ACCEPTANCES -- (cost $14,713,422)........... 14,713,422
------------
FLOATING RATE DEMAND NOTES -- (A)9.5%
A-1+/P-1 Abbey National PLC Capital Corp. 03/07/95.................. 6.12 20,000,000 20,000,000
A-1/P-1 Bankers Trust New York Corp. 03/01/95...................... 6.26 10,000,000 10,000,000
A-1/P-1 Merrill Lynch & Company 03/01/95........................... 6.26 25,000,000 25,000,000
A-1/P-1 PNC Bank 03/07/95.......................................... 6.13 4,000,000 3,999,616
A-1/P-1 Society National Bank Cleveland 03/01/95................... 6.18 10,000,000 10,000,000
------------
TOTAL FLOATING RATE DEMAND NOTES -- (cost $68,999,616)..... 68,999,616
------------
U.S. TREASURY BILL -- 0.0%
06/01/95 -- (cost $128,326)++.............................. 5.33 130,000 128,326
------------
TOTAL INVESTMENTS -- (cost $513,066,206)................... 513,066,206
------------
See footnotes to portfolios of investments and accompanying notes to financial
statements.
7
FFB FUNDS TRUST
CASH MANAGEMENT FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
FEBRUARY 28, 1995
YIELD TO
MATURITY
ON DATE PRINCIPAL VALUE
OF PURCHASE AMOUNT (NOTE 1A)
----------- ----------- ------------
REPURCHASE AGREEMENTS -- 29.7%
Citibank, N.A............................................................ 6.18% $45,000,000 $ 45,000,000
dated 02/28/95, 6.10%, 03/01/95 (Proceeds at maturity $45,007,625)
collateralized by: $19,553,444 Federal National Mortgage Association
Bond 5.736%, 03/01/24; $27,140,000 Federal Home Loan Mortgage
Corporation Bond 5.91%, 08/01/31
Dean Witter Reynolds, Inc................................................ 6.18 40,000,000 40,000,000
dated 02/28/95, 6.10%, 03/01/95 (Proceeds at maturity $40,006,778)
collateralized by $40,801,513 Federal National Mortgage Association
Bond 5.191% -- 11.50%, 08/01/97 -- 01/01/25
Morgan (J.P.) Securities, Inc............................................ 6.18 45,000,000 45,000,000
dated 02/28/95, 6.10%, 03/01/95 (Proceeds at maturity $45,007,625)
collateralized by: $17,854,638 Federal Home Loan Mortgage Corporation
Bond 9.00%, 01/01/25 -- 02/01/25; $27,948,974 Federal National Mortgage
Association Bond 7.00% -- 7.50%, 06/01/09 -- 06/01/14
Smith Barney Incorporated................................................ 6.18 41,363,000 41,363,000
dated 02/28/95, 6.10%, 03/01/95 (Proceeds at maturity $41,378,008)
collateralized by $42,190,260 Federal National Mortgage Association
Bonds 5.44% -- 10.50%, 02/01/20 -- 10/01/24
UBS Securities, Inc...................................................... 6.21 45,000,000 45,000,000
dated 02/28/95, 6.12%, 03/01/95 (Proceeds at maturity $45,007,650)
collateralized by: $15,101,636 Federal Home Loan Mortgage Association
Bond 5.651%, 12/01/27; $29,418,101 Federal National Mortgage
Association Bond 5.612%, 10/01/24
------------
TOTAL REPURCHASE AGREEMENTS -- (cost $216,363,000)....................... 216,363,000
------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS -- 100.0%
(cost $729,429,206)+................................................... 729,429,206
------------
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.0%............................ 278,011
------------
NET ASSETS -- 100.0%..................................................... $729,707,217
============
See footnotes to portfolios of investments and accompanying notes to financial
statements.
8
FFB FUNDS TRUST
TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1995
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 1)
----------- ----------- ------------
SHORT-TERM MUNICIPAL SECURITIES -- 100.4%
ALABAMA -- 1.0%
NR/A-1 Phenix City Industrial Development Board Environmental Improvement
Revenue Refunding Bond, Mead Coated Board Project B (Sumitomo
Bank, Ltd.) 3.95%, 3/1/95 (a)................................... $ 1,100,000 $ 1,100,000
------------
ARIZONA -- 1.2%
MIG1/A-1+ Cochise County PCR Corporation Solid Waste Disposal Revenue,
Arizona Electric Power Co. Inc. Project (SPA--National Rural
Utility Finance) 3.80%, 3/1/95 (AMT) (b)........................ 1,000,000 1,000,000
P-1/A-1 Maricopa County Pollution Control Corporation PCR Refunding Public
Service Corporation North Mexico Series D (Bank of America)
3.90%, 3/1/95 (a)............................................... 300,000 300,000
------------
1,300,000
------------
CALIFORNIA -- 4.3%
MIG1/SP1+ California HFA Revenue Bond Series 1 (FHA/FGIC/Bayerische
Landesbank) 4.15%, 5/01/95(b)................................... 180,000 180,000
MIG1/SP1+ California State RANS 3.24%, 6/28/95.............................. 1,000,000 1,000,000
NR/A-1 Los Angeles Community Redevelopment Agency COPS Baldwin Hills
Public Park (Wells Fargo Bank) 4.05%, 3/1/95 (a)................ 2,500,000 2,500,000
Aaa/AAA San Francisco City & County Airports Commission International
Airport Revenue Refunding Bond Series 2 (AMBAC) 6.10%, 5/1/95... 1,000,000 1,003,568
------------
4,683,568
------------
COLORADO -- 0.9%
NR/SP1+ Arapahoe County Capital Improvement Highway Revenue Project Series
E (Societe Generale) 4.45%, 8/31/95 (b)......................... 1,000,000 1,000,000
------------
DISTRICT OF COLUMBIA -- 4.6%
MIG1/SP1 TRANS UTGO Subseries A-5 (First National Bank of Chicago) 6.25%,
9/30/95......................................................... 1,000,000 1,007,601
VMIG1/A-1+ General Fund Recovery UTGO Series B (Union Bank of Switzerland)
4.50%, 3/1/95 (a)............................................... 4,000,000 4,000,000
------------
5,007,601
------------
FLORIDA -- 5.3%
Dade County Special Obligation (Banca Nazionale Del Lavoro) (a):
VMIG1/NR Fixed Equipment Project Series A 4.30%, 3/1/95.................... 1,800,000 1,800,000
VMIG1/NR Series A 4.30%, 3/1/95.......................................... 350,000 350,000
VMIG1/A-1+ Jacksonville Health Facilities Authority Revenue Baptist Medical
Center Project (MBIA/Sun Bank of Orlando) 3.60%, 3/1/95 (a)..... 1,000,000 1,000,000
Putnam County Development Authority PCR (NRUCFC):
Aa3/A-1+ Seminole Electric Series D (NRUCFC) 4.25%, 6/15/95 (b).......... 1,000,000 1,000,000
VMIG1/A-1 Saint Lucie County PCR Refunding Florida Power & Light Co.
Project 3.65%, 3/1/95 (a)....................................... 1,600,000 1,600,000
------------
5,750,000
------------
GEORGIA -- 4.6%
VMIG1/A-1+ Fulton County HDA Municipal Housing Revenue Series A (Sumitomo
Bank, Ltd.) 4.30%, 3/1/95 (a)................................... 1,950,000 1,950,000
VMIG1/NR Marietta HDA Multifamily Revenue Housing Falls at Bells Ferry
(Guardian Savings & Loan) 5.25%, 1/15/96 (b).................... 1,000,000 1,000,000
Municipal Electric Authority Sub-General Resolution:
VMIG1/A-1 Series B (SPA--Morgan Guaranty Trust Co.) 3.85%, 6/1/95 (b)....... 1,000,000 1,000,000
VMIG1/A-1 Series B (SPA--Morgan Guaranty Trust Co.) 3.05%, 3/1/95 (b)....... 1,000,000 1,000,000
------------
4,950,000
------------
See footnotes to portfolios of investments and accompanying notes to financial
statements.
9
FFB FUNDS TRUST
TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
FEBRUARY 28, 1995
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 1)
----------- ----------- ------------
SHORT-TERM MUNICIPAL SECURITIES -- (CONTINUED)
ILLINOIS -- 6.6%
NR/A-1+ Chicago Airport Special Facility Revenue CSX Beckett Aviation
(Barclays Bank PLC) 4.01%, 3/15/95 (a).......................... $ 1,000,000 $ 1,000,000
VMIG1/A-1+ Chicago O'Hare International Airport Revenue General Airport
Revenue General Airport Second Lien Series C (Societe Generale)
4.00%, 3/1/95 (a)............................................... 1,000,000 1,000,000
VMIG1/A-1+ Illinois State Toll Highway Authority Toll Highway Priority
Revenue Refunding Series B (MBIA/Societe Generale) 3.85%, 3/1/95
(a)............................................................. 1,000,000 1,000,000
NR/A-1+ Illinois HDA Housing Revenue Illinois Center Apartments Project
(Met Life Guaranty) 4.10%, 3/1/95 (a)........................... 1,700,000 1,700,000
Illinois Educational Facilities Authority Revenue (a):
VMIG1/A-1+ Art Institute (Mitisubishi Bank, Ltd.) 4.15%, 3/01/95........... 350,000 350,000
VMIG1/NR Newberry Library (Northern Trust Co.) 4.10%, 3/1/95............. 300,000 300,000
VMIG1/A-1 Revolving Fund Series D (First National Bank Of Chicago) 4.15%,
3/01/95......................................................... 400,000 400,000
NR/A-1+ Orlando Hills Multi-Family Mortgage Revenue Housing 88th Avenue
Project-1995 Series A (Bank One) 3.85%, 3/1/95 (a).............. 1,360,000 1,360,000
------------
7,110,000
------------
INDIANA -- 1.2%
VMIG1/A-1+ Jasper County PCR Refunding Northern Indiana Public Service Series C
(Union Bank of Switzerland) 3.60%, 3/1/95 (a)................... 1,300,000 1,300,000
------------
IOWA -- 0.9%
NR/A-1 Burlington Industrial Revenue Joyce International, Inc. Project
(Chemical Bank) 3.95%, 3/1/95 (a)............................... 1,000,000 1,000,000
------------
KANSAS -- 1.7%
NR/A-1+ Prairie Village Multifamily Housing Revenue J.C. Nichols Co.
Project (Bankers Life Co.) 4.00%, 3/1/95 (a).................... 1,800,000 1,800,000
------------
KENTUCKY -- 0.9%
NR/A-1+ Jefferson County Hospital Belknap Income Project (Chemical Bank)
3.95%, 3/1/95 (a)............................................... 952,000 952,000
------------
LOUISIANA -- 3.4%
VMIG1/A-1 Louisiana Public Facilities Authority Hospital Revenue Program Our
Lady Lake Project (FSA-SPA/Sakura Bank/Fuji Bank, Ltd.) 3.90%,
3/10/95 (c)..................................................... 1,700,000 1,700,000
VMIG1/AAA Louisiana Public Facilities Hospital Revenue Refunding Willis
Knighton Medical Center Project (AMBAC Mellon Bank) 3.95%,
3/1/95 (a)...................................................... 500,000 500,000
AAA/Aaa New Orleans Refunded GO (CGIC--Certificate Eligible) 8.00%,
9/1/95.......................................................... 1,460,000 1,485,778
------------
3,685,778
------------
MARYLAND -- 0.7%
MIG1/SP1 Washington County BAN (Municipal Government Guaranteed) 4.00%,
4/18/95......................................................... 750,000 750,536
------------
MASSACHUSETTS -- 2.8%
VMIG1/A-1+ Bay Transportation Authority General Transportation System State
Guaranteed GO of Authority Series 1984A (State Street Bank &
Trust Co.) 2.75%, 03/1/95 (b)................................... 1,000,000 1,000,000
VMIG1/A-1 Massachusetts State Industrial Finance Agency PCR Refunding N.E.
Power Co. Project Series B 4.10%, 4/11/95 (c)................... 2,000,000 2,000,000
------------
3,000,000
------------
MICHIGAN -- 5.3%
P-1/NR Delta County EDC Environmental Improvement Revenue Mead Escanaba
Paper Series C (Bank of Nova Scotia) 3.90%, 3/1/95 (a).......... 700,000 700,000
See footnotes to portfolios of investments and accompanying notes to financial
statements.
10
FFB FUNDS TRUST
TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
FEBRUARY 28, 1995
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 1)
----------- ----------- ------------
SHORT-TERM MUNICIPAL SECURITIES -- (CONTINUED)
MICHIGAN -- (CONTINUED)
P-1/A-1 Michigan Strategic Fund Revenue Dow Chemical Company Project 3.80%,
3/1/95 (a)...................................................... $ 2,200,000 $ 2,200,000
P-1/A-1+ Midland County EDC LTGO Revenue Dow Chemical Company Project
Series B 4.00%, 3/1/95 (a)...................................... 2,825,000 2,825,000
------------
5,725,000
------------
MISSISSIPPI -- 1.9%
P-1/NR Claiborne County PCR South Mississippi Electric Company NRUCFC
3.85%, 3/9/95 (a)............................................... 2,000,000 2,000,000
------------
MISSOURI -- 2.8%
VMIG1/A-1+ Missouri State Health & Educational Facilities Authority Revenue
Washington University Series A (Morgan Guaranty Trust) 3.85%,
3/1/95 (a)...................................................... 2,000,000 2,000,000
Aaa/AAA New Madrid Power Plant Refunding (AMBAC) 4.00%, 6/1/95............ 1,000,000 1,000,000
------------
3,000,000
------------
NEW HAMPSHIRE -- 1.4%
NR/A-1+ New Hampshire State HFA Refunding Multifamily Housing Revenue
Oxford Project (CNA Insurance) 4.40%, 3/1/95 (a)................ 1,500,000 1,500,000
------------
NEW JERSEY -- 2.0%
MIG1/SP1+ Morris County BAN UTGO 4.70%, 12/15/95............................ 1,000,000 1,001,170
Aa1/AA+ State UTGO 6.25%, 9/15/95......................................... 1,190,000 1,199,914
------------
2,201,084
------------
NEW MEXICO -- 2.3%
P-1/A-1+ Farmington PCR Refunding Arizona Public Service Company
Series B (Barclays Bank, Ltd.) 3.90%, 3/1/95 (a)................ 2,500,000 2,500,000
------------
NEW YORK -- 6.2%
MIG1/NR Erie County RANS UTGO (Union Bank of Switzerland) 4.75%,
8/15/95......................................................... 1,000,000 1,003,254
VMIG1/NR New York State Energy Research & Development Authority PCR LILCO
Project Revenue Bond Series B (Deutsche Bank) 3.00%, 3/1/95
(b)............................................................. 1,000,000 1,000,000
VMIG1/NR New York State Energy Research & Development Authority PCR LILCO
Project Revenue Bond Series B 4.70%, 3/1/96 (b)................. 1,000,000 1,000,000
New York UTGO (a):
VMIG1/A-1+ Series A-8 (Sanwa Bank, Ltd.) 4.05%, 3/1/95..................... 1,600,000 1,600,000
VMIG1/A-1 Series A-10 (Sumitomo Bank, Ltd.) 4.05%, 3/1/95................. 2,100,000 2,100,000
------------
6,703,254
------------
NORTH CAROLINA -- 1.6%
VMIG1/A-1+ Greensboro Public Improvement Series B (Wachovia Bank) 3.85%,
3/1/95 (a)...................................................... 1,750,000 1,750,000
------------
OKLAHOMA -- 4.0%
VMIG1/A-1+ Tulsa IDA Health Care Facility Revenue Medical Support Services,
Inc. Project 4.05%, 3/1/95 (a).................................. 3,000,000 3,000,000
VMIG1/NR Tulsa IDA Revenue Refunding Hillcrest Partnership Project (Bank of
Toyko) 4.05%, 3/2/95 (a)........................................ 1,305,000 1,305,000
------------
4,305,000
------------
PENNSYLVANIA -- 7.6%
P-1/A-1+ Allegheny County IDA Revenue U.S. Steel Environmental Improvement
(Norinchukin Bank) 3.70%, 3/10/95 (c)........................... 2,700,000 2,700,000
Aaa/A-1+ Delaware County IDA PCR Revenue Refunding
Philadelphia Electric Series B (FGIC) 3.75%, 3/13/95 (c)........ 1,300,000 1,300,000
Aaa/AAA Pennsylvania State Higher Education Revenue Bond Series K (AMBAC)
4.00%, 6/15/95.................................................. 1,200,000 1,200,485
P1/NR Schuykill County IDA Resource Recovery Revenue Westwood Energy
Project (Fuji Bank, Ltd.) 4.05%, 3/1/95 (a)..................... 3,000,000 3,000,000
------------
8,200,485
------------
See footnotes to portfolios of investments and accompanying notes to financial
statements.
11
FFB FUNDS TRUST
TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
FEBRUARY 28, 1995
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 1)
----------- ----------- ------------
SHORT-TERM MUNICIPAL SECURITIES -- (CONTINUED)
SOUTH CAROLINA -- 1.1%
NR/A-1+ Florence County IDA Stone Container Corp. Project (Bankers Trust
Co.) 4.15%, 3/15/95 (a)......................................... $ 200,000 $ 200,000
MIG1/A-1+ York County PCR Fixed Saluda River (NRUCFC) 4.55%, 8/15/95 (b).... 1,000,000 1,000,000
------------
1,200,000
------------
SOUTH DAKOTA -- 0.8%
Aa1/A-1+ South Dakota HDA Homeownership Mortgage Project Series B 3.25%,
5/1/95.......................................................... 835,000 835,000
------------
TENNESSEE -- 4.3%
NR/A-1 Chattanooga Hamilton County Hospital Authority Hospital Revenue
Refunding (SPA-Morgan Guaranty Trust Co.) 3.25%, 3/1/95 (a)..... 1,100,000 1,100,000
VMIG1/A-1+ State BAN Series B UTGO 4.00%, 3/01/95 (a)........................ 3,600,000 3,600,000
------------
4,700,000
------------
TEXAS -- 10.5%
Bexar County Housing Finance Corporation Revenue (a):
NR/A-1+ Multifamily Guaranteed Mortgage Refunding Creightons Mill
Development Project Series A (N.E. Mutual Life Insurance Co.)
4.40%, 3/1/95................................................. 1,000,000 1,000,000
NR/A-1+ Series 1984A (Industrial Surety Bank/SPA-Mitisui Bank, Ltd.)
4.40%, 3/1/95................................................. 1,000,000 1,000,000
Aa/AA Dallas Water Works & Sewer Revenue Refunding Bond 3.30%, 4/1/95... 500,000 500,039
Aa/AA El Paso Public Property Finance Contractual Obligation 4.25%,
8/15/95......................................................... 1,000,000 1,000,416
VMIG1/NR Harris County Housing Financial Corporation Multi-Family Housing
Revenue Arbor II Limited Project (Guardian Savings & Loan)
4.20%, 10/1/95 (b).............................................. 1,000,000 1,000,000
VMIG1/A-1 North Central Health Facilities Development Corporation Hospital
Revenue Presbyterian Medical Center (MBIA/SPA-Nationsbank of
Texas) (a):
Series C 3.80%, 3/1/95.......................................... 1,300,000 1,300,000
Series D 3,80%, 3/1/95.......................................... 1,200,000 1,200,000
MIG1/SP1+ State TRANS 4.24%, 3/1/95 (a)..................................... 1,000,000 1,000,000
VMIG1/A-1+ Texas State Water Development Board Series A (Canadian Imperial
Bank)
3.85%, 3/01/95 (a).............................................. 2,300,000 2,300,000
MIG1/A-1 Tyler Health Facilities Development Corporation East Texas Medical
Center Regional Health Series C (Banque Paribas) 4.40%, 5/11/95
(c)............................................................. 1,000,000 1,000,000
------------
11,300,455
------------
VIRGINIA -- 7.6%
VMIG1/A-1 Chesterfield County IDA PCR Virginia Electric & Power 4.10%,
4/13/95 (c)..................................................... 3,000,000 3,000,000
Aa/AA College Building Authority Virginia Refunding Bond Equipment
Leasing Project 5.20%, 10/1/95.................................. 1,000,000 1,001,882
VMIG1/NR Harrisonburg Redevelopment & HDA Multi-Family Housing Revenue
Rolling Brook Village Apartments Project (Guardian Savings &
Loan) 5.10%, 2/1/96 (b)......................................... 1,000,000 1,000,000
NR/A-1 Loudoun County IDA Residential Care Facilities Revenue Falcons
Landing Project Series B (Banque Paribas) 4.00%, 3/1/95 (a)..... 400,000 400,000
VMIG1/A-1 Louisa IDA PCR Virginia Electric & Power 4.05%, 4/21/95 (c)....... 1,790,000 1,790,000
MIG1/NR Virginia State Housing Authority Commonwealth Mortgage Revenue
Bond Series F 2.90%, 5/10/95 (b)................................ 1,000,000 1,000,093
------------
8,191,975
------------
See footnotes to portfolios of investments and accompanying notes to financial
statements.
12
FFB FUNDS TRUST
TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
FEBRUARY 28, 1995
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
SHORT-TERM MUNICIPAL SECURITIES -- (CONTINUED)
WEST VIRGINIA -- 0.9%
NR/A-1 Marshall County PCR Allied Signal Project 4.30%, 3/1/95 (a)....... 1,000,000 1,000,000
------------
TOTAL SHORT-TERM MUNICIPAL SECURITIES -- (cost $108,501,736)...... $108,501,736
------------
U.S. TREASURY BILL - 0.0%
6/01/95++ (Cost $44,240).......................................... $ 45,000 44,420
------------
TOTAL INVESTMENTS - 100.4% (cost-$108,546,156)+................... 108,546,156
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.4%)....................
(481,938)
------------
NET ASSETS -- 100.0%.............................................. $108,064,218
============
See footnotes to portfolios of investments and accompanying notes to financial
statements.
13
FFB FUNDS TRUST
PENNSYLVANIA TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1995
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 1A)
---------- ---------- -----------
FLOATING RATE DEMAND NOTES (A) -- 55.2%
VMIG/NR Allegheny County Higher Education Building Authority Revenue
University of Pittsburgh Series D (Fuji Bank, Ltd.) 4.00%,
3/2/95............................................................. $ 830,000 $ 830,000
Allegheny Hospital Development Authority Revenue Health Center
Presbyterian University Hospital (MBIA/Credit Suisse):
VMIG1/A+ Series A 4.00%, 3/2/95............................................. 100,000 100,000
VMIG1/A+ Series C 4.00%, 3/2/95............................................. 200,000 200,000
VMIG1/A+ Series D 4.00%, 3/2/95............................................. 800,000 800,000
Hospital Development Authority Revenue Series A ACES (Pittsburgh
National Bank):
VMIG1/A-1 4.00%, 3/1/95...................................................... 1,000,000 1,000,000
VMIG1/A-1 Series C ACES 4.00%, 3/1/95........................................ 700,000 700,000
P-1/A-1 Bedford County IDA Southeastern Pennsylvania Inc. Facilities (Banque
Paribas) 3.95%, 3/7/95............................................. 1,000,000 1,000,000
P-1/NR Bucks County IDA Revenue SHV Real Estate, Inc. (ABN AMRO Bank N.V.)
4.35%, 3/1/95...................................................... 100,000 100,000
NR/A-1 Chester County IDA Commercial Development Revenue Plaza Associates
Project Series A (Industrial Indemnity Surety Bond/First Federal
Savings & Loan of Pennsylvania) 3.75%, 3/1/95...................... 533,000 533,000
P-1/A-1+ Delaware County IDA Airport Facilities Revenue United Parcel Service
Project 3.75%, 3/1/95.............................................. 2,000,000 2,000,000
P-1/A-1+ Delaware County IDA, PCR Revenue British Petroleum Oil Inc. Project
3.60%, 3/1/95...................................................... 1,200,000 1,200,000
P-1/A-1+ Delaware IDA Solid Waste Revenue Scott Paper Company Series D
(National Westminster Bank) 4.05%, 3/1/95.......................... 100,000 100,000
VMIG1/A-1 Delaware Valley Regional Finance Series A (Marine Midland Bank/Hong
Kong & Shanghai Bank) 4.10%, 3/1/95................................ 300,000 300,000
VMIG1/A-1 Delaware Valley Regional Finance (Hong Kong & Shanghai Bank/Marine
Midland Bank, Inc.) 4.10%, 3/1/95.................................. 1,800,000 1,800,000
NR/A-1+ Emmaus General Authority Revenue Subseries E-5 (Canadian Imperial
Bank) 4.05%, 3/1/95................................................ 1,000,000 1,000,000
NR/NR Erie County Hospital Authority Revenue Union City Memorial Hospital
(Mellon Bank) 4.30%, 3/2/95........................................ 400,000 400,000
Aaa/A-1+ Gettysburg Area IDA, IDR (Credit Suisse) 4.10%, 3/1/95............... 165,000 165,000
Aaa/A-1+ Lehigh County Authority Water Revenue (FGIC/SPA/ABN AMRO) 3.90%,
3/1/95............................................................. 570,000 570,000
P-1/NR Lehigh County IDA, PCR Allegheny Electric Company Inc. Series A
(Rabobank Nederland) 4.35%, 3/1/95................................. 200,000 200,000
NR/A-1+ Montgomery County IDA Revenue Commercial Development 1 Valley Square
Project Series A (Home Unity Savings & Loan) 4.25%, 3/1/95......... 500,000 500,000
Aaa/A-1 Northeastern Hospital & Education Authority Health Care Revenue
Wyoming Valley Health Care Center Series A (AMBAC/Industrial Bank
of Japan, Ltd.) 4.00%, 3/1/95...................................... 1,000,000 1,000,000
Pennsylvania State Higher Education Facilities Authority:
NR/A-1+ Assistance Agency Student Loan Revenue Series 1984A (SLMA)
4.05%, 3/1/95.................................................... 300,000 300,000
NR/A-1+ College & University Revenue University of Pennsylvania First
Series 4.10%, 3/1/95............................................. 400,000 400,000
VMIG1/A-1 Hospital Revenue Frankford Hospital Series B (Mellon Bank) 4.20%,
3/1/95............................................................. 500,000 500,000
NR/A-1 Philadelphia IDA MultiFamily Revenue Refunding Housing Harbor View
Towers (Sumitomo Bank, Ltd.) 4.15%, 3/2/95......................... 750,000 750,000
NR/AAA Philadelphia IDA Institute for Cancer Research Series A (Morgan
Guaranty Trust) 3.60%, 3/1/95...................................... 400,000 400,000
VMIG1/NR Quakertown General Authority Health Facility Revenue -- Lifequest &
Affiliates Project (National Westminster Bank, PLC) 3.95%,
3/2/95............................................................. 400,000 400,000
Sayre Health Care Facilities Authority Revenue VHA Pennsylvania
Capital Financing Project (AMBAC/Mellon Bank):
Aaa/AAA Series A 4.05%, 3/1/95........................................... 400,000 400,000
Aaa/AAA Series M 4.05%, 3/1/95........................................... 400,000 400,000
Schuykill County IDA Resource Recovery Revenue:
NR/A-1 Northeastern Power Company DATES (Sumitomo Bank, Ltd.) 3.80%,
3/1/95........................................................... 1,200,000 1,200,000
See footnotes to portfolios of investments and accompanying notes to financial
statements.
14
FFB FUNDS TRUST
PENNSYLVANIA TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
FEBRUARY 28, 1995
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 1A)
---------- ---------- -----------
FLOATING RATE DEMAND NOTES (A) -- (CONTINUED)
Schuykill County IDA Resource Recovery Revenue -- (continued)
P-1/NR Westwood Energy Project DATES (Fuji Bank, Ltd.) 4.05%, 3/1/95...... $1,900,000 $ 1,900,000
Saint Mary Hospital Authority Langhorne Pennsylvania Hospital
Revenue Franciscan Health System DATES (Toronto Dominion Bank):
VMIG1/A-1+ Series A 3.75%, 3/1/95........................................... 100,000 100,000
VMIG1/A-1+ Series B 3.75%, 3/1/95........................................... 350,000 350,000
VMIG1/A-1+ Series C 3.75%, 3/1/95........................................... 920,000 920,000
VMIG1/NR Washington County Authority Lease Revenue -- Higher Education Pooled
Equipment Lease A (Sanwa Bank, Ltd.) 4.10%, 3/1/95................. 1,400,000 1,400,000
NR/A-1 York County IDA, IDR Preston Trucking Co. (Mellon Bank) 3.75%,
3/1/95............................................................. 100,000 100,000
-----------
TOTAL FLOATING RATE DEMAND NOTES -- (cost -- $24,018,000)............ 24,018,000
-----------
MUNICIPAL OBLIGATIONS -- 30.6%
P-2/A-1 Allegheny County Port Authority RANS (Pittsburgh National Bank)
4.10%, 7/3/95...................................................... 300,000 300,143
AAA/AAA Berks County Prerefunded UTGO (FGIC -- U.S. Government Securities)
7.125%, 11/15/95................................................... 300,000 304,766
Aaa/AAA Bucks County Water & Sewer Authority Revenue Southwest Region Water
District Prerefunded Bond (FGIC -- U.S. Government Securities)
9.10%, 12/1/95..................................................... 250,000 257,738
Aaa/AAA Butler Area School District Refunding Series A UTGO (MBIA) 4.00%,
6/1/95............................................................. 180,000 180,000
Aaa/AAA Carbondale School District UTGO (MBIA) 3.75%, 4/15/95................ 170,000 169,965
Aaa/AAA Chestnut Ridge School District (MBIA) 6.75%, 3/1/95.................. 100,000 100,000
Aaa/AAA Fleetwood Area School District Series A UTGO (FGIC) 4.50%, 5/1/95.... 175,000 175,000
NR/AAA Monroeville Hospital Authority Hospital Revenue Forbes Health Systems
Prerefunded 1985 Series A (Industrial Indemnity/U.S. Government
Securities) 9.70%, 10/1/13......................................... 400,000 420,215
NR/VMIG1 Montgomery County Redevelopment Authority Revenue Glenmore
Association Project Series B (Mellon Bank) 4.125%, 11/1/95 (b)..... 1,000,000 1,000,000
Aaa/NR Montgomery County Sewer Authority Sewer Revenue (FGIC/Surety Bond)
4.00%, 8/1/95...................................................... 100,000 100,000
Aaa/NR Montgomery County Higher Education & Health Authority Hospital
Revenue United Hospitals Project Series A Prerefunded (U.S.
Government Securities) 10.00%, 11/1/95............................. 400,000 421,196
Aaa/AAA Northhampton County Higher Education Authority Revenue Prerefunded
Lafayette College (AMBAC/U.S. Government Securities) 6.875%,
7/1/95............................................................. 500,000 503,350
Aaa/AAA Penns Manor Area School District Prerefunded (AMBAC/U.S. Government
Securities) 7.625%, 3/1/95......................................... 325,000 328,250
Pennsylvania HFA:
Aa/AA Single Family Mortgage Series 38 3.50%, 4/1/95..................... 100,000 100,000
NR/NR Unit Mitsubishi Bank (FHA/VA/Private Mortgage) 7.90%, 4/1/95 (b)... 585,000 584,874
Pennsylvania State Higher Education Facilities Authority:
A1/AA- Allegheny General Hospital Series A 6.00%, 9/1/95.................. 175,000 176,273
Aaa/AAA College & University Revenue University Trustees Prerefunded Series
A (U.S. Government Securities) 9.125%, 6/1/95.................... 1,005,000 1,015,884
Aaa/AAA State Systems Series K (AMBAC) 4.00%, 6/15/95...................... 225,000 225,093
MIG1/SP1+ Pennsylvania State TANS First Series 4.75%, 6/30/95.................. 1,000,000 1,002,568
MIG1/NR Pennsylvania State University University Project Notes
Series A 5.50%, 12/21/95........................................... 500,000 501,536
Aaa/AAA Pennsylvania State Public School Building Authority Hazelton Area
School District Series J (MBIA/U.S. Government Securities) 6.60%,
3/1/95............................................................. 300,000 300,000
Aaa/AAA Philadelphia Hospitals & Higher Education Facilities Authority
Revenue Bond Series C (FGIC/Pittsburgh National Bank) 3.75%, 7/1/95
(b)................................................................ 250,000 250,000
MIG1/SP1 Philadelphia TRANS Series B UTGO (Corestates Philadelphia National
Bank) 4.75%, 6/15/95............................................... 1,500,000 1,501,580
MIG1/SP1 Philadelphia School District TRANS UTGO 4.75%, 6/30/95............... 1,000,000 1,002,016
Aaa/AAA Pittsburgh UTGO Prerefunded (FGIC/U.S. Government Securities) 8.90%,
3/1/95............................................................. 250,000 255,000
Aaa/AAA Puerto Rico PCR Medical & Environmental Facilities Financing
Authority Revenue Merck & Co., Inc. Series A 4.10%, 12/1/95 (b).... 1,000,000 992,796
See footnotes to portfolios of investments and accompanying notes to financial
statements.
15
FFB FUNDS TRUST
PENNSYLVANIA TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
FEBRUARY 28, 1995
CREDIT PRINCIPAL VALUE
RATING* AMOUNT (NOTE 1A)
---------- ---------- -----------
MUNICIPAL OBLIGATIONS -- (CONTINUED)
Aaa/AAA Scranton Lackawanna Health & Welfare Authority Revenue Allied Skilled
Services Series B (FGIC) 4.00%, 8/15/95............................ $ 250,000 $ 250,000
Aaa/AAA Stowe Township Refunding UTGO (AMBAC) 4.60%, 8/1/95.................. 145,000 145,000
NR/SP1+ Temple University of the Commonwealth System of Higher Education
Funding Obligations Revenue Bond (GO of Institution) 4.50%,
5/24/95............................................................ 500,000 500,720
Aaa/AAA Warren County School District UTGO (FGIC) 4.50%, 9/1/95.............. 270,000 270,000
-----------
TOTAL MUNICIPAL OBLIGATIONS -- (cost -- $13,333,963)................. 13,333,963
-----------
TAX EXEMPT COMMERCIAL PAPER -- 13.3%
P-1/A-1 Allegheny County IDA Revenue U.S. Steel Environmental Improvement
(Norinchunkin Bank):
4.30%, 5/8/95.................................................... 300,000 300,000
4.30%, 5/8/95.................................................... 500,000 500,000
Aaa/A-1+ Delaware County IDA, PCR Refunding Philadelphia Electric Series B
(FGIC):
3.75%, 4/13/95................................................... 1,000,000 1,000,000
4.10%, 5/19/95................................................... 1,000,000 1,000,000
NR/A-1 Lehigh County General Purpose Authority Revenue Hospital Center
Services (MBIA/Pittsburgh National Bank) 4.10%, 4/12/95............ 1,000,000 1,000,000
NR/A-1 Montgomery County IDA Revenue Commercial Development (Home Savings &
Loan) 4.25%, 5/18/95............................................... 1,000,000 1,000,000
Baa/AAA Puerto Rico Government Development Bank 3.90%, 4/10/95............... 1,000,000 1,000,000
-----------
TOTAL TAX EXEMPT COMMERCIAL PAPER -- (cost $5,800,000)............... 5,800,000
-----------
TOTAL INVESTMENTS -- 99.1% -- (cost $43,151,963)+.................... 43,151,963
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.9%........................
387,129
-----------
NET ASSETS -- 100.0%................................................. $43,539,092
===========
See footnotes to portfolios of investments and accompanying notes to financial
statements.
16
FFB FUNDS TRUST
MONEY MARKET FUNDS
FOOTNOTES TO PORTFOLIOS OF INVESTMENTS
FEBRUARY 28, 1995
* Credit Ratings given by Moody's Investor Service, Inc. and Standard & Poor's
Corporation.
MOODY'S STANDARD & POOR'S
----------- ------------------
P-1 A-1 Short-term instruments of the highest quality.
Aaa AAA Instrument judged to be of the highest
quality and carrying the smallest amount of
investment risk.
Aa AA Instrument judged to be of high quality by all standards.
A A Instrument judged to be adequate by all standards.
MIG1/VMIG1 SP1 Instrument judged to be the best quality with strong protection.
NR NR Not Rated. In the opinion of the Investment Adviser, instrument judgedto
be of comparable investment quality to rated securities which may be
purchased by the Funds.
Items which possess the strongest investment attributes of their category are
given that letter rating followed by a number. The Standard & Poor's ratings may
be modified by the addition of a plus or minus sign to show relative standing
within the major rating categories. Moody's applies numerical modifiers to
designate relative standings within the generic ratings categories. Government
issues have assumed ratings of AAA/Aaa.
ABBREVIATIONS USED IN THE PORTFOLIOS:
ACES........................ Adjusted Convertible Extendable Security
AMBAC....................... American Municipal Bond Assurance Corporation
AMT......................... Alternative Minimum Tax
BAN......................... Bond Anticipation Note
CGIC........................ Capital Guaranty Insurance Corp.
COPS........................ Certificates of Participation
DATES....................... Demand Adjustable Tax-Exempt Security
EDC......................... Economic Development Corporation
FGIC........................ Financial Guaranty Insurance Corporation
FHA/VA...................... Federal Home Administration/Veterans Administration
FSA......................... Financial Security Assurance
GNMA........................ Government National Mortgage Association
GO.......................... General Obligation
HDA......................... Housing Development Authority
HFA......................... Housing Finance Agency
IDA......................... Industrial Development Authority
IDR......................... Industrial Development Revenue
LTGO........................ Limited Tax General Obligation
MBIA........................ Municipal Bond Insurance Association
NRUCFC...................... National Rural Utilities Cooperative Finance Corporation
PCR......................... Pollution Control Revenue
RANS........................ Revenue Anticipation Notes
SLMA........................ Student Loan Marketing Association
SPA......................... Standby Purchase Agreement
TANS........................ Tax Anticipation Notes
TRANS....................... Tax and Revenue Anticipation Notes
UPDATES..................... United Priced Demand Adjustable Tax-Exempt Security
UTGO........................ Unlimited Tax General Obligation
+ The cost of securities for Federal income tax purposes is substantially
the same.
++ This security is pledged as collateral for a Letter of Credit. The Funds
have issued letters of credit to ICI Insurance carriers for $5,000,000 and
have pledged certain securities as collateral.
(a) Floating Rate Demand Notes. Maturity date shown is the interest reset
date; rate shown is rate in effect at February 28, 1995.
(b) Maturity date shown is the mandatory or optional put date.
(c) Tax Exempt Commercial Paper.
(d) Security may be sold to institutional investors only.
INVESTMENT PERCENTAGES SHOWN ARE CALCULATED AS A PERCENTAGE OF
NET ASSETS.
INSTITUTIONS SHOWN IN PARENTHESES HAVE ENTERED INTO CREDIT SUPPORT
AGREEMENTS
WITH THE ISSUER.
See accompanying notes to financial statements.
17
FFB FUNDS TRUST
MONEY MARKET FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995
PENNSYLVANIA
U.S. U.S. CASH TAX-FREE TAX-FREE
TREASURY GOVERNMENT MANAGEMENT MONEY MARKET MONEY MARKET
FUND FUND FUND FUND FUND
------------- ------------ ------------ ------------- ------------
ASSETS
Investments in securities at value
(cost: $308,113,769, $164,362,307, $513,066,206,
$108,546,156, and $43,151,963, respectively)....... $ 308,113,769 $164,362,307 $513,066,206 $ 108,546,156 $43,151,963
Repurchase Agreements, at value
(cost: $363,959,000, $69,743,000, $216,363,000, $0,
and $0, respectively).............................. 363,959,000 69,743,000 216,363,000 -- --
Cash................................................. 41,190 24,425 760,257 62,438 56,346
Interest receivable.................................. 2,478,665 752,892 1,906,425 766,323 423,983
Prepaid expenses..................................... 108,823 237,177 210,475 54,432 --
Other assets......................................... 10,839 26,336 57,386 14,411 --
Unamortized organizational expense................... -- -- -- -- 308
------------- ----------- ----------- ------------- -----------
Total Assets..................................... 674,712,286 235,146,137 732,363,749 109,443,760 43,632,600
------------- ----------- ----------- ------------- -----------
LIABILITIES
Dividend payable..................................... 2,546,671 690,567 2,429,640 268,984 50,766
Advisory fee payable................................. 188,915 59,800 111,665 33,514 --
Administrative services fee payable.................. 80,964 25,629 71,101 14,058 --
Distribution expense payable......................... 24,433 7,507 20,015 3,458 1,452
Shareholder services fee payable..................... 13,928 4,271 12,101 -- --
Custodian fee payable................................ 13,267 10,104 1,196 16,275 1,732
Transfer agent fee payable........................... 1,496 1,917 -- 1,428 2,790
Payable for investment securities purchased.......... -- 10,000,000 -- 1,000,000 --
Other accrued expenses............................... 61,341 31,939 10,814 41,825 36,768
------------- ----------- ----------- ------------- -----------
Total Liabilities................................ 2,931,015 10,831,734 2,656,532 1,379,542 93,508
------------- ------------ ------------ ------------- ------------
NET ASSETS........................................... $ 671,781,271 $224,314,403 $729,707,217 $ 108,064,218 $ 43,539,092
=========== ============ ============ ============== ============
NET ASSETS
Shares of beneficial interest outstanding (par value $.001 per share);
3,000,000,000, 2,000,000,000, 3,000,000,000, 2,000,000,000, and 1,000,000,000
shares authorized, respectively.................... 671,781 224,314 729,708 108,038 43,545
Additional paid-in capital........................... 671,109,490 224,090,089 728,977,509 107,929,887 43,501,397
Accumulated undistributed net realized gain (loss) on
investments transactions........................... -- -- -- 26,293 (5,850)
------------- ------------ ------------ ------------- -----------
Net assets applicable to shares outstanding.......... $ 671,781,271 $224,314,403 $729,707,217 $ 108,064,218 $43,539,092
=========== ============ ============ ============== ============
Shares of beneficial interest outstanding............ 671,781,271 224,314,403 729,707,217 108,037,925 43,544,942
=========== =========== ============ ============ ============
Net asset value per share outstanding................ $1.00 $1.00 $1.00 $1.00 $1.00
=========== =========== ============ ============ =======
See accompanying notes to financial statements.
18
FFB FUNDS TRUST
MONEY MARKET FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1995
PENNSYLVANIA
U.S. U.S. CASH TAX-FREE TAX-FREE
TREASURY GOVERNMENT MANAGEMENT
MONEY MARKET MONEY MARKET
FUND FUND FUND FUND FUND
----------- ---------- ----------- ------------ ------------
Interest income.................................. $28,986,957 $9,806,231 $26,454,488 $2,949,379 $726,581
----------- ---------- ----------- ----------- ----------
Expenses:
Advisory....................................... 2,151,171 730,462 1,942,552 326,408 85,049
Administrative services........................ 915,113 311,418 828,806 138,856 31,893
Shareholder services........................... 156,838 52,176 460,563 23,315 --
Custodian...................................... 154,715 73,255 139,500 55,510 5,252
Registration................................... 102,099 36,200 175,283 15,643 22,700
Audit.......................................... 30,000 12,000 35,500 16,000 9,206
Distribution................................... 24,433 7,507 20,015 3,458 1,452
Insurance...................................... 21,871 7,603 22,422 3,718 578
Legal.......................................... 12,000 8,500 13,000 7,662 3,261
Reports to shareholders........................ 11,771 6,000 15,000 14,080 9,291
Transfer agent................................. 7,500 11,000 18,000 11,000 6,160
Trustees....................................... 7,000 7,000 7,000 7,000 7,000
Amortization of organization expenses.......... -- -- -- -- 4,854
Fund accounting................................ -- -- -- -- 31,000
Miscellaneous.................................. 62,435 35,274 32,779 14,386 5,770
----------- --------- ---------- ----------- ----------
Total expenses before waivers................ 3,656,946 1,298,395 3,710,420 637,036 223,466
Less: Expenses waived by
Adviser/Administrator...................... (11,435) (11,695) (18,350) (7,016) (153,054)
----------- --------- ---------- ----------- ----------
Net expenses................................... 3,645,511 1,286,700 3,692,070 630,020 70,412
----------- --------- ---------- ----------- ----------
Net investment income............................ 25,341,446 8,519,531 22,762,418 2,319,359 656,169
----------- --------- ---------- ----------- ----------
Net realized loss on investments................. -- -- (2,036) (1,707) (5,850)
----------- --------- ---------- ----------- ----------
Increase in net assets resulting from
operations..................................... $25,341,446 $8,519,531 $22,760,382 $ 2,317,652 $650,319
=========== ========== =========== ============ ==========
See accompanying notes to financial statements.
19
FFB FUNDS TRUST
MONEY MARKET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
U.S. TREASURY FUND U.S. GOVERNMENT FUND CASH MANAGEMENT FUND
--------------------------------- ----------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
1995 1994 1995 1994 1995 1994
--------------- --------------- ------------- ------------- -------------- --------------
Operations:
Net investment income...... $ 25,341,446 $ 16,061,371 $ 8,519,531 $ 5,221,224 $ 22,762,418 $ 16,739,340
Net realized gain (loss) on
investments.............. -- 19,244 -- -- (2,036) 2,537
--------------- --------------- ------------- ------------- -------------- --------------
Net increase in net assets
resulting from
operations................. 25,341,446 16,080,615 8,519,531 5,221,224 22,760,382 16,741,877
--------------- --------------- ------------- ------------- -------------- --------------
Distributions to Shareholders
From:
Net investment income...... (25,341,446) (16,061,371) (8,519,531) (5,221,224) (22,760,382) (16,739,340)
Net realized gain on
investments.............. -- (19,244) -- -- -- (2,537)
--------------- --------------- ------------- ------------- -------------- --------------
(25,341,446) (16,080,615) (8,519,531) (5,221,224) (22,760,382) (16,741,877)
--------------- --------------- ------------- ------------- -------------- --------------
Capital Share Transactions
(at $1.00 per share):
Proceeds from sale of
shares................... 2,278,464,898 2,386,582,286 955,839,659 847,409,232 2,272,124,455 2,616,464,265
Net asset value of shares
issued in reinvestment of
distributions............ 2,744,080 1,191,331 1,322,329 355,598 2,310,362 1,054,170
--------------- --------------- ------------- ------------- -------------- --------------
2,281,208,978 2,387,773,617 957,161,988 847,764,830 2,274,434,817 2,617,518,435
Cost of shares redeemed.... (2,282,509,968) (2,218,328,529) (965,059,364) (816,787,812) (2,148,775,607) (2,473,726,228)
--------------- --------------- ------------- ------------- -------------- --------------
Net increase (decrease) in
net assets from capital
share transactions......... (1,300,990) 169,445,088 (7,897,376) 30,977,018 125,659,210 143,792,207
--------------- --------------- ------------- ------------- -------------- --------------
Total Increase (Decrease) in
Net Assets................. (1,300,990) 169,445,088 (7,897,376) 30,977,018 125,659,210 143,792,207
Net Assets:
Beginning of year.......... 673,082,261 503,637,173 232,211,779 201,234,761 604,048,007 460,255,800
--------------- --------------- ------------- ------------- --------------
--------------
End of year................ $ 671,781,271 $ 673,082,261 $ 224,314,403 $ 232,211,779 $ 729,707,217 $ 604,048,007
============== ============== ============ ============ ============= =============
See accompanying notes to financial statements.
20
FFB FUNDS TRUST
MONEY MARKET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
TAX-FREE PENNSYLVANIA TAX-FREE
MONEY MARKET FUND MONEY MARKET FUND
----------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
1995 1994 1995 1994
-------------- ------------- ------------- -------------
Operations:
Net investment income.............................. $ 2,319,359 $ 1,630,762 $ 656,169 $ 310,064
Net realized gain (loss) on investments............ (1,707) 22,176 (5,850) (3,800)
------------- ------------ ------------ ------------
Net increase in net assets resulting from
operations......................................... 2,317,652 1,652,938 650,319 306,264
------------- ------------ ------------ ------------
Distributions to Shareholders From:
Net investment income.............................. (2,319,359) (1,624,938) (656,169) (306,264)
------------- ------------ ------------ ------------
Capital Share Transactions (at $1.00 per share):
Proceeds from sale of shares....................... 372,728,541 364,130,466 72,181,908 23,739,936
Net asset value of shares issued in reinvestment of
distributions.................................... 250,655 179,523 437,609 243,771
------------- ------------ ------------ ------------
372,979,196 364,309,989 72,619,517 23,983,707
Cost of shares redeemed............................ (379,401,874) (332,244,133) (43,458,037) (25,599,599)
------------- ------------ ------------ ------------
Net increase (decrease) in net assets from capital
share transactions................................. (6,422,678) 32,065,856 29,161,480 (1,615,892)
------------- ------------ ------------ ------------
Total Increase (Decrease) in Net Assets.............. (6,424,385) 32,093,856 29,155,630 (1,615,892)
Net Assets:
Beginning of year.................................. 114,488,603 82,394,747 14,383,462 15,999,354
------------- ------------ ------------ ------------
End of year........................................ $108,064,218 $114,488,603 $43,539,092 $14,383,462
============= ============ =========== ===========
See accompanying notes to financial statements.
21
FFB FUNDS TRUST
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1995
1. Description and Organization. FFB Funds Trust (the "Trust") was organized
in Massachusetts as a business trust on March 25, 1987 and currently consists of
ten separately managed portfolios. U.S. Treasury Fund, U.S. Government Fund,
Cash Management Fund, Tax-Free Money Market Fund and Pennsylvania Tax-Free Money
Market Fund, (the "Funds") are described in this report.
(a) The Funds value their investment securities at amortized cost which
approximates market value in accordance with Rule 2a-7 under the Investment
Company Act of 1940 of (the "Act") in order to maintain a constant net asset
value of $1.00 per share.
(b) It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute to
their shareholders all of their net investment taxable and non-taxable income,
and any net taxable gains realized. Therefore, no Federal income tax provision
is required.
(c) Each of the Funds' dividends from taxable and non-taxable net investment
income, including realized gains or losses, if any, on portfolio transactions,
are declared each business day and paid within five business days after the end
of the month.
(d) Costs incurred in connection with the Pennsylvania Tax-Free Money Market
Fund's organization and registration were deferred and are being amortized on a
straight line basis, over the period of benefit, not to exceed 60 months from
the date that Fund commenced operations.
(e) Investment transactions are recorded on the trade date. Identified cost of
investments sold is used for both financial statement and Federal income tax
purposes. Interest income, including the amortization of discount or premium, is
recorded as earned.
(f) Each Fund bears all costs of its operations other than expenses specifically
assumed by the Administrator or Adviser. Expenses specifically identifiable to a
particular Fund are borne by that Fund. Other expenses are allocated to each
Fund based on its net assets in relation to the total net assets of the Trust or
on another reasonable basis.
2. Adviser and Administrator. The Trust retains First Fidelity Bank, National
Association, New Jersey ("First Fidelity") to act as Adviser and Furman Selz
Incorporated ("Furman Selz") to act as Administrator for the Funds. First
Fidelity furnishes to the Trust investment guidance and policy direction in
connection with the management of the portfolios of the Funds', subject to
policy established by the Board of Trustees of the Trust, and administrative
assistance in connection with the operation of the Trust and the Funds. First
Fidelity is a wholly-owned subsidiary of First Fidelity Bancorporation.
Furman Selz provides management and administrative services necessary for the
operation of the Trust and the Funds. Furman Selz also furnishes office space
and certain facilities required for conducting the business of the Trust and
pays the compensation of the Trust's officers and Trustees affiliated with
Furman Selz.
As compensation for their advisory, administrative and management services,
First Fidelity and Furman Selz were each entitled to a monthly fee at the
following annual rates of average daily net assets.
FEE RATE
-----------------
U.S. TREASURY FUND, U.S. GOVERNMENT FUND, FIRST FURMAN
CASH MANAGEMENT FUND AND TAX-FREE MONEY MARKET FUND FIDELITY SELZ
-------------------------------------------------------------------------------- ------- -------
Not exceeding $500 million...................................................... 0.350% 0.150%
In excess of $500 million but not exceeding $1 billion.......................... 0.315% 0.135%
In excess of $1 billion but not exceeding $1.5 billion.......................... 0.280% 0.120%
In excess of $1.5 billion....................................................... 0.245% 0.105%
22
FFB FUNDS TRUST
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FEBRUARY 28, 1995
FEE RATE
-----------------
FIRST FURMAN
PENNSYLVANIA TAX-FREE MONEY MARKET FUND FIDELITY SELZ
--------------------------------------- ------- -------
Not exceeding $500 million...................................................... 0.400% 0.150%
In excess of $500 million but not exceeding $1 billion.......................... 0.360% 0.135%
In excess of $1 billion but not exceeding $1.5 billion.......................... 0.320% 0.120%
In excess of $1.5 billion....................................................... 0.280% 0.105%
For the year ended February 28, 1995, First Fidelity and Furman Selz earned fees
from each of the Funds as indicated below:
FIRST FURMAN
FIDELITY SELZ
----------- ---------
U.S. Treasury Fund........................................................... $2,151,171 $915,113
U.S. Government Fund......................................................... 730,462 311,418
Cash Management Fund......................................................... 1,942,552 828,806
Tax-Free Money Market Fund................................................... 326,408 138,856
First Fidelity and Furman Selz waived their fee for the year ended February 28,
1995 from the Pennsylvania Tax-Free Money Market Fund of $85,049 and $31,893,
respectively.
In addition, Furman Selz voluntarily waived partial fees of $11,435, $11,695,
$18,350, and $7,016, respectively, from the U.S. Treasury Fund, U.S. Government
Fund, Cash Management Fund, and Tax-Free Money Market Fund, respectively.
3. Other Services with Affiliates. First Fidelity is the transfer agent and
dividend disbursing agent for the Funds. Furman Selz acts as Sub-Transfer Agent
and receives an annual per account fee plus reimbursement of out-of-pocket
expenses. For the Pennsylvania Tax-Free Money Market Fund, Furman Selz waived
sub-transfer agent fees of $1,860.
In addition, First Fidelity may enter into agreements (the "Subaccounting
Agreements") with certain banks, financial institutions and corporations (the
"Participating Organizations") so that each Participating Organization handles
recordkeeping and provides certain administrative services for its customers who
invest in the Funds through accounts maintained at the Participating
Organization. In such cases, the Participating Organization or one of its
nominees will be the shareholder of record as nominee for its customers and will
maintain subaccounts for its customers. Each Participating Organization will
receive monthly payments, which in some cases may be based upon expenses that
the Participating Organization has incurred in the performance of its services
under the Subaccounting Agreement. The payment from each of the Funds will not
exceed, on an annualized basis, an amount equal to 0.25% of the average daily
value of the Fund's shares, during the preceding month, in the subaccounts of
which the Participating Organization is record owner as nominee for its
customers.
First Fidelity received shareholder servicing fees of 0.025% from each of the
Funds, except Pennsylvania Tax-Free Money Market Fund. For the year ended
February 28, 1995, First Fidelity received $156,838 from the U.S. Treasury Fund,
$52,176 from the U.S. Government Fund, $140,338 from the Cash Management Fund,
and $23,315 from the Tax-Free Money Market Fund.
First Fidelity also acts as custodian for the Funds. For furnishing custodian
services, First Fidelity is paid a monthly fee with respect to each Fund at an
annual rate based on a percentage of average daily net assets plus certain
transaction and out-of-pocket expenses. For the year ended February 28, 1995,
First Fidelity earned custodian fees of $135,889 from the U.S. Treasury Fund,
$69,460 from the U.S. Government Fund, $121,801
23
FFB FUNDS TRUST
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FEBRUARY 28, 1995
from the Cash Management Fund, and $47,720 from the Tax-Free Money Market Fund.
For the Pennsylvania Tax-Free Money Market Fund, First Fidelity waived custodian
fees of $4,252.
Furman Selz performs fund accounting services and maintains the books and
records for the Funds. Furman Selz is not paid a fund accounting fee from any of
the Funds except Pennsylvania Tax-Free Money Market Fund. The Pennsylvania
Tax-Free Money Market Fund pays Furman Selz a fee of $2,500 per month for
performing fund accounting services. For the year ended February 28, 1995,
Furman Selz waived this fee of $30,000.
FFB Funds Distributor, Inc., a wholly-owned subsidiary of Furman Selz acts as
Distributor for the Trust. Each Fund has adopted a Master Distribution Plan (the
"Plan") pursuant to Rule 12b-1 of the Investment Company Act of 1940, after
having concluded that there is a reasonable likelihood that the Plan will
benefit each Fund and its shareholders. The Plan provides for a monthly payment
by each Fund to the Distributor in such amounts that the Distributor presents
for Board approval, provided that each such payment is based on the average
daily value of the Fund's net assets during the preceding month and is
calculated at an annual rate not to exceed 0.25% for the U.S. Treasury Fund,
U.S. Government Fund, the Cash Management Fund and the Tax-Free Money Market
Fund; and 0.35% for the Pennsylvania Tax-Free Money Market Fund. For the year
ended February 28, 1995, the Funds accrued distribution expenses of $24,433,
$7,507, $20,015, $3,458 and $1,452 respectively from the U.S. Treasury Fund,
U.S. Government Fund, Cash Management Fund, Tax-Free Money Market Fund, and
Pennsylvania Tax-Free Money Market Fund, respectively.
For all of the Funds, certain of the states in which the Trust is qualified for
sale impose limitations on the expenses of the Trust. The Advisory Contract and
the Administrative Services Contract provide that if, in any fiscal year, the
total expenses of a Fund (excluding taxes, interest, distribution expenses,
brokerage commissions and other portfolio transaction expenses, other
expenditures which are capitalized in accordance with generally accepted
accounting principles and extraordinary expenses, but including the advisory and
administrative services fee) exceed the expense limitation applicable to that
Fund imposed by the securities regulations of any state, First Fidelity and
Furman Selz will pay or reimburse the Fund in amounts equal to 70% and 30% of
the excess, respectively. For the year ended February 28, 1995, no payments or
reimbursements were required as a result of these expense limitations.
4. Repurchase Agreements. The Funds may enter into repurchase agreements with
government securities dealers recognized by the Federal Reserve Board, with
member banks of the Federal Reserve System or with such other brokers or dealers
that meet the credit guidelines established by the Board of Trustees. The Funds
maintain securities as collateral whose market value, including accrued
interest, will be at least equal to 102% of the dollar amount invested by that
Fund in each agreement, including accrued interest, and that Fund will make
payment for such securities only upon physical delivery or upon evidence of book
entry transfer to the account of the custodian. To the extent that any
repurchase transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. If
the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
5. Concentration of Credit Risk. The Pennsylvania Tax-Free Money Market Fund
invests substantially all of its assets in debt obligations issued by the
Commonwealth of Pennsylvania and its authorities and agencies. The issuers'
ability to meet their obligations may be affected by economic or political
developments in the Commonwealth of Pennsylvania.
6. Federal Income Tax Status. For the year ended February 28, 1995, the Cash
Management Fund, the Tax-Free Money Market Fund, and the Pennsylvania Tax-Free
Money Market Fund had net capital loss carryforwards, for Federal income tax
purposes, of $2,036, $1,441, and $3,800, respectively. These losses, which may
be used to offset future realized gains, will expire the years ending February
28, 2003, 2003, and 2002, respectively.
24
FFB FUNDS TRUST
MONEY MARKET FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
U.S. TREASURY FUND
--------------------------------------------------------------------
Net Asset Value, Beginning of Year.......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ----------- ----------- ----------- -----------
Income from Investment Operations:
Net investment income..................................... 0.040 0.026 0.031 0.050 0.073
----------- ----------- ----------- ----------- -----------
Less Distributions:
Dividends from net investment income...................... (0.040) (0.026) (0.031) (0.050) (0.073)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year................................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=========== =========== =========== =========== ===========
Total Return................................................ 4.07% 2.63% 3.16% 5.15% 7.54%
Ratios/Supplemental Data:
Net Assets, End of Year (in thousands).................... $ 671,781 $ 673,082 $ 503,637 $ 453,363 $ 307,443
Ratios of Net Expenses to Average Net Assets.............. 0.58% 0.56% 0.57% 0.56% 0.62%
Ratios of Net Investment Income to Average Net Assets..... 4.04% 2.60% 3.11% 5.02% 7.27%
U.S. GOVERNMENT FUND
--------------------------------------------------------------------
Net Asset Value, Beginning of Year.......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ----------- ----------- ----------- -----------
Income from Investment Operations:
Net investment income..................................... 0.041 0.026 0.031 0.051 0.073
----------- ----------- ----------- ----------- -----------
Less Distributions:
Dividends from net investment income...................... (0.041) (0.026) (0.031) (0.051) (0.073)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year................................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=========== =========== =========== =========== ===========
Total Return................................................ 4.11% 2.63% 3.20% 5.19% 7.60%
Ratios/Supplemental Data:
Net Assets, End of Year (in thousands).................... $ 224,314 $ 232,212 $ 201,235 $ 205,969 $ 237,528
Ratios of Net Expenses to Average Net Assets.............. 0.62% 0.59% 0.58% 0.54% 0.60%
Ratios of Net Investment Income to Average Net Assets..... 4.08% 2.60% 3.15% 5.06% 7.33%
25
FFB FUNDS TRUST
MONEY MARKET FUNDS
FINANCIAL HIGHLIGHTS -- (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
CASH MANAGEMENT FUND
--------------------------------------------------------------------
Net Asset Value, Beginning of Year.......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ----------- ----------- ----------- -----------
Income from Investment Operations:
Net investment income..................................... 0.041 0.027 0.032 0.055 0.075
----------- ----------- ----------- ----------- -----------
Less Distributions:
Dividends from net investment income...................... (0.041) (0.027) (0.032) (0.055) (0.075)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year................................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=========== =========== =========== =========== ===========
Total Return................................................ 4.15% 2.72% 3.24% 5.67% 7.81%
Ratios/Supplemental Data:
Net Assets, End of Year (in thousands).................... $ 729,707 $ 604,048 $ 460,256 $ 401,129 $ 788,110
Ratios of Net Expenses to Average Net Assets.............. 0.66% 0.56% 0.60% 0.55% 0.55%
Ratios of Net Investment Income to Average Net Assets..... 4.06% 2.69% 3.19% 5.52% 7.53%
TAX-FREE MONEY MARKET FUND
--------------------------------------------------------------------
Net Asset Value, Beginning of Year.......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ----------- ----------- ----------- -----------
Income from Investment Operations:
Net investment income..................................... 0.025 0.019 0.024 0.039 0.053
----------- ----------- ----------- ----------- -----------
Less Distributions:
Dividends from net investment income...................... (0.025) (0.019) (0.024) (0.039) (0.053)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year................................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=========== =========== =========== =========== ===========
Total Return................................................ 2.52% 1.91% 2.41% 4.00% 5.45%
Ratios/Supplemental Data:
Net Assets, End of Year (in thousands).................... $ 108,064 $ 114,489 $ 82,395 $ 98,999 $ 116,538
Ratios of Net Expenses to Average Net Assets.............. 0.68% 0.67% 0.69% 0.62% 0.61%
Ratios of Net Investment Income to Average Net Assets..... 2.49% 1.88% 2.38% 3.92% 5.31%
26
FFB FUNDS TRUST
MONEY MARKET FUNDS
FINANCIAL HIGHLIGHTS -- (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
FEBRUARY 29,
1995 1994 1993 1992++
------------ ------------ ------------ ------------
PENNSYLVANIA TAX-FREE MONEY MARKET FUND
-----------------------------------------------------------
Net Asset Value, Beginning of Year......... $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income.................... 0.031 0.021 0.026 0.022
---------- ---------- ---------- ----------
Less Distributions:
Dividends from net investment income..... (0.031) (0.021) (0.026) (0.022)
---------- ---------- ---------- ----------
Net Asset Value, End of Year............... $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========== ========== ==========
Total Return............................... 2.81% 2.09% 2.65% 3.98%
Ratios/Supplemental Data:
Net Assets, End of Year (in thousands)... $ 43,539 $ 14,383 $ 15,999 $ 20,699
Ratios of Net Expenses to Average Net
Assets+............................... 0.33% 0.47% 0.35% 0.19%*
Ratios of Net Investment Income to
Average
Net Assets............................ 3.09% 2.10% 2.62% 3.90%*
* Annualized
+ Ratios before effect of waivers/reimbursements were 1.05%, 1.26%, 1.07%, and
0.77%*, respectively.
++ From August 15, 1991 (Commencement of Operations).
27
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of
FFB Funds Trust:
We have audited the accompanying statements of assets and liabilities of the
U.S. Treasury Fund, U.S. Government Fund, Cash Management Fund, Tax-Free Money
Market Fund, and Pennsylvania Tax-Free Money Market Fund -- the "Money Market
Funds" (portfolios of FFB Funds Trust) including the portfolios of investments,
as of February 28, 1995, and the related statements of operations for the year
then ended, and the statements of changes in net assets and financial highlights
for each of the years in the two-year period then ended. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. Financial highlights for
each of the periods presented in the three year period ended February 28, 1993
were audited by other auditors whose reports expressed unqualified opinions on
those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned at February
28, 1995, by count and by correspondence with custodians and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of FFB
Money Market Funds, as of February 28, 1995, and the results of their operations
for the year then ended, and the changes in their net assets and financial
highlights for each of the years in the two-year period then ended, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
New York, New York
April 27, 1995
28
FFB FUNDS TRUST
TAX STATUS OF DIVIDENDS PAID -- (UNAUDITED)
This information is presented to you to meet regulatory requirements and
requires no current action on your part. Certain portions of this information
were previously reported to you on Form 1099 at the close of the calendar year
1994.
For the fiscal year ended February 28, 1995, dividends paid to you are as
follows:
% OF INCOME % OF INCOME
DERIVED
INCOME DERIVED FROM FROM
GOVERNMENT SECURITIES
DIVIDEND PAID GOVERNMENT HELD
SUBJECT TO REPURCHASE
PER SHARE SECURITIES
AGREEMENTS
------------- --------------- ----------------------------
U.S. Treasury Fund.................................... $ 0.040 45.2% 54.8%
U.S. Government Fund.................................. $ 0.041 60.8% 39.2%
Cash Management Fund.................................. $ 0.041 0.1% 69.7%
Tax-Free Money Market Fund............................ $ 0.025 -- --
Pennsylvania Tax-Free Money Market Fund............... $ 0.031 -- --
Dividends from the U.S. Treasury Fund, U.S. Government Fund and Cash Management
Fund, are taxable as ordinary dividend income. None of these amounts qualify for
the dividends received deduction available to corporations.
Dividends from the Tax-Free Money Market Fund and Pennsylvania Tax Free Money
Market Fund are exempt from Federal taxation. They may not be exempt from state
or local taxation. You should contact your tax adviser as to the state and local
tax status of the dividends you received.
29
W
BOARD OF TRUSTEES
EDMUND A. HAJIM * CHAIRMAN OF THE BOARD AND PRESIDENT;
Chairman of the Board, Furman
Selz Incorporated
ROBERT H. DUNKER +* (Retired) Former Executive Vice President, First Fidelity
Bank,
N.A., N.J.
ROBERT F. KANE ++ (Retired) Former Vice Chairman, Monroe Systems for
Business, Inc.
WALTER J. NEPPL +* (Retired) Management Consultant
T. BROCK SAXE ++ President and Director, Tombrock Corporation
+ Member of Audit Committee
++ Member of Nominating Committee
* Interested person of the Trust as that term is defined in the
Investment Company Act of 1940
---------------------------------------------------------------------------------------------------
OFFICERS
EDMUND A. HAJIM Chairman of the Board and President
STEVEN D. BLECHER Executive Vice President
MICHAEL C. PETRYCKI Executive Vice President
JOHN J. PILEGGI Vice President and Treasurer
JOAN V. FIORE Vice President and Secretary
ROBERT A. HERING Vice President
DONALD E. BROSTROM Assistant Treasurer
FBMM0295
EX-99
13
FFB 100% SERVICE PROSPECTUS
[LOGO]
FFB 100% U.S. TREASURY FUND
SERVICE CLASS PROSPECTUS
237 Park Avenue, New York, New York 10017
General and Account Information: (800) 437-8790
FIRST FIDELITY BANK, N.A. -- INVESTMENT ADVISER
FFB FUNDS DISTRIBUTOR, INC. -- SPONSOR AND DISTRIBUTOR
FFB FUNDS TRUST (the "Trust") is an open-end, management investment company
which currently consists of 11 separate portfolios with different investment
objectives, including the FFB 100% U.S. Treasury Fund (the "Fund") described
below. The objective of the Fund is to achieve as high a level of current income
as is consistent with the preservation of capital and liquidity by investing
exclusively in short-term, direct obligations of the United States Treasury. The
Fund will not invest in repurchase agreements or engage in securities lending
transactions. The Fund is a diversified portfolio of the Trust.
INVESTMENTS IN THE FUND ARE NOT GUARANTEED OR INSURED BY THE
UNITED STATES
GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE. SHARES OF THE FUND ARE NOT
DEPOSITS
OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY, FIRST FIDELITY BANK
OR ITS
AFFILIATES, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY AND
MAY INVOLVE
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
Shares of the Fund are divided into two classes. This prospectus relates
only to Service Class shares which are offered to certain investors who invest
less than $5,000,000 and offer certain shareholder services at an additional fee
of 0.25%. The Fund also offers Institutional Class shares identical to Service
Class shares but without shareholder services and at a lower fee.
Shares of the Fund are offered for sale by FFB Funds Distributor, Inc.
("FFB Funds Distributor" or the "Distributor") as an investment vehicle for
individuals, institutions, corporations and fiduciaries. The Fund is sold
without a sales charge or load. Certain banks, financial institutions and
corporations (the "Participating Organizations") may agree to act as shareholder
servicing agents for investors who maintain accounts at these Participating
Organizations and to perform certain services for the Funds.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information
("SAI") dated October 7, 1994 containing additional and more detailed
information about the Fund has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus. It is
available without charge and can be obtained by writing or calling the Trust at
the address and general information number printed above.
------------------------------
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR INFORMATION ABOUT
THE FUNDS.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
OCTOBER 7, 1994
FUND EXPENSES
The following table illustrates the fees and expenses that a shareholder of
Service Class shares will incur.* The fees and expenses set forth below are
based on estimated projections. Service Class shares are offered to certain
investors who invest less than $5,000,000 in the Fund and include certain
shareholder services at an additional fee of 0.25%. The Fund also offers to
investors who invest more than $5,000,000 in the Fund Institutional Class shares
which are identical to Service Class shares but without certain shareholder
services and at a lower fee.
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sale Load imposed on Purchases.................................................. None
Sales Load imposed on Reinvested Dividends...................................... None
Redemption Fees................................................................. None
Exchange Fees................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Advisory and Administrative Expenses (after waiver)**........................... 0.17%
12b-1 Fees...................................................................... None
Other Expenses***............................................................... 0.33
-------
TOTAL FUND OPERATING EXPENSES (AFTER WAIVER)**..................................
0.50%
=======
* Investors who purchase and redeem shares of the Fund through a customer
account maintained at a Participating Organization may be charged additional
fees by such Participating Organization not to exceed 0.25%. In order to avoid
such additional fees, shareholders may always elect to purchases shared directly
from the Trust through the Distributor.
** Certain Advisory and Administrative Expenses will be waived or
reimbursed for the Fund's first year of operation. Absent these waivers,
Advisory and Administrative Expenses and Total Fund Operating Expenses would be
0.22% and 0.55%, respectively. For the Institutional Class, Advisory and
Administrative Expenses are 0.17% and Total Fund Operating Expenses are 0.25%.
Absent waivers, Advisory and Administrative Expenses and Total Fund Operating
Expenses for the Institutional Class would be 0.22% and 0.30%, respectively.
*** Other expenses include a shareholder servicing charge of 0.25%. For a
description of shareholder servicing, see "Servicing Agreements" on page 4. For
the Institutional Class, Other Expenses are 0.08% and there is no shareholder
servicing charge.
The purpose of this table is to assist the shareholder in understanding the
various costs and expenses that an investor in the Fund will bear. For a more
complete description of the Annual Fund Operating Expenses, see "Management of
the Fund".
Example
You would pay the following expenses on a $1,000
investment, assuming (1) 5% gross annual return and (2)
redemption at the end of each time period:
SERVICE CLASS
-------------
1 year..................................................... $ 5.00
3 years.................................................... $ 16.00
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL
RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE
ASSUMED AMOUNT.
2
INVESTMENT OBJECTIVE AND POLICIES
The objective of the Fund is to seek to provide investors with as high a
level of current income as is consistent with the preservation of capital and
liquidity. There is no assurance that this objective will be achieved. The Fund
invests exclusively in direct obligations of the United States Treasury which
have remaining maturities not exceeding one year and does not invest in
obligations issued or guaranteed by agencies or instrumentalities of the United
States Government. The Fund will not invest in repurchase agreements or engage
in securities lending transactions. From time to time the Fund may hold cash
pending investment or for temporary defensive purposes.
INVESTMENT RESTRICTIONS
The Fund may not (1) borrow money or pledge or mortgage its assets, except
that it may borrow from banks up to 10% of the current value of its total net
assets for temporary purposes only in order to meet redemptions, and those
borrowings may be secured by the pledge of not more than 10% of the current
value of the total net assets of its Fund (but investments may not be purchased
by the Fund while any such borrowings exist); (2) make loans, except loans of
portfolio securities having a value of not more than 10% of the Fund's current
assets and except that the Fund may make deposits with banks; or (3) invest an
amount equal to 10% or more of the current value of its net assets in illiquid
securities, including those securities which do not have readily available
market quotations. The foregoing investment restrictions and those described in
the SAI are fundamental policies which may be changed only when permitted by law
and approved by the holders of a majority of the outstanding voting securities
of the Fund, as described under "Other Information" in the SAI.
MANAGEMENT OF THE FUND
The property, affairs and business of the Fund are managed by the Board of
Trustees. The Trustees elect officers who are charged with the responsibility
for the day-to-day operations of the Fund and the execution of policies
formulated by the Trustees. Detailed information about the Trustees and Officers
may be found in the SAI under "Management of the Fund".
ADVISER
First Fidelity serves as the investment adviser for the Fund. The offices
of the Adviser are located at 765 Broad Street, Newark, New Jersey 07102. The
Adviser is a national banking association which provides commercial banking and
trust business services throughout New Jersey. It is a wholly-owned subsidiary
of First Fidelity Incorporated, originally established in 1812, which, as a
result of a reorganization with Fidelcor, Inc., a Pennsylvania bank holding
company, is now a wholly-owned subsidiary of First Fidelity Bancorporation.
First Fidelity Bancorporation, a New Jersey corporation, provides financial and
related services through its subsidiary organizations. The advisory services of
the Adviser are provided through the Asset Management Group of the Trust
Division which, as of August 31, 1994, had approximately $16 billion of client
assets under management. The Adviser has provided investment advisory services
to investment companies since 1986 and currently acts as Adviser to all Funds
within FFB Funds Trust.
3
Pursuant to a Master Advisory Contract (the "Advisory Contract"), First
Fidelity furnishes continuous investment guidance consistent with the Fund's
investment objective and policies and provides administrative assistance in
connection with the operation of the Fund. First Fidelity also acts as transfer
agent, custodian and dividend disbursing agent for the fund, as described in the
SAI.
First Fidelity intends to receive its customary managing agency account
fees or any other account fees it imposes on accounts of its bank customers in
respect of customer assets invested in the Fund where permitted by applicable
federal, state and local laws; this may result in the receipt by First Fidelity
of customer account fees in addition to advisory fees from the Funds and a
corresponding reduction in the total yield for the funds realized by customers
who hold Fund shares in regular customer accounts with Fidelity. Neither First
Fidelity, nor any of its affiliates, nor any of their employees will make loans
for the purpose of purchasing or carrying shares of the fund or make loans to
the Fund. Prospectuses and sales material for the fund can be obtained from FFB
Funds Distributor.
SPONSOR AND DISTRIBUTOR
FFB Funds Distributor, Inc. is the Sponsor and Distributor of the Fund and
has its principal office at 237 Park Avenue, New York, New York 10017. The
Distributor is an affiliate of Furman Selz Incorporated ("Furman Selz").
Pursuant to a Master Distribution Contract (the "Distribution Contract"), the
Distributor is responsible for the distribution of Fund shares. The Distributor
receives no compensation for services rendered to the Fund pursuant to the
Distribution Contract.
ADMINISTRATOR
Pursuant to a Master Administrative Services Contract (the "Administrative
Services Contract"), Furman Selz acts as the Administrator of the Fund and has
its office at 237 Park Avenue, New York, New York 10017. It provides personnel,
office space and all management and administrative services reasonably necessary
for the operation of the Trust and the Fund (such as maintaining the Fund's
books and records, monitoring compliance with all state and Federal laws and
assisting the Trustees in the execution of their duties other than those
services which are provided by First Fidelity pursuant to the Advisory Contract.
Furman Selz receives from the Fund a monthly fee based on the net assets of the
Fund as compensation for its provision of administrative services to the Fund.
See "Fees and Expenses".
SERVICING AGREEMENTS
First Fidelity, as Transfer Agent, may enter into agreements (the
"Servicing Agreements") with certain banks, financial institutions and
corporations (the "Participating Organizations") under which each Participating
Organization handles recordkeeping and provides certain administrative services
for its customers who invest in the Funds through accounts maintained at the
Participating Organization. These administrative services may include the
maintenance of account records in the name of each shareholder (reflecting
purchases, redemptions and dividends paid or reinvested), the processing of
dividends, reinvestments, purchase and redemption requests, the preparation and
mailing of periodic account statements, the addressing and mailing of the Funds'
communications to shareholders (financial reports, proxy information and tax
reports) and other related services. In such cases, the Participating
Organization or one of its nominees will be the shareholder of record in that
particular Fund as nominee for its customers and will maintain subaccounts of
its customers. Pursuant to
4
a separate agreement between a Participating Organization and its customers,
customers may grant or may already have granted to a Participating Organization
the power to vote proxies relating to their shares of the Funds. Any customer of
a Participating Organization may become the shareholder of record upon written
request to its Participating Organization or First Fidelity, as Transfer Agent.
Each Participating Organization will receive monthly payments which will be
based upon expenses that the Participating Organization has incurred in the
performance of its services under the Servicing Agreement. The payments will not
exceed, on an annualized basis, an amount equal to 0.25% of the average daily
value during the month of Fund shares in the subaccounts of which the
Participating Organization is record owner as nominee for its customers. Such
payments will be separately negotiated with each Participating Organization and
will vary depending upon such factors as the services provided and the costs
incurred by each Participating Organization. The payments may be more or less
than the fees payable to First Fidelity pursuant to the Agency Agreement for
similar services. Participating Organizations will not be paid any amounts under
the Funds' Distribution Plan (See "Distribution Plan"). The net assets of each
Fund are used for purposes of calculating the maximum amount payable under its
Distribution Plan and will, however, include assets of persons who purchase
shares through Participating Organizations.
The payments will be made by each Fund to First Fidelity which will, in
turn, pay the Participating Organization pursuant to the Servicing Agreements.
First Fidelity will not keep any portion of the payments and will not receive
any compensation as transfer or dividend disbursing agent with respect to the
subaccounts maintained by Participating Organizations. The Board of Trustees
will review, at least quarterly, the amounts paid and the purposes for which
such expenditures were made pursuant to the Servicing Agreements.
GLASS-STEAGALL ACT
The Glass-Steagall Act and other applicable laws generally prohibit banks
that are members of the Federal Reserve System from engaging in the business of
underwriting, selling or distributing securities. The Board, based upon advice
from counsel, believes that First Fidelity may perform the services of the Fund
contemplated by the Advisory Contract without violation of the Glass-Steagall
Act or any other applicable banking laws or regulations. However, it is possible
that further changes in either Federal or state statutes and regulations
concerning the permissible activities of banks or trust companies, as well as
further judicial or administrative decisions and interpretations of present and
future statutes and regulations, might prevent First Fidelity from continuing to
perform such services for the Fund. If First Fidelity were prohibited from
acting as investment adviser to the Fund, it is expected that the Trustees of
the Trust would recommend to the shareholders of the Fund that they approve the
Fund's entering into a new Advisory Contract with another qualified investment
adviser to be selected by the Trustees.
FEES AND EXPENSES
As compensation for their advisory, administrative and management services,
First Fidelity and Furman Selz are each paid a monthly fee at the following
annual rates:
FEE RATE
-----------------
FIRST FURMAN
FIDELITY SELZ
-------- ------
Portion of average daily value of net assets of each Fund................... 0.14% 0.08%
5
Except for the expenses paid by First Fidelity, the Distributor and Furman
Selz, the Trust bears all costs of its operations, such as legal and accounting
expenses and Trustees' fees and expenses. Expenses attributable to the Fund are
charged against the assets of the Fund. Other expenses of the Trust are
allocated among the Fund and other Funds of FFB Funds Trust by the Board of
Trustees in a manner which may, but need not, be proportionately in relation to
the net assets of each Fund.
PORTFOLIO TRANSACTIONS
Pursuant to the Advisory Contract, the Adviser places orders for the
purchases and sale of portfolio investments for the Fund's account with brokers
or dealers selected by it in its discretion. The Adviser will not place orders
with the Sponsor or any affiliate of the Sponsor.
Purchases and sales of portfolio securities for the Fund are generally
placed by the Adviser with primary market markers for these securities on a net
basis, without any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs, primary dealer spreads and underwriting
commissions. Transactions with dealers serving as primary market makers reflect
the spread between the bid and asked prices. Purchases of underwritten issues
may be made which will include an underwriting fee paid to the underwriter. In
effecting purchases and sales of portfolio securities for the account of the
Fund, the Adviser will seek the best execution of the Fund's orders. Due to the
Fund's investments in securities with short maturities, portfolio turnover may
be regarded as high. The Fund may also attempt to increase yield by trading to
take advantage of short-term investment variations. High portfolio turnover
should not adversely affect the Fund since it does not usually pay brokerage
commissions when purchasing short-term debt obligations.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund for the purpose of pricing
purchase and redemption orders is determined at 12:00 Noon (Eastern Standard
time) on each day the New York Stock Exchange is open for trading except for
holidays, which include New Year's Day, Martin Luther King Jr's Birthday,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day. The net asset
value per share of each Fund is computed by dividing the value of the net assets
of the Fund's outstanding shares. All expenses, including the advisory and
administrative fees, are accrued daily and taken into account for the purpose of
determining the net asset value.
The Fund uses the amortized cost method to value its portfolio securities
and seeks to maintain a constant net asset value of $1.00 per share, although
there is no assurance of such. The amortized cost method involves valuing a
security at its cost and amortizing any discount or premium over the period
until maturity, regardless of the impact of fluctuating interest rates on the
market value of the security. See the SAI for more details.
PURCHASE OF SHARES
Shares of the Fund are offered at net asset value by the Distributor as an
investment vehicle for institutions, corporations, fiduciaries and individuals.
Prospectuses and sales material can be obtained from the Distributor.
Investments in the Fund are not insured.
6
The minimum initial investment requirement for the Fund is $1,000.00. There
are no minimum investment requirements with respect to investments effected
through certain automatic purchase and redemption arrangements on behalf of
customer accounts maintained at Participating Organizations. The minimum
investment requirements may be waived or lowered for investments effected on a
group basis by certain other institutions and their employees. All funds will be
invested in full and fractional shares. The Trust reserves the right to reject
any purchase order.
Orders for shares will be executed at the net asset value per share next
determined after an order has been received. Orders will become effective when
Federal funds (money made available to the Funds through a Federal Reserve bank
wire transfer) are available to the Trust's custodian for investment. If payment
is transmitted by wire, the order will become effective upon receipt of Federal
funds. Federal Reserve wire transmissions may be subject to delays of up to
several hours, in which case execution of an order will be delayed for a like
period of time. Payments transmitted by a bank wire other than the Federal
Reserve Wire System may take longer to be converted into Federal funds. Banks
may charge a service fee for transfers by wire. Checks must be payable in United
States dollars and will be accepted subject to collection at full face value.
Compensation to salespersons may vary depending upon whether Service Class
or Institutional Class shares are sold.
PROSPECTIVE INVESTORS WHO WISH TO OBTAIN ADDITIONAL INFORMATION
CONCERNING
INVESTMENT PROCEDURES SHOULD CONTACT THE DISTRIBUTOR AT (800)
437-8790.
DIRECT PURCHASES THROUGH FFB FUNDS DISTRIBUTOR, INC.
PURCHASE BY WIRE
1. Telephone: (800) 437-8790. State that funds are to be invested in the
FFB 100% U.S. Treasury Fund and the Class of shares of the Fund in which the
funds are to be invested. Give the name(s) in which the Fund shares are to be
registered, address, social security or tax identification number (where
applicable), dividend payment election, amount to be wired, name of the wiring
bank and name and telephone number of the person to be contacted in connection
with the order. An account number will be assigned.
2. Instruct the wiring bank to transmit the specified amount in Federal
funds to:
Investors Fiduciary Trust Company ("IFTC")
Kansas City, MO 64105
ABA Routing Number: 101003621
Acct. No. 7512996
Indicate Name of Fund
Account Name(s) (in which to be registered)
Account Number (As assigned by telephone)
3. Fill in a Purchase Application and mail to:
FFB Funds Distributor, Inc.
P.O. Box 4490
Grand Central Station
New York, NY 10163-4490
7
A COMPLETED PURCHASE APPLICATION MUST BE RECEIVED BY FFB FUNDS
DISTRIBUTOR
BEFORE THE EXPEDITED REDEMPTION OR CHECK REDEMPTION SERVICES CAN
BE USED.
PURCHASE BY MAIL
1. Complete a Purchase Application. Indicate the services to be used.
2. Mail the Purchase Application and a check payable to the Fund to FFB
Funds Distributor.
ADDITIONAL PURCHASE BY WIRE AND MAIL
Additional purchases of shares may be made by wire by instructing the bank
to transmit the amount ($100 or more) of any additional purchase in Federal
funds to IFTC along with your account name and number. Additional purchases may
also be made be mail by making a check ($100 or more) payable to the Fund
indicating your Fund account number on the check and mailing it to FFB Funds
Distributor.
PURCHASES THROUGH CUSTOMER ACCOUNTS
Purchases of shares also may be made through customer accounts maintained
at participating Organizations, including qualified Individual Retirement and
Keogh Plan accounts. Purchases through such accounts may be subject to
additional procedural requirements and are governed by the terms of the
agreement between the customer and the Participating Organization itself. All
such procedural requirements must, however, be consistent with the 1940 Act.
Purchases will be made through a customer's account only as directed by or on
behalf of the customer on a direction form executed prior to the customer's
first purchase of shares of the Fund. For example, a customer with an account at
a Participating Organization may instruct the Participating Organization to
invest money in excess of a level agreed upon between the customer and the
Participating Organization in shares the Fund periodically or give other
instructions to the Participating Organization within limits prescribed by that
Participating Organization.
BY PAYROLL DIRECT DEPOSITS
Investors may set up a payroll direct deposit arrangement for amounts to be
automatically invested in the Fund. Participants in the Payroll Direct Deposit
program may make periodic investments of a least $20.00 per pay period. Contact
FFB Funds Distributor for more information about Payroll Direct Deposit.
REDEMPTION OF SHARES
Upon receipt by FFB Funds Distributor of a redemption request in proper
form, shares of the Fund will be redeemed at its next determined net asset
value. See "Determination of Net Asset Value". For the shareholder's
convenience, the Trust has established several different direct redemption
procedures. NO PAYMENT OF PROCEEDS OF A REDEMPTION OF SHARES
PURCHASED BY CHECK
WILL BE PERMITTED UNTIL THE CHECK IS CLEARED, WHICH MAY TAKE UP TO 15
DAYS AFTER
THOSE SHARES HAVE BEEN CREDITED TO THE SHAREHOLDER'S ACCOUNT.
8
DIRECT REDEMPTION THROUGH FFB FUNDS DISTRIBUTOR
REDEMPTION BY MAIL
1. Write a letter of instruction. Indicate the dollar amount or number of
shares to be redeemed. Refer to the shareholder's Fund account number.
2. Sign the letter in exactly the same way the account is registered. If
there is more than one owner of the shares, all must sign.
3. If shares to be redeemed have a value of $25,000 or more, the
signature(s) must be guaranteed by a commercial bank which is a member of the
Federal Deposit Insurance Corporation, a trust company, a member firm of a
domestic stock exchange or a foreign branch of any of the foregoing or an
approved savings bank or savings and loan association. A signature guarantee by
a non-approved savings bank or a notary public is not acceptable. Further
documentation, such as copies of corporate resolutions and instruments of
authority, may be requested from corporations, administrators, executors,
personal representatives, trustees or custodians to evidence the authority of
the person or entity making the redemption request.
4. Mail the letter to FFB Funds Distributor at the address set forth
under "Purchase of Shares".
Checks for redemption proceeds will normally be mailed within seven days to
the shareholder's address of record.
Upon request, the proceeds of a redemption amounting to $1,000 or more (net
of any withholding required under Federal Income Tax laws) will be sent by wire
to the shareholder's predesignated bank account. When proceeds of a redemption
are to be paid to someone other than the shareholder either by wire or check,
the signature(s) on the letter of instruction must be guaranteed regardless of
the amount of the redemption.
REDEMPTION BY EXPEDITED REDEMPTION SERVICE
If shares are held in book entry form and the Expedited Redemption Service
has been elected on the Purchase Application on file with FFB Funds Distributor,
redemption of shares may be requested by telephone or letter on any day the Fund
is open for business. (See "Determination of Net Asset Value" for days the Fund
is open.) A signature guarantee is not required.
1. Telephone the request to FFB Funds Distributor at (800) 437-8790.
2. Mail the request to FFB Funds Distributor at the address set forth
under "Purchase of Shares".
Proceeds of Expedited Redemptions of $1,000 or more (net of any withholding
required under Federal income tax laws) will be wired to the shareholder's bank
indicated in the Purchase Application. If an Expedited Redemption request is
received by the FFB Funds Distributor by 12:00 Noon (Eastern Standard time) on a
day the Fund is open for business, the redemption proceeds will be transmitted
to the shareholder's bank that same day. Otherwise, redemption will be effected
and the proceeds will be transmitted on the next day on which the Fund is open
for business. A check for proceeds of less than $1,000 will be mailed to the
shareholder's address of record.
9
FFB Funds Distributor employs reasonable procedures to confirm that
instructions communicated by telephone are genuine. If FFB Funds Distributor
fails to employ such reasonable procedures, FFB Funds Distributor may be liable
for any loss, damage or expense arising out of any telephone transactions
purporting to be on a shareholder's behalf. In order to assure the accuracy of
instructions received by telephone, FFB Funds Distributor requires some form of
personal identification prior to acting upon instructions received by telephone,
records telephone instructions and provides written confirmation to investors of
such transactions.
REDEMPTION THROUGH CUSTOMER ACCOUNTS
Investors who purchase shares through customer accounts maintained at
Participating Organizations may redeem those shares only through the
Participating Organization. Customers of Participating Organizations should
inquire at the Participating Organization as to any additional procedures
governing the processing of redemption requests by the Participating
Organization. All such procedures must be consistent with the 1940 Act. In some
cases, a customer may instruct the Participating Organization which maintains
the account through which the customer purchases shares to redeem shares
periodically as required to bring the customer's account balance up to a level
agreed upon between the customer and the Participating Organization. If a
redemption request with respect to such an automatic redemption arrangement is
received from a Participating Organization by the Transfer Agent by 12:00 Noon
(Eastern Standard time) on a day the Fund is open for business, the redemption
proceeds determined at the next calculated net asset value will be transmitted
that same day to the investor's customer account unless otherwise specified by
the Participating Organization. Some customers may be able to instruct their
Participating Organization to arrange for proceeds to be transmitted other than
to their customer account.
ACCOUNT SERVICES
All transactions in shares of the Fund will be reflected in a statement for
each shareholder which will be mailed at least once each month. In those cases
where a Participating Organization or its nominee is shareholder of record of
shares purchased for its customer, the statement may be transmitted to the
customer by the Participating Organization. Individual transactions will not be
separately reported. Shareholders can write or call FFB Funds Distributor at
(800) 437-8790 (or their Participating Organization, as the case may be) with
any questions relating to their investments in shares of the Fund.
Participating Organizations may be the shareholders of record as nominee
for their customers and may maintain subaccounts for those customers. Any such
customer may become the shareholder of record upon written request to the
Participating Organization or FFB Funds Distributor.
FFB Funds Distributor will transmit promptly to each of its customers for
whom it processes purchases and redemptions of shares and to each Participating
Organization copies of all reports to shareholders, proxy statements and other
Trust communications. The Trust's arrangements with FFB Funds Distributor and
the subaccounting arrangements require Participating Organizations to grant
investors who purchase shares through customer accounts the opportunity to vote
their shares by proxy at all shareholder meetings of the Trust. In certain
cases, a customer of a Participating Organization may have given his
Participating Organization the power to vote shares on his behalf.
10
Customers with accounts at Participating Organizations should consult their
Participating Organization for information concerning their rights to vote
shares.
DIVIDENDS AND DISTRIBUTIONS
The Trust intends to declare as a dividend on shares of the Fund
substantially all of the taxable net investment income for the Fund at the close
of each day on which the Fund is open for business (See "Determination of Net
Asset Value" for the days the Fund is open) to the shareholders of record of the
Fund at 12:00 Noon (Eastern Standard time) on that day. Shares purchased will
begin earning dividends on the day the purchase order is executed and shares
redeemed will earn dividends through the previous day. Net investment income for
a Saturday, Sunday or holiday will be declared as a dividend on the previous
business day.
Dividends declared in, and attributable to, the preceding month will be
paid within five business days after the end of each month. Dividends will be
invested automatically in additional shares of the Fund at the next determined
net asset value and credited to the shareholder's account on the payment date
or, at the shareholder's election, paid in cash. For all investments effected
through customer accounts maintained at First Fidelity or other Participating
Organizations (see "Purchase of Shares -- Purchase through Customer Accounts"),
dividend payments in cash will be transmitted within five business days after
the end of each month to the investor's bank account through which the shares
were purchased or, if a Participating Organization so specifies, to it for
crediting to its customer's account. Dividend checks will be mailed to all other
shareholders who elect to be paid in cash within five business days after the
end of each month.
Investors who redeem all or a portion of shares of the Fund prior to a
dividend payment date will be entitled to all dividends declared but unpaid on
those shares on the next dividend payment date.
FEDERAL TAXES
The Fund is treated as a separate entity for Federal income tax purposes.
The Fund has elected to be treated as a regulated investment company, qualified
as such for its last taxable year and intends to continue to so qualify by
complying in the future with the provisions of the Internal Revenue Code (the
"Code") applicable to regulated investment companies so that it will not be
liable for Federal income tax with respect to its net investment income
(including tax-exempt income) and net realized capital gains distributed to
shareholders in accordance with the timing requirements of the Code. The Fund
intends to distribute annually substantially all of its net taxable and
tax-exempt investment income and net realized capital gains to its shareholders.
Amounts, other than tax-exempt interest, not distributed in accordance with
a calendar year distribution requirement are subject to a non-deductible 4%
excise tax. To avoid application of the excise tax, the Fund intends to make its
distributions in accordance with the calendar year distribution requirement. For
this purpose, a distribution, including an exempt interest dividend, will be
treated as paid on December 31 of a calendar year if it is declared by the Fund
in October, November or December of that year to shareholders of record on a
date in such a month and paid by the Fund during January of the following year.
Such distributions will be treated as received by shareholders in the calendar
year in which the distributions are declared, rather than the calendar year in
which the distributions are received.
11
Dividends derived from the Fund's net investment income and any excess of
its net short-term capital gains over its net long-term capital loss will be
taxable to shareholders as ordinary income, whether such dividends are invested
in additional shares or received in cash.
Distributions of the excess of net long-term capital gain over net
short-term capital loss designated by the Fund as capital gains dividends will
be taxable as long-term capital gains, regardless of how long a shareholder has
held his Fund shares, whether they are invested in additional shares or received
in cash. The Fund does not, however, anticipate realizing a substantial amount
of net long-term capital gains. Dividends and distributions will not qualify for
the dividends-received deduction for corporations.
To the extent that the Fund's dividends are derived from interest income
exempt from Federal income tax and are designated as "exempt-interest dividends"
by such Fund, they will be excludable from a shareholder's gross income for
Federal income tax purposes, whether they are invested in additional shares or
received in cash.
Interest on indebtedness incurred or continued (or deemed to be incurred or
continued) by shareholders to purchase or carry shares of the Fund may not be
deductible in whole or in part for Federal income tax purposes. In addition,
under rules issued by the Internal Revenue Service for determining when borrowed
funds are considered used for the purposes of purchasing or carrying particular
assets, the purchase of shares may be considered to have been made with borrowed
funds, even though the borrowed funds are not directly traceable to the purchase
of shares.
The exemption of exempt-interest dividends for Federal income tax purposes
may not result in similar exemptions under the tax laws of state or local taxing
authorities. In general, only interest earned on obligations issued by the state
or locality in which the investor resides will be exempt from state and local
taxes. Shareholders should consult their tax advisers about the status of
dividends from the Fund in their own states and localities. Each year the Trust
will notify shareholders of the Federal income tax status of distributions and
the percentage of interest income received by the Fund during the preceding year
on tax-exempt obligations indicating on a state-by-state basis the source of the
income.
The Fund generally will be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from dividends (including capital gains
dividends) paid to non-corporate shareholders if (a) the shareholder fails to
furnish and certify his correct taxpayer identification number or social
security number, (b) the Internal Revenue Service (the "IRS") or a broker
notifies a shareholder or the Fund that the shareholder has failed to report
properly certain interest and dividend income to the IRS and to respond to
notices to that effect, or (c) when required to do so, the shareholder fails to
certify that he is not subject to backup withholding.
Shareholder will be notified each year of the amounts of dividends and
distributions. Dividends and distributions may also be subject to state or local
taxes. Investors should consult their tax advisers for specific information on
the tax consequences of particular types of distributions. Applications and
purchase orders without a certified taxpayer identification number may be
returned to the investor. The Fund reserves the right to close by redemption
accounts without correct certified taxpayer identification numbers.
12
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
Pursuant to an Agency Agreement, First Fidelity acts as the Fund's Transfer
and Dividend Disbursing Agent and is responsible for maintaining account records
detailing ownership of Fund shares and for crediting income, capital gains and
other changes in share ownership to investors' accounts. First Fidelity is also
the Fund's Custodian. Furman Selz acts as the Fund's Sub-Transfer Agent pursuant
to a Sub-Transfer Agency Agreement.
PERFORMANCE INFORMATION
FFB Funds Trust may, from time to time, include the yield and effective
yield of the Fund in advertisements or reports to shareholders or prospective
investors. Shareholders of the Service Class of Shares will experience a lower
net return on their investment than shareholders of the Institutional Class of
Shares because of the shareholder servicing charge to which Service Class shares
will be subject. Current yield for the Fund will be based on income received by
a hypothetical investment over a given seven-day period (less expenses accrued
during the period), and then "annualized" (i.e., assuming that the seven-day
yield would be received for 52 weeks, stated in terms of an annual percentage
return on the investment). "Effective yield" for the Fund is calculated in a
manner similar to that used to calculate yield, but reflects the compounding
effect of earnings on reinvested dividends.
Performance information for the Fund may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, Dow Jones
Industrial Average, or other unmanaged indices so that investors may compare a
Fund's results with those of a group of unmanaged securities widely regarded by
investors as representative of the securities markets in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in a Fund. Unmanaged indices may
assume the reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for the Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of the Fund's investment objective and policies, characteristics and
quality of the portfolios, and the market conditions during the given time
period, and should not be considered as a representation of what may be achieved
in the future. For a description of the methods used to determine yield and
effective yield for the Fund, see the SAI.
Investors who purchase and redeem shares of the Fund through a customer
account maintained at a Participating Organization may be charged one or more of
the following types of fees as agreed upon by the Participating Organization and
the investor with respect to the customer services provided by the Participating
Organization: account fees (a fixed amount per month or per year); transaction
fees (a fixed amount per transaction processed); compensating balance
requirements (a minimum dollar amount a customer must maintain in order to
obtain the services offered); or account maintenance fees (a periodic charge
based upon a percentage of the assets in the account or of the dividends paid on
those assets). Such fees will have the effect of reducing the yield and
effective yield of the Fund for those investors. Investors who maintain accounts
with the Fund's Transfer Agent will not pay these fees.
13
OTHER INFORMATION
The Trust was organized as a Massachusetts business trust on March 25, 1987
as a successor to FFB Money Trust which was organized on December 4, 1985 and
currently consists of eleven separate portfolios. The Board of Trustees may
establish additional portfolios in the future. The capitalization of FFB Funds
Trust consists of 15,100,000,000 authorized sales of beneficial interest with a
par value of $0.001 each. Shares of the Fund are divided into two classes.
Institutional Class shares are offered to certain investors who invest a minimum
of $5,000,000. Service Class shares are identical to Institutional Class shares
but offer certain shareholder services at an additional fee of up to 0.25%. When
issued, shares of the Fund are fully paid, non-assessable and will have no
preemptive rights. All shares of the Trust have equal voting rights and will be
voted in the aggregate, and not be class, except where voting by class is
required by law or where the matter involved affects only one class. For more
details concerning the voting rights of shareholders, see the SAI. First
Fidelity is not the beneficial owner of shares of the Fund, but it may have been
granted discretionary authority to vote all or some of those shares, in which
case the bank may be in a position to control the Fund.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
Officers of the Trust for acts or obligations of the Trust which are binding
only on the assets and property of the Trust and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Trust or the Trustees. The Declaration of Trust provides for indemnification
out of Trust property for all loss and expense of any shareholder held
personally liable for the obligations of the Trust. The risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its obligations
and should be considered remote.
The Trust is not required to hold regular annual meetings of the Funds'
shareholders and does not intend to do so. The Trustees are required to call a
meeting for the purpose of considering the removal of a person serving as
Trustee if requested in writing to do so by the holders of not less than 10% of
the outstanding shares of the Trust and in connection with such meeting to
comply with the shareholders' communications provisions of Section 16(c) of the
Act regarding assistance to shareholders who seek to remove and person serving
as Trustee.
14
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--------------------------------------------------------------------------------
-------------------------------------------- -------------------------
FFB FUNDS TRUST FFB
237 PARK AVENUE -------------------------
NEW YORK, NEW YORK 10017 FUNDS
-------------------------
GENERAL AND ACCOUNT INFORMATION:
(800) 437-8790
INVESTMENT ADVISER
First Fidelity Bank, N.A.
765 Broad Street, Newark, New Jersey 07102
ADMINISTRATOR
Furman Selz Incorporated
237 Park Avenue, New York, New York 10017
SPONSOR AND DISTRIBUTOR
FFB Funds Distributor, Inc.
237 Park Avenue, New York, New York 10017
CUSTODIAN, TRANSFER AGENT 100% U.S. Treasury
Fund
AND DIVIDEND DISBURSING AGENT
First Fidelity Bank, N.A. Service Class
765 Broad Street, Newark, New Jersey 07102
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick
345 Park Avenue, New York, New York 10154
LEGAL COUNSEL
Baker & McKenzie
805 Third Avenue, New York, New York 10022
----------------------------------------
TABLE OF CONTENTS
Fund Expenses........................... 2
Investment Objective and Policies....... 3
Investment Restrictions................. 3
Management of the Fund.................. 3
Determination of Net Asset Value........ 6
Purchase of Shares...................... 6
PROSPECTUS
Redemption of Shares.................... 8
Account Service......................... 10
OCTOBER 7, 1994
Dividends and Distributions............. 11
Federal Taxes........................... 11
Transfer and Dividend Disbursing Agent
and Custodian........................... 13
Performance Information................. 13
Other Information....................... 14
--------------------------------------------
No dealer, salesman, or other person has
been authorized to give any information or
to make any representations, other than
those contained in the Prospectus, in
connection with the offer contained in this
Prospectus, and, if given or made, such
other information or representations must
not be relied upon as having been authorized Managed by:
by the Trust, the Distributor or the First Fidelity Bank, N.A.
Investment Adviser. This Prospectus does not
constitute an offering in any state in which Sponsored and Distributed
By:
such offering may not lawfully be made. FFB Funds Distributor, Inc.
EX-99
14
FFB 100% INSTIUTIONAL PROSPECTUS
[LOGO]
FFB 100% U.S. TREASURY FUND
INSTITUTIONAL CLASS PROSPECTUS
237 Park Avenue, New York, New York 10017
General and Account Information: (800) 437-8790
FIRST FIDELITY BANK, N.A. -- INVESTMENT ADVISER
FFB FUNDS DISTRIBUTOR, INC. -- SPONSOR AND DISTRIBUTOR
FFB FUNDS TRUST (the "Trust") is an open-end, management investment company
which currently consists of 11 separate portfolios with different investment
objectives, including the FFB 100% U.S. Treasury Fund (the "Fund") described
below. The objective of the Fund is to achieve as high a level of current income
as is consistent with the preservation of capital and liquidity by investing
exclusively in short-term, direct obligations of the United States Treasury. The
Fund will not invest in repurchase agreements or engage in securities lending
transactions. The Fund is a diversified portfolio of the Trust.
INVESTMENTS IN THE FUND ARE NOT GUARANTEED OR INSURED BY THE UNITED STATES
GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE. SHARES OF THE FUND ARE NOT DEPOSITS
OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY, FIRST FIDELITY BANK OR ITS
AFFILIATES, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY AND MAY INVOLVE
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
Shares of the Fund are divided into two classes. This prospectus relates
only to Institutional Class shares which are offered to certain investors who
invest a minimum of $5,000,000. The Fund also offers to investers who invest
less than $5,000,000 Service Class shares identical to Institutional Class
shares but offering certain shareholder services at an additional fee of up to
0.25%.
Shares of the Fund are offered for sale by FFB Funds Distributor, Inc.
("FFB Funds Distributor" or the "Distributor") as an investment vehicle for
individuals, institutions, corporations and fiduciaries. The Fund is sold
without a sales charge or load.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information
("SAI") dated October 7, 1994 containing additional and more detailed
information about the Fund has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus. It is
available without charge and can be obtained by writing or calling the Trust at
the address and general information number printed above.
------------------------------
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR INFORMATION ABOUT THE FUNDS.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
OCTOBER 7, 1994
FUND EXPENSES
The following table illustrates the fees and expenses that a shareholder of
Institutional Class shares will incur.* The fees and expenses set forth below
are based on estimated projections. Institutional Class shares are offered to
certain investors who make a minimum investment of $5,000,000 and are designed
to offer a low expense ratio. The Fund also offers Service Class shares which
are identical to Institutional Class shares but offer certain shareholder
services at an additional fee of up to 0.25% of average daily net assets.
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sale Load imposed on Purchases.................................................. None
Sales Load imposed on Reinvested Dividends...................................... None
Redemption Fees................................................................. None
Exchange Fees................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory and Administrative Expenses (after waiver)**........................... 0.17%
12b-1 Fees...................................................................... None
Other Expenses***............................................................... 0.08
-----------
TOTAL FUND OPERATING EXPENSES (AFTER WAIVER)**.................................. 0.25%
==========
* Investors who purchase and redeem shares of the Fund through a customer
account maintained at certain banks, financial institutions or corporations (a
"Participating Organization") may be charged additional fees by such
Participating Organization not to exceed 0.25%. In order to avoid such
additional fees, shareholders may always elect to purchases shared directly from
the Trust through the Distributor.
** Certain Advisory and Administrative Expenses will be waived or
reimbursed for the Fund's first year of operation. Absent these waivers,
Advisory and Administrative Expenses and Total Fund Operating Expenses would be
0.22% and 0.30%, respectively. For the Service Class, Advisory and
Administrative Expenses are 0.17% and Total Fund Operating Expenses are 0.50%.
Absent waivers, Advisory and Administrative Expenses and Total Fund Operating
Expenses for the Service Class would be 0.22% and 0.55%, respectively.
*** For the Service Class, Other Expenses of 0.33% include a shareholder
servicing charge of 0.25% for services including sub-accounting, transaction
processing, reporting and other related services.
The purpose of this table is to assist the shareholder in understanding the
various costs and expenses that an investor in the Fund will bear. For a more
complete description of the Annual Fund Operating Expenses, see "Management of
the Fund".
Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
gross annual return and (2) redemption at the end of each time period:
INSTITUTIONAL
CLASS
-------------
1 year..................................................... $3.00
3 years.................................................... $8.00
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
2
INVESTMENT OBJECTIVE AND POLICIES
The objective of the Fund is to seek to provide investors with as high a
level of current income as is consistent with the preservation of capital and
liquidity. There is no assurance that this objective will be achieved. The Fund
invests exclusively in direct obligations of the United States Treasury which
have remaining maturities not exceeding one year and does not invest in
obligations issued or guaranteed by agencies or instrumentalities of the United
States Government. The Fund will not invest in repurchase agreements or engage
in securities lending transactions. From time to time the Fund may hold cash
pending investment or for temporary defensive purposes.
INVESTMENT RESTRICTIONS
The Fund may not (1) borrow money or pledge or mortgage its assets, except
that it may borrow from banks up to 10% of the current value of its total net
assets for temporary purposes only in order to meet redemptions, and those
borrowings may be secured by the pledge of not more than 10% of the current
value of the total net assets of its Fund (but investments may not be purchased
by the Fund while any such borrowings exist); (2) make loans, except loans of
portfolio securities having a value of not more than 10% of the Fund's current
assets and except that the Fund may make deposits with banks; or (3) invest an
amount equal to 10% or more of the current value of its net assets in illiquid
securities, including those securities which do not have readily available
market quotations. The foregoing investment restrictions and those described in
the SAI are fundamental policies which may be changed only when permitted by law
and approved by the holders of a majority of the outstanding voting securities
of the Fund, as described under "Other Information" in the SAI.
MANAGEMENT OF THE FUND
The property, affairs and business of the Fund are managed by the Board of
Trustees. The Trustees elect officers who are charged with the responsibility
for the day-to-day operations of the Fund and the execution of policies
formulated by the Trustees. Detailed information about the Trustees and Officers
may be found in the SAI under "Management of the Fund".
ADVISER
First Fidelity serves as the investment adviser for the Fund. The offices
of the Adviser are located at 765 Broad Street, Newark, New Jersey 07102. The
Adviser is a national banking association which provides commercial banking and
trust business services throughout New Jersey. It is a wholly-owned subsidiary
of First Fidelity Incorporated, originally established in 1812, which, as a
result of a reorganization with Fidelcor, Inc., a Pennsylvania bank holding
company, is now a wholly-owned subsidiary of First Fidelity Bancorporation.
First Fidelity Bancorporation, a New Jersey corporation, provides financial and
related services through its subsidiary organizations. The advisory services of
the Adviser are provided through the Asset Management Group of the Trust
Division which, as of August 31, 1994, had approximately $16 billion of client
assets under management. The Adviser has provided investment advisory services
to investment companies since 1986 and currently acts as Adviser to all Funds
within FFB Funds Trust.
Pursuant to a Master Advisory Contract (the "Advisory Contract"), First
Fidelity furnishes continuous investment guidance consistent with the Fund's
investment objective and policies and
3
provides administrative assistance in connection with the operation of the Fund.
First Fidelity also acts as transfer agent, custodian and dividend disbursing
agent for the fund, as described in the SAI.
First Fidelity intends to receive its customary managing agency account
fees or any other account fees it imposes on accounts of its bank customers in
respect of customer assets invested in the Fund where permitted by applicable
federal, state and local laws; this may result in the receipt by First Fidelity
of customer account fees in addition to advisory fees from the Funds and a
corresponding reduction in the total yield for the funds realized by customers
who hold Fund shares in regular customer accounts with Fidelity. Neither First
Fidelity, nor any of its affiliates, nor any of their employees will make loans
for the purpose of purchasing or carrying shares of the fund or make loans to
the Fund. Prospectuses and sales material for the fund can be obtained from FFB
Funds Distributor.
SPONSOR AND DISTRIBUTOR
FFB Funds Distributor, Inc. is the Sponsor and Distributor of the Fund and
has its principal office at 237 Park Avenue, New York, New York 10017. The
Distributor is an affiliate of Furman Selz Incorporated ("Furman Selz").
Pursuant to a Master Distribution Contract (the "Distribution Contract"), the
Distributor is responsible for the distribution of Fund shares. The Distributor
receives no compensation for services rendered to the Fund pursuant to the
Distribution Contract.
ADMINISTRATOR
Pursuant to a Master Administrative Services Contract (the "Administrative
Services Contract"), Furman Selz acts as the Administrator of the Fund and has
its office at 237 Park Avenue, New York, New York 10017. It provides personnel,
office space and all management and administrative services reasonably necessary
for the operation of the Trust and the Fund (such as maintaining the Fund's
books and records, monitoring compliance with all state and Federal laws and
assisting the Trustees in the execution of their duties other than those
services which are provided by First Fidelity pursuant to the Advisory Contract.
Furman Selz receives from the Fund a monthly fee based on the net assets of the
Fund as compensation for its provision of administrative services to the Fund.
See "Fees and Expenses".
GLASS-STEAGALL ACT
The Glass-Steagall Act and other applicable laws generally prohibit banks
that are members of the Federal Reserve System from engaging in the business of
underwriting, selling or distributing securities. The Board, based upon advice
from counsel, believes that First Fidelity may perform the services of the Fund
contemplated by the Advisory Contract without violation of the Glass-Steagall
Act or any other applicable banking laws or regulations. However, it is possible
that further changes in either Federal or state statutes and regulations
concerning the permissible activities of banks or trust companies, as well as
further judicial or administrative decisions and interpretations of present and
future statutes and regulations, might prevent First Fidelity from continuing to
perform such services for the Fund. If First Fidelity were prohibited from
acting as investment adviser to the Fund, it is expected that the Trustees of
the Trust would recommend to the shareholders of the Fund that they approve the
Fund's entering into a new Advisory Contract with another qualified investment
adviser to be selected by the Trustees.
4
FEES AND EXPENSES
As compensation for their advisory, administrative and management services,
First Fidelity and Furman Selz are each paid a monthly fee at the following
annual rates:
FEE RATE
-----------------
FIRST FURMAN
FIDELITY SELZ
-------- ------
Portion of average daily value of net assets of each Fund................... 0.14% 0.08%
Except for the expenses paid by First Fidelity, the Distributor and Furman
Selz, the Trust bears all costs of its operations, such as legal and accounting
expenses and Trustees' fees and expenses. Expenses attributable to the Fund are
charged against the assets of the Fund. Other expenses of the Trust are
allocated among the Fund and other Funds of FFB Funds Trust by the Board of
Trustees in a manner which may, but need not, be proportionately in relation to
the net assets of each Fund.
PORTFOLIO TRANSACTIONS
Pursuant to the Advisory Contract, the Adviser places orders for the
purchases and sale of portfolio investments for the Fund's account with brokers
or dealers selected by it in its discretion. The Adviser will not place orders
with the Sponsor or any affiliate of the Sponsor.
Purchases and sales of portfolio securities for the Fund are generally
placed by the Adviser with primary market markers for these securities on a net
basis, without any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs, primary dealer spreads and underwriting
commissions. Transactions with dealers serving as primary market makers reflect
the spread between the bid and asked prices. Purchases of underwritten issues
may be made which will include an underwriting fee paid to the underwriter. In
effecting purchases and sales of portfolio securities for the account of the
Fund, the Adviser will seek the best execution of the Fund's orders. Due to the
Fund's investments in securities with short maturities, portfolio turnover may
be regarded as high. The Fund may also attempt to increase yield by trading to
take advantage of short-term investment variations. High portfolio turnover
should not adversely affect the Fund since it does not usually pay brokerage
commissions when purchasing short-term debt obligations.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund for the purpose of pricing
purchase and redemption orders is determined at 12:00 Noon (Eastern Standard
time) on each day the New York Stock Exchange is open for trading except for
holidays, which include New Year's Day, Martin Luther King Jr's Birthday,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day. The net asset
value per share of each Fund is computed by dividing the value of the net assets
of the Fund's outstanding shares. All expenses, including the advisory and
administrative fees, are accrued daily and taken into account for the purpose of
determining the net asset value.
The Fund uses the amortized cost method to value its portfolio securities
and seeks to maintain a constant net asset value of $1.00 per share, although
there is no assurance of such. The amortized cost method involves valuing a
security at its cost and amortizing any discount or premium over the period
5
until maturity, regardless of the impact of fluctuating interest rates on the
market value of the security. See the SAI for more details.
PURCHASE OF SHARES
Shares of the Fund are offered at net asset value by the Distributor as an
investment vehicle for institutions, corporations, fiduciaries and individuals.
Prospectuses and sales material can be obtained from the Distributor.
Investments in the Fund are not insured.
The minimum initial investment requirement for the Fund is $5,000,000.
There are no minimum investment requirements with respect to investments
effected through certain automatic purchase and redemption arrangements on
behalf of customer accounts maintained at Participating Organizations. The
minimum investment requirements may be waived or lowered for investments
effected on a group basis by certain other institutions and their employees. All
funds will be invested in full and fractional shares. The Trust reserves the
right to reject any purchase order.
Orders for shares will be executed at the net asset value per share next
determined after an order has been received. Orders will become effective when
Federal funds (money made available to the Funds through a Federal Reserve bank
wire transfer) are available to the Trust's custodian for investment. If payment
is transmitted by wire, the order will become effective upon receipt of Federal
funds. Federal Reserve wire transmissions may be subject to delays of up to
several hours, in which case execution of an order will be delayed for a like
period of time. Payments transmitted by a bank wire other than the Federal
Reserve Wire System may take longer to be converted into Federal funds. Banks
may charge a service fee for transfers by wire. Checks must be payable in United
States dollars and will be accepted subject to collection at full face value.
Compensation to salespersons may vary depending upon whether Service Class
or Institutional Class shares are sold.
PROSPECTIVE INVESTORS WHO WISH TO OBTAIN ADDITIONAL INFORMATION CONCERNING
INVESTMENT PROCEDURES SHOULD CONTACT THE DISTRIBUTOR AT (800) 437-8790.
DIRECT PURCHASES THROUGH FFB FUNDS DISTRIBUTOR, INC.
PURCHASE BY WIRE
1. Telephone: (800) 437-8790. State that funds are to be invested in the
FFB 100% U.S. Treasury Fund and the Class of shares of the Fund in which the
funds are to be invested. Give the name(s) in which the Fund shares are to be
registered, address, social security or tax identification number (where
applicable), dividend payment election, amount to be wired, name of the wiring
bank and name and telephone number of the person to be contacted in connection
with the order. An account number will be assigned.
6
2. Instruct the wiring bank to transmit the specified amount in Federal
funds to:
Investors Fiduciary Trust Company ("IFTC")
Kansas City, MO 64105
ABA Routing Number: 101003621
Acct. No. 7512996
Indicate Name of Fund
Account Name(s) (in which to be registered)
Account Number (As assigned by telephone)
3. Fill in a Purchase Application and mail to:
FFB Funds Distributor, Inc.
P.O. Box 4490
Grand Central Station
New York, NY 10163-4490
A COMPLETED PURCHASE APPLICATION MUST BE RECEIVED BY FFB FUNDS DISTRIBUTOR
BEFORE THE EXPEDITED REDEMPTION OR CHECK REDEMPTION SERVICES CAN BE USED.
PURCHASE BY MAIL
1. Complete a Purchase Application. Indicate the services to be used.
2. Mail the Purchase Application and a check payable to the Fund to FFB
Funds Distributor.
ADDITIONAL PURCHASE BY WIRE AND MAIL
Additional purchases of shares may be made by wire by instructing the bank
to transmit the amount ($100 or more) of any additional purchase in Federal
funds to IFTC along with your account name and number. Additional purchases may
also be made be mail by making a check ($100 or more) payable to the Fund
indicating your Fund account number on the check and mailing it to FFB Funds
Distributor.
PURCHASES THROUGH CUSTOMER ACCOUNTS
Purchases of shares also may be made through customer accounts maintained
at participating Organizations, including qualified Individual Retirement and
Keogh Plan accounts. Purchases through such accounts may be subject to
additional procedural requirements and are governed by the terms of the
agreement between the customer and the Participating Organization itself. All
such procedural requirements must, however, be consistent with the 1940 Act.
Purchases will be made through a customer's account only as directed by or on
behalf of the customer on a direction form executed prior to the customer's
first purchase of shares of the Fund. For example, a customer with an account at
a Participating Organization may instruct the Participating Organization to
invest money in excess of a level agreed upon between the customer and the
Participating Organization in shares the Fund periodically or give other
instructions to the Participating Organization within limits prescribed by that
Participating Organization.
7
BY PAYROLL DIRECT DEPOSITS
Investors may set up a payroll direct deposit arrangement for amounts to be
automatically invested in the Fund. Participants in the Payroll Direct Deposit
program may make periodic investments of a least $20.00 per pay period. Contact
FFB Funds Distributor for more information about Payroll Direct Deposit.
REDEMPTION OF SHARES
Upon receipt by FFB Funds Distributor of a redemption request in proper
form, shares of the Fund will be redeemed at its next determined net asset
value. See "Determination of Net Asset Value". For the shareholder's
convenience, the Trust has established several different direct redemption
procedures. NO PAYMENT OF PROCEEDS OF A REDEMPTION OF SHARES PURCHASED BY CHECK
WILL BE PERMITTED UNTIL THE CHECK IS CLEARED, WHICH MAY TAKE UP TO 15 DAYS AFTER
THOSE SHARES HAVE BEEN CREDITED TO THE SHAREHOLDER'S ACCOUNT.
DIRECT REDEMPTION THROUGH FFB FUNDS DISTRIBUTOR
REDEMPTION BY MAIL
1. Write a letter of instruction. Indicate the dollar amount or number of
shares to be redeemed. Refer to the shareholder's Fund account number.
2. Sign the letter in exactly the same way the account is registered. If
there is more than one owner of the shares, all must sign.
3. If shares to be redeemed have a value of $25,000 or more, the
signature(s) must be guaranteed by a commercial bank which is a member of the
Federal Deposit Insurance Corporation, a trust company, a member firm of a
domestic stock exchange or a foreign branch of any of the foregoing or an
approved savings bank or savings and loan association. A signature guarantee by
a non-approved savings bank or a notary public is not acceptable. Further
documentation, such as copies of corporate resolutions and instruments of
authority, may be requested from corporations, administrators, executors,
personal representatives, trustees or custodians to evidence the authority of
the person or entity making the redemption request.
4. Mail the letter to FFB Funds Distributor at the address set forth
under "Purchase of Shares".
Checks for redemption proceeds will normally be mailed within seven days to
the shareholder's address of record.
Upon request, the proceeds of a redemption amounting to $1,000 or more (net
of any withholding required under Federal Income Tax laws) will be sent by wire
to the shareholder's predesignated bank account. When proceeds of a redemption
are to be paid to someone other than the shareholder either by wire or check,
the signature(s) on the letter of instruction must be guaranteed regardless of
the amount of the redemption.
REDEMPTION BY EXPEDITED REDEMPTION SERVICE
If shares are held in book entry form and the Expedited Redemption Service
has been elected on the Purchase Application on file with FFB Funds Distributor,
redemption of shares may be requested
8
by telephone or letter on any day the Fund is open for business. (See
"Determination of Net Asset Value" for days the Fund is open.) A signature
guarantee is not required.
1. Telephone the request to FFB Funds Distributor at (800) 437-8790.
2. Mail the request to FFB Funds Distributor at the address set forth
under "Purchase of Shares".
Proceeds of Expedited Redemptions of $1,000 or more (net of any withholding
required under Federal income tax laws) will be wired to the shareholder's bank
indicated in the Purchase Application. If an Expedited Redemption request is
received by the FFB Funds Distributor by 12:00 Noon (Eastern Standard time) on a
day the Fund is open for business, the redemption proceeds will be transmitted
to the shareholder's bank that same day. Otherwise, redemption will be effected
and the proceeds will be transmitted on the next day on which the Fund is open
for business. A check for proceeds of less than $1,000 will be mailed to the
shareholder's address of record.
FFB Funds Distributor employs reasonable procedures to confirm that
instructions communicated by telephone are genuine. If FFB Funds Distributor
fails to employ such reasonable procedures, FFB Funds Distributor may be liable
for any loss, damage or expense arising out of any telephone transactions
purporting to be on a shareholder's behalf. In order to assure the accuracy of
instructions received by telephone, FFB Funds Distributor requires some form of
personal identification prior to acting upon instructions received by telephone,
records telephone instructions and provides written confirmation to investors of
such transactions.
REDEMPTION THROUGH CUSTOMER ACCOUNTS
Investors who purchase shares through customer accounts maintained at
Participating Organizations may redeem those shares only through the
Participating Organization. Customers of Participating Organizations should
inquire at the Participating Organization as to any additional procedures
governing the processing of redemption requests by the Participating
Organization. All such procedures must be consistent with the 1940 Act. In some
cases, a customer may instruct the Participating Organization which maintains
the account through which the customer purchases shares to redeem shares
periodically as required to bring the customer's account balance up to a level
agreed upon between the customer and the Participating Organization. If a
redemption request with respect to such an automatic redemption arrangement is
received from a Participating Organization by the Transfer Agent by 12:00 Noon
(Eastern Standard time) on a day the Fund is open for business, the redemption
proceeds determined at the next calculated net asset value will be transmitted
that same day to the investor's customer account unless otherwise specified by
the Participating Organization. Some customers may be able to instruct their
Participating Organization to arrange for proceeds to be transmitted other than
to their customer account.
ACCOUNT SERVICES
All transactions in shares of the Fund will be reflected in a statement for
each shareholder which will be mailed at least once each month. In those cases
where a Participating Organization or its nominee is shareholder of record of
shares purchased for its customer, the statement may be transmitted to the
customer by the Participating Organization. Individual transactions will not be
separately reported. Shareholders can write or call FFB Funds Distributor at
(800) 437-8790 (or their
9
Participating Organization, as the case may be) with any questions relating to
their investments in shares of the Fund.
Participating Organizations may be the shareholders of record as nominee
for their customers and may maintain subaccounts for those customers. Any such
customer may become the shareholder of record upon written request to the
Participating Organization or FFB Funds Distributor.
FFB Funds Distributor will transmit promptly to each of its customers for
whom it processes purchases and redemptions of shares and to each Participating
Organization copies of all reports to shareholders, proxy statements and other
Trust communications. The Trust's arrangements with FFB Funds Distributor and
the subaccounting arrangements require Participating Organizations to grant
investors who purchase shares through customer accounts the opportunity to vote
their shares by proxy at all shareholder meetings of the Trust. In certain
cases, a customer of a Participating Organization may have given his
Participating Organization the power to vote shares on his behalf. Customers
with accounts at Participating Organizations should consult their Participating
Organization for information concerning their rights to vote shares.
DIVIDENDS AND DISTRIBUTIONS
The Trust intends to declare as a dividend on shares of the Fund
substantially all of the taxable net investment income for the Fund at the close
of each day on which the Fund is open for business (See "Determination of Net
Asset Value" for the days the Fund is open) to the shareholders of record of the
Fund at 12:00 Noon (Eastern Standard time) on that day. Shares purchased will
begin earning dividends on the day the purchase order is executed and shares
redeemed will earn dividends through the previous day. Net investment income for
a Saturday, Sunday or holiday will be declared as a dividend on the previous
business day.
Dividends declared in, and attributable to, the preceding month will be
paid within five business days after the end of each month. Dividends will be
invested automatically in additional shares of the Fund at the next determined
net asset value and credited to the shareholder's account on the payment date
or, at the shareholder's election, paid in cash. For all investments effected
through customer accounts maintained at First Fidelity or other Participating
Organizations (see "Purchase of Shares -- Purchase through Customer Accounts"),
dividend payments in cash will be transmitted within five business days after
the end of each month to the investor's bank account through which the shares
were purchased or, if a Participating Organization so specifies, to it for
crediting to its customer's account. Dividend checks will be mailed to all other
shareholders who elect to be paid in cash within five business days after the
end of each month.
Investors who redeem all or a portion of shares of the Fund prior to a
dividend payment date will be entitled to all dividends declared but unpaid on
those shares on the next dividend payment date.
FEDERAL TAXES
The Fund is treated as a separate entity for Federal income tax purposes.
The Fund has elected to be treated as a regulated investment company, qualified
as such for its last taxable year and intends to continue to so qualify by
complying in the future with the provisions of the Internal Revenue Code (the
"Code") applicable to regulated investment companies so that it will not be
liable for Federal
10
income tax with respect to its net investment income (including tax-exempt
income) and net realized capital gains distributed to shareholders in accordance
with the timing requirements of the Code. The Fund intends to distribute
annually substantially all of its net taxable and tax-exempt investment income
and net realized capital gains to its shareholders.
Amounts, other than tax-exempt interest, not distributed in accordance with
a calendar year distribution requirement are subject to a non-deductible 4%
excise tax. To avoid application of the excise tax, the Fund intends to make its
distributions in accordance with the calendar year distribution requirement. For
this purpose, a distribution, including an exempt interest dividend, will be
treated as paid on December 31 of a calendar year if it is declared by the Fund
in October, November or December of that year to shareholders of record on a
date in such a month and paid by the Fund during January of the following year.
Such distributions will be treated as received by shareholders in the calendar
year in which the distributions are declared, rather than the calendar year in
which the distributions are received.
Dividends derived from the Fund's net investment income and any excess of
its net short-term capital gains over its net long-term capital loss will be
taxable to shareholders as ordinary income, whether such dividends are invested
in additional shares or received in cash.
Distributions of the excess of net long-term capital gain over net
short-term capital loss designated by the Fund as capital gains dividends will
be taxable as long-term capital gains, regardless of how long a shareholder has
held his Fund shares, whether they are invested in additional shares or received
in cash. The Fund does not, however, anticipate realizing a substantial amount
of net long-term capital gains. Dividends and distributions will not qualify for
the dividends-received deduction for corporations.
To the extent that the Fund's dividends are derived from interest income
exempt from Federal income tax and are designated as "exempt-interest dividends"
by such Fund, they will be excludable from a shareholder's gross income for
Federal income tax purposes, whether they are invested in additional shares or
received in cash.
Interest on indebtedness incurred or continued (or deemed to be incurred or
continued) by shareholders to purchase or carry shares of the Fund may not be
deductible in whole or in part for Federal income tax purposes. In addition,
under rules issued by the Internal Revenue Service for determining when borrowed
funds are considered used for the purposes of purchasing or carrying particular
assets, the purchase of shares may be considered to have been made with borrowed
funds, even though the borrowed funds are not directly traceable to the purchase
of shares.
The exemption of exempt-interest dividends for Federal income tax purposes
may not result in similar exemptions under the tax laws of state or local taxing
authorities. In general, only interest earned on obligations issued by the state
or locality in which the investor resides will be exempt from state and local
taxes. Shareholders should consult their tax advisers about the status of
dividends from the Fund in their own states and localities. Each year the Trust
will notify shareholders of the Federal income tax status of distributions and
the percentage of interest income received by the Fund during the preceding year
on tax-exempt obligations indicating on a state-by-state basis the source of the
income.
The Fund generally will be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from dividends (including capital gains
dividends) paid to non-corporate shareholders
11
if (a) the shareholder fails to furnish and certify his correct taxpayer
identification number or social security number, (b) the Internal Revenue
Service (the "IRS") or a broker notifies a shareholder or the Fund that the
shareholder has failed to report properly certain interest and dividend income
to the IRS and to respond to notices to that effect, or (c) when required to do
so, the shareholder fails to certify that he is not subject to backup
withholding.
Shareholder will be notified each year of the amounts of dividends and
distributions. Dividends and distributions may also be subject to state or local
taxes. Investors should consult their tax advisers for specific information on
the tax consequences of particular types of distributions. Applications and
purchase orders without a certified taxpayer identification number may be
returned to the investor. The Fund reserves the right to close by redemption
accounts without correct certified taxpayer identification numbers.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
Pursuant to an Agency Agreement, First Fidelity acts as the Fund's Transfer
and Dividend Disbursing Agent and is responsible for maintaining account records
detailing ownership of Fund shares and for crediting income, capital gains and
other changes in share ownership to investors' accounts. First Fidelity is also
the Fund's Custodian. Furman Selz acts as the Fund's Sub-Transfer Agent pursuant
to a Sub-Transfer Agency Agreement.
PERFORMANCE INFORMATION
FFB Funds Trust may, from time to time, include the yield and effective
yield of the Fund in advertisements or reports to shareholders or prospective
investors. Shareholders of the Service Class of Shares will experience a lower
net return on their investment than shareholders of the Institutional Class of
Shares because of the shareholder servicing charge to which Service Class shares
will be subject. Current yield for the Fund will be based on income received by
a hypothetical investment over a given seven-day period (less expenses accrued
during the period), and then "annualized" (i.e., assuming that the seven-day
yield would be received for 52 weeks, stated in terms of an annual percentage
return on the investment). "Effective yield" for the Fund is calculated in a
manner similar to that used to calculate yield, but reflects the compounding
effect of earnings on reinvested dividends.
Performance information for the Fund may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, Dow Jones
Industrial Average, or other unmanaged indices so that investors may compare a
Fund's results with those of a group of unmanaged securities widely regarded by
investors as representative of the securities markets in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in a Fund. Unmanaged indices may
assume the reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for the Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of the Fund's investment objective and policies, characteris-
12
tics and quality of the portfolios, and the market conditions during the given
time period, and should not be considered as a representation of what may be
achieved in the future. For a description of the methods used to determine yield
and effective yield for the Fund, see the SAI.
Investors who purchase and redeem shares of the Fund through a customer
account maintained at a Participating Organization may be charged one or more of
the following types of fees as agreed upon by the Participating Organization and
the investor with respect to the customer services provided by the Participating
Organization: account fees (a fixed amount per month or per year); transaction
fees (a fixed amount per transaction processed); compensating balance
requirements (a minimum dollar amount a customer must maintain in order to
obtain the services offered); or account maintenance fees (a periodic charge
based upon a percentage of the assets in the account or of the dividends paid on
those assets). Such fees will have the effect of reducing the yield and
effective yield of the Fund for those investors. Investors who maintain accounts
with the Fund's Transfer Agent will not pay these fees.
OTHER INFORMATION
The Trust was organized as a Massachusetts business trust on March 25, 1987
as a successor to FFB Money Trust which was organized on December 4, 1985 and
currently consists of eleven separate portfolios. The Board of Trustees may
establish additional portfolios in the future. The capitalization of FFB Funds
Trust consists of 15,100,000,000 authorized sales of beneficial interest with a
par value of $0.001 each. Shares of the Fund are divided into two classes.
Institutional Class shares are offered to certain investors who invest a minimum
of $5,000,000. Service Class shares are identical to Institutional Class shares
but offer certain shareholder services at an additional fee of up to 0.25%. When
issued, shares of the Fund are fully paid, non-assessable and will have no
preemptive rights. All shares of the Trust have equal voting rights and will be
voted in the aggregate, and not be class, except where voting by class is
required by law or where the matter involved affects only one class. For more
details concerning the voting rights of shareholders, see the SAI. First
Fidelity is not the beneficial owner of shares of the Fund, but it may have been
granted discretionary authority to vote all or some of those shares, in which
case the bank may be in a position to control the Fund.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
Officers of the Trust for acts or obligations of the Trust which are binding
only on the assets and property of the Trust and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Trust or the Trustees. The Declaration of Trust provides for indemnification
out of Trust property for all loss and expense of any shareholder held
personally liable for the obligations of the Trust. The risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its obligations
and should be considered remote.
The Trust is not required to hold regular annual meetings of the Funds'
shareholders and does not intend to do so. The Trustees are required to call a
meeting for the purpose of considering the removal of a person serving as
Trustee if requested in writing to do so by the holders of not less than 10% of
the outstanding shares of the Trust and in connection with such meeting to
comply with the shareholders' communications provisions of Section 16(c) of the
Act regarding assistance to shareholders who seek to remove and person serving
as Trustee.
13
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--------------------------------------------------------------------------------
-------------------------------------------- -------------------------
FFB FUNDS TRUST FFB
237 PARK AVENUE -------------------------
NEW YORK, NEW YORK 10017 FUNDS
-------------------------
GENERAL AND ACCOUNT INFORMATION:
(800) 437-8790
INVESTMENT ADVISER First Fidelity Bank, N.A.
765 Broad Street, Newark, New Jersey 07102
ADMINISTRATOR
Furman Selz Incorporated
237 Park Avenue, New York, New York 10017
SPONSOR AND DISTRIBUTOR
FFB Funds Distributor, Inc.
237 Park Avenue, New York, New York 10017
CUSTODIAN, TRANSFER AGENT 100% U.S. Treasury Fund
AND DIVIDEND DISBURSING AGENT Institutional Class
First Fidelity Bank, N.A.
765 Broad Street, Newark, New Jersey 07102
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick
345 Park Avenue, New York, New York 10154
LEGAL COUNSEL
Baker & McKenzie
805 Third Avenue, New York, New York 10022
----------------------------------------
TABLE OF CONTENTS
Fund Expenses........................... 2 PROSPECTUS
Investment Objective and Policies....... 3 OCTOBER 7, 1994
Investment Restrictions................. 3
Management of the Fund.................. 3
Determination of Net Asset Value........ 5
Purchase of Shares...................... 6
Redemption of Shares.................... 8
Account Service......................... 9
Dividends and Distributions............. 10
Federal Taxes........................... 10
Transfer and Dividend Disbursing Agent
and Custodian......................... 12
Performance Information................. 12
Other Information....................... 13
--------------------------------------------
No dealer, salesman, or other person has been authorized to give any
information or to make any representations, other than those contained
in the Prospectus, in connection with the offer contained in this
Prospectus, and, if given or made, such other information or
representations must
not be relied upon as having been authorized Managed by:
by the Trust, the Distributor or the First Fidelity Bank, N.A.
Investment Adviser. This Prospectus does not
constitute an offering in any state in which Sponsored and Distributed By:
such offering may not lawfully be made. FFB Funds Distributor, Inc.
EX-99
15
FFB MONEY MARKET SERVICE PROSPECTUS
[FFB FUNDS LOGO]
SERVICE CLASS
U.S. TREASURY FUND CASH MANAGEMENT FUND
U.S. GOVERNMENT FUND TAX-FREE MONEY MARKET FUND
PENNSYLVANIA TAX-FREE MONEY MARKET FUND
237 Park Avenue, New York, New York 10017
General and Account Information: (800) 437-8790
FIRST FIDELITY BANK, N.A. -- INVESTMENT ADVISER
FFB FUNDS DISTRIBUTOR, INC. -- SPONSOR AND DISTRIBUTOR
FFB FUNDS TRUST (the "Trust") is an open-end, management investment company
which currently consists of twelve separate portfolios with different investment
objectives, five of which are described in this Prospectus (the "Funds"). The
objective of each Fund is to achieve as high a level of current income as is
consistent with preservation of capital and liquidity. Each of the Funds other
than the Pennsylvania Tax-Free Money Market Fund is a diversified portfolio of
the Trust.
FFB U.S. TREASURY FUND invests exclusively in short-term, direct
obligations of the United States Treasury and repurchase agreements.
FFB U.S. GOVERNMENT FUND invests exclusively in short-term obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities and repurchase agreements.
FFB CASH MANAGEMENT FUND invests exclusively in a variety of high-quality,
short-term money market instruments and repurchase agreements, including
obligations in which the FFB U.S. Government Fund and FFB U.S. Treasury Fund
invest.
FFB TAX-FREE MONEY MARKET FUND invests primarily in high quality,
tax-exempt securities ("Municipal Obligations") with short-term maturities, to
provide its shareholders with as high a level of current income exempt from
Federal income taxes as is consistent with the preservation of capital and
liquidity.
FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND invests in high quality
Pennsylvania securities that are exempt from Federal and Pennsylvania personal
income taxes in the opinion of bond counsel to the issuer with remaining
maturities of thirteen months or less.
Shares of the Funds are divided into two classes. This prospectus relates
only to Service Class shares which are offered to investors who are not
purchasing the Funds through the Trust Department or Wholesale Bank Division of
First Fidelity Bank, N.A. or other banks or financial institutions. Each Fund
also offers Institutional Class shares which are available to customers of the
Trust Department and Wholesale Bank Division of First Fidelity Bank or other
banks or financial institutions and are identical to Service Class shares but
include fewer individual shareholder communication services at a lower servicing
fee.
Shares of each Fund are offered for sale by FFB Funds Distributor, Inc.
(the "Distributor") as an investment vehicle for institutions, corporations,
fiduciaries and individuals. The Funds are sold without a sales charge or load;
the Funds may pay expenses related to the distribution of their shares. Certain
banks, financial institutions and corporations (the "Participating
Organizations") may agree to act as shareholder servicing agents for investors
who maintain accounts at these Participating Organizations and to perform
certain services for the Funds.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Funds. A Statement of Additional Information
(the "SAI") dated June 30, 1995 containing additional and more detailed
information about the Funds has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus. It is
available without charge and can be obtained by writing or calling the Trust at
the address and general information number printed above.
------------------------------
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR INFORMATION ABOUT
THE FUNDS.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUNDS ARE NOT GUARANTEED OR INSURED BY THE UNITED STATES
GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE. SHARES OF THE FUNDS ARE NOT DEPOSITS
OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY, FIRST FIDELITY BANK OR ITS
AFFILIATES, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY, AND MAY INVOLVE
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
JUNE 30, 1995
FUND EXPENSES
The following tables illustrate the expenses and fees that a Service Class
shareholder of the Funds will incur.* The fees and expenses set forth below with
respect to Service Class shares are based on estimated projections. Service
Class shares are offered to customers who do not purchase Fund shares through
the Trust Department or Wholesale Bank Division of First Fidelity Bank, N.A. or
other banks or financial institutions and may be subject to shareholder
servicing charges of up to 0.35% of average daily net assets. Service Class
shareholders generally require enhanced individual communications services
including additional telephone services and responses to customer inquiries. The
Fund also offers Institutional Class shares which are available to customers of
the Trust Department or Wholesale Bank Division of First Fidelity Bank, N.A. and
other banks and financial institutions and are subject to a shareholder
servicing charge of up to 0.25% of average daily net assets.
U.S. TREASURY FUND
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sales Load imposed on Purchases................................................... None
Sales Load imposed on Reinvested Dividends........................................ None
Redemption Fees................................................................... None
Exchange Fees..................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Advisory & Administrative Expenses................................................ 0.50%
12b-1 Fees (after waiver)**....................................................... 0.03%
Other Expenses (after waiver)+.................................................... 0.28%
------
TOTAL FUND OPERATING EXPENSES (after waiver)+....................................... 0.81%
======
* Participating Organizations may receive shareholder servicing fees for
Fund shares purchased and maintained through Participating Organizations in an
amount not to exceed 0.35% of the Fund's average daily net assets purchased and
maintained through such Participating Organizations. In addition, customer
accounts maintained at Participating Organizations may be assessed additional
direct fees by the Participating Organization as agreed upon by the customer and
Participating Organization at the time of purchase. In order to avoid such
additional direct fees, shareholders may always elect to purchase shares
directly from the Trust through the Distributor. See "Management of the
Fund -- Servicing Agreements" and "Purchase of Shares -- Purchases through
Customer Accounts."
** Absent waivers, the 12b-1 Plan fee is calculated at an annual rate not
to exceed 0.25% of the Fund's average daily net assets. (See "Management of the
Fund -- Distribution Plan" herein.)
+ Other Expenses include a shareholder servicing charge of 0.25%. The
shareholder servicing charges would be 0.35% absent waivers. Other Expenses
would be 0.38% and Total Fund Operating Expenses would be 1.13% absent waivers.
2
U.S. GOVERNMENT FUND
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sales Load imposed on Purchases................................................... None
Sales Load imposed on Reinvested Dividends........................................ None
Redemption Fees................................................................... None
Exchange Fees..................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Advisory & Administrative Expenses................................................ 0.50%
12b-1 Fees (after waiver)**....................................................... 0.03%
Other Expenses (after waiver)+.................................................... 0.30%
------
TOTAL FUND OPERATING EXPENSES (after waiver)+..................................... 0.83%
======
* Participating Organizations may receive shareholder servicing fees for
Fund shares purchased and maintained through Participating Organizations in an
amount not to exceed 0.35% of the Fund's average daily net assets purchased and
maintained through such Participating Organizations. In addition, customer
accounts maintained at Participating Organizations may be assessed additional
direct fees by the Participating Organization as agreed upon by the customer and
Participating Organization at the time of purchase. In order to avoid such
additional direct fees, shareholders may always elect to purchase shares
directly from the Trust through the Distributor. See "Management of the
Fund -- Servicing Agreements" and "Purchase of Shares -- Purchases through
Customer Accounts."
** Absent waivers, the 12b-1 Plan fee is calculated at an annual rate not
to exceed 0.25% of the Fund's average daily net assets. (See "Management of the
Fund -- Distribution Plan" herein.)
+ Other Expenses include a shareholder servicing charge of 0.25%. The
shareholder servicing charges would be 0.35% absent waivers. Other Expenses
would be 0.40% and Total Fund Operating Expenses would be 1.15% absent waivers.
TAX FREE MONEY MARKET FUND
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sales Load imposed on Purchases................................................... None
Sales Load imposed on Reinvested Dividends........................................ None
Redemption Fees................................................................... None
Exchange Fees..................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Advisory & Administrative Expenses................................................ 0.50%
12b-1 Fees (after waiver)**....................................................... 0.03%
Other Expenses (after waiver)+.................................................... 0.29%
------
TOTAL FUND OPERATING EXPENSES (after waiver)+..................................... 0.82%
======
* Participating Organizations may receive shareholder servicing fees for
Fund shares purchased and maintained through Participating Organizations in an
amount not to exceed 0.35% of the Fund's average daily net assets purchased and
maintained through such Participating Organizations. In addition, customer
accounts maintained at Participating Organizations may be assessed additional
direct fees by the Participating Organization as agreed upon by the customer and
Participating
3
Organization at the time of purchase. In order to avoid such additional direct
fees, shareholders may always elect to purchase shares directly from the Trust
through the Distributor. See "Management of the Fund -- Servicing Agreements"
and "Purchase of Shares -- Purchases through Customer Accounts."
** Absent waivers, the 12b-1 Plan fee is calculated at an annual rate not
to exceed 0.25% of the Fund's average daily net assets. (See "Management of the
Fund -- Distribution Plan" herein.)
+ Other Expenses include a shareholder servicing charge of 0.25%. The
shareholder servicing charges would be 0.35% absent waivers. Other Expenses
would be 0.39% and Total Fund Operating Expenses would be 1.14%.
CASH MANAGEMENT FUND
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sales Load imposed on Purchases................................................... None
Sales Load imposed on Reinvested Dividends........................................ None
Redemption Fees................................................................... None
Exchange Fees..................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Advisory & Administrative Expenses................................................ 0.50%
12b-1 Fees (after waiver)**....................................................... 0.03%
Other Expenses (after waiver)+.................................................... 0.38%
------
TOTAL FUND OPERATING EXPENSES (after waiver)+..................................... 0.91%
======
* Participating Organizations may receive shareholder servicing fees for
Fund shares purchased and maintained through Participating Organizations in an
amount not to exceed 0.35% of the Fund's average daily net assets purchased and
maintained through such Participating Organizations. In addition, customer
accounts maintained at Participating Organizations may be assessed additional
direct fees by the Participating Organization as agreed upon by the customer and
Participating Organization at the time of purchase. In order to avoid such
additional direct fees, shareholders may always elect to purchase shares
directly from the Trust through the Distributor. See "Management of the
Fund -- Servicing Agreements" and "Purchase of Shares -- Purchases through
Customer Accounts."
** Absent waivers, the 12b-1 Plan fee is calculated at an annual rate not
to exceed 0.25% of the Fund's average daily net assets. (See "Management of the
Fund -- Distribution Plan" herein.)
+ Other Expenses include a shareholder servicing charge of 0.25%. The
shareholder servicing charges would be 0.35% absent waivers. Other Expenses
would be 0.48% and Total Fund Operating Expenses would be 1.23% absent waivers.
4
PENNSYLVANIA TAX FREE MONEY MARKET FUND
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sales Load imposed on Purchases................................................... None
Sales Load imposed on Reinvested Dividends........................................ None
Redemption Fees................................................................... None
Exchange Fees..................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Advisory & Administrative Expenses (after waiver)**............................... 0.00%
12b-1 Fees (after waiver)***...................................................... 0.03%
Other Expenses (after waiver)+.................................................... 0.67%
------
TOTAL FUND OPERATING EXPENSES (after waiver)+**................................... 0.70%
======
* Participating Organizations may receive shareholder servicing fees for
Fund shares purchased and maintained through Participating Organizations in an
amount not to exceed 0.35% of the Fund's average daily net assets purchased and
maintained through such Participating Organizations. In addition, customer
accounts maintained at Participating Organizations may be assessed additional
direct fees by the Participating Organization as agreed upon by the customer and
Participating Organization at the time of purchase. In order to avoid such
additional direct fees, shareholders may always elect to purchase shares
directly from the Trust through the Distributor. See "Management of the
Fund -- Servicing Agreements" and "Purchase of Shares -- Purchases through
Customer Accounts."
** Advisory and Administrative Expenses would have been 0.55% absent
waivers.
*** Absent waivers, the 12b-1 Plan fee is calculated at an annual rate not
to exceed 0.35% of the Fund's average daily net assets. (See "Management of the
Fund -- Distribution Plan" herein.) Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted by the NASD
to the extent, if any, the full 12b-1 Plan fee is charged in the future.
+ "Other Expenses" include a shareholder servicing charge of 0.25%. The
shareholder servicing charges would be 0.35% absent waivers. Other Expenses
would be 0.77% and Total Fund Operating Expenses would be 1.67% absent waivers.
The purpose of these tables is to assist shareholders in understanding the
various costs and expenses that an investor in a Fund will bear. For a more
complete description of the Annual Fund Operating Expenses, see "Management of
the Funds".
5
Example
You would pay the following
expenses on a $1,000 investment,
assuming (1) 5% gross annual
return and (2) redemption at the
end of each time period:
MONEY MARKET SERVICE CLASS
--------------------------------------------------
PA
U.S. U.S. CASH TAX TAX
TREASURY GOVERNMENT MANAGEMENT FREE
FREE
FUND FUND FUND FUND FUND
--- --- ---- --- ---
1 Year................................. $ 8 $ 8 $ 9 $ 8 $ 7
3 Years................................ 24 25 28 24 21
5 Years................................ 42 44 48 42 37
10 Years................................ 94 98 107 94 83
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF
FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL
RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE
ASSUMED AMOUNT.
6
INVESTMENT OBJECTIVES, POLICIES AND ASSOCIATED RISKS
The objective of each Fund is to seek to provide investors with as high a
level of current income as is consistent with preservation of capital and
liquidity. There is no assurance that this objective will be achieved. Each Fund
will maintain a dollar weighted average portfolio maturity of not more than 90
days.
FFB U.S. TREASURY FUND
The FFB U.S. Treasury Fund (the "U.S. Treasury Fund") invests exclusively
in direct obligations of the United States Treasury which have remaining
maturities not exceeding one year and certain repurchase agreements. The U.S.
Treasury Fund will not invest in obligations issued or guaranteed by agencies or
instrumentalities of the United States Government.
FFB U.S. GOVERNMENT FUND
The FFB U.S. Government Fund (the "U.S. Government Fund") invests
exclusively in obligations issued or guaranteed by the United States Government
or its agencies or instrumentalities which have remaining maturities not
exceeding one year and certain repurchase agreements. The U.S. Treasury issues
various types of marketable securities, consisting of bills, notes, bonds and
certificates of indebtedness which are all direct obligations of the United
States Government and differ primarily in the length of their maturity. U.S.
Treasury bills, which have a maturity of up to one year, are the most frequently
issued marketable United States Government security. United States Government
agency and instrumentality obligations are debt securities issued by United
States Government-sponsored enterprises and Federal agencies. Some obligations
of agencies, such as those issued by the Export Import Bank, are supported by
the full faith and credit of the United States; others, such as those of the
Federal Home Loan Banks, by the right of the issuer to borrow from the United
States Treasury; others, such as those of the Federal National Mortgage
Association, by the discretionary authority of the United States Government to
purchase certain obligations of the agency or instrumentality; and others, such
as those of the Federal Farm Credit Banks, only by the credit of the agency or
instrumentality issuing the obligation. In the case of obligations not backed by
the full faith and credit of the United States, the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment.
United States Government agency and instrumentality obligations include
variable rate master demand notes issued by Federal agencies or
instrumentalities (see the SAI for further details about variable rate master
demand notes). The U.S. Government Fund and the Cash Management Fund will invest
in obligations of United States Government agencies and instrumentalities only
when the Funds' investment adviser is satisfied that the credit risk with
respect to the issuer is minimal.
FFB CASH MANAGEMENT FUND
The FFB Cash Management Fund (the "Cash Management Fund") invests
exclusively in short-term money market instruments which have remaining
maturities not exceeding one year, short-term loan participations which have
remaining maturities not exceeding one year, variable rate demand notes,
variable rate master demand notes and certain repurchase agreements. The Cash
Management Fund does not limit the percentage of its assets that it may invest
in any one type of money market
7
instrument. The Board of Trustees of the Trust has general responsibility for
the quality of investments made by the Cash Management Fund and has delegated
day-to-day portfolio decision-making to First Fidelity Bank, National
Association ("First Fidelity" or the "Adviser"). Consequently, the Board does
not make individual portfolio decisions for the Fund or approve specific issuers
in advance. These decisions are made by the investment adviser consistent with
the quality and creditworthiness standards of the Fund as described below,
pursuant to guidelines established by the Board of Trustees. The Adviser will
select only portfolio investments which present minimal credit risks and are of
high quality based upon the ratings of nationally recognized rating
organizations (as set forth below) or, if unrated, of comparable quality. Shares
of the Cash Management Fund, U.S. Government Fund and U.S. Treasury Fund are not
insured or guaranteed by the United States Government. Money market instruments
in which the Cash Management Fund may invest include obligations issued or
guaranteed by the United States Government or its agencies and instrumentalities
(as described in this Prospectus under the heading FFB U.S. Government Fund) and
the following other kinds of investments:
The Fund will not invest in options, financial futures transactions or
other similar "derivative" instruments except as otherwise provided herein.
BANK OBLIGATIONS. These obligations include negotiable certificates of
deposit, bankers' acceptances and fixed time deposits. The Cash Management Fund
will not invest in any obligations of First Fidelity or its affiliates, as
defined under the Investment Company Act of 1940, as amended (the "1940 Act").
The Cash Management Fund is permitted to invest in obligations of correspondent
banks of First Fidelity (banks with which First Fidelity maintains a special
servicing relationship) which are not affiliates of the Trust, but the Cash
Management Fund will not give preference in its investment selections to those
obligations.
The Cash Management Fund limits its investments in United States bank
obligations to obligations of United States banks (including foreign branches)
which have more than $1 billion in total assets at the time of investment and
are members of the Federal Reserve System or are examined by the Comptroller of
the Currency or whose deposits are insured by the Federal Deposit Insurance
Corporation. The Cash Management Fund limits its investments in foreign bank
obligations to United States dollar-denominated obligations of those foreign
banks (including United States branches of foreign banks) which at the time of
investment (i) have more than $10 billion, or the equivalent in other
currencies, in total assets; (ii) in terms of assets are among the 75 largest
foreign banks in the world; (iii) have branches or agencies (limited purpose
offices which do not offer all banking services) in the United States; and (iv)
in the opinion of the Fund's investment adviser, are of an investment quality
comparable to obligations of United States banks which may be purchased by the
Cash Management Fund. There is no limitation on the amount of Cash Management
Fund assets which may be invested in obligations of foreign banks which meet the
conditions set forth herein.
Fixed time deposits may be withdrawn on demand by the investor, but may be
subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such
deposits. The Cash Management Fund may not invest in fixed time deposits subject
to withdrawal penalties maturing in more than seven calendar days; investments
in fixed time deposits subject to withdrawal penalties maturing from two
business days through seven calendar days may not exceed 10% of the value of the
total assets of the Cash Management Fund.
8
Obligations of foreign banks involve somewhat different investment risks
than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that the obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions like exchange controls may be adopted which might adversely affect
the payment of principal and interest on those obligations and that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. In that connection, foreign banks are not subject to examination by any
United States Government agency or instrumentality.
COMMERCIAL PAPER. Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by both domestic and foreign bank holding companies, corporations
and financial institutions and United States Government agencies and
instrumentalities (but only includes taxable securities). All commercial paper
purchased by the Cash Management Fund is, at the time of investment, (i) rated
"P-1" by Moody's Investors Service, Inc. ("Moody's") and "A-1" or better by
Standard & Poor's Corporation ("S&P") or in a comparable rating category by any
two of the nationally recognized statistical rating organizations that have
rated the commercial paper, (ii) rated in a comparable category by only one such
organization if it is the only organization that has rated the commercial paper
(and provided the purchase is approved or ratified by the Board of Trustees) or
(iii) if not rated, issued or guaranteed as to principal and interest by issuers
having an existing debt security rating of "Aa" or better by Moody's and "AA" or
better by S&P and in the opinion of the Cash Management Fund's investment
adviser, of an investment quality comparable to rated commercial paper in which
the Cash Management Fund may invest and within the credit quality policies,
guidelines and procedures established by the Board of Trustees (and provided the
purchase is approved or ratified by the Board of Trustees).
Variable rate demand notes have a maturity of five to twenty years but
carry with them the right of the holder to put the securities to a remarketing
agent or other entity on short notice, typically seven days or less, so that
after adjustment the value of the securities approximates par. Generally, the
remarketing agent will adjust the interest rate every seven days (or at other
intervals corresponding to the notice period for the put), in order to maintain
the interest rate at the prevailing rate for securities with a seven-day
maturity. The remarketing agent is typically a financial intermediary that has
agreed to perform these services. Variable rate master demand notes permit the
Fund to invest punctuating amounts at varying rates of interest pursuant to
direct arrangements between the Fund, as lender, and the borrower. Because the
notes are direct lending arrangements between the Fund and the borrower, they
will not generally be traded, and there is no secondary market for them,
although they are redeemable (and thus immediately repayable by the borrower) at
principal amount, plus accrued interest, at any time. The borrower also may
prepay up to the full amount of the note without penalty. While master demand
notes, as such, are not typically rated by credit rating agencies, if not so
rated, a fund may, under its minimum rating standards, invest in them only if,
in the opinion of the Adviser, they are of an investment quality comparable to
other debt obligations in which the Cash Management Fund may invest and are
within the credit quality policies, guidelines and procedures established by
9
the Board of Trustees. See the SAI for further details on variable rate demand
notes and variable rate master demand notes.
CORPORATE DEBT SECURITIES. Investments by the Cash Management Fund in
these securities are limited to nonconvertible corporate debt securities of U.S.
or foreign corporations such as bonds and debentures which have one year or less
remaining to maturity and which are rated "AA" or better by S&P and "Aa" or
better by Moody's, or in a comparable rating category by any two of the
nationally recognized statistical rating organizations that have rated the
securities or by one such organization if it is the only organization that has
rated the securities (provided the investment is approved or ratified by the
Board of Trustees).
The Cash Management Fund may invest in both rated commercial paper and
rated corporate debt obligations of foreign issuers that are denominated in
United States dollars and meet the same quality criteria applicable to
investments by the Cash Management Fund in commercial paper and corporate debt
obligations of domestic issuers. These investments, therefore, are not expected
to involve significant additional risks as compared to the risks of investing in
comparable domestic securities. Generally, all foreign investments carry with
them both opportunities and risks not applicable to investments in the
securities of domestic issuers, such as risks of foreign political and economic
instability, adverse movements in foreign exchange rates, the imposition or
tightening of exchange controls or other limitations on repatriation of foreign
capital, changes in foreign governmental attitudes toward private investment
(possibly leading to nationalization, increased taxation or confiscation of
foreign assets) and added difficulties inherent in obtaining and enforcing a
judgment against a foreign issuer of securities should it default. The rating
organizations used by the Adviser consider numerous factors in evaluating the
quality of foreign securities, and, therefore, many, if not all, of these risks
will have been considered by the rating organization in its assignment of a
particular rating to a particular foreign security or issuer.
PARTICIPATION INTERESTS. The Cash Management Fund may purchase high
quality participation interests having remaining maturities not exceeding one
year in loans extended by banks to U.S. and foreign companies and which are
within the credit quality policies, guidelines and procedures established by the
Board of Trustees. In a typical corporate loan syndication, a number of
institutional lenders lend a corporate borrower a specified sum pursuant to the
terms and conditions of a loan agreement. One of the co-lenders usually agrees
to act as the agent bank with respect to the loan. The loan agreement among the
corporate borrower and the co-lenders identifies the agent bank as well as sets
forth the rights and duties of the parties. The agreement often (but not always)
provides for the collateralization of the corporate borrower's obligations
thereunder and includes various types of restrictive covenants which must be met
by the borrower.
The participation interests acquired by the Cash Management Fund may,
depending on the transaction, take the form of a direct co-lending relationship
with the corporate borrower, an assignment of an interest in the loan by a
co-lender or another participant or a participation in the seller's share of the
loan. Typically, the Cash Management Fund will look to the agent bank to collect
principal of and interest on a participation interest, to monitor compliance
with loan covenants, to enforce all credit remedies, such as foreclosures on
collateral, and to notify co-lenders of any adverse changes in the borrower's
financial condition or declarations of insolvency. The agent bank in such cases
will be qualified under the 1940 Act to serve as a custodian for a registered
investment company
10
such as the Fund. The agent bank is compensated for these services by the
borrower pursuant to the terms of the loan agreement.
When the Cash Management Fund acts as co-lender in connection with a
participation interest or when the Cash Management Fund acquires a participation
interest the terms of which provide that the Cash Management Fund will be in
privity with the corporate borrower, such Fund will have direct recourse against
the borrower in the event the borrower fails to pay scheduled principal and
interest. In all other cases, the Cash Management Fund will look to the agent
bank to enforce appropriate credit remedies against the borrower.
The Adviser believes that the principal credit risk associated with
acquiring participation interests from a co-lender or another participant is the
credit risk associated with the underlying corporate borrower. The Cash
Management Fund may incur additional credit risk, however, when such Fund is in
the position of participant rather than a co-lender because such Fund must
assume the risk of insolvency of the co-lender from which the participation
interest was acquired and that of any person interpositioned between the Cash
Management Fund and the co-lender. However, in acquiring participation interests
the Cash Management Fund will conduct analysis and evaluation of the financial
condition of each such co-lender and participant to ensure that the
participation interest meets such Fund's high quality standard. The Adviser will
treat participation interests as illiquid for purposes of the investment
restriction that none of the Funds will invest 10% or more of the current value
of a Fund's net assets in illiquid securities.
FFB TAX-FREE MONEY MARKET FUND
The FFB Tax-Free Money Market Fund (the "Tax-Free Money Fund") invests at
least 80% of its net assets in high quality Municipal Obligations the interest
on which is exempt from Federal income tax, which have remaining maturities not
exceeding one year and which meet the rating standards described below. The
Tax-Free Money Fund does not limit the percentage of assets which it may invest
in a particular type of municipal obligation. The Municipal Obligations in which
the Tax-Free Money Fund invests may not yield as high a level of current income
as longer term or lower grade municipal obligations. However, the shorter
maturities and higher grades of the Municipal Obligations held by the Tax-Free
Money Fund can be expected to result in higher liquidity and less fluctuation in
market value as a result of changes in interest rates. The Tax-Free Money Fund
will maintain a dollar weighted average portfolio maturity of not more than 90
days.
FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND
The Pennsylvania Tax-Free Money Market Fund (the "Pennsylvania Tax-Free
Fund") invests at least 80% of its net assets in Municipal Obligations issued by
the Commonwealth of Pennsylvania or its counties, municipalities, authorities or
other political subdivisions, and municipal obligations issued by territories or
possessions of the United States, such as Puerto Rico, the interest on which, in
the opinion of bond counsel, is exempt from Federal and Pennsylvania personal
income taxes. The Pennsylvania Tax-Free Fund limits its investments to Municipal
Obligations with remaining maturities of thirteen months or less and will
maintain a dollar-weighted average portfolio maturity of 90 days or less.
Normally, the Pennsylvania Tax-Free Fund will seek to invest substantially
all of its assets in short-term Municipal Obligations. However, under certain
unusual circumstances, such as a temporary
11
decline in the issuance of Pennsylvania obligations, the Pennsylvania Tax-Free
Fund may invest up to 20% of its assets in the following: short-term municipal
securities issued outside of Pennsylvania (the income from which may be subject
to Pennsylvania income taxes) or certain taxable fixed income securities (the
income from which may be subject to Federal and Pennsylvania personal income
taxes). In most instances, however, the Pennsylvania Tax-Free Fund will seek to
avoid such holdings in an effort to provide income that is fully exempt from
Federal and Pennsylvania personal income taxes. To the extent the Fund maintains
a temporary defensive posture, the Fund's investment objectives may not be fully
achieved.
The Pennsylvania Tax-Free Fund may also invest in Municipal Obligations
issued to finance private activities, whose interest is a preference item for
purposes of the Federal alternative minimum tax. Such "private activity bonds"
might include industrial development bonds and securities issued to finance
projects such as solid waste disposal facilities, student loans or water and
sewage projects. The Pennsylvania Tax-Free Fund currently intends to treat
"private activity bonds" as not federally tax exempt and, accordingly, to limit
income from "private activity bonds" to no more than 20%. See "Federal Taxes"
for further information. Municipal obligations, which in the opinion of bond
counsel are exempt from Federal income taxes, are debt obligations issued by or
on behalf of states, cities, municipalities and other public authorities.
The Fund will not invest in options, financial futures transactions or
other similar "derivative" instruments except as otherwise provided herein.
Shares of the Tax-Free Money Fund and the Pennsylvania Tax-Free Fund
(collectively, the "Tax-Free Funds") are not insured or guaranteed by the United
States Government. The Tax-Free Funds will only purchase securities: (i) rated
within the two highest rating categories by Moody's and S&P or in a comparable
rating category by any two of the nationally recognized statistical rating
organizations that have rated the securities; (ii) rating in a comparable rating
category by only one such organization that has rated the securities, or (iii)
which, if unrated, are deemed to be of equivalent quality as determined by the
Adviser pursuant to guidelines established by the Board of Trustees. The types
of Municipal Obligations in which the Tax-Free Funds may invest include the
following:
MUNICIPAL BONDS. Municipal bonds generally have a maturity at the time of
issuance of more than one year. Municipal bonds may be issued to raise money for
various public purposes -- such as constructing public facilities and resource
recovery projects and making loans to public institutions. There are generally
two types of municipal bonds: general obligation bonds and revenue bonds.
General obligation bonds are backed by the taxing power of the issuing
municipality and are considered the safest type of municipal bond. Revenue bonds
are backed by the revenues of a project or facility -- tolls from a toll bridge,
for example. Industrial development revenue bonds (which are private activity
bonds) are a specific type of revenue bond backed by the credit and security of
a private user, and therefore investments in these bonds have more potential
risk. Certain types of municipal bonds are issued to obtain funding for
privately operated facilities. Municipal bonds generally have a maturity at the
time of issuance of more than one year.
MUNICIPAL NOTES. Municipal notes are generally sold as interim financing
in anticipation of the collection of taxes, a bond sale or receipt of other
revenue. Municipal notes generally have maturities at the time of issuance of
one year or less. Investments in municipal notes are limited to notes which are
rated at the date of purchase: (i) MIG 1 or MIG 2 by Moody's and in a comparable
rating category by at least one other nationally recognized statistical rating
organization that has rated the notes, or
12
(ii) in a comparable rating category by only one such organization, including
Moody's, if it is the only organization that has rated the notes, or (iii) if
not rated, are, in the opinion of the Adviser, of comparable investment quality
and within the credit quality policies and guidelines established by the Board
of Trustees.
Notes rated "MIG 1" are judged to be of the "best quality" and carry the
smallest amount of investment risk. Notes rated "MIG 2" are judged to be of
"high quality", with margins of protection ample although not as large as in the
preceding group.
MUNICIPAL COMMERCIAL PAPER. Municipal commercial paper is a debt
obligation with a stated maturity of one year or less which is issued to finance
seasonal working capital needs or as short-term financing in anticipation of
longer-term debt. Investments in municipal commercial paper are limited to
commercial paper which is rated at the date of purchase: (i) "P-1" by Moody's
and "A-1" or "A-1+" by S&P with respect to the Tax-Free Money Fund ("P-2"
(Prime-2) or better by Moody's and "A-2" or better by S&P with respect to the
Pennsylvania Tax-Free Fund) or (ii) in a comparable rating category by any two
of the nationally recognized statistical ratings organizations that have rated
commercial paper or (iii) in a comparable rating category by only one such
organization if it is the only organization that has rated the commercial paper
or (iv) if not rated, is, in the opinion of the Adviser, of comparable
investment quality and within the credit quality policies and guidelines
established by the Board of Trustees.
Issuers of municipal (and taxable) commercial paper rated "P-1" have a
"superior capacity for repayment of short-term promissory obligations". The
"A-1" rating for commercial paper under the S&P classification indicates that
the "degree of safety regarding timely payment is either overwhelming or very
strong". Commercial paper with "overwhelming safety characteristics" will be
rated "A1+". Commercial paper receiving a "P-2" rating has a strong capacity for
repayment of short-term promissory obligations. Commercial paper rated "A-2" has
the capacity for timely payment although the relative degree of safety is not as
overwhelming as for issues designated "A-1". See the Appendix for a more
complete description of securities ratings.
WHEN-ISSUED SECURITIES. The Tax-Free Funds may purchase Municipal
Obligations on a when-issued basis, in which case delivery and payment normally
take place 15 to 45 days after the date of the commitment to purchase. The Funds
will only make commitments to purchase Municipal Obligations on a when-issued
basis with the intention of actually acquiring the securities but may sell them
before the settlement date if it is deemed advisable. Any gains realized in such
sales would produce taxable income. The when-issued securities are subject to
market fluctuation and no interest accrues to the purchaser during this period.
The payment obligation and the interest rate that will be received on the
securities are each fixed at the time the purchaser enters into the commitment.
For purposes of determining a Fund's weighted average maturity, the maturity of
a when-issued security is calculated from its commitment date. Purchasing
Municipal Obligations on a when-issued basis is a form of leveraging and can
involve a risk that the yields available in the market when the delivery takes
place may actually be higher than those obtained in the transaction itself in
which case there could be an unrealized loss at the time of delivery.
Each Fund will establish a segregated account with its custodian in which
it will maintain cash, United States government securities, or other liquid,
high quality debt instruments in an amount at least equal in value to each
Fund's commitments to purchase when-issued securities. If the value of
13
these assets declines, a Fund will place additional liquid assets in the account
on a daily basis so that the value of the assets in the account is equal to the
amount of such commitments.
SECURITIES WITH PUT OR DEMAND RIGHTS. The Tax-Free Funds have the ability
to enter into put transactions, sometimes referred to as stand-by commitments,
with respect to Municipal Obligations held in its portfolio or to purchase
securities which carry a demand feature or put option which permit a Fund, as
holder, to tender them back to the issuer or a third party prior to maturity and
receive payment within seven days. Segregated accounts will be maintained by
each Fund for all such transactions.
The amount payable to a Fund by the seller upon its exercise of a put will
normally be (i) the Fund's acquisition cost of the securities (excluding any
accrued interest which such Fund paid on their acquisition), less any amortized
market premium plus any amortized market or original issue discount during the
period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during the period the securities
were owned by the Fund. Absent unusual circumstances, each Fund values the
underlying securities at their amortized cost. Accordingly, the amount payable
by a broker dealer or bank during the time a put is exercisable will be
substantially the same as the value of the underlying securities.
Each Fund's right to exercise a put is unconditional and unqualified. A put
is not transferable by a Fund, although a Fund may sell the underlying
securities to a third party at any time. The Funds expect that puts will
generally be available without any additional direct or indirect cost. However,
if necessary and advisable, the Funds may pay for certain puts either separately
in cash or by paying a higher price for portfolio securities which are acquired
subject to such a put (thus reducing the yield to maturity otherwise available
to the same securities). Thus, the aggregate price paid for securities with put
rights may be higher than the price that would otherwise be paid.
The Funds may enter into put transactions only with broker dealers (in
accordance with the rules of the Securities and Exchange Commission) and banks
which, in the opinion of the Adviser, present minimal credit risks. The Adviser
will monitor periodically the creditworthiness of issuers of such obligations
held by the Funds. The Funds' ability to exercise a put will depend on the
ability of the broker-dealer or bank to pay for the underlying securities at the
time the put is exercised. In the event that a broker-dealer or bank should
default on its obligation to purchase an underlying security, a Fund might be
unable to recover all or a portion of any loss sustained from having to sell the
security elsewhere. Each Fund intends to enter into put transactions solely to
maintain portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes.
For a detailed description of put transactions, see "Investment
Policies -- Securities with Put Rights" in the SAI.
TAXABLE SECURITIES. Under normal market conditions, each of the Tax-Free
Funds may at times elect to invest temporarily up to 20% of the current value of
its net assets in taxable securities of the type described below pending the
investment in Municipal Obligations of proceeds of sales of Fund shares or
proceeds from the sale of portfolio securities or in anticipation of
redemptions. However, at all times under normal market conditions the percentage
of a Fund's income and corresponding distributions which is tax-exempt will be
very close to 100%. In addition, for temporary defensive purposes, a Fund may
invest up to 100% of its total assets in such taxable securities when, in the
opinion of the Fund's Adviser, it is advisable to do so because of market
conditions. The types of
14
taxable securities in which the Funds may invest are limited to the following
money market instruments which have remaining maturities not exceeding one year
with respect to the Tax-Free Money Fund and thirteen months with respect to the
Pennsylvania Tax-Free Fund; (i) obligations of the United States Government, its
agencies or instrumentalities; (ii) negotiable certificates of deposit and
bankers' acceptances of United States banks which have more than $1 billion in
total assets at the time of investment and are members of the Federal Reserve
System or are examined by the Comptroller of the Currency or whose deposits are
insured by the Federal Deposit Insurance Corporation; (iii) domestic and foreign
U.S. dollar-denominated commercial paper rated "P-1" by Moody's or "A-1" or
"A-1+" by S&P; and (iv) repurchase agreements with respect to any of the
foregoing portfolio securities. Each Fund also has the right to hold up to 100%
of its total assets in cash as the Adviser deems necessary for temporary
defensive purposes. To the extent the Fund maintains a temporary defensive
posture, the Fund's investment objectives may not be fully achieved.
Investments of the Funds in U.S. dollar-denominated foreign commercial
paper may involve certain risks not applicable to investment by a Fund in the
obligations of domestic issuers. These risks may include risks of foreign
political or economic instability, difficulties in enforcing a judgment against
a foreign issuer should it default, the imposition or tightening of exchange
controls and changes in foreign governmental attitudes toward private
investment, including the possibility of increased taxation, nationalization or
expropriation of Fund assets. Foreign issuers of securities may also be subject
to different accounting and disclosure systems, which may affect the type and
quality of information available about an issuer. The rating services used by
the Funds take these factors into consideration when assigning a rating to a
particular security, and therefore the additional risk to the Funds of investing
in foreign securities with the same ratings as a domestic security is not
expected to be significant.
The Funds will not invest in any obligations of or loan any of their
portfolio securities to First Fidelity or its affiliates as defined in the 1940
Act or any affiliates of the Funds. Subject to the limitations described, each
Fund is permitted to invest in obligations of correspondent banks of First
Fidelity (banks with which First Fidelity maintains a special bank servicing
relationship) which are not affiliates of the Trust, its Adviser or its
Distributor, but the Funds will not give preference in their investment
selections to those obligations.
After purchase by a Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Funds. Neither
event will require a sale of such security by the Funds. However, the Funds'
Adviser will consider such event in its determination of whether the Funds
should continue to hold the security. To the extent the ratings given by Moody's
or S&P may change as a result of changes in such organizations of their rating
systems, the Funds will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in this
Prospectus and in the SAI.
Opinions relating to the validity of Municipal Obligations and to the
exclusion of interest thereon from Federal and Pennsylvania personal income
taxes are rendered by bond counsel to the respective issuers at the time of
issuance. Neither the Funds, the Trust nor the Adviser will review the
proceedings relating to the issuance of Municipal Obligations or the basis for
such opinions.
15
Other types of Municipal Obligations which may be purchased by the
Pennsylvania Tax-Free Fund include:
MUNICIPAL LEASE OBLIGATIONS. Municipal lease obligations are financing
arrangements secured by leases of property to a municipality. These obligations
are considered to be illiquid securities and typically are not fully backed by
the municipality's credit. Interest from a municipal lease obligation may become
taxable if the lease is assigned. If the governmental user does not appropriate
sufficient funds for the following year's lease payments, the lease will
terminate, with the possibility of default on the lease obligations and
significant loss to the Pennsylvania Tax-Free Fund. The Pennsylvania Tax-Free
Fund will not purchase any municipal lease obligation that is not covered by a
legal opinion (typically from the issuer's counsel) to the effect that, as of
the effective date of such lease, the lease is the valid and binding obligation
of the governmental issuer. For a more detailed description of Municipal Leases,
see "Investment Policies -- Municipal Leases" in the SAI.
RESOURCE RECOVERY BONDS. Resource recovery bonds may be general
obligations of the issuing municipality or supported by corporate or bank
guarantees. The viability of the resource recovery project, environmental
protection regulations and project operator tax incentives may affect the value
and credit quality of resource recovery bonds.
VARIABLE AND FLOATING RATE OBLIGATIONS. Certain of the municipal
obligations which the Pennsylvania Tax-Free Fund may purchase have a floating or
variable rate of interest. Such obligations bear interest at rates which are not
fixed, but which vary with changes in specified market rates or indices, such as
a Federal Reserve composite index. Certain of such obligations may carry a
demand feature or put option which would permit such Fund, as holder, to tender
them back to the issuer or a third party prior to maturity ("demand
instruments"). Such Fund may invest in floating and variable rate municipal
obligations even if they carry stated maturities in excess of one year.
Obligations with a demand feature generally receive two ratings, one
representing an evaluation of the degree of risk associated with scheduled
interest and principal payments and the other representing an evaluation of the
degree of risk associated with the demand feature. The two highest ratings
assigned to the demand feature by Moody's are "VMIG 1" and "VMIG 2" which have
generally the same characteristics as Moody's "MIG 1" and "MIG 2" ratings.
Investments in variable and floating rate obligations are limited to those that
are rated VMIG 1 by Moody's or, if not rated, are, in the opinion of the
Adviser, of comparable investment quality. The Adviser will monitor on an
ongoing basis the earning power, cash flow and other liquidity ratios of the
issuers of such obligations and will similarly monitor the ability of an issuer
of a demand instrument to pay principal and interest on demand. The Pennsylvania
Tax-Free Fund's right to obtain payment at par on a demand instrument could be
affected by events occurring between the date such Fund elects to demand payment
and the date payment is due which may adversely affect the ability of the issuer
of the instrument to make payment when due.
The Pennsylvania Tax-Free Fund does not intend to concentrate its
investments in any one industry. Thus, from time to time, such Fund may invest
25% or more of its assets in municipal obligations which are related in such a
way that an economic, business or political development or change affecting one
such obligation would also affect the other obligations; for example, municipal
obligations, the interest on which is paid from revenues of similar type
projects or municipal obligations whose issuers are located in the same state.
Because the taxable money market is a broader and more liquid market with a
greater number of investors, issuers and market makers than is the market for
short-term tax-exempt municipal obliga-
16
tions, the liquidity of the Pennsylvania Tax-Free Fund may not be equal to that
of a money market fund which invests exclusively in short-term taxable money
market instruments. The more limited marketability of short-term tax-exempt
municipal obligations may make it difficult in certain circumstances to dispose
of large investments advantageously. In general, tax-exempt municipal
obligations are also subject to credit risks such as the loss of credit ratings
or possible default. In addition, an issuer of tax-exempt municipal obligations
may lose its tax-exempt status in the event of a change in the current tax laws.
RISK FACTORS: INVESTING IN PENNSYLVANIA MUNICIPAL OBLIGATIONS. Each
investor should consider carefully the special risks inherent in the
Pennsylvania Tax-Free Fund's investment in Pennsylvania Municipal Obligations.
Pennsylvania has been historically identified as a heavy industry state although
that reputation has recently changed as the industrial composition of
Pennsylvania diversified when the coal, steel, and railroad industries began to
decline. This diversification was necessary when the traditionally strong
industries in Pennsylvania declined as a long-term shift in jobs, investment and
workers away from the northeast part of the nation took place. The major new
sources of growth are in the service sector, including trade, medical and health
services, education and financial institutions. Pennsylvania is highly
urbanized, with approximately 50% of the Commonwealth's population contained in
the metropolitan areas which include the cities of Philadelphia and Pittsburgh.
It should be noted that Pennsylvania Municipal Obligations may be adversely
affected by local political and economic conditions and developments within
Pennsylvania. For example, adverse conditions in a significant industry within
Pennsylvania may from time to time have a correspondingly adverse effect on
specific issuers within Pennsylvania or on anticipated revenue to the
Commonwealth itself. An expanded discussion of the risks associated with the
purchase of Pennsylvania issues is contained in the SAI.
INVESTMENT COMPANY SECURITIES. The Pennsylvania Tax-Free Fund may invest
in securities issued by other investment companies. Such securities will be
acquired by the Pennsylvania Tax-Free Fund within the limits prescribed by the
Act, which include a prohibition against a Fund investing more than 10% of the
value of its total assets in such securities. Investments in securities issued
by other investment companies will subject shareholders to the imposition of
duplicative fees and expenses.
All five of the Funds may engage in the following portfolio transactions:
LOANS OF PORTFOLIO SECURITIES. Each of the Funds may loan its portfolio
securities to brokers, dealers, and financial institutions to increase current
income. All loans of securities must be continuously secured by collateral
consisting of United States Government securities, cash or letters of credit
maintained on a daily mark-to-market basis in an amount at least equal to the
current market value of the securities loaned plus the interest payable with
respect to the loan.
As a condition of the loan, the Fund lending the security must have the
right to call the loan and obtain the return of the securities loaned within
five business days. Moreover, a Fund will receive any interest or dividends paid
on the loaned securities. The Funds will not lend portfolio securities to First
Fidelity, or to any affiliate of First Fidelity or to any other affiliate of the
Funds. Loans of securities involve a risk that the borrower may fail to return
the securities or may fail to provide additional collateral.
17
REPURCHASE AGREEMENTS. Securities held by the Funds may be subject to
repurchase agreements. A repurchase agreement is a transaction in which the
seller of a security commits itself at the time of the sale to repurchase that
security from the buyer at a mutually agreed upon time and price. Each Fund will
enter into repurchase agreements only with dealers, domestic banks or recognized
financial institutions which, in the opinion of the Adviser, present minimal
credit risks. Each Fund will enter into repurchase agreements only with respect
to obligations which could otherwise be purchased by that Fund or any other
obligations backed by the full faith and credit of the United States. Where the
securities underlying a repurchase agreement are not U.S. Government securities,
they must be of the highest quality at the time the repurchase agreement is
entered into (e.g., a long-term debt security would be required to be rated by
S&P as "AAA" or its equivalent). While the maturity of the underlying securities
in a repurchase agreement transaction may be more than one year, the term of the
repurchase agreement is always less than one year. The maturities of the
underlying securities will have to be taken into account in calculating the
Fund's dollar weighted average portfolio maturity if the seller of the
repurchase agreement fails to perform under such agreement. In the event of
default by the seller under the repurchase agreement, a Fund may experience a
loss of income from the loaned securities and a decrease in the value of any
collateral maintained, problems in exercising its rights to the underlying
securities and costs and time delays in connection with the disposition of such
securities. Each Fund will invest no more than 10% of its net assets in
repurchase agreements maturing in more than seven days and other illiquid
investments.
INVESTMENT RESTRICTIONS
The investment objective of each Fund and the policy of the Tax-Free Funds
of investing at least 80% of their net assets in Municipal Obligations are
fundamental policies and except for policies with respect to repurchase
agreements and securities with put rights, which are also fundamental policies
of each Fund and subject to the investment restrictions set forth below, each
Fund's investment policies and the Adviser's discretion to make use of a
particular investment technique or activity are not fundamental and may be
changed by the Board of Trustees of the Trust without the approval of
shareholders.
None of the Funds may (1) borrow money or pledge or mortgage its assets,
except that each Fund may borrow from banks up to 10% of the current value of
the total net assets of that Fund for temporary purposes only in order to meet
redemptions, and those borrowings may be secured by the pledge of not more than
10% of the current value of the total net assets of that Fund (but investments
may not be purchased by that Fund while any such borrowings exist); (2) make
loans, except loans of portfolio securities having a value of not more than 10%
(5% with respect to the Tax-Free Money Market Fund) of that Fund's current
assets and except that each Fund may purchase a portion of an issue of publicly
distributed bonds, debentures or other obligations, make deposits with banks and
enter into repurchase agreements with respect to its portfolio securities; or
(3) invest an amount equal to 10% or more of the current value of a Fund's net
assets in illiquid securities, including those securities which do not have
readily available market quotations and repurchase agreements having maturities
of more than seven calendar days and, with respect to the Cash Management Fund,
fixed time deposits not subject to withdrawal penalties having maturities of
more than seven calendar days. Investments in restricted securities eligible for
resale pursuant to Rule 144A of the Securities Act of 1933 which have been
determined to be liquid by the Board of Trustees based upon the trading markets
for the securities will not be included for purposes of this limitation.
However, investing in
18
Rule 144A securities could have the effect of increasing the level of fund
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing such securities. For each Fund, the foregoing
investment restrictions and those described in the SAI are fundamental policies
which may be changed only when permitted by law and approved by the holders of a
majority of the outstanding voting securities of that Fund, as described under
"Other Information" in the SAI.
MANAGEMENT OF THE FUNDS
The property, affairs and business of the Funds are managed by the Board of
Trustees. The Trustees elect officers who are charged with the responsibility
for the day-to-day operations of the Funds and the execution of policies
formulated by the Trustees. Detailed information about the Trustees and Officers
may be found in the SAI under "Management of the Funds".
ADVISER
First Fidelity serves as the investment adviser for each of the Funds. The
offices of the Adviser are located at 765 Broad Street, Newark, New Jersey
07102. The Adviser is a national banking association with branches in
Pennsylvania, New York, Maryland and throughout New Jersey. It is a wholly-owned
subsidiary of First Fidelity Incorporated, originally established in 1812,
which, as a result of a reorganization with Fidelcor, Inc., a Pennsylvania bank
holding company, is now a wholly-owned subsidiary of First Fidelity
Bancorporation. First Fidelity Bancorporation, a New Jersey corporation,
provides financial and related services through its subsidiary organizations.
The advisory services of the Adviser are provided through the Asset Management
Group of the Trust Division which, as of March 31, 1995, had approximately $16.7
billion of client assets under management. The Adviser has provided investment
advisory services to investment companies since 1986 and currently acts as
Adviser to all Funds within FFB Funds Trust.
Pursuant to a Master Advisory Contract (the "Advisory Contract"), First
Fidelity furnishes continuous investment guidance consistent with each Fund's
investment objective and policies and provides administrative assistance in
connection with the operation of each Fund. First Fidelity also acts as transfer
agent, custodian and dividend disbursing agent for the Funds, as described in
the SAI.
First Fidelity intends to receive its customary managing agency account
fees or any other account fees it imposes on accounts of its bank customers in
respect of customer assets invested in the Funds where permitted by applicable
federal, state and local laws; this may result in the receipt by First Fidelity
of customer account fees in addition to advisory fees from the Funds and a
corresponding reduction in the total yield for the Funds realized by customers
who hold Fund shares in regular customer accounts with First Fidelity. Neither
First Fidelity, nor any of its affiliates, nor any of their employees will make
loans for the purpose of purchasing or carrying shares of the Funds or make
loans to the Funds. Prospectuses and sales material for the Funds can be
obtained from FFB Funds Distributor.
First Fidelity Bancorporation, a bank holding company based in Newark, New
Jersey, and Philadelphia, Pennsylvania and the indirect parent of the Adviser
has recently agreed to merge with First Union Corp., a bank holding company
based in Charlotte, North Carolina. The merger is subject to approval by the
shareholders of both corporations and by federal and state bank regulators. It
is anticipated that the merger will occur before the end of 1995.
19
SPONSOR AND DISTRIBUTOR
FFB Funds Distributor, Inc., (the "Distributor" or "FFB Funds
Distributor"), the Sponsor and Distributor, has its principal office at 237 Park
Avenue, New York, New York 10017. The Distributor is an affiliate of Furman Selz
Incorporated ("Furman Selz").
Pursuant to a Master Distribution Contract (the "Distribution Contract"),
the Distributor is responsible for the distribution of Fund shares. The
Distributor receives no compensation for services rendered to the Funds pursuant
to the Distribution Contract.
ADMINISTRATOR
Pursuant to a Master Administrative Services Contract (the "Administrative
Services Contract"), Furman Selz acts as the Administrator of the Funds and has
its office at 237 Park Avenue, New York, New York 10017. It provides personnel,
office space and all management and administrative services reasonably necessary
for the operation of the Trust and the Funds (such as maintaining the Funds'
books and records, monitoring compliance with all state and Federal laws and
assisting the Trustees in the execution of their duties) other than those
services which are provided by First Fidelity pursuant to the Advisory Contract.
Furman Selz receives from the Funds a monthly fee based on the net assets of the
Funds as compensation for its provision of administrative services to the Funds.
See "Fees and Expenses".
DISTRIBUTION PLAN
Each Fund has adopted a Master Distribution Plan (the "Plan") pursuant to
Rule 12b-1 of the 1940 Act, after having concluded that there is a reasonable
likelihood that the Plan will benefit each Fund and its shareholders. The Plan
provides for a monthly payment by each Fund to the Distributor in such amounts
that the Distributor may request for direct and indirect distribution expenses,
subject to periodic Board approval and to an overall expense limitation. These
expenses include the printing and distribution of prospectuses sent to
prospective investors, the preparation, printing and distribution of sales
literature and expenses associated with media advertisements, telephone services
and payments to financial intermediaries for introducing assets to and retaining
assets in the Funds. The Distributor may also make payments to itself and other
broker-dealers or financial intermediaries for assistance in distributing shares
of the Funds and otherwise promoting the sale of Fund shares. Each such payment
is based on the average daily value of that Fund's net assets during the
preceding month and is calculated at an annual rate not to exceed 0.25% per
annum, except the Pennsylvania Tax-Free Fund is calculated at an annual rate not
to exceed 0.35%.
The Funds are permitted to pay banks and other depository institutions
under the Plan for performing additional administrative and shareholder
servicing functions. The Funds believe that such services are permissible
activities under present banking laws and regulations and will take appropriate
actions (which should not adversely affect the Funds or their shareholders) in
the future to maintain compliance with applicable laws should any changes occur.
The Plan provides for the Distributor to prepare and submit to the Board of
Trustees on a quarterly basis written reports of all amounts expended pursuant
to the Plan and the purpose for which such expenditures were made. The Plan may
not be amended to increase materially the amount spent for distribution expenses
without approval by a majority of each Fund's outstanding shares and approval of
a majority of the non-interested Trustees.
20
SERVICING AGREEMENTS
First Fidelity, as Transfer Agent, may enter into agreements (the
"Servicing Agreements") with certain banks, financial institutions and
corporations (the "Participating Organizations") under which each Participating
Organization handles recordkeeping and provides certain administrative services
for its customers who invest in the Funds through accounts maintained at the
Participating Organization. These administrative services may include the
maintenance of account records in the name of each shareholder (reflecting
purchases, redemptions and dividends paid or reinvested), the processing of
dividends, reinvestments, purchase and redemption requests, the preparation and
mailing of periodic account statements, the addressing and mailing of the Funds'
communications to shareholders (financial reports, proxy information and tax
reports) and other related services. In such cases, the Participating
Organization or one of its nominees will be the shareholder of record in that
particular Fund as nominee for its customers and will maintain subaccounts of
its customers. Pursuant to a separate agreement between a Participating
Organization and its customers, customers may grant or may already have granted
to a Participating Organization the power to vote proxies relating to their
shares of the Funds. Any customer of a Participating Organization may become the
shareholder of record upon written request to its Participating Organization or
First Fidelity, as Transfer Agent. Services performed by the Participating
Organizations will include enhanced personal communication services including
additional telephone services and responses to individual inquiries.
Each Participating Organization will receive monthly payments which will be
based upon expenses that the Participating Organization has incurred in the
performance of its services under the Servicing Agreement. The payments will not
exceed, on an annualized basis, an amount equal to 0.35% of the average daily
value during the month of Fund shares in the subaccounts of which the
Participating Organization is record owner as nominee for its customers. Such
payments will be separately negotiated with each Participating Organization and
will vary depending upon such factors as the services provided and the costs
incurred by each Participating Organization. The payments may be more or less
than the fees payable to First Fidelity pursuant to the Agency Agreement for
similar services. Participating Organizations will not be paid any amounts under
the Funds' Distribution Plan (See "Distribution Plan"). The net assets of each
Fund are used for purposes of calculating the maximum amount payable under its
Distribution Plan and will, however, include assets of persons who purchase
shares through Participating Organizations.
The payments will be made by each Fund to First Fidelity which will, in
turn, pay the Participating Organization pursuant to the Servicing Agreements.
First Fidelity will not keep any portion of the payments and will not receive
any compensation as transfer or dividend disbursing agent with respect to the
subaccounts maintained by Participating Organizations. The Board of Trustees
will review, at least quarterly, the amounts paid and the purposes for which
such expenditures were made pursuant to the Servicing Agreements.
Investors who purchase and redeem shares of the Funds through a customer
account maintained at a Participating Organization may be charged one or more of
the following types of fees as agreed upon by the Participating Organization and
the investor with respect to the customer services provided by the Participating
Organization: account fees (a fixed amount per month or per year); transaction
fees (a fixed amount per transaction processed); compensating balance
requirements (a minimum dollar amount a customer must maintain in order to
obtain the services offered); or account maintenance fees (a periodic charge
based upon a percentage of the assets in the account or of the dividends paid on
those assets).
21
GLASS-STEAGALL ACT
The Glass-Steagall Act and other applicable laws generally prohibit banks
that are members of the Federal Reserve System from engaging in the business of
underwriting, selling or distributing securities. The Board, based upon advice
from counsel, believes that First Fidelity may perform the services for the
Funds contemplated by the Advisory Contract with violation of the Glass-Steagall
Act or other applicable banking laws or regulations. However, it is possible
that future changes in either Federal or state statutes and regulations
concerning the permissible activities of banks or trust companies, as well as
further judicial administrative decisions and interpretations of present and
future statutes and regulations, might prevent First Fidelity from continuing to
perform such services for the Funds. If First Fidelity were prohibited from
acting as investment adviser to the Funds, it is expected that the Trustees of
the Trust would recommend to the shareholders of the Funds that they approve the
Funds' entering into a new Advisory Contract with another qualified investment
adviser to be selected by the Trustees.
FEES AND EXPENSES
As compensation for their advisory, administrative and management services,
First Fidelity and Furman Selz are each paid a monthly fee at the following
annual rates:
U.S. TREASURY FUND, U.S. GOVERNMENT FUND, CASH MANAGEMENT FUND AND
TAX-FREE FEE RATE
MONEY FUND -----------------
---------------------------------------------------------------------------- FIRST FURMAN
PORTION OF AVERAGE DAILY VALUE OF NET ASSETS OF EACH FUND
FIDELITY SELZ
---------------------------------------------------------------------------- -------- ------
Not exceeding $500 million.................................................. 0.350% 0.150%
In excess of $500 million but not exceeding $1 billion...................... 0.315% 0.135%
In excess of $1 billion but not exceeding $1.5 billion...................... 0.280% 0.120%
In excess of $1.5 billion................................................... 0.245% 0.105%
FEE RATE
PENNSYLVANIA TAX-FREE FUND -----------------
---------------------------------------------------------------------------- FIRST FURMAN
PORTION OF AVERAGE DAILY VALUE OF NET ASSETS FIDELITY
SELZ
---------------------------------------------------------------------------- -------- ------
Not exceeding $500 million.................................................. 0.400% 0.150%
In excess of $500 million but not exceeding $1 billion...................... 0.360% 0.135%
In excess of $1 billion but not exceeding $1.5 billion...................... 0.320% 0.120%
In excess of $1.5 billion................................................... 0.280% 0.105%
PORTFOLIO TRANSACTIONS
Pursuant to the Advisory Contract, the Adviser places orders for the
purchase and sale of portfolio investments for each Fund's account with brokers
or dealers selected by it in its discretion. The Adviser will not place orders
with the Sponsor or any affiliate of the Sponsor.
Purchases and sales of portfolio securities for the Funds are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Funds. Trading does,
however, involve transaction costs, primary dealer spreads and underwriting
commissions. Transactions with dealers serving as primary market makers reflect
the spread between the bid and asked prices. Purchases of underwritten issues
may be made which will
22
include an underwriting fee paid to the underwriter. In effecting purchases and
sales of portfolio securities for the account of the Funds, the Adviser will
seek the best execution of each Fund's orders. Due to the Funds' investments in
securities with short maturities, portfolio turnover may be regarded as high.
The Funds may also attempt to increase yield by trading to take advantage of
short-term investment variations. High portfolio turnover should not adversely
affect the Funds since they do not usually pay brokerage commissions when
purchasing short-term debt obligations.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Fund for the purpose of pricing
purchase and redemption orders is determined at 12:00 Noon (Eastern Standard
time) on each day the New York Stock Exchange is open for trading except for
holidays, which include New Year's Day, Martin Luther King Jr.'s Birthday,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day. The net asset
value per share of each Fund is computed by dividing the value of the net assets
of that Fund (i.e., the value of the assets less the liabilities) by the total
number of that Fund's outstanding shares. All expenses, including the advisory
and administrative fees, are accrued daily and taken into account for the
purpose of determining the net asset value.
Each Fund uses the amortized cost method to value its portfolio securities
and seeks to maintain a constant net asset value of $1.00 per share, although
there is no assurance of such. The amortized cost method involves valuing a
security at its cost and amortizing any discount or premium over the period
until maturity, regardless of the impact of fluctuating interest rates on the
market value of the security. See the SAI for more details.
PURCHASE OF SHARES
Shares of each Fund are offered at net asset value by the Distributor as an
investment vehicle for institutions, corporations, fiduciaries and individuals.
Prospectuses and sales material can be obtained from the Distributor.
Investments in the Funds are not insured.
The minimum initial investment is $1,000. There are no minimum investment
requirements with respect to investments effected through certain automatic
purchase and redemption arrangements on behalf of customer accounts maintained
at Participating Organizations. The minimum investment requirements may be
waived or lowered for investments effected on a group basis by certain other
institutions and their employees. All funds will be invested in full and
fractional shares. The Trust reserves the right to reject any purchase order.
Orders for shares will be executed at the net asset value per share next
determined after an order has been received. Orders will become effective when
Federal funds (money made available to the Funds through a Federal Reserve bank
wire transfer) are available to the Trust's custodian for investment. If payment
is transmitted by wire, the order will become effective upon receipt of Federal
funds. Federal Reserve wire transmissions may be subject to delays of up to
several hours, in which case execution of an order will be delayed for a like
period of time. Payments transmitted by a bank wire other than the Federal
Reserve Wire System may take longer to be converted into Federal funds. Banks
may charge a service fee for transfers by wire. Checks must be payable in United
States dollars and will be accepted subject to collection at full face value.
23
Compensation to salespersons may vary depending upon whether Service Class
or Institutional Class shares are sold.
PROSPECTIVE INVESTORS WHO WISH TO OBTAIN ADDITIONAL INFORMATION
CONCERNING
INVESTMENT PROCEDURES SHOULD CONTACT THE DISTRIBUTOR AT: (800)
437-8790.
DIRECT PURCHASES THROUGH FFB FUNDS DISTRIBUTOR, INC.
PURCHASE BY WIRE
1. Telephone: (800) 437-8790. State whether funds are to be invested in
the FFB U.S. Treasury Fund, FFB U.S. Government Fund, FFB Cash Management Fund,
FFB Tax-Free Money Market Fund and FFB Pennsylvania Tax-Free Money Market Fund.
Give the name(s) in which the Fund shares are to be registered, address, social
security or tax identification number (where applicable), dividend payment
election, amount to be wired, name of the wiring bank and name and telephone
number of the person to be contacted in connection with the order. An account
number will be assigned.
2. Instruct the wiring bank to transmit the specified amount in Federal
funds ($1,000 or more) to:
Investors Fiduciary Trust Company ("IFTC")
Kansas City, MO 64105
ABA Routing Number: 101003621
Acct. No. 7512996
Indicate Name of Fund
Account Name(s) (in which to be registered)
Account Number (as assigned by telephone)
3. Fill in a Purchase Application and mail to:
FFB Funds Distributor, Inc.
P.O. Box 4490
Grand Central Station
New York, NY 10163-4490
A COMPLETED PURCHASE APPLICATION MUST BE RECEIVED BY FFB FUNDS DISTRIBUTOR
BEFORE THE EXPEDITED REDEMPTION OR CHECK REDEMPTION SERVICES CAN BE USED.
PURCHASE BY MAIL
1. Complete a Purchase Application. Indicate the services to be used.
2. Mail the Purchase Application and a check for $1,000 or more, payable
to the appropriate Fund, as the case may be, to FFB Funds Distributor.
ADDITIONAL PURCHASES BY WIRE AND MAIL
Additional purchases of shares may be made by wire by instructing the
wiring bank to transmit the amount ($100 or more) of any additional purchase in
Federal funds to IFTC along with your account name and number. Additional
purchases may also be made by mail by making a check ($100 or more) payable to
the particular Fund indicating your Fund account number on the check and mailing
it to FFB Funds Distributor.
24
AUTOMATIC INVESTMENT PLAN
The Funds provide a convenient method by which an investor can have amounts
sent directly from his or her checking account for investment in the Funds. The
minimum initial and subsequent investment pursuant to this Program is $100 per
Fund on a monthly or quarterly basis.
PURCHASES THROUGH CUSTOMER ACCOUNTS
Purchases of shares also may be made through customer accounts maintained
at Participating Organizations, including qualified Individual Retirement and
Keogh Plan accounts. Purchases through such accounts may be subject to
additional procedural requirements and are governed by the terms of the
agreement between the customer and the Participating Organization itself. All
such procedural requirements must, however, be consistent with the 1940 Act.
Purchases will be made through a customer's account only as directed by or on
behalf of the customer on a direction form executed prior to the customer's
first purchase of shares of any Fund. For example, a customer with an account at
a Participating Organization may instruct the Participating Organization to
invest money in excess of a level agreed upon between the customer and the
Participating Organization in shares of one of the Funds periodically or give
other instructions to the Participating Organization within limits prescribed by
that Participating Organization.
BY PAYROLL DIRECT DEPOSITS
Investors may set up a payroll direct deposit arrangement for amounts to be
automatically invested in any of the Funds. Participants in the Payroll Direct
Deposit program may make periodic investments of a least $20.00 per pay period.
Contact FFB Funds Distributor for more information about Payroll Direct Deposit.
REDEMPTION OF SHARES
Upon receipt by FFB Funds Distributor of a redemption request in proper
form, shares of a Fund will be redeemed at its next determined net asset value.
See "Determination of Net Asset Value". For the shareholder's convenience, the
Trust has established several different direct redemption procedures. NO PAYMENT
OF PROCEEDS OF A REDEMPTION OF SHARES PURCHASED BY CHECK WILL BE
PERMITTED UNTIL
THE CHECK IS CLEARED, WHICH MAY TAKE UP TO 15 DAYS AFTER THOSE
SHARES HAVE BEEN
CREDITED TO THE SHAREHOLDER'S ACCOUNT.
DIRECT REDEMPTION THROUGH FFB FUNDS DISTRIBUTOR
REDEMPTION BY MAIL
1. Write a letter of instruction. Indicate the dollar amount or number of
shares to be redeemed. Refer to the shareholder's Fund account number.
2. Sign the letter in exactly the same way the account is registered. If
there is more than one owner of the shares, all must sign.
3. If shares to be redeemed have a value of $25,000 or more, the
signature(s) must be guaranteed by a commercial bank which is a member of the
Federal Deposit Insurance Corporation, a trust company, a member firm of a
domestic stock exchange or a foreign branch of any of the foregoing or
25
an approved savings bank or savings and loan association. A signature guarantee
by a non-approved savings bank or a notary public is not acceptable. Further
documentation, such as copies of corporate resolutions and instruments of
authority, may be requested from corporations, administrators, executors,
personal representatives, trustees or custodians to evidence the authority of
the person or entity making the redemption request.
4. Mail the letter to FFB Funds Distributor at the address set forth under
"Purchase of Shares".
Checks for redemption proceeds will normally be mailed within seven days to
the shareholder's address of record.
Upon request, the proceeds of a redemption amounting to $1,000 or more (net
of any withholding required under Federal Income Tax laws) will be sent by wire
to the shareholder's predesignated bank account. The shareholder's receiving
bank may charge its customers a wire transfer fee for this service. When
proceeds of a redemption are to be paid to someone other than the shareholder
either by wire or check, the signature(s) on the letter of instruction must be
guaranteed regardless of the amount of the redemption.
REDEMPTION BY EXPEDITED REDEMPTION SERVICE
If shares are held in book entry form and the Expedited Redemption Service
has been elected on the Purchase Application on file with FFB Funds Distributor,
redemption of shares may be requested by telephone or letter on any day the
Funds are open for business. (See "Determination of Net Asset Value" for days
the Funds are open.) A signature guarantee is not required.
1. Telephone the request to FFB Funds Distributor at (800) 437-8790.
2. Mail the request to FFB Funds Distributor at the address set forth
under "Purchase of Shares".
Proceeds of Expedited Redemptions of $1,000 or more (net of any withholding
required under Federal income tax laws) will be wired to the shareholder's bank
indicated in the Purchase Application. If an Expedited Redemption request is
received by the FFB Funds Distributor by 12:00 Noon (Eastern Standard time) on a
day the Funds are open for business, the redemption proceeds will be transmitted
to the shareholder's bank that same day. The shareholder's receiving bank may
charge its customers a wire transfer fee for this service. Otherwise, redemption
will be effected and the proceeds will be transmitted on the next day on which
the Funds are open for business. A check for proceeds of less than $1,000 will
be mailed to the shareholder's address of record.
FFB Funds Distributor employs reasonable procedures to confirm that
instructions communicated by telephone are genuine. If FFB Funds Distributor
fails to employ such reasonable procedures, FFB Funds Distributor may be liable
for any loss, damage or expense arising out of any telephone transactions
purporting to be on a shareholder's behalf. In order to assure the accuracy of
instructions received by telephone, FFB Funds Distributor requires some form of
personal identification prior to acting upon instructions received by telephone,
records telephone instructions and provides written confirmation to investors of
such transactions.
REDEMPTION BY CHECK REDEMPTION SERVICE
If the Check Redemption Service has been elected on the Purchase
Application, you will be sent a Check Redemption Signature Card to be completed.
Once the Signature Card is on file with FFB
26
Funds Distributor, redemptions of shares may be made by using redemption checks
provided by the Funds. There is no charge for this service. Checks must be
written for amounts of $500 or more and may be payable to anyone and negotiated
in the normal way. If more than one shareholder owns the shares in a Fund
account, all must sign the check unless an election has been made to require
only one signature on checks and that election has been filed with FFB Funds
Distributor.
Shares represented by a redemption check will continue to earn daily income
until the check clears the banking system. When honoring a redemption check, FFB
Funds Distributor will cause the Fund to redeem exactly enough full and
fractional shares from a Fund account to cover the amount of the check. The
Check Redemption Service may be terminated at any time by FFB Funds Distributor
or the Funds.
SYSTEMATIC WITHDRAWAL PLAN
An owner of $12,000 or more of shares in a Fund may elect to have periodic
redemptions from his or her account to be paid on a monthly, quarterly or annual
basis. The maximum payment per year is 12% of the account value at the time of
the election. The minimum periodic payment is $100. A sufficient number of
shares to make the scheduled redemption will normally be redeemed on the 25th
day of each month. Depending on the size of the payment requested and
fluctuation in the net asset value, if any, of the shares redeemed, redemptions
for the purpose of making such payments may reduce or even exhaust the account.
A shareholder may request that these payments be sent to a predesignated bank or
other designated party. Capital gains and dividend distributions paid to the
account will automatically be reinvested at net asset value on the distribution
payment date. The Funds reserve the right to amend the Systematic Withdrawal
Plan on 30 days' notice. The Plan may be terminated at any time by the
shareholder. It should be noted that it may be to a shareholder's disadvantage
to buy shares with a sales charge while concurrently making systematic
redemptions under this Plan.
REDEMPTION THROUGH CUSTOMER ACCOUNTS
Investors who purchase shares through customer accounts maintained at
Participating Organizations may redeem those shares only through the
Participating Organization. Customers of Participating Organizations should
inquire at the Participating Organization as to any additional procedures
governing the processing of redemption requests by the Participating
Organization. All such procedures must be consistent with the 1940 Act. In some
cases, a customer may instruct the Participating Organization which maintains
the account through which the customer purchases shares to redeem shares
periodically as required to bring the customer's account balance up to a level
agreed upon between the customer and the Participating Organization. If a
redemption request with respect to such an automatic redemption arrangement is
received from a Participating Organization by the Transfer Agent by 12:00 Noon
(Eastern Standard time) on a day the Funds are open for business, the redemption
proceeds determined at the next calculated net asset value will be transmitted
that same day to the investor's customer account unless otherwise specified by
the Participating Organization. Some customers may be able to instruct their
Participating Organization to arrange for proceeds to be transmitted other than
to their customer account.
27
EXCHANGE PRIVILEGE
Shareholders who have held all or part of their shares in a Fund for at
least fifteen days may exchange shares of the Fund for shares (at their next
determined relative net asset value) of the same class of other Funds for which
First Fidelity is the Adviser and FFB Funds Distributor is also the Distributor.
Shareholders should call or write the Distributor for additional information
about exchanges and a copy of the prospectus for any additional Fund with which
they wish to make an exchange before investing. Exchanges may be made by writing
FFB Funds Distributor, by telephone if the shareholder has elected telephone
exchange privileges on their Purchase Application, or through a Participating
Organization. For shareholders to whom the minimum investment restrictions
apply, the minimum amount which must be exchanged into another Fund in which
shares are not held is $1,000; no partial exchange may be made if, as a result,
such shareholder's interest in the Fund would be reduced to less than $1,000.
There is no service charge for exchanges. Before effecting an exchange,
shareholders should review the Prospectus (and, if applicable, the Prospectus
for any other Fund).
An exchange of shares is taxable as a redemption on which gain or loss may
be recognized for Federal income tax purposes. In the case of transactions
subject to a sales charge, the charge will be assessed on an exchange of shares,
equal to the excess of the sales load applicable to the shares to be acquired,
over the amount of any sales load previously paid on the shares to be exchanged.
See "Federal Taxes" for an explanation of circumstances in which the sales load
paid to acquire shares of a Fund may not be taken into account in determining
gain or loss on the disposition of those shares. The exchange privilege may be
modified or terminated upon 60 days' written notice. See the SAI for further
details.
INDIVIDUAL RETIREMENT ACCOUNTS
The Funds may be used as a funding medium for IRAs. Shares may also be
purchased for IRAs established with authorized custodians. In addition, an IRA
may be established through a custodial account with IFTC. Completion of a
special application is required in order to create such an account, and the
minimum initial investment for an IRA is $250. Contributions to IRAs are subject
to prevailing amount limits set by the Internal Revenue Service. A $5.00
establishment fee and an annual $12.00 maintenance and custody fee are payable
with respect to each IRA. For more information and IRA Information, call FFB
Funds Distributor at (800) 437-8790.
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a statement
for each shareholder which will be mailed at least once each month. In those
cases where a Participating Organization or its nominee is shareholder of record
of shares purchased for its customer, the statement may be transmitted to the
customer by the Participating Organization. Individual transactions will not be
separately reported. Shareholders can write or call FFB Funds Distributor at
(800) 437-8790 (or their Participating Organization, as the case may be) with
any questions relating to their investments in shares of the Funds.
Participating Organizations may be the shareholders of record as nominee
for their customers and may maintain subaccounts for those customers. Any such
customer may become the shareholder of record upon written request to the
Participating Organization or FFB Funds Distributor.
28
FFB Funds Distributor will transmit promptly to each of its customers for
whom it processes purchases and redemptions of shares and to each Participating
Organization copies of all reports to shareholders, proxy statements and other
Trust communications. The Trust's arrangements with FFB Funds Distributor and
the subaccounting arrangements require Participating Organizations to grant
investors who purchase shares through customer accounts the opportunity to vote
their shares by proxy at all shareholder meetings of the Trust. In certain
cases, a customer of a Participating Organization may have given his
Participating Organization the power to vote shares on his behalf. Customers
with accounts at Participating Organizations should consult their Participating
Organization for information concerning their rights to vote shares.
DIVIDENDS AND DISTRIBUTIONS
The Trust intends to declare as a dividend on shares of each Fund
substantially all of the taxable net investment income for such Fund at the
close of each day on which that Fund is open for business (See "Determination of
Net Asset Value" for the days the Funds are open) to the shareholders of record
of such Fund at 12:00 Noon (Eastern Standard time) on that day. Shares purchased
will begin earning dividends on the day the purchase order is executed and
shares redeemed will earn dividends through the previous day. Net investment
income for a Saturday, Sunday or holiday will be declared as a dividend on the
previous business day.
Dividends declared in, and attributable to, the preceding month will be
paid within five business days after the end of each month. Dividends will be
invested automatically in additional shares of the Funds from which they were
paid at the next determined net asset value and credited to the shareholder's
account on the payment date or, at the shareholder's election, paid in cash. For
all investments effected through customer accounts maintained at First Fidelity
or other Participating Organizations (see "Purchase of Shares -- Purchase
through Customer Accounts"), dividend payments in cash will be transmitted
within five business days after the end of each month to the investor's bank
account through which the shares were purchased or, if a Participating
Organization so specifies, to it for crediting to its customer's account.
Dividend checks will be mailed to all other shareholders who elect to be paid in
cash within five business days after the end of each month.
Investors who redeem all or a portion of shares of a Fund prior to a
dividend payment date will be entitled to all dividends declared but unpaid on
those shares on the next dividend payment date.
FEDERAL TAXES
Each Fund is treated as a separate entity for Federal income tax purposes.
Each Fund has elected to be treated as a regulated investment company, qualified
as such for its last taxable year and intends to continue to so qualify by
complying in the future with the provisions of the Internal Revenue Code (the
"Code") applicable to regulated investment companies so that it will not be
liable for Federal income tax with respect to its net investment income
(including tax-exempt income) and net realized capital gains distributed to
shareholders in accordance with the timing requirements of the Code. Each Fund
intends to distribute annually substantially all of its net taxable and
tax-exempt investment income and net realized capital gains to its shareholders
for each taxable year.
Amounts, other than tax-exempt interest, not distributed in accordance with
a calendar year distribution requirement are subject to a non-deductible 4%
excise tax. To avoid application of the
29
excise tax, each Fund intends to make its distributions in accordance with the
calendar year distribution requirement. For this purpose, a distribution,
including an exempt interest dividend, will be treated as paid on December 31 of
a calendar year if it is declared by a Fund in October, November or December of
that year to shareholders of record on a date in such a month and paid by the
Fund during January of the following year. Such distributions will be treated as
received by shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
Dividends derived from a Fund's net investment income (including original
issue discount with respect to certain stripped municipal obligations and
stripped coupons) and any excess of its net short-term capital gain over its net
long-term capital loss will be taxable to shareholders as ordinary income,
whether such dividends are invested in additional shares or received in cash.
Distributions of the excess of net long-term capital gain over net
short-term capital loss designated by a Fund as capital gains dividends will be
taxable as long-term capital gains, regardless of how long a shareholder has
held his Fund shares, whether they are invested in additional shares or received
in cash. The Funds do not, however, anticipate realizing a substantial amount of
net long-term capital gains. Dividends and distributions will not qualify for
the dividends-received deduction for corporations.
To the extent that a Fund's dividends are derived from interest income
exempt from Federal income tax and are designated as "exempt-interest dividends"
by such Fund, they will be excludable from a shareholder's gross income for
Federal income tax purposes, whether they are invested in additional shares or
received in cash.
Most of the income of the Tax-Free Money Fund and the Pennsylvania Tax-Free
Fund is expected to be derived from tax-exempt interest from Municipal
Obligations rather than taxable interest. Each such Fund's dividends derived
from interest on Municipal Obligations will constitute exempt-interest dividends
if that Fund complies with certain requirements of the Code and, except as
discussed below, will not be subject to Federal income tax. Some portion of the
exempt-interest dividends paid by each Fund will be treated as an item of "tax
preference" for purposes of the alternative minimum tax if the Fund invests in
certain types of Municipal Obligations.
Entities or persons who are "substantial users" (or persons related to
"substantial users"), as defined in the Code, of facilities financed by
Municipal Obligations issued for certain private activities should consult their
tax advisers before purchasing shares of the Tax-Free Funds. "Substantial user"
is defined in applicable Treasury regulations to include a "non-exempt person"
who regularly uses in trade or business a part of a facility financed from the
proceeds of industrial development bonds.
Exempt-interest dividends and other distributions paid by the Funds are
includable in the tax base for determining taxability of social security or
railroad retirement benefits.
Interest on indebtedness incurred or continued (or deemed to be incurred or
continued) by shareholders to purchase or carry shares of the Fund may not be
deductible in whole or in part for Federal income tax purposes. In addition,
under rules issued by the Internal Revenue Service for determining when borrowed
funds are considered used for the purposes of purchasing or carrying particular
assets, the purchase of shares may be considered to have been made with borrowed
funds, even though the borrowed funds are not directly traceable to the purchase
of shares.
30
The exemption of exempt-interest dividends for Federal income tax purposes
may not result in similar exemptions under the tax laws of state or local taxing
authorities. In general, only interest earned on obligations issued by the state
or locality in which the investor resides will be exempt from state and local
taxes. Shareholders should consult their tax advisers about the status of
dividends from the Fund in their own states and localities. Each year the Trust
will notify shareholders of the Federal income tax status of distributions and
the percentage of interest income received by the Funds during the preceding
year on tax-exempt obligations indicating on a state-by-state basis the source
of that income.
Each Fund generally will be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from dividends (including capital gains
dividends) paid to non-corporate shareholders if (a) the shareholder fails to
furnish and certify his correct taxpayer identification number or social
security number, (b) the Internal Revenue Service (the "IRS") or a broker
notifies a shareholder or a Fund that the shareholder has failed to report
properly certain interest and dividend income to the IRS and to respond to
notices to that effect, or (c) when required to do so, the shareholder fails to
certify that he is not subject to backup withholding.
Shareholders will be notified each year of the amounts of dividends and
distributions. Dividends and distributions may also be subject to state or local
taxes. Investors should consult their tax advisers for specific information on
the tax consequences of particular types of distributions. Applications and
purchase orders without a certified taxpayer identification number may be
returned to the investor. The Funds reserve the right to close by redemption
accounts without correct certified taxpayer identification numbers.
STATE AND LOCAL TAXES
The Fund intends to qualify under Pennsylvania law so as to pass through
the tax-free characteristic of the Fund's exempt obligations. Shareholders who
are Pennsylvania resident individuals, estates or trusts subject to the
Pennsylvania income tax will not be subject to Pennsylvania personal income tax
on distributions of interest from the Pennsylvania Tax Free Fund which are
attributable to obligations issued by the Commonwealth of Pennsylvania and its
political subdivisions, agencies and instrumentalities, certain qualifying
obligations of United States territories and possessions or United States
Government obligations, the interest from which is statutorily free from state
taxation in the Commonwealth of Pennsylvania ("exempt obligations").
Corporate shareholders who are subject to the Pennsylvania corporate net
income tax will not be subject to corporate net income tax on distributions of
interest made by the Pennsylvania Tax-Free Fund, provided such distributions are
attributable to exempt obligations.
Distribution of gains made by the Pennsylvania Tax Free Fund which are
attributable to exempt obligations issued before February 1, 1994 will not be
subject to Pennsylvania personal income tax or Pennsylvania corporate income
tax. Distribution of gains attributable to exempt obligations issued on or after
February 1, 1994 are subject to such taxes. Due to the short-term nature of the
investments to be made by the Pennsylvania Tax Free Fund, it is not anticipated
that the Fund will realize gains which would otherwise be distributed to
shareholders. Distributions attributable to most other sources will not be
exempt from Pennsylvania personal income tax.
Management of the Pennsylvania Tax-Free Fund believes that shares of such
Fund which are held by individual shareholders who are Pennsylvania residents
and subject to the Pennsylvania county
31
personal property tax will be exempt from such tax to the extent that such
Fund's portfolio consists of exempt obligations on the annual assessment date.
Corporations are not subject to Pennsylvania personal property taxes.
Management of the Pennsylvania Tax-Free Fund believes that in the case of
individual shareholders who are residents of the City of Philadelphia,
distributions of interest shall be considered exempt from the Philadelphia
School District Investment Net Income Tax in the same proportion as the Fund's
portfolio is invested in exempt obligations. It is necessary that the Fund
report annually to such individual shareholders its percentage investment in
exempt obligations.
In order to qualify under the Pennsylvania tax laws to pass through the
tax-free characteristics of the Fund's exempt obligations, the Fund will invest
in securities for income earnings rather than trade for profit and will observe
certain limitations on varying its investments.
Shareholders should consult their own tax advisers with respect to the tax
status of distributions from the Funds in their own states and localities.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
Pursuant to an Agency Agreement, First Fidelity acts as the Funds' Transfer
and Dividend Disbursing Agent and is responsible for maintaining account records
detailing ownership of Fund shares and for crediting income, capital gains and
other changes in share ownership to investors' accounts. First Fidelity is also
the Funds' Custodian. Furman Selz acts as the Funds' Sub-Transfer Agent pursuant
to a Sub-Transfer Agency Agreement.
PERFORMANCE INFORMATION
FFB Funds Trust may, from time to time, include the yield and effective
yield of the Funds in advertisements or reports to shareholders or prospective
investors. Shareholders of the Service Class of shares will experience a lower
net return on their investment than shareholders of the Institutional Class of
shares because of the higher shareholder servicing charge to which Service Class
shareholders will be subject. Current yield for a Fund will be based on income
received by a hypothetical investment over a given seven-day period (less
expenses accrued during the period), and then "annualized" (i.e., assuming that
the seven-day yield would be received for 52 weeks, stated in terms of an annual
percentage return on the investment). "Effective yield" for a Fund is calculated
in a manner similar to that used to calculate yield, but reflects the
compounding effect of earnings on reinvested dividends.
Performance information for a Fund may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, Dow Jones
Industrial Average, or other unmanaged indices so that investors may compare a
Fund's results with those of a group of unmanaged securities widely regarded by
investors as representative of the securities markets in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in a Fund. Unmanaged indices may
assume the reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
32
Performance information for any Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of a Fund's investment objective and policies, characteristics and quality
of the portfolios, and the market conditions during the given time period, and
should not be considered as a representation of what may be achieved in the
future. For a description of the methods used to determine yield and effective
yield for the Funds, see the SAI.
Investors who purchase and redeem shares of the Fund through a customer
account maintained at a Participating Organization may be charged one or more
types of fees as agreed upon by the Participating Organization and the investor
with respect to the customer services provided by the Participating
Organization. Such fees will have the effect of reducing the yield and effective
yield of the Funds for those investors. Investors who maintain accounts with the
Funds' Transfer Agent will not pay these fees.
OTHER INFORMATION
The Trust was organized as a Massachusetts business trust on March 25, 1987
as a successor to FFB Money Trust which was organized on December 4, 1985 and
currently consists of twelve separate portfolios. The Board of Trustees may
establish additional portfolios in the future. The capitalization of FFB Funds
Trust consists of 15,100,000,000 authorized shares of beneficial interest with a
par value of $0.001 each. The five funds described herein each issue two classes
of shares, Institutional Class and Service Class. The classes vary in level of
shareholder servicing and cost. Service Class shares, for investors other than
customers of the Trust Department or Wholesale Bank Division of First Fidelity
Bank, N.A. and other banks and financial institutions, include enhanced
individual communication services and a higher servicing fee. When issued,
shares of the Funds are fully paid, non-assessable and will have no preemptive
rights. All shares of the Trust have equal voting rights and will be voted in
the aggregate, and not by class, except where voting by class is required by law
or where the matter involved affects only one class. For more details concerning
the voting rights of shareholders, see the SAI. First Fidelity is not the
beneficial owner of shares of the Funds, but it may have been granted
discretionary authority to vote all or some of those shares, in which case the
bank may be in a position to control the Funds.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
Officers of the Trust for acts or obligations of the Trust which are binding
only on the assets and property of the Trust and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Trust or the Trustees. The Declaration of Trust provides for indemnification
out of Trust property for all loss and expense of any shareholder held
personally liable for the obligations of the Trust. The risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its obligations
and should be considered remote.
The Trust is not required to hold regular annual meetings of the Funds'
shareholders and does not intend to do so. The Trustees are required to call a
meeting for the purpose of considering the removal of a person serving as
Trustee if requested in writing to do so by the holders of not less than 10% of
the outstanding shares of the Trust and in connection with such meeting to
comply with the shareholders' communications provisions of Section 16(c) of the
1940 Act regarding assistance to shareholders who seek to remove any person
serving as Trustee.
33
APPENDIX
DESCRIPTION OF MUNICIPAL BOND RATINGS
The following are summaries of the ratings used by Moody's and S&P
applicable to permitted investments of the Funds:
MOODY'S INVESTORS SERVICE, INC.*
AAA: Municipal bonds which are rated "Aaa" are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
AA: Municipal bonds which are rated "Aa" are judged to be of high quality
by all standards. Together with the "Aaa" group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in "Aaa" securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat larger than in
"Aaa" securities.
A: Municipal bonds which are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
BAA: Bonds which are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
NOTE: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from "Aa" through "B" in its corporate bond ratings. Although
Industrial Revenue Bonds and Environmental Control Revenue Bonds are tax-exempt
issues, they are included in the corporate bond rating system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category. The modifier 2 indicates a mid-range ranking and modifier 3 indicates
that the issue ranks in the lower end of its generic rating category. Moody's
does not apply numerical modifiers other than "Aa 1", "A 1" and "Baa 1" in its
municipal bond rating system, which offer the maximum security within the "Aa",
"A" and "Baa" groups, respectively.
STANDARD & POOR'S CORPORATION
AAA: Municipal bonds rated "AAA" are highest grade obligations. They
possess the ultimate degree of protection as to principal and interest.
---------------
* Moody's Investors Service, Inc. rates bonds of issuers which have $600,000 or
more of debt, except bonds of educational institutions, projects under
construction, enterprises without established earnings records and situations
where current financial data is unavailable.
34
AA: Municipal bonds rated "AA" also qualify as high grade obligations and
in the majority of instances differ from "AAA" issues only in a small degree.
A: Municipal bonds rated "A" are regarded as upper medium grade. They have
considerable investment strength but are not entirely free from adverse effects
of changes in economic and trade conditions. Interest and principal are regarded
as safe.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the "A" category.
RATINGS OF SHORT-TERM SECURITIES
MOODY'S INVESTORS SERVICE, INC.
The following ratings apply to short-term municipal notes and loans:
MIG 1: Loans bearing this designation are of the best quality, enjoying
strong protection from established cash flows for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG 2: Loans bearing this designation are of high quality, with margins or
protection ample although not so large as in the preceding group.
PRIME-1: Issuers receiving this rating have a superior capacity for
repayment of short-term promissory obligations.
PRIME-2: Issuers receiving this rating have a strong capacity for repayment
of short-term promissory obligations.
STANDARD & POOR'S CORPORATION
The following ratings apply to short-term municipal notes:
AAA: This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to repay principal and interest.
AA: Notes rated "AA" have a very strong capacity to repay principal and pay
interest and differ from "AAA" issues only in a small degree.
A-1: This designation indicates that the degree of safety regarding timely
payment is very strong.
A-2: Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated "A-1".
35
--------------------------------------------------------------------------------
[FFB FUNDS LOGO]
GENERAL AND ACCOUNT INFORMATION: [FFB LOGO] Money
(800) 437-8790 Market
INVESTMENT ADVISER Funds
First Fidelity Bank, N.A.
765 Broad Street U.S. Treasury Fund
Newark, New Jersey 07102 U.S. Government Fund
Cash Management Fund
ADMINISTRATOR Tax-Free Money
Furman Selz Incorporated Market Fund
237 Park Avenue Pennsylvania Tax-Free
New York, New York 10017 Money Market Fund
SPONSOR AND DISTRIBUTOR
FFB Funds Distributor, Inc.
237 Park Avenue
New York, New York 10017
CUSTODIAN, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
First Fidelity Bank, N.A., New Jersey
765 Broad Street
Newark, New Jersey 07102
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
LEGAL COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
TABLE OF CONTENTS
SERVICE CLASS
Fund Expenses............................ 2
Investment Objectives, Policies and
Associated Risks......................... 7
Investment Restrictions.................. 18
----------------------------
Management of the Funds.................. 19
Determination of Net Asset Value......... 23
Purchase of Shares....................... 23
PROSPECTUS
Redemption of Shares..................... 25
Exchange Privilege....................... 28
Individual Retirement Accounts........... 28
JUNE 30, 1995
Account Services......................... 28
Dividends and Distributions.............. 29
Federal Taxes............................ 29
State and Local Taxes.................... 31
Transfer and Dividend Disbursing Agent
and Custodian............................ 32
Performance Information.................. 32
Other Information........................ 33
Appendix................................. 34
-------------------------------------------- Managed by:
No dealer, salesman, or other person has First Fidelity Bank, N.A.
been authorized to give any information or
to make any representations, other than Sponsored and Distributed
By:
those contained in the Prospectus, and, if FFB Funds Distributor, Inc.
given or made, such other information or
representations must not be relied upon as
having been authorized by the Trust, the
Distributor or the Investment Adviser. This
Prospectus does not constitute an offering
in any state in which such offering may not
lawfully be made.
FBMMSCO695
EX-99
16
FFB MONEY MARKET INSTIUTIONAL PROSPECTUS
[FFB FUNDS LOGO]
INSTITUTIONAL CLASS
U.S. TREASURY FUND CASH MANAGEMENT FUND
U.S. GOVERNMENT FUND TAX-FREE MONEY MARKET FUND
PENNSYLVANIA TAX-FREE MONEY MARKET FUND
237 Park Avenue, New York, New York 10017
General and Account Information: (800) 437-8790
FIRST FIDELITY BANK, N.A. -- INVESTMENT ADVISER
FFB FUNDS DISTRIBUTOR, INC. -- SPONSOR AND DISTRIBUTOR
FFB FUNDS TRUST (the "Trust") is an open-end, management investment company
which currently consists of twelve separate portfolios with different investment
objectives, five of which are described in this Prospectus (the "Funds"). The
objective of each Fund is to achieve as high a level of current income as is
consistent with preservation of capital and liquidity. Each of the Funds other
than the Pennsylvania Tax-Free Money Market Fund is a diversified portfolio of
the Trust.
FFB U.S. TREASURY FUND invests exclusively in short-term, direct
obligations of the United States Treasury and repurchase agreements.
FFB U.S. GOVERNMENT FUND invests exclusively in short-term obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities and repurchase agreements.
FFB CASH MANAGEMENT FUND invests exclusively in a variety of high-quality,
short-term money market instruments and repurchase agreements, including
obligations in which the FFB U.S. Government Fund and FFB U.S. Treasury Fund
invest.
FFB TAX-FREE MONEY MARKET FUND invests primarily in high quality,
tax-exempt securities ("Municipal Obligations") with short-term maturities, to
provide its shareholders with as high a level of current income exempt from
Federal income taxes as is consistent with the preservation of capital and
liquidity.
FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND invests in high quality
Pennsylvania securities that are exempt from Federal and Pennsylvania personal
income taxes in the opinion of bond counsel to the issuer with remaining
maturities of thirteen months or less.
Shares of the Funds are divided into two classes. This prospectus relates
only to Institutional Class shares which are offered to customers of the Trust
Department and Wholesale Bank Division of First Fidelity Bank, N.A. and other
banks and financial institutions. Each Fund also offers Service Class shares
which are available to all other investors and are identical to Institutional
Class shares but include enhanced individual share holder communication services
at a higher servicing fee.
Shares of each Fund are offered for sale by FFB Funds Distributor, Inc.
(the "Distributor") as an investment vehicle for institutions, corporations,
fiduciaries and individuals. The Funds are sold without a sales charge or load;
the Funds may pay expenses related to the distribution of their shares. Certain
banks, financial institutions and corporations (the "Participating
Organizations") may agree to act as shareholder servicing agents for investors
who maintain accounts at these Participating Organizations and to perform
certain services for the Funds.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Funds. A Statement of Additional Information
(the "SAI") dated June 30, 1995 containing additional and more detailed
information about the Funds has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus. It is
available without charge and can be obtained by writing or calling the Trust at
the address and general information number printed above.
------------------------------
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR INFORMATION ABOUT
THE FUNDS.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUNDS ARE NOT GUARANTEED OR INSURED BY THE UNITED STATES
GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE. SHARES OF THE FUNDS ARE NOT DEPOSITS
OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY, FIRST FIDELITY BANK OR ITS
AFFILIATES, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY, AND MAY INVOLVE
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
JUNE 30, 1995
FUND EXPENSES
The following table illustrates the expenses and fees that an Institutional
Class shareholder of the Funds will incur.* The fees and expenses set forth
below with respect to Institutional Class shares are based on the fiscal year
ended February 28, 1995. Institutional Class shares are offered to customers of
the Trust Department or Wholesale Bank Division of First Fidelity Bank, N.A. and
other banks and financial institutions and may be subject to shareholder
servicing charges of up to 0.25% of average daily net assets. The Fund also
offers Service Class shares which are available to all other investors and are
subject to a shareholder servicing charge of up to 0.35% of average daily net
assets. Service Class shareholders generally require enhanced individual
communications services including additional telephone services and responses to
customer inquiries.
U.S. TREASURY FUND
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sales Load imposed on Purchases................................................... None
Sales Load imposed on Reinvested Dividends........................................ None
Redemption Fees................................................................... None
Exchange Fees..................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Advisory & Administrative Expenses (after waiver)................................. 0.50%
12b-1 Fees (after waiver)**....................................................... 0.03%
Other Expenses (after waiver)+.................................................... 0.08%
------
TOTAL FUND OPERATING EXPENSES (after waiver)+..................................... 0.61%
======
* Participating Organizations may receive shareholder servicing fees for
Fund shares purchased and maintained through Participating Organizations in an
amount not to exceed 0.25% of the Fund's average daily net assets purchased and
maintained through such Participating Organizations. In addition, customer
accounts maintained at Participating Organizations may be assessed additional
direct fees by the Participating Organization as agreed upon by the customer and
Participating Organization at the time of purchase. In order to avoid such
additional direct fees, shareholders may always elect to purchase shares
directly from the Trust through the Distributor. See "Management of the
Fund -- Servicing Agreements" and "Purchase of Shares -- Purchases through
Customer Accounts".
** Absent waivers, the 12b-1 Plan fee is calculated at an annual rate not
to exceed 0.25% of the Fund's average daily net assets. (See "Management of the
Fund -- Distribution Plan" herein).
+ Other Expenses include a shareholder servicing charge of 0.05%. The
shareholder servicing charges would be 0.25% absent waivers. Other Expenses
would be 0.28% and Total Fund Operating Expenses would be 1.03% absent waivers.
2
U.S. GOVERNMENT FUND
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sales Load imposed on Purchases................................................... None
Sales Load imposed on Reinvested Dividends........................................ None
Redemption Fees................................................................... None
Exchange Fees..................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Advisory & Administrative Expenses................................................ 0.50%
12b-1 Fees (after waiver)**....................................................... 0.03%
Other Expenses (after waiver)+.................................................... 0.12%
------
TOTAL FUND OPERATING EXPENSES (after waiver)+..................................... 0.65%
======
* Participating Organizations may receive shareholder servicing fees for
Fund shares purchased and maintained through Participating Organizations in an
amount not to exceed 0.25% of the Fund's average daily net assets purchased and
maintained through such Participating Organizations. In addition, customer
accounts maintained at Participating Organizations may be assessed additional
direct fees by the Participating Organization as agreed upon by the customer and
Participating Organization at the time of purchase. In order to avoid such
additional direct fees, shareholders may always elect to purchase shares
directly from the Trust through the Distributor. See "Management of the
Fund -- Servicing Agreements" and "Purchase of Shares -- Purchases through
Customer Accounts".
** Absent waivers, the 12b-1 Plan fee is calculated at an annual rate not
to exceed 0.25% of the Fund's average daily net assets. (See "Management of the
Fund -- Distribution Plan" herein).
+ Other Expenses include a shareholder servicing charge of 0.05%. The
shareholder servicing charges would be 0.25% absent waivers. Other Expenses
would be 0.32% and Total Fund Operating Expenses would be 1.07% absent waivers.
TAX FREE MONEY MARKET FUND
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sales Load imposed on Purchases................................................... None
Sales Load imposed on Reinvested Dividends........................................ None
Redemption Fees................................................................... None
Exchange Fees..................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Advisory & Administrative Expenses................................................ 0.50%
12b-1 Fees (after waiver)**....................................................... 0.03%
Other Expenses (after waiver)+.................................................... 0.18%
------
TOTAL FUND OPERATING EXPENSES (after waiver)+..................................... 0.71%
======
* Participating Organizations may receive shareholder servicing fees for
Fund shares purchased and maintained through Participating Organizations in an
amount not to exceed 0.25% of the Fund's average daily net assets purchased and
maintained through such Participating Organizations. In addition, customer
accounts maintained at Participating Organizations may be assessed additional
direct fees by the Participating Organization as agreed upon by the customer and
Participating Organization at the time of purchase. In order to avoid such
additional direct fees, shareholders may
3
always elect to purchase shares directly from the Trust through the Distributor.
See "Management of the Fund-Servicing Agreements" and "Purchase of
Shares-Purchases through Customer Accounts".
** Absent waivers, the 12b-1 Plan fee is calculated at an annual rate not
to exceed 0.25% of the Fund's average daily net assets. (See "Management of the
Fund -- Distribution Plan" herein).
+ Other Expenses include a shareholder servicing charge of 0.05%. The
shareholder servicing charges would be 0.25% absent waivers. Other Expenses
would be 0.38% and Total Fund Operating Expenses would be 1.13% absent waivers.
CASH MANAGEMENT FUND
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sales Load imposed on Purchases................................................... None
Sales Load imposed on Reinvested Dividends........................................ None
Redemption Fees................................................................... None
Exchange Fees..................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Advisory & Administrative Expenses................................................ 0.50%
12b-1 Fees (after waiver)**....................................................... 0.03%
Other Expenses (after waiver)+.................................................... 0.13%
------
TOTAL FUND OPERATING EXPENSES (after waiver)+..................................... 0.66%
======
* Participating Organizations may receive shareholder servicing fees for
Fund shares purchased and maintained through Participating Organizations in an
amount not to exceed 0.25% of the Fund's average daily net assets purchased and
maintained through such Participating Organizations. In addition, customer
accounts maintained at Participating Organizations may be assessed additional
direct fees by the Participating Organization as agreed upon by the customer and
Participating Organization at the time of purchase. In order to avoid such
additional direct fees, shareholders may always elect to purchase shares
directly from the Trust through the Distributor. See "Management of the
Fund -- Servicing Agreements" and "Purchase of Shares -- Purchases through
Customer Accounts".
** Absent waivers, the 12b-1 Plan fee is calculated at an annual rate not
to exceed 0.25% of the Fund's average daily net assets. (See "Management of the
Fund -- Distribution Plan" herein).
+ Other Expenses include a shareholder servicing charge of 0.08%. The
shareholder servicing charges would be 0.25% absent waivers. Other Expenses
would be 0.30% and Total Fund Operating Expenses would be 1.05% absent waivers.
4
PENNSYLVANIA TAX FREE MONEY MARKET FUND
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sales Load imposed on Purchases................................................... None
Sales Load imposed on Reinvested Dividends........................................ None
Redemption Fees................................................................... None
Exchange Fees..................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Advisory & Administrative Expenses (after waiver)**............................... 0.00%
12b-1 Fees (after waiver)***...................................................... 0.03%
Other Expenses (after waiver)+.................................................... 0.35%
------
TOTAL FUND OPERATING EXPENSES (after waiver)...................................... 0.38%
======
* Participating Organizations may receive shareholder servicing fees for
Fund shares purchased and maintained through Participating Organizations in an
amount not to exceed 0.25% of the Fund's average daily net assets purchased and
maintained through such Participating Organizations. In addition, customer
accounts maintained at Participating Organizations may be assessed additional
direct fees by the Participating Organization as agreed upon by the customer and
Participating Organization at the time of purchase. In order to avoid such
additional direct fees, shareholders may always elect to purchase shares
directly from the Trust through the Distributor. See "Management of the
Fund -- Servicing Agreements" and "Purchase of Shares -- Purchases through
Customer Accounts".
** Advisory and Administrative Fees were waived and certain expenses were
reimbursed. Without these waivers/reimbursements, Advisory and Administrative
Expenses would have been 0.55%.
*** Absent waivers, the 12b-1 Plan fee is calculated at an annual rate not
to exceed 0.35% of the Fund's average daily net assets. (See "Management of the
Fund -- Distribution Plan" herein). Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted by the NASD
to the extent, if any, the full 12b-1 Plan fee is charged in the future.
+ "Other Expenses" include a shareholder servicing charge of 0.05%. The
shareholder servicing charges would be 0.25% absent waivers. Other Expenses
would be 0.55% and Total Fund Operating Expenses would be 1.45% absent waivers.
The purpose of these tables is to assist shareholders in understanding the
various costs and expenses that an investor in a Fund will bear. For a more
complete description of the Annual Fund Operating Expenses, see "Management of
the Funds".
5
Example
You would pay the following
expenses on a $1,000 investment,
assuming (1) 5% gross annual
return and (2) redemption at the
end of each time period:
INSTITUTIONAL CLASS
--------------------------------------------------------
U.S. U.S. CASH PA
TREASURY GOVERNMENT MANAGEMENT TAX FREE
TAX FREE
FUND FUND FUND FUND FUND
-------- ---------- ---------- -------- --------
1 Year................................... $ 6 $ 7 $ 7 $ 7 $ 4
3 Years.................................. 19 21 21 23 12
5 Years.................................. 34 36 37 39 21
10 Years.................................. 76 80 82 88 48
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF
FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL
RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE
ASSUMED AMOUNT.
6
FINANCIAL HIGHLIGHTS
The following financial highlights for a share of beneficial interest of
the Institutional Class shares during the period ended February 28, 1995 has
been audited by KPMG Peat Marwick LLP, independent accountants, whose
unqualified report thereon is incorporated by reference in the SAI. The
supplementary financial information for the year ended February 28, 1993 and
prior years has been audited by other auditors. This information should be read
in conjunction with the financial statements and notes thereto which are
incorporated by reference in the SAI. Further information about the performance
of the Registrant is contained in the Registrant's annual report to shareholders
which may be obtained without charge.
SELECTED PER SHARE DATA AND RATIOS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1995 1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------ ------------
U.S. TREASURY FUND
Net asset value, beginning of
period........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from investment
operations:
Net investment income.......... 0.040 0.026 0.031 0.050 0.073 0.083
------------ ------------ ------------ ------------ ------------ ------------
Less Distributions:
Dividends from net investment
income....................... (0.040) (0.026) (0.031) (0.50) (0.073) (0.083)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of period
(in thousands)................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
============ ============ ============ ============ ============ ============
Ratios/Supplemental Data:
Net assets, end of period
(in thousands)............... $671,781 $673,082 $503,637 $453,363 $307,443 $214,073
Ratio of expenses to average
net assets................... 0.58% 0.56% 0.57% 0.56% 0.62% 0.62%
Ratio of net investment income
to average net assets........ 4.04% 2.60% 3.11% 5.02% 7.27% 8.28%
U.S. GOVERNMENT FUND
Net asset value, beginning of
period........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from investment
operations:
Net investment income.......... 0.041 0.026 0.031 0.051 0.073 0.086
------------ ------------ ------------ ------------ ------------ ------------
Less Distributions:
Dividends from net investment
income....................... (0.041) (0.026) (0.031) (0.051) (0.073) (0.086)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of
period......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
============ ============ ============ ============ ============ ============
Ratios/Supplemental Data:
Net assets, end of period
(in thousands)............... $224,314 $232,212 $201,235 $205,969 $237,528 $200,312
Ratio of expenses to average
net assets................... 0.62% 0.59% 0.58% 0.54% 0.60% 0.56%
Ratio of net investment income
to average net assets........ 4.08% 2.60% 3.15% 5.06% 7.33% 8.58%
YEAR ENDED YEAR ENDED PERIOD ENDED
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
1989 1988 1987**
------------ ------------ ------------
U.S. TREASURY FUND
Net asset value, beginning of
period........................ $ 1.000 $ 1.000 $ 1.000
Income from investment
operations:
Net investment income.......... 0.072 0.66 0.026
------------ ------------ ------
Less Distributions:
Dividends from net investment
income....................... (0.072) (0.66) (0.026)
------------ ------------ ------
Net asset value, end of period
(in thousands)................. $ 1.000 $ 1.000 $ 1.000
============ ============ =============
Ratios/Supplemental Data:
Net assets, end of period
(in thousands)............... $110,096 $166,035 $ 69,504
Ratio of expenses to average
net assets................... 0.61% 0.62% 0.54%
Ratio of net investment income
to average net assets........ 7.02% 6.00% 5.67%
U.S. GOVERNMENT FUND
Net asset value, beginning of
period........................ $ 1.000 $ 1.000 $ 1.000
Income from investment
operations:
Net investment income.......... 0.073 0.069 0.037
------------ ------------ ------
Less Distributions:
Dividends from net investment
income....................... (0.073) (0.069) (0.037)
------------ ------------ ------
Net asset value, end of
period......................... $ 1.000 $ 1.000 $ 1.000
============ ============ =============
Ratios/Supplemental Data:
Net assets, end of period
(in thousands)............... $251,517 $230,287 $ 89,164
Ratio of expenses to average
net assets................... 0.61% 0.60% 0.49%
Ratio of net investment income
to average net assets........ 7.52% 6.30% 5.51%*
---------------
* Annualized.
7
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1995 1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------ ------------
CASH MANAGEMENT FUND
Net asset value, beginning of
period........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from investment
operations:
Net investment income.......... 0.041 0.027 0.032 0.055 0.075 0.086
------------ ------------ ------------ ------------ ------------ ------------
Less Distributions:
Dividends from net investment
income....................... (0.041) (0.027) (0.032) (0.055) (0.075) (0.086)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of
period......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
============ ============ ============ ============ ============ ============
Ratios/Supplemental Data:
Net assets, end of period (in
thousands)................... $729,707 $604,048 $460,256 $401,129 $788,110 $529,518
Ratio of expenses to average
net assets................... 0.66% 0.56% 0.60% 0.55% 0.55% 0.56%
Ratio of net investment income
to average net assets........ 4.06% 2.69% 3.19% 5.52% 7.53% 8.57%
TAX-FREE MONEY MARKET FUND
Net asset value, beginning of
period........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from investment
operations:
Net investment income.......... 0.025 0.019 0.024 0.039 0.053 0.057
------------ ------------ ------------ ------------ ------------ ------------
Less Distributions:
Dividends from net investment
income....................... (0.025) (0.019) (0.024) (0.039) (0.053) (0.057)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of
period......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
============ ============ ============ ============ ============ ============
Ratios/Supplemental Data:
Net assets, end of period (in
thousands)................... $108,064 $114,489 $ 82,395 $ 98,999 $116,538 $141,869
Ratio of expenses to average
net assets................... 0.68% 0.59% 0.58% 0.54% 0.61% 0.56%
Ratio of net investment income
to average net assets........ 2.49% 1.88% 2.38% 3.92% 5.31% 5.68%
YEAR ENDED YEAR ENDED PERIOD ENDED
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
1989 1988 1987**
------------ ------------ ------------
CASH MANAGEMENT FUND
Net asset value, beginning of
period........................ $ 1.000 $ 1.000 $ 1.000
Income from investment
operations:
Net investment income.......... 0.074 0.64 0.056
------------ ------------ ------------
Less Distributions:
Dividends from net investment
income....................... (0.074) (0.64) (0.056)
------------ ------------ ------------
Net asset value, end of
period......................... $ 1.000 $ 1.000 $ 1.000
============ ============ =============
Ratios/Supplemental Data:
Net assets, end of period (in
thousands)................... $548,179 $406,994 $340,920
Ratio of expenses to average
net assets................... 0.57% 0.58% 0.57%
Ratio of net investment income
to average net assets........ 7.37% 6.40% 5.79%
TAX-FREE MONEY MARKET FUND
Net asset value, beginning of
period........................ $ 1.000 $ 1.000 $ 1.000
Income from investment
operations:
Net investment income.......... 0.050 0.041 0.016
------------ ------------ ------------
Less Distributions:
Dividends from net investment
income....................... (0.050) (0.041) (0.016)
------------ ------------ ------------
Net asset value, end of
period......................... $ 1.000 $ 1.000 $ 1.000
============ ============ =============
Ratios/Supplemental Data:
Net assets, end of period (in
thousands)................... $149,091 $132,666 $121,874
Ratio of expenses to average
net assets................... 0.61% 0.60% 0.49%*
Ratio of net investment income
to average net assets........ 4.99% 4.14% 3.82%*
---------------
* Annualized.
** Period from commencement of operations on February 28, 1987. Commencement of
operations for each of the Funds is as follows: U.S. Treasury
Fund -- September 30, 1986; U.S. Government Fund -- July 16, 1986.
8
PENNSYLVANIA TAX-FREE MONEY MARKET FUND
FOR THE PERIOD AUGUST 15,
YEAR ENDED YEAR ENDED YEAR ENDED 1991
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, (COMMENCEMENT OF OPERATIONS)
1995 1994 1993 THROUGH FEBRUARY 29, 1992
------------ ------------ ------------ ----------------------------
Net asset value, beginning of period........ $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from investment operations:
Net investment income..................... 0.031 0.021 0.026 0.022*
Net gain (loss) on securities (both
realized and unrealized)................ .000 0.000 0.000 0.000
------------ ------------ ------------ -------
Total from Investment Operations.......... .031 0.021 0.026 0.022
------------ ------------ ------------ -------
Less Distributions:
Dividends from net investment income...... (0.031) (0.021) (0.26) (0.022)
------------ ------------ ------------ -------
Net asset value, end of period.............. $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========== ========== ==========================
Ratio/Supplemental Data:
Net assets, end of period (in
thousands).............................. $ 43,539 $ 14,383 $ 15,999 $ 20,699
Ratio of expenses to average net
assets+................................. 0.33% 0.47% 0.35% 0.19%
Ratio of net income to average net
assets.................................. 3.09% 2.10% 2.62% 3.90%
---------------
* Annualized.
+ Ratios before effect of waivers/reimbursements were 1.05%, 1.26%, 1.07% and
0.77%*, respectively.
9
INVESTMENT OBJECTIVES, POLICIES AND ASSOCIATED RISKS
The objective of each Fund is to seek to provide investors with as high a
level of current income as is consistent with preservation of capital and
liquidity. There is no assurance that this objective will be achieved. Each Fund
will maintain a dollar weighted average portfolio maturity of not more than 90
days.
FFB U.S. TREASURY FUND
The FFB U.S. Treasury Fund (the "U.S. Treasury Fund") invests exclusively
in direct obligations of the United States Treasury which have remaining
maturities not exceeding one year and certain repurchase agreements. The U.S.
Treasury Fund will not invest in obligations issued or guaranteed by agencies or
instrumentalities of the United States Government.
FFB U.S. GOVERNMENT FUND
The FFB U.S. Government Fund (the "U.S. Government Fund") invests
exclusively in obligations issued or guaranteed by the United States Government
or its agencies or instrumentalities which have remaining maturities not
exceeding one year and certain repurchase agreements. The U.S. Treasury issues
various types of marketable securities, consisting of bills, notes, bonds and
certificates of indebtedness which are all direct obligations of the United
States Government and differ primarily in the length of their maturity. U.S.
Treasury bills, which have a maturity of up to one year, are the most frequently
issued marketable United States Government security. United States Government
agency and instrumentality obligations are debt securities issued by United
States Government-sponsored enterprises and Federal agencies. Some obligations
of agencies, such as those issued by the Export Import Bank, are supported by
the full faith and credit of the United States; others, such as those of the
Federal Home Loan Banks, by the right of the issuer to borrow from the United
States Treasury; others, such as those of the Federal National Mortgage
Association, by the discretionary authority of the United States Government to
purchase certain obligations of the agency or instrumentality; and others, such
as those of the Federal Farm Credit Banks, only by the credit of the agency or
instrumentality issuing the obligation. In the case of obligations not backed by
the full faith and credit of the United States, the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment.
United States Government agency and instrumentality obligations include
variable rate master demand notes issued by Federal agencies or
instrumentalities (see the SAI for further details about variable rate master
demand notes). The U.S. Government Fund and the Cash Management Fund will invest
in obligations of United States Government agencies and instrumentalities only
when the Funds' investment adviser is satisfied that the credit risk with
respect to the issuer is minimal.
FFB CASH MANAGEMENT FUND
The FFB Cash Management Fund (the "Cash Management Fund") invests
exclusively in short-term money market instruments which have remaining
maturities not exceeding one year, short-term loan participations which have
remaining maturities not exceeding one year, variable rate demand notes,
variable rate master demand notes and certain repurchase agreements. The Cash
Management Fund does not limit the percentage of its assets that it may invest
in any one type of money market
10
instrument. The Board of Trustees of the Trust has general responsibility for
the quality of investments made by the Cash Management Fund and has delegated
day-to-day portfolio decision-making to First Fidelity Bank, National
Association ("First Fidelity" or the "Adviser"). Consequently, the Board does
not make individual portfolio decisions for the Fund or approve specific issuers
in advance. These decisions are made by the investment adviser consistent with
the quality and creditworthiness standards of the Fund as described below,
pursuant to guidelines established by the Board of Trustees. The Adviser will
select only portfolio investments which present minimal credit risks and are of
high quality based upon the ratings of nationally recognized rating
organizations (as set forth below) or, if unrated, of comparable quality. Shares
of the Cash Management Fund, U.S. Government Fund and U.S. Treasury Fund are not
insured or guaranteed by the United States Government. Money market instruments
in which the Cash Management Fund may invest include obligations issued or
guaranteed by the United States Government or its agencies and instrumentalities
(as described in this Prospectus under the heading FFB U.S. Government Fund) and
the following other kinds of investments:
The Fund will not invest in options, financial futures transactions or
other similar "derivative" instruments except as otherwise provided herein.
BANK OBLIGATIONS. These obligations include negotiable certificates of
deposit, bankers' acceptances and fixed time deposits. The Cash Management Fund
will not invest in any obligations of First Fidelity or its affiliates, as
defined under the Investment Company Act of 1940, as amended (the "1940 Act").
The Cash Management Fund is permitted to invest in obligations of correspondent
banks of First Fidelity (banks with which First Fidelity maintains a special
servicing relationship) which are not affiliates of the Trust, but the Cash
Management Fund will not give preference in its investment selections to those
obligations.
The Cash Management Fund limits its investments in United States bank
obligations to obligations of United States banks (including foreign branches)
which have more than $1 billion in total assets at the time of investment and
are members of the Federal Reserve System or are examined by the Comptroller of
the Currency or whose deposits are insured by the Federal Deposit Insurance
Corporation. The Cash Management Fund limits its investments in foreign bank
obligations to United States dollar-denominated obligations of those foreign
banks (including United States branches of foreign banks) which at the time of
investment (i) have more than $10 billion, or the equivalent in other
currencies, in total assets; (ii) in terms of assets are among the 75 largest
foreign banks in the world; (iii) have branches or agencies (limited purpose
offices which do not offer all banking services) in the United States; and (iv)
in the opinion of the Fund's investment adviser, are of an investment quality
comparable to obligations of United States banks which may be purchased by the
Cash Management Fund. There is no limitation on the amount of Cash Management
Fund assets which may be invested in obligations of foreign banks which meet the
conditions set forth herein.
Fixed time deposits may be withdrawn on demand by the investor, but may be
subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such
deposits. The Cash Management Fund may not invest in fixed time deposits subject
to withdrawal penalties maturing in more than seven calendar days; investments
in fixed time deposits subject to withdrawal penalties maturing from two
business days through seven calendar days may not exceed 10% of the value of the
total assets of the Cash Management Fund.
11
Obligations of foreign banks involve somewhat different investment risks
than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that the obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions like exchange controls may be adopted which might adversely affect
the payment of principal and interest on those obligations and that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. In that connection, foreign banks are not subject to examination by any
United States Government agency or instrumentality.
COMMERCIAL PAPER. Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by both domestic and foreign bank holding companies, corporations
and financial institutions and United States Government agencies and
instrumentalities (but only includes taxable securities). All commercial paper
purchased by the Cash Management Fund is, at the time of investment, (i) rated
"P-1" by Moody's Investors Service, Inc. ("Moody's") and "A-1" or better by
Standard & Poor's Corporation ("S&P") or in a comparable rating category by any
two of the nationally recognized statistical rating organizations that have
rated the commercial paper, (ii) rated in a comparable category by only one such
organization if it is the only organization that has rated the commercial paper
(and provided the purchase is approved or ratified by the Board of Trustees) or
(iii) if not rated, issued or guaranteed as to principal and interest by issuers
having an existing debt security rating of "Aa" or better by Moody's and "AA" or
better by S&P and in the opinion of the Cash Management Fund's investment
adviser, of an investment quality comparable to rated commercial paper in which
the Cash Management Fund may invest and within the credit quality policies,
guidelines and procedures established by the Board of Trustees (and provided the
purchase is approved or ratified by the Board of Trustees).
Variable rate demand notes have a maturity of five to twenty years but
carry with them the right of the holder to put the securities to a remarketing
agent or other entity on short notice, typically seven days or less, so that
after adjustment the value of the securities approximates par. Generally, the
remarketing agent will adjust the interest rate every seven days (or at other
intervals corresponding to the notice period for the put), in order to maintain
the interest rate at the prevailing rate for securities with a seven-day
maturity. The remarketing agent is typically a financial intermediary that has
agreed to perform these services. Variable rate master demand notes permit the
Fund to invest punctuating amounts at varying rates of interest pursuant to
direct arrangements between the Fund, as lender, and the borrower. Because the
notes are direct lending arrangements between the Fund and the borrower, they
will not generally be traded, and there is no secondary market for them,
although they are redeemable (and thus immediately repayable by the borrower) at
principal amount, plus accrued interest, at any time. The borrower also may
prepay up to the full amount of the note without penalty. While master demand
notes, as such, are not typically rated by credit rating agencies, if not so
rated, a fund may, under its minimum rating standards, invest in them only if,
in the opinion of the Adviser, they are of an investment quality comparable to
other debt obligations in which the Cash Management Fund may invest and are
within the credit quality policies, guidelines and procedures established by
12
the Board of Trustees. See the SAI for further details on variable rate demand
notes and variable rate master demand notes.
CORPORATE DEBT SECURITIES. Investments by the Cash Management Fund in
these securities are limited to nonconvertible corporate debt securities of U.S.
or foreign corporations such as bonds and debentures which have one year or less
remaining to maturity and which are rated "AA" or better by S&P and "Aa" or
better by Moody's, or in a comparable rating category by any two of the
nationally recognized statistical rating organizations that have rated the
securities or by one such organization if it is the only organization that has
rated the securities (provided the investment is approved or ratified by the
Board of Trustees).
The Cash Management Fund may invest in both rated commercial paper and
rated corporate debt obligations of foreign issuers that are denominated in
United States dollars and meet the same quality criteria applicable to
investments by the Cash Management Fund in commercial paper and corporate debt
obligations of domestic issuers. These investments, therefore, are not expected
to involve significant additional risks as compared to the risks of investing in
comparable domestic securities. Generally, all foreign investments carry with
them both opportunities and risks not applicable to investments in the
securities of domestic issuers, such as risks of foreign political and economic
instability, adverse movements in foreign exchange rates, the imposition or
tightening of exchange controls or other limitations on repatriation of foreign
capital, changes in foreign governmental attitudes toward private investment
(possibly leading to nationalization, increased taxation or confiscation of
foreign assets) and added difficulties inherent in obtaining and enforcing a
judgment against a foreign issuer of securities should it default. The rating
organizations used by the Adviser consider numerous factors in evaluating the
quality of foreign securities, and, therefore, many, if not all, of these risks
will have been considered by the rating organization in its assignment of a
particular rating to a particular foreign security or issuer.
PARTICIPATION INTERESTS. The Cash Management Fund may purchase high
quality participation interests having remaining maturities not exceeding one
year in loans extended by banks to U.S. and foreign companies and which are
within the credit quality policies, guidelines and procedures established by the
Board of Trustees. In a typical corporate loan syndication, a number of
institutional lenders lend a corporate borrower a specified sum pursuant to the
terms and conditions of a loan agreement. One of the co-lenders usually agrees
to act as the agent bank with respect to the loan. The loan agreement among the
corporate borrower and the co-lenders identifies the agent bank as well as sets
forth the rights and duties of the parties. The agreement often (but not always)
provides for the collateralization of the corporate borrower's obligations
thereunder and includes various types of restrictive covenants which must be met
by the borrower.
The participation interests acquired by the Cash Management Fund may,
depending on the transaction, take the form of a direct co-lending relationship
with the corporate borrower, an assignment of an interest in the loan by a
co-lender or another participant or a participation in the seller's share of the
loan. Typically, the Cash Management Fund will look to the agent bank to collect
principal of and interest on a participation interest, to monitor compliance
with loan covenants, to enforce all credit remedies, such as foreclosures on
collateral, and to notify co-lenders of any adverse changes in the borrower's
financial condition or declarations of insolvency. The agent bank in such cases
will be qualified under the 1940 Act to serve as a custodian for a registered
investment company
13
such as the Fund. The agent bank is compensated for these services by the
borrower pursuant to the terms of the loan agreement.
When the Cash Management Fund acts as co-lender in connection with a
participation interest or when the Cash Management Fund acquires a participation
interest the terms of which provide that the Cash Management Fund will be in
privity with the corporate borrower, such Fund will have direct recourse against
the borrower in the event the borrower fails to pay scheduled principal and
interest. In all other cases, the Cash Management Fund will look to the agent
bank to enforce appropriate credit remedies against the borrower.
The Adviser believes that the principal credit risk associated with
acquiring participation interests from a co-lender or another participant is the
credit risk associated with the underlying corporate borrower. The Cash
Management Fund may incur additional credit risk, however, when such Fund is in
the position of participant rather than a co-lender because such Fund must
assume the risk of insolvency of the co-lender from which the participation
interest was acquired and that of any person interpositioned between the Cash
Management Fund and the co-lender. However, in acquiring participation interests
the Cash Management Fund will conduct analysis and evaluation of the financial
condition of each such co-lender and participant to ensure that the
participation interest meets such Fund's high quality standard. The Adviser will
treat participation interests as illiquid for purposes of the investment
restriction that none of the Funds will invest 10% or more of the current value
of a Fund's net assets in illiquid securities.
FFB TAX-FREE MONEY MARKET FUND
The FFB Tax-Free Money Market Fund (the "Tax-Free Money Fund") invests at
least 80% of its net assets in high quality Municipal Obligations the interest
on which is exempt from Federal income tax, which have remaining maturities not
exceeding one year and which meet the rating standards described below. The
Tax-Free Money Fund does not limit the percentage of assets which it may invest
in a particular type of municipal obligation. The Municipal Obligations in which
the Tax-Free Money Fund invests may not yield as high a level of current income
as longer term or lower grade municipal obligations. However, the shorter
maturities and higher grades of the Municipal Obligations held by the Tax-Free
Money Fund can be expected to result in higher liquidity and less fluctuation in
market value as a result of changes in interest rates. The Tax-Free Money Fund
will maintain a dollar weighted average portfolio maturity of not more than 90
days.
FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND
The Pennsylvania Tax-Free Money Market Fund (the "Pennsylvania Tax-Free
Fund") invests at least 80% of its net assets in Municipal Obligations issued by
the Commonwealth of Pennsylvania or its counties, municipalities, authorities or
other political subdivisions, and municipal obligations issued by territories or
possessions of the United States, such as Puerto Rico, the interest on which, in
the opinion of bond counsel, is exempt from Federal and Pennsylvania personal
income taxes. The Pennsylvania Tax-Free Fund limits its investments to Municipal
Obligations with remaining maturities of thirteen months or less and will
maintain a dollar-weighted average portfolio maturity of 90 days or less.
Normally, the Pennsylvania Tax-Free Fund will seek to invest substantially
all of its assets in short-term Municipal Obligations. However, under certain
unusual circumstances, such as a temporary
14
decline in the issuance of Pennsylvania obligations, the Pennsylvania Tax-Free
Fund may invest up to 20% of its assets in the following: short-term municipal
securities issued outside of Pennsylvania (the income from which may be subject
to Pennsylvania income taxes) or certain taxable fixed income securities (the
income from which may be subject to Federal and Pennsylvania personal income
taxes). In most instances, however, the Pennsylvania Tax-Free Fund will seek to
avoid such holdings in an effort to provide income that is fully exempt from
Federal and Pennsylvania personal income taxes.
The Pennsylvania Tax-Free Fund may also invest in Municipal Obligations
issued to finance private activities, whose interest is a preference item for
purposes of the Federal alternative minimum tax. Such "private activity bonds"
might include industrial development bonds and securities issued to finance
projects such as solid waste disposal facilities, student loans or water and
sewage projects. The Pennsylvania Tax-Free Fund currently intends to treat
"private activity bonds" as not federally tax exempt and, accordingly, to limit
income from "private activity bonds" to no more than 20%. See "Federal Taxes"
for further information. Municipal obligations, which in the opinion of bond
counsel are exempt from Federal income taxes, are debt obligations issued by or
on behalf of states, cities, municipalities and other public authorities.
The Fund will not invest in options, financial futures transactions or
other similar "derivative" instruments except as otherwise provided herein.
Shares of the Tax-Free Money Fund and the Pennsylvania Tax-Free Fund
(collectively, the "Tax-Free Funds") are not insured or guaranteed by the United
States Government. The Tax-Free Funds will only purchase securities: (i) rated
within the two highest rating categories by Moody's and S&P or in a comparable
rating category by any two of the nationally recognized statistical rating
organizations that have rated the securities; (ii) rating in a comparable rating
category by only one such organization that has rated the securities, or (iii)
which, if unrated, are deemed to be of equivalent quality as determined by the
Adviser pursuant to guidelines established by the Board of Trustees. The types
of Municipal Obligations in which the Tax-Free Funds may invest include the
following:
MUNICIPAL BONDS. Municipal bonds generally have a maturity at the time of
issuance of more than one year. Municipal bonds may be issued to raise money for
various public purposes -- such as constructing public facilities and resource
recovery projects and making loans to public institutions. There are generally
two types of municipal bonds: general obligation bonds and revenue bonds.
General obligation bonds are backed by the taxing power of the issuing
municipality and are considered the safest type of municipal bond. Revenue bonds
are backed by the revenues of a project or facility -- tolls from a toll bridge,
for example. Industrial development revenue bonds (which are private activity
bonds) are a specific type of revenue bond backed by the credit and security of
a private user, and therefore investments in these bonds have more potential
risk. Certain types of municipal bonds are issued to obtain funding for
privately operated facilities. Municipal bonds generally have a maturity at the
time of issuance of more than one year.
MUNICIPAL NOTES. Municipal notes are generally sold as interim financing
in anticipation of the collection of taxes, a bond sale or receipt of other
revenue. Municipal notes generally have maturities at the time of issuance of
one year or less. Investments in municipal notes are limited to notes which are
rated at the date of purchase: (i) MIG 1 or MIG 2 by Moody's and in a comparable
rating category by at least one other nationally recognized statistical rating
organization that has rated the notes, or (ii) in a comparable rating category
by only one such organization, including Moody's, if it is the only organization
that has rated the notes, or (iii) if not rated, are, in the opinion of the
Adviser, of
15
comparable investment quality and within the credit quality policies and
guidelines established by the Board of Trustees.
Notes rated "MIG 1" are judged to be of the "best quality" and carry the
smallest amount of investment risk. Notes rated "MIG 2" are judged to be of
"high quality", with margins of protection ample although not as large as in the
preceding group.
MUNICIPAL COMMERCIAL PAPER. Municipal commercial paper is a debt
obligation with a stated maturity of one year or less which is issued to finance
seasonal working capital needs or as short-term financing in anticipation of
longer-term debt. Investments in municipal commercial paper are limited to
commercial paper which is rated at the date of purchase: (i) "P-1" by Moody's
and "A-1" or "A-1+" by S&P with respect to the Tax-Free Money Fund ("P-2"
(Prime-2) or better by Moody's and "A-2" or better by S&P with respect to the
Pennsylvania Tax-Free Fund) or (ii) in a comparable rating category by any two
of the nationally recognized statistical ratings organizations that have rated
commercial paper or (iii) in a comparable rating category by only one such
organization if it is the only organization that has rated the commercial paper
or (iv) if not rated, is, in the opinion of the Adviser, of comparable
investment quality and within the credit quality policies and guidelines
established by the Board of Trustees.
Issuers of municipal (and taxable) commercial paper rated "P-1" have a
"superior capacity for repayment of short-term promissory obligations". The
"A-1" rating for commercial paper under the S&P classification indicates that
the "degree of safety regarding timely payment is either overwhelming or very
strong". Commercial paper with "overwhelming safety characteristics" will be
rated "A1+". Commercial paper receiving a "P-2" rating has a strong capacity for
repayment of short-term promissory obligations. Commercial paper rated "A-2" has
the capacity for timely payment although the relative degree of safety is not as
overwhelming as for issues designated "A-1". See the Appendix for a more
complete description of securities ratings.
WHEN-ISSUED SECURITIES. The Tax-Free Funds may purchase Municipal
Obligations on a when-issued basis, in which case delivery and payment normally
take place 15 to 45 days after the date of the commitment to purchase. The Funds
will only make commitments to purchase Municipal Obligations on a when-issued
basis with the intention of actually acquiring the securities but may sell them
before the settlement date if it is deemed advisable. Any gains realized in such
sales would produce taxable income. The when-issued securities are subject to
market fluctuation and no interest accrues to the purchaser during this period.
The payment obligation and the interest rate that will be received on the
securities are each fixed at the time the purchaser enters into the commitment.
For purposes of determining a Fund's weighted average maturity, the maturity of
a when-issued security is calculated from its commitment date. Purchasing
Municipal Obligations on a when-issued basis is a form of leveraging and can
involve a risk that the yields available in the market when the delivery takes
place may actually be higher than those obtained in the transaction itself in
which case there could be an unrealized loss at the time of delivery.
Each Fund will establish a segregated account with its custodian in which
it will maintain cash, United States government securities, or other liquid,
high quality debt instruments in an amount at least equal in value to each
Fund's commitments to purchase when-issued securities. If the value of these
assets declines, a Fund will place additional liquid assets in the account on a
daily basis so that the value of the assets in the account is equal to the
amount of such commitments.
16
SECURITIES WITH PUT OR DEMAND RIGHTS. The Tax-Free Funds have the ability
to enter into put transactions, sometimes referred to as stand-by commitments,
with respect to Municipal Obligations held in its portfolio or to purchase
securities which carry a demand feature or put option which permit a Fund, as
holder, to tender them back to the issuer or a third party prior to maturity and
receive payment within seven days. Segregated accounts will be maintained by
each Fund for all such transactions.
The amount payable to a Fund by the seller upon its exercise of a put will
normally be (i) the Fund's acquisition cost of the securities (excluding any
accrued interest which such Fund paid on their acquisition), less any amortized
market premium plus any amortized market or original issue discount during the
period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during the period the securities
were owned by the Fund. Absent unusual circumstances, each Fund values the
underlying securities at their amortized cost. Accordingly, the amount payable
by a broker dealer or bank during the time a put is exercisable will be
substantially the same as the value of the underlying securities.
Each Fund's right to exercise a put is unconditional and unqualified. A put
is not transferable by a Fund, although a Fund may sell the underlying
securities to a third party at any time. The Funds expect that puts will
generally be available without any additional direct or indirect cost. However,
if necessary and advisable, the Funds may pay for certain puts either separately
in cash or by paying a higher price for portfolio securities which are acquired
subject to such a put (thus reducing the yield to maturity otherwise available
to the same securities). Thus, the aggregate price paid for securities with put
rights may be higher than the price that would otherwise be paid.
The Funds may enter into put transactions only with broker dealers (in
accordance with the rules of the Securities and Exchange Commission) and banks
which, in the opinion of the Adviser, present minimal credit risks. The Adviser
will monitor periodically the creditworthiness of issuers of such obligations
held by the Funds. The Funds' ability to exercise a put will depend on the
ability of the broker-dealer or bank to pay for the underlying securities at the
time the put is exercised. In the event that a broker-dealer or bank should
default on its obligation to purchase an underlying security, a Fund might be
unable to recover all or a portion of any loss sustained from having to sell the
security elsewhere. Each Fund intends to enter into put transactions solely to
maintain portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes.
For a detailed description of put transactions, see "Investment
Policies -- Securities with Put Rights" in the SAI.
TAXABLE SECURITIES. Under normal market conditions, each of the Tax-Free
Funds may at times elect to invest temporarily up to 20% of the current value of
its net assets in taxable securities of the type described below pending the
investment in Municipal Obligations of proceeds of sales of Fund shares or
proceeds from the sale of portfolio securities or in anticipation of
redemptions. However, at all times under normal market conditions the percentage
of a Fund's income and corresponding distributions which is tax-exempt will be
very close to 100%. In addition, for temporary defensive purposes, a Fund may
invest up to 100% of its total assets in such taxable securities when, in the
opinion of the Fund's Adviser, it is advisable to do so because of market
conditions. The types of taxable securities in which the Funds may invest are
limited to the following money market instruments which have remaining
maturities not exceeding one year with respect to the Tax-Free Money Fund and
thirteen months with respect to the Pennsylvania Tax-Free Fund; (i) obligations
of
17
the United States Government, its agencies or instrumentalities; (ii) negotiable
certificates of deposit and bankers' acceptances of United States banks which
have more than $1 billion in total assets at the time of investment and are
members of the Federal Reserve System or are examined by the Comptroller of the
Currency or whose deposits are insured by the Federal Deposit Insurance
Corporation; (iii) domestic and foreign U.S. dollar-denominated commercial paper
rated "P-1" by Moody's or "A-1" or "A-1+" by S&P; and (iv) repurchase agreements
with respect to any of the foregoing portfolio securities. Each Fund also has
the right to hold up to 100% of its total assets in cash as the Adviser deems
necessary for temporary defensive purposes.
Investments of the Funds in U.S. dollar-denominated foreign commercial
paper may involve certain risks not applicable to investment by a Fund in the
obligations of domestic issuers. These risks may include risks of foreign
political or economic instability, difficulties in enforcing a judgment against
a foreign issuer should it default, the imposition or tightening of exchange
controls and changes in foreign governmental attitudes toward private
investment, including the possibility of increased taxation, nationalization or
expropriation of Fund assets. Foreign issuers of securities may also be subject
to different accounting and disclosure systems, which may affect the type and
quality of information available about an issuer. The rating services used by
the Funds take these factors into consideration when assigning a rating to a
particular security, and therefore the additional risk to the Funds of investing
in foreign securities with the same ratings as a domestic security is not
expected to be significant.
The Funds will not invest in any obligations of or loan any of their
portfolio securities to First Fidelity or its affiliates as defined in the 1940
Act or any affiliates of the Funds. Subject to the limitations described, each
Fund is permitted to invest in obligations of correspondent banks of First
Fidelity (banks with which First Fidelity maintains a special bank servicing
relationship) which are not affiliates of the Trust, its Adviser or its
Distributor, but the Funds will not give preference in their investment
selections to those obligations.
After purchase by a Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Funds. Neither
event will require a sale of such security by the Funds. However, the Funds'
Adviser will consider such event in its determination of whether the Funds
should continue to hold the security. To the extent the ratings given by Moody's
or S&P may change as a result of changes in such organizations of their rating
systems, the Funds will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in this
Prospectus and in the SAI.
Opinions relating to the validity of Municipal Obligations and to the
exclusion of interest thereon from Federal and Pennsylvania personal income
taxes are rendered by bond counsel to the respective issuers at the time of
issuance. Neither the Funds, the Trust nor the Adviser will review the
proceedings relating to the issuance of Municipal Obligations or the basis for
such opinions.
Other types of Municipal Obligations which may be purchased by the
Pennsylvania Tax-Free Fund include:
MUNICIPAL LEASE OBLIGATIONS. Municipal lease obligations are financing
arrangements secured by leases of property to a municipality. These obligations
are considered to be illiquid securities and typically are not fully backed by
the municipality's credit. Interest from a municipal lease obligation may become
taxable if the lease is assigned. If the governmental user does not appropriate
sufficient
18
funds for the following year's lease payments, the lease will terminate, with
the possibility of default on the lease obligations and significant loss to the
Pennsylvania Tax-Free Fund. The Pennsylvania Tax-Free Fund will not purchase any
municipal lease obligation that is not covered by a legal opinion (typically
from the issuer's counsel) to the effect that, as of the effective date of such
lease, the lease is the valid and binding obligation of the governmental issuer.
For a more detailed description of Municipal Leases, see "Investment
Policies -- Municipal Leases" in the SAI.
RESOURCE RECOVERY BONDS. Resource recovery bonds may be general
obligations of the issuing municipality or supported by corporate or bank
guarantees. The viability of the resource recovery project, environmental
protection regulations and project operator tax incentives may affect the value
and credit quality of resource recovery bonds.
VARIABLE AND FLOATING RATE OBLIGATIONS. Certain of the municipal
obligations which the Pennsylvania Tax-Free Fund may purchase have a floating or
variable rate of interest. Such obligations bear interest at rates which are not
fixed, but which vary with changes in specified market rates or indices, such as
a Federal Reserve composite index. Certain of such obligations may carry a
demand feature or put option which would permit such Fund, as holder, to tender
them back to the issuer or a third party prior to maturity ("demand
instruments"). Such Fund may invest in floating and variable rate municipal
obligations even if they carry stated maturities in excess of one year.
Obligations with a demand feature generally receive two ratings, one
representing an evaluation of the degree of risk associated with scheduled
interest and principal payments and the other representing an evaluation of the
degree of risk associated with the demand feature. The two highest ratings
assigned to the demand feature by Moody's are "VMIG 1" and "VMIG 2" which have
generally the same characteristics as Moody's "MIG 1" and "MIG 2" ratings.
Investments in variable and floating rate obligations are limited to those that
are rated VMIG 1 by Moody's or, if not rated, are, in the opinion of the
Adviser, of comparable investment quality. The Adviser will monitor on an
ongoing basis the earning power, cash flow and other liquidity ratios of the
issuers of such obligations and will similarly monitor the ability of an issuer
of a demand instrument to pay principal and interest on demand. The Pennsylvania
Tax-Free Fund's right to obtain payment at par on a demand instrument could be
affected by events occurring between the date such Fund elects to demand payment
and the date payment is due which may adversely affect the ability of the issuer
of the instrument to make payment when due.
The Pennsylvania Tax-Free Fund does not intend to concentrate its
investments in any one industry. Thus, from time to time, such Fund may invest
25% or more of its assets in municipal obligations which are related in such a
way that an economic, business or political development or change affecting one
such obligation would also affect the other obligations; for example, municipal
obligations, the interest on which is paid from revenues of similar type
projects or municipal obligations whose issuers are located in the same state.
Because the taxable money market is a broader and more liquid market with a
greater number of investors, issuers and market makers than is the market for
short-term tax-exempt municipal obligations, the liquidity of the Pennsylvania
Tax-Free Fund may not be equal to that of a money market fund which invests
exclusively in short-term taxable money market instruments. The more limited
marketability of short-term tax-exempt municipal obligations may make it
difficult in certain circumstances to dispose of large investments
advantageously. In general, tax-exempt municipal obligations are also subject to
credit risks such as the loss of credit ratings or possible default. In
addition, an issuer
19
of tax-exempt municipal obligations may lose its tax-exempt status in the event
of a change in the current tax laws.
RISK FACTORS: INVESTING IN PENNSYLVANIA MUNICIPAL OBLIGATIONS. Each
investor should consider carefully the special risks inherent in the
Pennsylvania Tax-Free Fund's investment in Pennsylvania Municipal Obligations.
Pennsylvania has been historically identified as a heavy industry state although
that reputation has recently changed as the industrial composition of
Pennsylvania diversified when the coal, steel, and railroad industries began to
decline. This diversification was necessary when the traditionally strong
industries in Pennsylvania declined as a long-term shift in jobs, investment and
workers away from the northeast part of the nation took place. The major new
sources of growth are in the service sector, including trade, medical and health
services, education and financial institutions. Pennsylvania is highly
urbanized, with approximately 50% of the Commonwealth's population contained in
the metropolitan areas which include the cities of Philadelphia and Pittsburgh.
It should be noted that Pennsylvania Municipal Obligations may be adversely
affected by local political and economic conditions and developments within
Pennsylvania. For example, adverse conditions in a significant industry within
Pennsylvania may from time to time have a correspondingly adverse effect on
specific issuers within Pennsylvania or on anticipated revenue to the
Commonwealth itself; conversely, an improving economic outlook for a significant
industry may have a positive effect on such issuers or revenues. An expanded
discussion of the risks associated with the purchase of Pennsylvania issues is
contained in the SAI.
INVESTMENT COMPANY SECURITIES. The Pennsylvania Tax-Free Fund may invest
in securities issued by other investment companies. Such securities will be
acquired by the Pennsylvania Tax-Free Fund within the limits prescribed by the
Act, which include a prohibition against a Fund investing more than 10% of the
value of its total assets in such securities. Investments in securities issued
by other investment companies will subject shareholders to the imposition of
duplicative fees and expenses.
All five of the Funds may engage in the following portfolio transactions:
LOANS OF PORTFOLIO SECURITIES. Each of the Funds may loan its portfolio
securities to brokers, dealers, and financial institutions to increase current
income. All loans of securities must be continuously secured by collateral
consisting of United States Government securities, cash or letters of credit
maintained on a daily mark-to-market basis in an amount at least equal to the
current market value of the securities loaned plus the interest payable with
respect to the loan.
As a condition of the loan, the Fund lending the security must have the
right to call the loan and obtain the return of the securities loaned within
five business days. Moreover, a Fund will receive any interest or dividends paid
on the loaned securities. The Funds will not lend portfolio securities to First
Fidelity, or to any affiliate of First Fidelity or to any other affiliate of the
Funds. Loans of securities involve a risk that the borrower may fail to return
the securities or may fail to provide additional collateral.
REPURCHASE AGREEMENTS. Securities held by the Funds may be subject to
repurchase agreements. A repurchase agreement is a transaction in which the
seller of a security commits itself at the time of the sale to repurchase that
security from the buyer at a mutually agreed upon time and price. Each Fund will
enter into repurchase agreements only with dealers, domestic banks or recognized
financial institutions which, in the opinion of the Adviser, present minimal
credit risks. Each Fund will enter
20
into repurchase agreements only with respect to obligations which could
otherwise be purchased by that Fund or any other obligations backed by the full
faith and credit of the United States. Where the securities underlying a
repurchase agreement are not U.S. Government securities, they must be of the
highest quality at the time the repurchase agreement is entered into (e.g., a
long-term debt security would be required to be rated by S&P as "AAA" or its
equivalent). While the maturity of the underlying securities in a repurchase
agreement transaction may be more than one year, the term of the repurchase
agreement is always less than one year. The maturities of the underlying
securities will have to be taken into account in calculating the Fund's dollar
weighted average portfolio maturity if the seller of the repurchase agreement
fails to perform under such agreement. In the event of default by the seller
under the repurchase agreement, a Fund may experience a loss of income from the
loaned securities and a decrease in the value of any collateral maintained,
problems in exercising its rights to the underlying securities and costs and
time delays in connection with the disposition of such securities. Each Fund
will invest no more than 10% of its net assets in repurchase agreements maturing
in more than seven days and other illiquid investments.
INVESTMENT RESTRICTIONS
The investment objective of each Fund and the policy of the Tax-Free Funds
of investing at least 80% of their net assets in Municipal Obligations are
fundamental policies and except for policies with respect to repurchase
agreements and securities with put rights, which are also fundamental policies
of each Fund and subject to the investment restrictions set forth below, each
Fund's investment policies and the Adviser's discretion to make use of a
particular investment technique or activity are not fundamental and may be
changed by the Board of Trustees of the Trust without the approval of
shareholders.
None of the Funds may (1) borrow money or pledge or mortgage its assets,
except that each Fund may borrow from banks up to 10% of the current value of
the total net assets of that Fund for temporary purposes only in order to meet
redemptions, and those borrowings may be secured by the pledge of not more than
10% of the current value of the total net assets of that Fund (but investments
may not be purchased by that Fund while any such borrowings exist); (2) make
loans, except loans of portfolio securities having a value of not more than 10%
(5% with respect to the Tax-Free Money Market Fund) of that Fund's current
assets and except that each Fund may purchase a portion of an issue of publicly
distributed bonds, debentures or other obligations, make deposits with banks and
enter into repurchase agreements with respect to its portfolio securities; or
(3) invest an amount equal to 10% or more of the current value of a Fund's net
assets in illiquid securities, including those securities which do not have
readily available market quotations and repurchase agreements having maturities
of more than seven calendar days and, with respect to the Cash Management Fund,
fixed time deposits not subject to withdrawal penalties having maturities of
more than seven calendar days. Investments in restricted securities eligible for
resale pursuant to Rule 144A of the Securities Act of 1933 which have been
determined to be liquid by the Board of Trustees based upon the trading markets
for the securities will not be included for purposes of this limitation.
However, investing in Rule 144A securities could have the effect of increasing
the level of fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing such securities. For each Fund,
the foregoing investment restrictions and those described in the SAI are
fundamental policies which may be changed only when permitted by law and
approved by the holders of a majority of the outstanding voting securities of
that Fund, as described under "Other Information" in the SAI.
21
MANAGEMENT OF THE FUNDS
The property, affairs and business of the Funds are managed by the Board of
Trustees. The Trustees elect officers who are charged with the responsibility
for the day-to-day operations of the Funds and the execution of policies
formulated by the Trustees. Detailed information about the Trustees and Officers
may be found in the SAI under "Management of the Funds".
ADVISER
First Fidelity serves as the investment adviser for each of the Funds. The
offices of the Adviser are located at 765 Broad Street, Newark, New Jersey
07102. The Adviser is a national banking association with branches in
Pennsylvania, New York, Maryland and throughout New Jersey. It is a wholly-owned
subsidiary of First Fidelity Incorporated, originally established in 1812,
which, as a result of a reorganization with Fidelcor, Inc., a Pennsylvania bank
holding company, is now a wholly-owned subsidiary of First Fidelity
Bancorporation. First Fidelity Bancorporation, a New Jersey corporation,
provides financial and related services through its subsidiary organizations.
The advisory services of the Adviser are provided through the Asset Management
Group of the Trust Division which, as of March 31, 1995, had approximately $16.7
billion of client assets under management. The Adviser has provided investment
advisory services to investment companies since 1986 and currently acts as
Adviser to all Funds within FFB Funds Trust.
Pursuant to a Master Advisory Contract (the "Advisory Contract"), First
Fidelity furnishes continuous investment guidance consistent with each Fund's
investment objective and policies and provides administrative assistance in
connection with the operation of each Fund. First Fidelity also acts as transfer
agent, custodian and dividend disbursing agent for the Funds, as described in
the SAI.
First Fidelity intends to receive its customary managing agency account
fees or any other account fees it imposes on accounts of its bank customers in
respect of customer assets invested in the Funds where permitted by applicable
federal, state and local laws; this may result in the receipt by First Fidelity
of customer account fees in addition to advisory fees from the Funds and a
corresponding reduction in the total yield for the Funds realized by customers
who hold Fund shares in regular customer accounts with First Fidelity. Neither
First Fidelity, nor any of its affiliates, nor any of their employees will make
loans for the purpose of purchasing or carrying shares of the Funds or make
loans to the Funds. Prospectuses and sales material for the Funds can be
obtained from FFB Funds Distributor.
First Fidelity Bancorporation, a bank holding company based in Newark, New
Jersey, and Philadelphia, Pennsylvania and the indirect parent of the Adviser
has recently agreed to merge with First Union Corp., a bank holding company
based in Charlotte, North Carolina. The merger is subject to approval by the
shareholders of both corporations and by federal and state bank regulators. It
is anticipated that the merger will occur before the end of 1995.
SPONSOR AND DISTRIBUTOR
FFB Funds Distributor, Inc., (the "Distributor" or "FFB Funds
Distributor"), the Sponsor and Distributor, has its principal office at 237 Park
Avenue, New York, New York 10017. The Distributor is an affiliate of Furman Selz
Incorporated ("Furman Selz").
22
Pursuant to a Master Distribution Contract (the "Distribution Contract"),
the Distributor is responsible for the distribution of Fund shares. The
Distributor receives no compensation for services rendered to the Funds pursuant
to the Distribution Contract.
ADMINISTRATOR
Pursuant to a Master Administrative Services Contract (the "Administrative
Services Contract"), Furman Selz acts as the Administrator of the Funds and has
its office at 237 Park Avenue, New York, New York 10017. It provides personnel,
office space and all management and administrative services reasonably necessary
for the operation of the Trust and the Funds (such as maintaining the Funds'
books and records, monitoring compliance with all state and Federal laws and
assisting the Trustees in the execution of their duties) other than those
services which are provided by First Fidelity pursuant to the Advisory Contract.
Furman Selz receives from the Funds a monthly fee based on the net assets of the
Funds as compensation for its provision of administrative services to the Funds.
See "Fees and Expenses".
DISTRIBUTION PLAN
Each Fund has adopted a Master Distribution Plan (the "Plan") pursuant to
Rule 12b-1 of the 1940 Act, after having concluded that there is a reasonable
likelihood that the Plan will benefit each Fund and its shareholders. The Plan
provides for a monthly payment by each Fund to the Distributor in such amounts
that the Distributor may request for direct and indirect distribution expenses,
subject to periodic Board approval and to an overall expense limitation. These
expenses include the printing and distribution of prospectuses sent to
prospective investors, the preparation, printing and distribution of sales
literature and expenses associated with media advertisements, telephone services
and payments to financial intermediaries for introducing assets to and retaining
assets in the Funds. The Distributor may also make payments to itself and other
broker-dealers or financial intermediaries for assistance in distributing shares
of the Funds and otherwise promoting the sale of Fund shares. Each such payment
is based on the average daily value of that Fund's net assets during the
preceding month and is calculated at an annual rate not to exceed 0.25% per
annum, except the Pennsylvania Tax-Free Fund is calculated at an annual rate not
to exceed 0.35%.
The Funds are permitted to pay banks and other depository institutions
under the Plan for performing additional administrative and shareholder
servicing functions. The Funds believe that such services are permissible
activities under present banking laws and regulations and will take appropriate
actions (which should not adversely affect the Funds or their shareholders) in
the future to maintain compliance with applicable laws should any changes occur.
The Plan provides for the Distributor to prepare and submit to the Board of
Trustees on a quarterly basis written reports of all amounts expended pursuant
to the Plan and the purpose for which such expenditures were made. The Plan may
not be amended to increase materially the amount spent for distribution expenses
without approval by a majority of each Fund's outstanding shares and approval of
a majority of the non-interested Trustees.
SERVICING AGREEMENTS
First Fidelity, as Transfer Agent, may enter into agreements (the
"Servicing Agreements") with certain banks, financial institutions and
corporations (the "Participating Organizations") under which
23
each Participating Organization handles recordkeeping and provides certain
administrative services for its customers who invest in the Funds through
accounts maintained at the Participating Organization. These administrative
services may include the maintenance of account records in the name of each
shareholder (reflecting purchases, redemptions and dividends paid or
reinvested), the processing of dividends, reinvestments, purchase and redemption
requests, the preparation and mailing of periodic account statements, the
addressing and mailing of the Funds' communications to shareholders (financial
reports, proxy information and tax reports) and other related services. In such
cases, the Participating Organization or one of its nominees will be the
shareholder of record in that particular Fund as nominee for its customers and
will maintain subaccounts of its customers. Pursuant to a separate agreement
between a Participating Organization and its customers, customers may grant or
may already have granted to a Participating Organization the power to vote
proxies relating to their shares of the Funds. Any customer of a Participating
Organization may become the shareholder of record upon written request to its
Participating Organization or First Fidelity, as Transfer Agent.
Each Participating Organization will receive monthly payments which will be
based upon expenses that the Participating Organization has incurred in the
performance of its services under the Servicing Agreement. The payments will not
exceed, on an annualized basis, an amount equal to 0.25% of the average daily
value during the month of Fund shares in the subaccounts of which the
Participating Organization is record owner as nominee for its customers. Such
payments will be separately negotiated with each Participating Organization and
will vary depending upon such factors as the services provided and the costs
incurred by each Participating Organization. The payments may be more or less
than the fees payable to First Fidelity pursuant to the Agency Agreement for
similar services. Participating Organizations will not be paid any amounts under
the Funds' Distribution Plan (See "Distribution Plan"). The net assets of each
Fund are used for purposes of calculating the maximum amount payable under its
Distribution Plan and will, however, include assets of persons who purchase
shares through Participating Organizations.
The payments will be made by each Fund to First Fidelity which will, in
turn, pay the Participating Organization pursuant to the Servicing Agreements.
First Fidelity will not keep any portion of the payments and will not receive
any compensation as transfer or dividend disbursing agent with respect to the
subaccounts maintained by Participating Organizations. The Board of Trustees
will review, at least quarterly, the amounts paid and the purposes for which
such expenditures were made pursuant to the Servicing Agreements.
Investors who purchase and redeem shares of the Funds through a customer
account maintained at a Participating Organization may be charged one or more of
the following types of fees as agreed upon by the Participating Organization and
the investor with respect to the customer services provided by the Participating
Organization: account fees (a fixed amount per month or per year); transaction
fees (a fixed amount per transaction processed); compensating balance
requirements (a minimum dollar amount a customer must maintain in order to
obtain the services offered); or account maintenance fees (a periodic charge
based upon a percentage of the assets in the account or of the dividends paid on
those assets).
GLASS-STEAGALL ACT
The Glass-Steagall Act and other applicable laws generally prohibit banks
that are members of the Federal Reserve System from engaging in the business of
underwriting, selling or distributing
24
securities. The Board, based upon advice from counsel, believes that First
Fidelity may perform the services for the Funds contemplated by the Advisory
Contract without violation of the Glass-Steagall Act or other applicable banking
laws or regulations. However, it is possible that future changes in either
Federal or state statutes and regulations concerning the permissible activities
of banks or trust companies, as well as further judicial administrative
decisions and interpretations of present and future statutes and regulations,
might prevent First Fidelity from continuing to perform such services for the
Funds. If First Fidelity were prohibited from acting as investment adviser to
the Funds, it is expected that the Trustees of the Trust would recommend to the
shareholders of the Funds that they approve the Funds' entering into a new
Advisory Contract with another qualified investment adviser to be selected by
the Trustees.
FEES AND EXPENSES
As compensation for their advisory, administrative and management services,
First Fidelity and Furman Selz are each paid a monthly fee at the following
annual rates:
U.S. TREASURY FUND, U.S. GOVERNMENT FUND, CASH MANAGEMENT FUND AND
TAX-FREE FEE RATE
MONEY FUND -----------------
---------------------------------------------------------------------------- FIRST FURMAN
PORTION OF AVERAGE DAILY VALUE OF NET ASSETS OF EACH FUND
FIDELITY SELZ
---------------------------------------------------------------------------- -------- ------
Not exceeding $500 million.................................................. 0.350% 0.150%
In excess of $500 million but not exceeding $1 billion...................... 0.315% 0.135%
In excess of $1 billion but not exceeding $1.5 billion...................... 0.280% 0.120%
In excess of $1.5 billion................................................... 0.245% 0.105%
FEE RATE
PENNSYLVANIA TAX-FREE FUND -----------------
---------------------------------------------------------------------------- FIRST FURMAN
PORTION OF AVERAGE DAILY VALUE OF NET ASSETS FIDELITY
SELZ
---------------------------------------------------------------------------- -------- ------
Not exceeding $500 million.................................................. 0.400% 0.150%
In excess of $500 million but not exceeding $1 billion...................... 0.360% 0.135%
In excess of $1 billion but not exceeding $1.5 billion...................... 0.320% 0.120%
In excess of $1.5 billion................................................... 0.280% 0.105%
First Fidelity also receives a fee for serving as Custodian and Transfer
Agent for the Funds. See "Custodian, Transfer Agent and Dividend Disbursing
Agent" in the SAI.
Except for the expenses paid by First Fidelity, the Distributor and Furman
Selz, the Trust bears all costs of its operations, such as legal and accounting
expenses and Trustees' fees and expenses. Expenses attributable to each Fund are
charged against the assets of that Fund. Other expenses of the Trust are
allocated among the Funds by the Board of Trustees in a manner which may, but
need not, be proportionately in relation to the net assets of each Fund.
PORTFOLIO TRANSACTIONS
Pursuant to the Advisory Contract, the Adviser places orders for the
purchase and sale of portfolio investments for each Fund's account with brokers
or dealers selected by it in its discretion. The Adviser will not place orders
with the Sponsor or any affiliate of the Sponsor.
25
Purchases and sales of portfolio securities for the Funds are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Funds. Trading does,
however, involve transaction costs, primary dealer spreads and underwriting
commissions. Transactions with dealers serving as primary market makers reflect
the spread between the bid and asked prices. Purchases of underwritten issues
may be made which will include an underwriting fee paid to the underwriter. In
effecting purchases and sales of portfolio securities for the account of the
Funds, the Adviser will seek the best execution of each Fund's orders. Due to
the Funds' investments in securities with short maturities, portfolio turnover
may be regarded as high. The Funds may also attempt to increase yield by trading
to take advantage of short-term investment variations. High portfolio turnover
should not adversely affect the Funds since they do not usually pay brokerage
commissions when purchasing short-term debt obligations.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Fund for the purpose of pricing
purchase and redemption orders is determined at 12:00 Noon (Eastern Standard
time) on each day the New York Stock Exchange is open for trading except for
holidays, which include New Year's Day, Martin Luther King Jr.'s Birthday,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day. The net asset
value per share of each Fund is computed by dividing the value of the net assets
of that Fund (i.e., the value of the assets less the liabilities) by the total
number of that Fund's outstanding shares. All expenses, including the advisory
and administrative fees, are accrued daily and taken into account for the
purpose of determining the net asset value.
Each Fund uses the amortized cost method to value its portfolio securities
and seeks to maintain a constant net asset value of $1.00 per share, although
there is no assurance of such. The amortized cost method involves valuing a
security at its cost and amortizing any discount or premium over the period
until maturity, regardless of the impact of fluctuating interest rates on the
market value of the security. See the SAI for more details.
PURCHASE OF SHARES
Shares of each Fund are offered at net asset value by the Distributor as an
investment vehicle for institutions, corporations, fiduciaries and individuals.
Prospectuses and sales material can be obtained from the Distributor.
Investments in the Funds are not insured.
The minimum initial investment is $1,000. There are no minimum investment
requirements with respect to investments effected through certain automatic
purchase and redemption arrangements on behalf of customer accounts maintained
at Participating Organizations. The minimum investment requirements may be
waived or lowered for investments effected on a group basis by certain other
institutions and their employees. All funds will be invested in full and
fractional shares. The Trust reserves the right to reject any purchase order.
Orders for shares will be executed at the net asset value per share next
determined after an order has been received. Orders will become effective when
Federal funds (money made available to the Funds through a Federal Reserve bank
wire transfer) are available to the Trust's custodian for investment. If payment
is transmitted by wire, the order will become effective upon receipt of Federal
26
funds. Federal Reserve wire transmissions may be subject to delays of up to
several hours, in which case execution of an order will be delayed for a like
period of time. Payments transmitted by a bank wire other than the Federal
Reserve Wire System may take longer to be converted into Federal funds. Banks
may charge a service fee for transfers by wire. Checks must be payable in United
States dollars and will be accepted subject to collection at full face value.
Compensation to salespersons may vary depending upon whether Service Class
or Institutional Class shares are sold.
PROSPECTIVE INVESTORS WHO WISH TO OBTAIN ADDITIONAL INFORMATION
CONCERNING
INVESTMENT PROCEDURES SHOULD CONTACT THE DISTRIBUTOR AT: (800)
437-8790.
DIRECT PURCHASES THROUGH FFB FUNDS DISTRIBUTOR, INC.
PURCHASE BY WIRE
1. Telephone: (800) 437-8790. State whether funds are to be invested in
the FFB U.S. Treasury Fund, FFB U.S. Government Fund, FFB Cash Management Fund,
FFB Tax-Free Money Market Fund and FFB Pennsylvania Tax-Free Money Market Fund.
Give the name(s) in which the Fund shares are to be registered, address, social
security or tax identification number (where applicable), dividend payment
election, amount to be wired, name of the wiring bank and name and telephone
number of the person to be contacted in connection with the order. An account
number will be assigned.
2. Instruct the wiring bank to transmit the specified amount in Federal
funds ($1,000 or more) to:
Investors Fiduciary Trust Company ("IFTC")
Kansas City, MO 64105
ABA Routing Number: 101003621
Acct. No. 7512996
Indicate Name of Fund
Account Name(s) (in which to be registered)
Account Number (as assigned by telephone)
3. Fill in a Purchase Application and mail to:
FFB Funds Distributor, Inc.
P.O. Box 4490
Grand Central Station
New York, NY 10163-4490
A COMPLETED PURCHASE APPLICATION MUST BE RECEIVED BY FFB FUNDS
DISTRIBUTOR
BEFORE THE EXPEDITED REDEMPTION OR CHECK REDEMPTION SERVICES CAN
BE USED.
PURCHASE BY MAIL
1. Complete a Purchase Application. Indicate the services to be used.
2. Mail the Purchase Application and a check for $1,000 or more, payable
to the appropriate Fund, as the case may be, to FFB Funds Distributor.
27
ADDITIONAL PURCHASES BY WIRE AND MAIL
Additional purchases of shares may be made by wire by instructing the
wiring bank to transmit the amount ($100 or more) of any additional purchase in
Federal funds to IFTC along with your account name and number. Additional
purchases may also be made by mail by making a check ($100 or more) payable to
the particular Fund indicating your Fund account number on the check and mailing
it to FFB Funds Distributor.
AUTOMATIC INVESTMENT PLAN
The Funds provide a convenient method by which an investor can have amounts
sent directly from his or her checking account for investment in the Funds. The
minimum initial and subsequent investment pursuant to this Program is $100 per
Fund on a monthly or quarterly basis.
PURCHASES THROUGH CUSTOMER ACCOUNTS
Purchases of shares also may be made through customer accounts maintained
at Participating Organizations, including qualified Individual Retirement and
Keogh Plan accounts. Purchases through such accounts may be subject to
additional procedural requirements and are governed by the terms of the
agreement between the customer and the Participating Organization itself. All
such procedural requirements must, however, be consistent with the 1940 Act.
Purchases will be made through a customer's account only as directed by or on
behalf of the customer on a direction form executed prior to the customer's
first purchase of shares of any Fund. For example, a customer with an account at
a Participating Organization may instruct the Participating Organization to
invest money in excess of a level agreed upon between the customer and the
Participating Organization in shares of one of the Funds periodically or give
other instructions to the Participating Organization within limits prescribed by
that Participating Organization.
BY PAYROLL DIRECT DEPOSITS
Investors may set up a payroll direct deposit arrangement for amounts to be
automatically invested in any of the Funds. Participants in the Payroll Direct
Deposit program may make periodic investments of a least $20.00 per pay period.
Contact FFB Funds Distributor for more information about Payroll Direct Deposit.
REDEMPTION OF SHARES
Upon receipt by FFB Funds Distributor of a redemption request in proper
form, shares of a Fund will be redeemed at its next determined net asset value.
See "Determination of Net Asset Value". For the shareholder's convenience, the
Trust has established several different direct redemption procedures. NO PAYMENT
OF PROCEEDS OF A REDEMPTION OF SHARES PURCHASED BY CHECK WILL BE
PERMITTED UNTIL
THE CHECK IS CLEARED, WHICH MAY TAKE UP TO 15 DAYS AFTER THOSE
SHARES HAVE BEEN
CREDITED TO THE SHAREHOLDER'S ACCOUNT.
28
DIRECT REDEMPTION THROUGH FFB FUNDS DISTRIBUTOR
REDEMPTION BY MAIL
1. Write a letter of instruction. Indicate the dollar amount or number of
shares to be redeemed. Refer to the shareholder's Fund account number.
2. Sign the letter in exactly the same way the account is registered. If
there is more than one owner of the shares, all must sign.
3. If shares to be redeemed have a value of $25,000 or more, the
signature(s) must be guaranteed by a commercial bank which is a member of the
Federal Deposit Insurance Corporation, a trust company, a member firm of a
domestic stock exchange or a foreign branch of any of the foregoing or an
approved savings bank or savings and loan association. A signature guarantee by
a non-approved savings bank or a notary public is not acceptable. Further
documentation, such as copies of corporate resolutions and instruments of
authority, may be requested from corporations, administrators, executors,
personal representatives, trustees or custodians to evidence the authority of
the person or entity making the redemption request.
4. Mail the letter to FFB Funds Distributor at the address set forth under
"Purchase of Shares".
Checks for redemption proceeds will normally be mailed within seven days to
the shareholder's address of record.
Upon request, the proceeds of a redemption amounting to $1,000 or more (net
of any withholding required under Federal Income Tax laws) will be sent by wire
to the shareholder's predesignated bank account. The shareholder's receiving
bank may charge its customers a wire transfer fee for this service. When
proceeds of a redemption are to be paid to someone other than the shareholder
either by wire or check, the signature(s) on the letter of instruction must be
guaranteed regardless of the amount of the redemption.
REDEMPTION BY EXPEDITED REDEMPTION SERVICE
If shares are held in book entry form and the Expedited Redemption Service
has been elected on the Purchase Application on file with FFB Funds Distributor,
redemption of shares may be requested by telephone or letter on any day the
Funds are open for business. (See "Determination of Net Asset Value" for days
the Funds are open.) A signature guarantee is not required.
1. Telephone the request to FFB Funds Distributor at (800) 437-8790.
2. Mail the request to FFB Funds Distributor at the address set forth
under "Purchase of Shares".
Proceeds of Expedited Redemptions of $1,000 or more (net of any withholding
required under Federal income tax laws) will be wired to the shareholder's bank
indicated in the Purchase Application. If an Expedited Redemption request is
received by the FFB Funds Distributor by 12:00 Noon (Eastern Standard time) on a
day the Funds are open for business, the redemption proceeds will be transmitted
to the shareholder's bank that same day. The shareholder's receiving bank may
charge its customers a wire transfer fee for this service. Otherwise, redemption
will be effected and the proceeds will be transmitted on the next day on which
the Funds are open for business. A check for proceeds of less than $1,000 will
be mailed to the shareholder's address of record.
29
FFB Funds Distributor employs reasonable procedures to confirm that
instructions communicated by telephone are genuine. If FFB Funds Distributor
fails to employ such reasonable procedures, FFB Funds Distributor may be liable
for any loss, damage or expense arising out of any telephone transactions
purporting to be on a shareholder's behalf. In order to assure the accuracy of
instructions received by telephone, FFB Funds Distributor requires some form of
personal identification prior to acting upon instructions received by telephone,
records telephone instructions and provides written confirmation to investors of
such transactions.
REDEMPTION BY CHECK REDEMPTION SERVICE
If the Check Redemption Service has been elected on the Purchase
Application, you will be sent a Check Redemption Signature Card to be completed.
Once the Signature Card is on file with FFB Funds Distributor, redemptions of
shares may be made by using redemption checks provided by the Funds. There is no
charge for this service. Checks must be written for amounts of $500 or more and
may be payable to anyone and negotiated in the normal way. If more than one
shareholder owns the shares in a Fund account, all must sign the check unless an
election has been made to require only one signature on checks and that election
has been filed with FFB Funds Distributor.
Shares represented by a redemption check will continue to earn daily income
until the check clears the banking system. When honoring a redemption check, FFB
Funds Distributor will cause the Fund to redeem exactly enough full and
fractional shares from a Fund account to cover the amount of the check. The
Check Redemption Service may be terminated at any time by FFB Funds Distributor
or the Funds.
SYSTEMATIC WITHDRAWAL PLAN
An owner of $12,000 or more of shares in a Fund may elect to have periodic
redemptions from his or her account to be paid on a monthly, quarterly or annual
basis. The maximum payment per year is 12% of the account value at the time of
the election. The minimum periodic payment is $100. A sufficient number of
shares to make the scheduled redemption will normally be redeemed on the 25th
day of each month. Depending on the size of the payment requested and
fluctuation in the net asset value, if any, of the shares redeemed, redemptions
for the purpose of making such payments may reduce or even exhaust the account.
A shareholder may request that these payments be sent to a predesignated bank or
other designated party. Capital gains and dividend distributions paid to the
account will automatically be reinvested at net asset value on the distribution
payment date. The Funds reserve the right to amend the Systematic Withdrawal
Plan on 30 days' notice. The Plan may be terminated at any time by the
shareholder. It should be noted that it may be to a shareholder's disadvantage
to buy shares with a sales charge while concurrently making systematic
redemptions under this Plan.
REDEMPTION THROUGH CUSTOMER ACCOUNTS
Investors who purchase shares through customer accounts maintained at
Participating Organizations may redeem those shares only through the
Participating Organization. Customers of Participating Organizations should
inquire at the Participating Organization as to any additional procedures
governing the processing of redemption requests by the Participating
Organization. All such procedures must be consistent with the 1940 Act. In some
cases, a customer may instruct the Participating
30
Organization which maintains the account through which the customer purchases
shares to redeem shares periodically as required to bring the customer's account
balance up to a level agreed upon between the customer and the Participating
Organization. If a redemption request with respect to such an automatic
redemption arrangement is received from a Participating Organization by the
Transfer Agent by 12:00 Noon (Eastern Standard time) on a day the Funds are open
for business, the redemption proceeds determined at the next calculated net
asset value will be transmitted that same day to the investor's customer account
unless otherwise specified by the Participating Organization. Some customers may
be able to instruct their Participating Organization to arrange for proceeds to
be transmitted other than to their customer account.
EXCHANGE PRIVILEGE
Shareholders who have held all or part of their shares in a Fund for at
least fifteen days may exchange shares of the Fund for shares (at their next
determined relative net asset value) of the same class of other Funds for which
First Fidelity is the Adviser and FFB Funds Distributor is also the Distributor.
Shareholders should call or write the Distributor for additional information
about exchanges and a copy of the prospectus for any additional Fund with which
they wish to make an exchange before investing. Exchanges may be made by writing
FFB Funds Distributor, by telephone if the shareholder has elected telephone
exchange privileges on their Purchase Application, or through a Participating
Organization. For shareholders to whom the minimum investment restrictions
apply, the minimum amount which must be exchanged into another Fund in which
shares are not held is $1,000; no partial exchange may be made if, as a result,
such shareholder's interest in the Fund would be reduced to less than $1,000.
There is no charge for exchanges. Before effecting an exchange, shareholders
should review the Prospectus (and, if applicable, the Prospectus for any other
Fund).
An exchange of shares is taxable as a redemption on which gain or loss may
be recognized for Federal income tax purposes. In the case of transactions
subject to a sales charge, the charge will be assessed on an exchange of shares,
equal to the excess of the sales load applicable to the shares to be acquired,
over the amount of any sales load previously paid on the shares to be exchanged.
See "Federal Taxes" for an explanation of circumstances in which the sales load
paid to acquire shares of a Fund may not be taken into account in determining
gain or loss on the disposition of those shares. The exchange privilege may be
modified or terminated upon 60 days' written notice. See the SAI for further
details.
INDIVIDUAL RETIREMENT ACCOUNTS
The Funds may be used as a funding medium for IRAs. Shares may also be
purchased for IRAs established with authorized custodians. In addition, an IRA
may be established through a custodial account with IFTC. Completion of a
special application is required in order to create such an account, and the
minimum initial investment for an IRA is $250. Contributions to IRAs are subject
to prevailing amount limits set by the Internal Revenue Service. A $5.00
establishment fee and an annual $12.00 maintenance and custody fee are payable
with respect to each IRA. For more information and IRA Information, call FFB
Funds Distributor at (800) 437-8790.
31
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a statement
for each shareholder which will be mailed at least once each month. In those
cases where a Participating Organization or its nominee is shareholder of record
of shares purchased for its customer, the statement may be transmitted to the
customer by the Participating Organization. Individual transactions will not be
separately reported. Shareholders can write or call FFB Funds Distributor at
(800) 437-8790 (or their Participating Organization, as the case may be) with
any questions relating to their investments in shares of the Funds.
Participating Organizations may be the shareholders of record as nominee
for their customers and may maintain subaccounts for those customers. Any such
customer may become the shareholder of record upon written request to the
Participating Organization or FFB Funds Distributor.
FFB Funds Distributor will transmit promptly to each of its customers for
whom it processes purchases and redemptions of shares and to each Participating
Organization copies of all reports to shareholders, proxy statements and other
Trust communications. The Trust's arrangements with FFB Funds Distributor and
the subaccounting arrangements require Participating Organizations to grant
investors who purchase shares through customer accounts the opportunity to vote
their shares by proxy at all shareholder meetings of the Trust. In certain
cases, a customer of a Participating Organization may have given his
Participating Organization the power to vote shares on his behalf. Customers
with accounts at Participating Organizations should consult their Participating
Organization for information concerning their rights to vote shares.
DIVIDENDS AND DISTRIBUTIONS
The Trust intends to declare as a dividend on shares of each Fund
substantially all of the taxable net investment income for such Fund at the
close of each day on which that Fund is open for business (See "Determination of
Net Asset Value" for the days the Funds are open) to the shareholders of record
of such Fund at 12:00 Noon (Eastern Standard time) on that day. Shares purchased
will begin earning dividends on the day the purchase order is executed and
shares redeemed will earn dividends through the previous day. Net investment
income for a Saturday, Sunday or holiday will be declared as a dividend on the
previous business day.
Dividends declared in, and attributable to, the preceding month will be
paid within five business days after the end of each month. Dividends will be
invested automatically in additional shares of the Funds from which they were
paid at the next determined net asset value and credited to the shareholder's
account on the payment date or, at the shareholder's election, paid in cash. For
all investments effected through customer accounts maintained at First Fidelity
or other Participating Organizations (see "Purchase of Shares -- Purchase
through Customer Accounts"), dividend payments in cash will be transmitted
within five business days after the end of each month to the investor's bank
account through which the shares were purchased or, if a Participating
Organization so specifies, to it for crediting to its customer's account.
Dividend checks will be mailed to all other shareholders who elect to be paid in
cash within five business days after the end of each month.
Investors who redeem all or a portion of shares of a Fund prior to a
dividend payment date will be entitled to all dividends declared but unpaid on
those shares on the next dividend payment date.
32
FEDERAL TAXES
Each Fund is treated as a separate entity for Federal income tax purposes.
Each Fund has elected to be treated as a regulated investment company, qualified
as such for its last taxable year and intends to continue to so qualify by
complying in the future with the provisions of the Internal Revenue Code (the
"Code") applicable to regulated investment companies so that it will not be
liable for Federal income tax with respect to its net investment income
(including tax-exempt income) and net realized capital gains distributed to
shareholders in accordance with the timing requirements of the Code. Each Fund
intends to distribute annually substantially all of its net taxable and
tax-exempt investment income and net realized capital gains to its shareholders
for each taxable year.
Amounts, other than tax-exempt interest, not distributed in accordance with
a calendar year distribution requirement are subject to a non-deductible 4%
excise tax. To avoid application of the excise tax, each Fund intends to make
its distributions in accordance with the calendar year distribution requirement.
For this purpose, a distribution, including an exempt interest dividend, will be
treated as paid on December 31 of a calendar year if it is declared by a Fund in
October, November or December of that year to shareholders of record on a date
in such a month and paid by the Fund during January of the following year. Such
distributions will be treated as received by shareholders in the calendar year
in which the distributions are declared, rather than the calendar year in which
the distributions are received.
Dividends derived from a Fund's net investment income (including original
issue discount with respect to certain stripped municipal obligations and
stripped coupons) and any excess of its net short-term capital gain over its net
long-term capital loss will be taxable to shareholders as ordinary income,
whether such dividends are invested in additional shares or received in cash.
Distributions of the excess of net long-term capital gain over net
short-term capital loss designated by a Fund as capital gains dividends will be
taxable as long-term capital gains, regardless of how long a shareholder has
held his Fund shares, whether they are invested in additional shares or received
in cash. The Funds do not, however, anticipate realizing a substantial amount of
net long-term capital gains. Dividends and distributions will not qualify for
the dividends-received deduction for corporations.
To the extent that a Fund's dividends are derived from interest income
exempt from Federal income tax and are designated as "exempt-interest dividends"
by such Fund, they will be excludable from a shareholder's gross income for
Federal income tax purposes, whether they are invested in additional shares or
received in cash.
Most of the income of the Tax-Free Money Fund and the Pennsylvania Tax-Free
Fund is expected to be derived from tax-exempt interest from Municipal
Obligations rather than taxable interest. Each such Fund's dividends derived
from interest on Municipal Obligations will constitute exempt-interest dividends
if that Fund complies with certain requirements of the Code and, except as
discussed below, will not be subject to Federal income tax. Some portion of the
exempt-interest dividends paid by each Fund will be treated as an item of "tax
preference" for purposes of the alternative minimum tax if the Fund invests in
certain types of Municipal Obligations.
Entities or persons who are "substantial users" (or persons related to
"substantial users"), as defined in the Code, of facilities financed by
Municipal Obligations issued for certain private activities should consult their
tax advisers before purchasing shares of the Tax-Free Funds. "Substantial user"
is
33
defined in applicable Treasury regulations to include a "non-exempt person" who
regularly uses in trade or business a part of a facility financed from the
proceeds of industrial development bonds.
Exempt-interest dividends and other distributions paid by the Funds are
includable in the tax base for determining taxability of social security or
railroad retirement benefits.
Interest on indebtedness incurred or continued (or deemed to be incurred or
continued) by shareholders to purchase or carry shares of the Fund may not be
deductible in whole or in part for Federal income tax purposes. In addition,
under rules issued by the Internal Revenue Service for determining when borrowed
funds are considered used for the purposes of purchasing or carrying particular
assets, the purchase of shares may be considered to have been made with borrowed
funds, even though the borrowed funds are not directly traceable to the purchase
of shares.
The exemption of exempt-interest dividends for Federal income tax purposes
may not result in similar exemptions under the tax laws of state or local taxing
authorities. In general, only interest earned on obligations issued by the state
or locality in which the investor resides will be exempt from state and local
taxes. Shareholders should consult their tax advisers about the status of
dividends from the Fund in their own states and localities. Each year the Trust
will notify shareholders of the Federal income tax status of distributions and
the percentage of interest income received by the Funds during the preceding
year on tax-exempt obligations indicating on a state-by-state basis the source
of that income.
Each Fund generally will be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from dividends (including capital gains
dividends) paid to non-corporate shareholders if (a) the shareholder fails to
furnish and certify his correct taxpayer identification number or social
security number, (b) the Internal Revenue Service (the "IRS") or a broker
notifies a shareholder or a Fund that the shareholder has failed to report
properly certain interest and dividend income to the IRS and to respond to
notices to that effect, or (c) when required to do so, the shareholder fails to
certify that he is not subject to backup withholding.
Shareholders will be notified each year of the amounts of dividends and
distributions. Dividends and distributions may also be subject to state or local
taxes. Investors should consult their tax advisers for specific information on
the tax consequences of particular types of distributions. Applications and
purchase orders without a certified taxpayer identification number may be
returned to the investor. The Funds reserve the right to close by redemption
accounts without correct certified taxpayer identification numbers.
STATE AND LOCAL TAXES
The Fund intends to qualify under Pennsylvania law so as to pass through
the tax-free characteristic of the Fund's exempt obligations. Shareholders who
are Pennsylvania resident individuals, estates or trusts subject to the
Pennsylvania income tax will not be subject to Pennsylvania personal income tax
on distributions of interest from the Pennsylvania Tax Free Fund which are
attributable to obligations issued by the Commonwealth of Pennsylvania and its
political subdivisions, agencies and instrumentalities, certain qualifying
obligations of United States territories and possessions or United States
Government obligations, the interest from which is statutorily free from state
taxation in the Commonwealth of Pennsylvania ("exempt obligations").
34
Corporate shareholders who are subject to the Pennsylvania corporate net
income tax will not be subject to corporate net income tax on distributions of
interest made by the Pennsylvania Tax-Free Fund, provided such distributions are
attributable to exempt obligations.
Distribution of gains made by the Pennsylvania Tax Free Fund which are
attributable to exempt obligations issued before February 1, 1994 will not be
subject to Pennsylvania personal income tax or Pennsylvania corporate income
tax. Distribution of gains attributable to exempt obligations issued on or after
February 1, 1994 are subject to such taxes. Due to the short-term nature of the
investments to be made by the Pennsylvania Tax Free Fund, it is not anticipated
that the Fund will realize gains which would otherwise be distributed to
shareholders. Distributions attributable to most other sources will not be
exempt from Pennsylvania personal income tax.
Management of the Pennsylvania Tax-Free Fund believes that shares of such
Fund which are held by individual shareholders who are Pennsylvania residents
and subject to the Pennsylvania county personal property tax will be exempt from
such tax to the extent that such Fund's portfolio consists of exempt obligations
on the annual assessment date. Corporations are not subject to Pennsylvania
personal property taxes.
Management of the Pennsylvania Tax-Free Fund believes that in the case of
individual shareholders who are residents of the City of Philadelphia,
distributions of interest shall be considered exempt from the Philadelphia
School District Investment Net Income Tax in the same proportion as the Fund's
portfolio is invested in exempt obligations. It is necessary that the Fund
report annually to such individual shareholders its percentage investment in
exempt obligations.
In order to qualify under the Pennsylvania tax laws to pass through the
tax-free characteristics of the Fund's exempt obligations, the Fund will invest
in securities for income earnings rather than trade for profit and will observe
certain limitations on varying its investments.
Shareholders should consult their own tax advisers with respect to the tax
status of distributions from the Funds in their own states and localities.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
Pursuant to an Agency Agreement, First Fidelity acts as the Funds' Transfer
and Dividend Disbursing Agent and is responsible for maintaining account records
detailing ownership of Fund shares and for crediting income, capital gains and
other changes in share ownership to investors' accounts. First Fidelity is also
the Funds' Custodian. Furman Selz acts as the Funds' Sub-Transfer Agent pursuant
to a Sub-Transfer Agency Agreement.
PERFORMANCE INFORMATION
FFB Funds Trust may, from time to time, include the yield and effective
yield of the Funds in advertisements or reports to shareholders or prospective
investors. Shareholders of the Service Class of shares will experience a lower
net return on their investment than shareholders of the Institutional Class of
shares because of the higher shareholder servicing charge to which Service Class
shareholders will be subject. Current yield for a Fund will be based on income
received by a hypothetical investment over a given seven-day period (less
expenses accrued during the period), and then "annualized" (i.e., assuming that
the seven-day yield would be received for 52 weeks, stated in terms
35
of an annual percentage return on the investment). "Effective yield" for a Fund
is calculated in a manner similar to that used to calculate yield, but reflects
the compounding effect of earnings on reinvested dividends.
Performance information for a Fund may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, Dow Jones
Industrial Average, or other unmanaged indices so that investors may compare a
Fund's results with those of a group of unmanaged securities widely regarded by
investors as representative of the securities markets in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in a Fund. Unmanaged indices may
assume the reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for any Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of a Fund's investment objective and policies, characteristics and quality
of the portfolios, and the market conditions during the given time period, and
should not be considered as a representation of what may be achieved in the
future. For a description of the methods used to determine yield and effective
yield for the Funds, see the SAI.
Investors who purchase and redeem shares of the Fund through a customer
account maintained at a Participating Organization may be charged one or more
types of fees as agreed upon by the Participating Organization and the investor
with respect to the customer services provided by the Participating
Organization. Such fees will have the effect of reducing the yield and effective
yield of the Funds for those investors. Investors who maintain accounts with the
Funds' Transfer Agent will not pay these fees.
OTHER INFORMATION
The Trust was organized as a Massachusetts business trust on March 25, 1987
as a successor to FFB Money Trust which was organized on December 4, 1985 and
currently consists of twelve separate portfolios. The Board of Trustees may
establish additional portfolios in the future. The capitalization of FFB Funds
Trust consists of 15,100,000,000 authorized shares of beneficial interest with a
par value of $0.001 each. The five funds described herein each issue two classes
of shares, Institutional Class and Service Class. The classes vary in level of
shareholder servicing and cost. Service Class shares, for investors other than
customers of the Trust Department or Wholesale Bank Division of First Fidelity
Bank, N.A. and other banks and financial institutions, include enhanced
individual communication services and a higher servicing fee. When issued,
shares of the Funds are fully paid, non-assessable and will have no preemptive
rights. All shares of the Trust have equal voting rights and will be voted in
the aggregate, and not by class, except where voting by class is required by law
or where the matter involved affects only one class. For more details concerning
the voting rights of shareholders, see the SAI. First Fidelity is not the
beneficial owner of shares of the Funds, but it may have been granted
discretionary authority to vote all or some of those shares, in which case the
bank may be in a position to control the Funds.
36
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
Officers of the Trust for acts or obligations of the Trust which are binding
only on the assets and property of the Trust and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Trust or the Trustees. The Declaration of Trust provides for indemnification
out of Trust property for all loss and expense of any shareholder held
personally liable for the obligations of the Trust. The risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its obligations
and should be considered remote.
The Trust is not required to hold regular annual meetings of the Funds'
shareholders and does not intend to do so. The Trustees are required to call a
meeting for the purpose of considering the removal of a person serving as
Trustee if requested in writing to do so by the holders of not less than 10% of
the outstanding shares of the Trust and in connection with such meeting to
comply with the shareholders' communications provisions of Section 16(c) of the
1940 Act regarding assistance to shareholders who seek to remove any person
serving as Trustee.
37
APPENDIX
DESCRIPTION OF MUNICIPAL BOND RATINGS
The following are summaries of the ratings used by Moody's and S&P
applicable to permitted investments of the Funds:
MOODY'S INVESTORS SERVICE, INC.*
AAA: Municipal bonds which are rated "Aaa" are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
AA: Municipal bonds which are rated "Aa" are judged to be of high quality
by all standards. Together with the "Aaa" group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in "Aaa" securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat larger than in
"Aaa" securities.
A: Municipal bonds which are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
BAA: Bonds which are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
NOTE: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from "Aa" through "B" in its corporate bond ratings. Although
Industrial Revenue Bonds and Environmental-Control Revenue Bonds are tax-exempt
issues, they are included in the corporate bond rating system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category. The modifier 2 indicates a mid-range ranking and modifier 3 indicates
that the issue ranks in the lower end of its generic rating category. Moody's
does not apply numerical modifiers other than "Aa 1", "A 1" and "Baa 1" in its
municipal bond rating system, which offer the maximum security within the "Aa",
"A" and "Baa" groups, respectively.
STANDARD & POOR'S CORPORATION
AAA: Municipal bonds rated "AAA" are highest grade obligations. They
possess the ultimate degree of protection as to principal and interest.
---------------
* Moody's Investors Service, Inc. rates bonds of issuers which have $600,000 or
more of debt, except bonds of educational institutions, projects under
construction, enterprises without established earnings records and situations
where current financial data is unavailable.
38
AA: Municipal bonds rated "AA" also qualify as high grade obligations and
in the majority of instances differ from "AAA" issues only in a small degree.
A: Municipal bonds rated "A" are regarded as upper medium grade. They have
considerable investment strength but are not entirely free from adverse effects
of changes in economic and trade conditions. Interest and principal are regarded
as safe.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the "A" category.
RATINGS OF SHORT-TERM SECURITIES
MOODY'S INVESTORS SERVICE, INC.
The following ratings apply to short-term municipal notes and loans:
MIG 1: Loans bearing this designation are of the best quality, enjoying
strong protection from established cash flows for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG 2: Loans bearing this designation are of high quality, with margins or
protection ample although not so large as in the preceding group.
PRIME-1: Issuers receiving this rating have a superior capacity for
repayment of short-term promissory obligations.
PRIME-2: Issuers receiving this rating have a strong capacity for repayment
of short-term promissory obligations.
STANDARD & POOR'S CORPORATION
The following ratings apply to short-term municipal notes:
AAA: This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to repay principal and interest.
AA: Notes rated "AA" have a very strong capacity to repay principal and pay
interest and differ from "AAA" issues only in a small degree.
A-1: This designation indicates that the degree of safety regarding timely
payment is very strong.
A-2: Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated "A-1".
39
--------------------------------------------------------------------------------
[FFB FUNDS LOGO]
GENERAL AND ACCOUNT INFORMATION: [FFB LOGO] Money
(800) 437-8790 Market
INVESTMENT ADVISER Funds
First Fidelity Bank, N.A.
765 Broad Street, U.S. Treasury Fund
Newark, New Jersey 07102 U.S. Government Fund
Cash Management Fund
ADMINISTRATOR Tax-Free Money
Furman Selz Incorporated Market Fund
237 Park Avenue, Pennsylvania Tax-Free
New York, New York 10017 Money Market Fund
SPONSOR AND DISTRIBUTOR
FFB Funds Distributor, Inc.
237 Park Avenue,
New York, New York 10017
CUSTODIAN, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
First Fidelity Bank, N.A., New Jersey
765 Broad Street,
Newark, New Jersey 07102
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP
345 Park Avenue,
New York, New York 10154
LEGAL COUNSEL
Baker & McKenzie
805 Third Avenue,
New York, New York 10022
TABLE OF CONTENTSINSTITUTIONAL CLASS
Fund Expenses............................ 2
Financial Highlights..................... 7
Investment Objectives, Policies and
Associated Risks......................... 10
Investment Restrictions.................. 21
Management of the Funds.................. 22
Determination of Net Asset Value......... 26
PROSPECTUS
Purchase of Shares....................... 26
Redemption of Shares..................... 28
Exchange Privilege....................... 31
JUNE 30, 1995
Individual Retirement Accounts........... 31
Account Services......................... 32
Dividends and Distributions.............. 32
Federal Taxes............................ 33
State and Local Taxes.................... 34
Transfer and Dividend Disbursing Agent
and Custodian............................ 35
Performance Information.................. 35
Other Information........................ 36
Appendix................................. 38
-------------------------------------------- Managed by:
No dealer, salesman, or other person has First Fidelity Bank, N.A.
been authorized to give any information or
to make any representations, other than Sponsored and Distributed
By:
those contained in the Prospectus, and, if FFB Funds Distributor, Inc.
given or made, such other information or
representations must not be relied upon as
having been authorized by the Trust, the
Distributor or the Investment Adviser. This
Prospectus does not constitute an offering
in any state in which such offering may not
lawfully be made.
FBMMIC0695
EX-99
17
FFB TREASURY, GOVERNMENT AND 100% SAI
FFB CASH MANAGEMENT FUND
FFB U.S. GOVERNMENT FUND
FFB U.S. TREASURY FUND
FFB 100% U.S. TREASURY FUND
FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND
FFB TAX-FREE MONEY MARKET FUND
237 Park Avenue, New York, New York 10017
General and Account Information: (800) 437-8790
STATEMENT OF ADDITIONAL INFORMATION
FFB Cash Management Fund, FFB U.S. Government Fund, FFB U.S.
Treasury Fund, FFB 100% U.S. Treasury Fund (the "Money Market Funds"), FFB
Pennsylvania Tax-Free Money Market Fund and FFB Tax-Free Money Market Fund (the
"Tax-Free Money Market Funds") (the Money Market Funds and the Tax-Free Money
Market Funds are collectively referred to herein as the "Funds") are six
separate investment portfolios of FFB Funds Trust (the "Trust"), an open-end,
diversified management investment company. The objective of each Money Market
Fund is to seek to achieve as high a level of current income as is consistent
with preservation of capital and liquidity. The objective of each Tax-Free
Money Market Fund is to provide its shareholders with income that is exempt
from both federal and state personal income tax.
FFB CASH MANAGEMENT FUND invests in a variety of high-quality,
short-term money market instruments and repurchase agreements,
including obligations in which the FFB U.S. Government Fund and FFB
U.S. Treasury Fund invest.
FFB U.S. GOVERNMENT FUND invests exclusively in short-term
obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities and repurchase agreements.
FFB U.S. TREASURY FUND invests exclusively in short-term,
direct obligations of the U.S. Treasury and repurchase agreements.
FFB 100% U.S. TREASURY FUND invests exclusively in short-term,
direct obligations of the U.S. Treasury. The Fund will not invest in
repurchase agreements or engage in securities lending transactions.
FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND invests primarily
in high quality tax-exempt securities ("Municipal Obligations") of
Pennsylvania issuers with short-term maturities.
FFB TAX-FREE MONEY MARKET FUND invests primarily in
high-quality tax-exempt Municipal Obligations with short-term
maturities.
SHARES OF EACH FUND ARE OFFERED FOR SALE BY FFB FUNDS
DISTRIBUTOR, INC. (THE "SPONSOR AND DISTRIBUTOR") AS AN INVESTMENT
VEHICLE FOR
INSTITUTIONS, CORPORATIONS, FIDUCIARIES AND INDIVIDUALS. THE FUNDS
ARE SOLD
WITHOUT A SALES CHARGE OR LOAD; THE FUNDS MAY PAY CERTAIN EXPENSES
RELATED TO
THE DISTRIBUTION OF THEIR SHARES. EXCEPT FOR THE INSTITUTIONAL CLASS OF SHARES
OF THE 100% U.S. TREASURY FUND, CERTAIN BANKS, FINANCIAL INSTITUTIONS AND
CORPORATIONS ("PARTICIPATING ORGANIZATIONS") MAY AGREE TO ACT AS SHAREHOLDER
SERVICING AGENTS FOR INVESTORS WHO MAINTAIN ACCOUNTS AT THE PARTICIPATING
ORGANIZATIONS AND TO PERFORM CERTAIN SERVICES FOR THE FUNDS.
This Statement of Additional Information is not a prospectus
and is only authorized for distribution when preceded or accompanied by the
Funds' Prospectus dated June 30, 1995, (the "Prospectus"). This Statement of
Additional Information contains additional and more detailed information than
that set forth in the Prospectus and should be read in conjunction with the
Prospectus, additional copies of which may be obtained without charge from the
Distributor at 237 Park Avenue, New York, New York 10017 (telephone: (800)
437-8790).
JUNE 30, 1995
- 2 -
TABLE OF CONTENTS
Investment Objective and Federal Income Taxes ........................ 34
Policies .................... 3 Other Information ........................... 37
Investment Restrictions .............. 15 Principal Shareholders ..................... 39
Special Risk Considerations .......... 17 Custodian, Transfer Agent
Management of the Funds .............. 21 and Dividend Disbursing
Performance Information .............. 28 Agent ............................. 41
Determination of Net Servicing Agreements ............. 43
Asset Value ................ 30 Independent Accountants ..................... 44
Portfolio Transactions .............. 31 Financial Statements ....................... 44
Exchange Privilege .................. 33
Redemptions .......................... 34
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the
investment objective and policies of the Funds found under "Investment
Objective and Policies" in the Prospectus.
FFB CASH MANAGEMENT FUND
The FFB Cash Management Fund ("Cash Management Fund") invests
in short-term money market instruments which have remaining maturities not
exceeding one year, variable rate demand notes, variable rate master demand
notes and certain repurchase agreements. These money market instruments may
include obligations issued or guaranteed by the U.S. Government or its agencies
or instrumentalities and the following other kinds of investments:
BANK OBLIGATIONS. These obligations include negotiable certificates
of deposit, bankers' acceptances and fixed time deposits. A
certificate of deposit is a short-term, interest-bearing negotiable
certificate issued by a commercial bank against funds deposited in the
bank. A bankers' acceptance is a short-term draft drawn on a
commercial bank by a borrower, usually in connection with an
international commercial transaction. The borrower is liable for
payment as is the bank, which unconditionally guarantees to pay the
draft at its face amount on the maturity date. Fixed time deposits
are obligations of foreign branches of U.S. banks or foreign banks
which are payable on a stated maturity date and bear a fixed rate of
interest. Although fixed time deposits do not have a market, there
are no contractual restrictions on the right to transfer a beneficial
interest in the deposit to a third party. See "Investment Objective
and Policies - Cash Management Fund - Bank Obligations" in the
Prospectus with respect to certain limitations on investments by the
Cash Management Fund in fixed time deposits.
- 3 -
COMMERCIAL PAPER. Commercial paper includes short-term
unsecured promissory notes, variable rate demand notes and variable
rate master demand notes issued by domestic and foreign bank holding
companies, corporations, financial institutions and government
agencies and instrumentalities (but only includes taxable securities).
All commercial paper purchased by the Fund is, at the time of
investment, (i) rated "P-1" by Moody's Investors Service, Inc.
("Moody's") and "A-1" or better by Standard & Poor's Corporation
("S&P") or in a comparable category by any two of the nationally
recognized statistical rating organizations that have rated the
commercial paper, (ii) rated in a comparable category by only one such
organization if it is the only organization that has rated the
commercial paper (provided the purchase is approved or ratified by the
Board of Trustees), (iii) issued or guaranteed as to principal and
interest by issuers having an existing debt security rating of "Aa" or
better by Moody's or "AA" or better by S&P or (iv) securities which,
if not rated, are, in the opinion of the Fund's Adviser, of an
investment quality comparable to rated commercial paper in which the
Fund may invest. Because variable rate master demand notes are direct
lending arrangements between the lender and the borrower, the Fund's
Adviser does not generally contemplate that they will be traded.
There is no secondary market for variable rate master demand notes,
although they are redeemable, and thus immediately repayable by the
borrower, at principal amount, plus accrued interest, at any time.
See "Variable Rate Master Demand Notes".
CORPORATE DEBT SECURITIES. Fund investments in these
securities are limited to nonconvertible corporate debt securities of
U.S. or foreign corporations such as bonds and debentures which have
one year or less remaining to maturity and which are rated "AA" or
better by S&P and "Aa" or better by Moody's or in a comparable rating
category by any two of the nationally recognized statistical rating
organizations that have rated the securities or by one such
organization if it is the only organization that has rated the
securities (provided the purchase is approved or ratified by the Board
of Trustees).
----------
The rating "P-1" is the highest commercial paper rating
assigned by Moody's and the ratings "A-1" and "A-1+" are the highest
commercial paper ratings assigned by S&P. Debt rated "Aa" or better
by Moody's or "AA" or better by S&P are generally regarded as
high-grade obligations and such ratings indicate that the ability to
pay principal and interest is very strong.
After purchase by the Cash Management Fund, a security may
cease to be rated or its rating may be reduced below the minimum
required for purchase by the Fund. Neither event
- 4 -
will require a sale of such security by the Fund. However, the
Adviser, under delegated authority, will consult with the Board of
Trustees or will take such action as is deemed necessary pursuant to
procedures established by the Board in reassessing the security and
determining what further appropriate action should be taken. To the
extent the ratings given by Moody's or S&P or other nationally
recognized statistical rating organizations may change as a result of
changes in such organizations or their rating systems, the Cash
Management Fund will attempt to use comparable ratings as standards
for investments in accordance with the investment policies contained
in the Prospectus and in this Statement of Additional Information.
PARTICIPATION INTERESTS. The investment of the Cash
Management Fund in participation interests may take the form of
participation interests in, assignments or novations of a corporate
loan ("Participation Interests"). The Participation Interests may be
acquired from an agent bank, co-Lenders or other holders of
Participation Interests ("Participants"). In a novation, the Cash
Management Fund would assume all of the rights of the lender in a
corporate loan, including the right to receive payments of principal
and interest and other amounts directly from the Borrower and to
enforce its rights as a lender directly against the Borrower. As an
alternative, the Cash Management Fund may purchase an assignment of
all or a portion of a lender's interest in a corporate loan, in which
case, the Cash Management Fund may be required generally to rely on
the assigning lender to demand payment and enforce its rights against
the Borrower, but would otherwise be entitled to all of such lender's
rights in the corporate loan. The Cash Management Fund also may
purchase a Participation Interest in a portion of the rights of a
lender in a corporate loan. In such a case, the Cash Management Fund
will be entitled to receive payments of principal, interest and fees,
if any, but generally will not be entitled to enforce its rights
directly against the agent bank or the borrower; rather, the Cash
Management Fund must rely on the lending institution for that purpose.
The Cash Management Fund will not act as an agent bank, a guarantor or
sole negotiator or a structure with respect to a corporate loan.
In a typical corporate loan involving the sale of
Participation Interests, the agent bank administers the terms of the
corporate loan agreement and is responsible for the collection of
principal and interest and fee payments to the credit of all lenders
which are parties to the corporate loan agreement. The Cash
Management Fund generally will rely on the agent bank or an
Intermediate Participant to collect its portion of the payments on the
corporate loan. The agent bank monitors the value of the collateral
and, if the value of the collateral declines, may take certain action,
including accelerating the Corporate Loan, giving
- 5 -
the Borrower an opportunity to provide additional collateral or
seeking other protection for the benefit of the participants in the
corporate loan, depending on the terms of the corporate loan
agreement. Furthermore, unless under the terms of a participation
agreement the Cash Management Fund has direct recourse against the
Borrower (which is unlikely), the Cash Management Fund will rely on
the agent bank to use appropriate creditor remedies against the
Borrower. The agent bank also is responsible for monitoring
compliance with covenants contained in the corporate loan agreement
and for notifying holders of corporate loans of any failures of
compliance. Typically, under corporate loan agreements, the agent
bank is given broad discretion in enforcing the corporate loan
agreement, and is obligated to use only the same care it would use in
the management of its own property. For these services the Borrower
compensates the agent bank. Such compensation may include special
fees paid on structuring and funding the corporate loan and other fees
paid on a continuing basis.
A financial institution's employment as an agent bank may be
terminated in the event that it fails to observe the requisite
standard of care or becomes insolvent, or has a receiver, conservator,
or similar official appointed for it by the appropriate bank
regulatory authority or becomes a debtor in a bankruptcy proceeding.
A successor agent bank generally will be appointed to replace the
terminated agent bank, and assets held by the agent bank under the
corporate loan agreement should remain available to holders of
corporate loans. If, however, assets held by the agent bank for the
benefit of the Cash Management Fund were determined by an appropriate
regulatory authority or court to be subject to the claims of the agent
bank's general or secured creditors the Cash Management Fund might
incur certain costs and delays in realizing payment on a corporate
loan, or suffer a loss of principal and/or interest. In situations
involving Intermediate Participants similar risks may arise.
FFB U.S. GOVERNMENT FUND
The FFB U.S. Government Fund ("U.S. Government Fund") invests
exclusively in obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities which have remaining maturities not exceeding one
year and certain repurchase agreements. Agencies and instrumentalities which
issue or guarantee debt securities and which have been established or sponsored
by the U.S Government include the Bank for Cooperatives, the Export-Import
Bank, the Federal Farm Credit System, the Federal Home Loan Banks, the Federal
Home Loan Mortgage Corporation, the Federal Intermediate Credit Banks, the
Federal Land Banks, the Federal National Mortgage Association and the Student
Loan Marketing Association. U.S. Government agency and instrumentality
obligations include master notes issued by these entities but do not include
obligations of the World Bank,
- 6 -
the Inter-American Development Bank or the Asian Development Bank.
FFB U.S. TREASURY FUND
The FFB U.S. Treasury Fund ("U.S. Treasury Fund") invests
exclusively in direct obligations of the U.S. Treasury which have remaining
maturities not exceeding one year and certain repurchase agreements. The U.S.
Treasury issues various types of marketable securities consisting of bills,
notes, bonds, certificates of indebtedness and, from time to time, other debt
securities. They are direct obligations of the U.S. Government and differ
primarily in the length of their maturity. Treasury bills, the most frequently
issued marketable U.S. Government security, have a maturity of up to one year
and are issued on a discount basis.
FFB 100% U.S. TREASURY FUND
The FFB 100% U.S. Treasury Fund ("100% U.S. Treasury Fund")
invests exclusively in direct obligations of the U.S. Treasury which have
remaining maturities not exceeding one year. The U.S. Treasury issues various
types of marketable securities consisting of bills, notes, bonds, certificates
of indebtedness and, from time to time, other debt securities. They are direct
obligations of the U.S. Government and differ primarily in the length of their
maturity. Treasury bills, the most frequently issued marketable U.S.
Government security, have a maturity of up to one year and are issued on a
discount basis.
FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND; FFB TAX-FREE MONEY
MARKET FUND
To attain their objectives, the Pennsylvania Tax-Free Money
Market Fund (the "Pennsylvania Tax-Free Fund") and the Tax-Free Money Market
Fund (the "Tax-Free Fund") invest primarily in high quality Municipal
Obligations which have remaining maturities not exceeding thirteen months with
respect to the Pennsylvania Tax Free Fund and one year with respect to the
Tax-Free Fund. Both Tax-Free Money Market Funds maintain a dollar-weighted
average portfolio maturity of 90 days or less. For information concerning the
investment quality of Municipal Obligations that may be purchased by the Funds,
see "Investment Objective and Policies" in the Prospectus. The tax-exempt
status of a Municipal Obligation is determined by the issuer's bond counsel at
the time of the issuance of the security. Municipal Obligations, which are
exempt from federal and state personal income taxes and are debt obligations
issued by or on behalf of states, cities, municipalities and other public
authorities, include:
MUNICIPAL BONDS. Municipal bonds are issued to obtain funds
for various public purposes, including the construction of schools,
highways and other public facilities, for
- 7 -
general operating expenses and for making loans to other public
institutions. Industrial development or private activity bonds are
municipal bonds which are issued by or on behalf of public authorities
to provide funding for the construction, equipment, repair and
improvement of various privately-operated facilities. The Funds
generally do not intend to purchase these types of bonds but they may
do so. See "Federal Income Taxes".
For the purpose of certain requirements under the Investment
Company Act of 1940 (the "1940 Act") and various of the Funds'
investment restrictions, identification of the "issuer" of a municipal
security depends on the terms and conditions of the security. When
the assets and revenues of a political subdivision are separate from
those of the government which created the subdivision and the security
is backed only by the assets and revenues of the subdivision, the
subdivision would be deemed to be the sole issuer. Similarly, in the
case of an industrial development bond, if that bond is backed only by
the assets and revenues of the non-governmental user, then the
non-governmental user would be deemed to be the sole issuer. If,
however, in either case, the creating government or some other entity
guarantees the security, the guarantee would be considered a separate
security and would be treated as an issue of the government or other
agency.
Municipal bonds may be categorized as "general obligation" or
"revenue" bonds. General obligation bonds are secured by the issuer's
pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are secured by the net revenue
derived from a particular facility or group of facilities or, in some
cases, the proceeds of a special excise or other specific revenue
source, but not by the general taxing power. Industrial development
bonds are, in most cases, revenue bonds and do not generally carry the
pledge of the credit of the issuing municipality or public authority.
MUNICIPAL NOTES. Municipal notes include, but are not limited
to, tax anticipation notes (TANs), bond anticipation notes (BANs),
revenue anticipation notes (RANs), construction loan notes and project
notes. Notes sold as interim financing in anticipation of collection
of taxes, a bond sale or receipt of other revenue are usually general
obligations of the issuer. Project notes are issued by local housing
authorities to finance urban renewal and public housing projects and
are secured by the full faith and credit of the U.S. Government.
MUNICIPAL COMMERCIAL PAPER. Municipal commercial paper is
issued to finance seasonal working capital needs or as short-term
financing in anticipation of longer-term debt. It is paid from the
general revenues of the issuer or
- 8 -
refinanced with additional issuances of commercial paper or long-term
debt.
MUNICIPAL LEASES. Municipal leases, which may take the form
of a lease or an installment purchase or conditional sale contract,
are issued by state and local governments and authorities to acquire a
wide variety of equipment and facilities such as fire and sanitation
vehicles, telecommunications equipment and other capital assets.
Municipal leases frequently have special risks not normally associated
with general obligation or revenue bonds. Leases and installment
purchases or conditional sale contracts (which normally provide for
title to the leased asset to pass eventually to the government issuer)
have evolved as a means for governmental issuers to acquire property
and equipment without meeting the constitutional and statutory
requirements for the issuance of debt. The debt-issuance limitations
of many state constitutions and statutes are deemed to be inapplicable
because of the inclusion in many leases or contracts of "non-
appropriation" clauses that provide that the governmental issuer has
no obligation to make future payments under the lease or contract
unless money is appropriated for such purpose by the appropriate
legislative body on a yearly or other periodic basis. These types of
municipal leases may be considered illiquid and subject to the 10%
limitation of investment in illiquid securities set forth under
"Investment Restrictions" contained herein. The Board of Trustees may
adopt guidelines and delegate to the Adviser the daily function of
determining and monitoring the liquidity of municipal leases. In
making such determination, the Board and the Adviser may consider such
factors as the frequency of trades for the obligations, the number of
dealers willing to purchase or sell the obligations and the number of
other potential buyers and the nature of the marketplace for the
obligations, including the time needed to dispose of the obligations
and the method of soliciting offers. If the Board determines that any
municipal leases are illiquid, such leases will be subject to the 10%
limitation on investments in illiquid securities.
For purposes of diversification under the Act, the
identification of the issuer of Municipal Obligations depends on the terms and
conditions of the obligation. If the assets and revenues of an agency,
authority, instrumentality or other political subdivision are separate from
those of the government creating the subdivision and the obligation is backed
only by the assets and revenues of the subdivision, such subdivision would be
regarded as the sole issuer. Similarly, in the case of an industrial
development bond, if the bond is backed only by the assets and revenues of the
non-governmental user, the non-governmental user would be deemed to be the sole
issuer. If in either case the creating government or another entity guarantees
an
- 9 -
obligation, the guarantee would be considered a separate security and be
treated as an issue of such government or entity.
As described in the Prospectus, the Funds may, under limited
circumstances, elect to invest in certain taxable securities and repurchase
agreements with respect to those securities. The Funds will enter into
repurchase agreements only with broker-dealers, domestic banks or recognized
financial institutions which, in the opinion of the Funds' Adviser, present
minimal credit risks. In the event of default by the seller under a repurchase
agreement, a Fund may have problems in exercising its rights to the underlying
securities and may incur costs and experience time delays in connection with
the disposition of such securities. The Funds' Adviser will monitor the value
of the underlying security at the time the transaction is entered into and at
all times during the term of the repurchase agreement to ensure that the value
of the security always equals or exceeds the agreed upon repurchase price.
Repurchase agreements may be considered to be loans under the Act,
collateralized by the underlying securities.
The Funds may engage in the following investment activities:
SECURITIES WITH PUT RIGHTS (OR "STAND-BY COMMITMENTS"). When
the Funds purchase Municipal Obligations they may obtain the right to
resell them, or "put" them, to the seller (a broker-dealer or bank) at
an agreed upon price within a specific period prior to their maturity
date. No Fund limits the percentage of its assets that may be
invested in securities with put rights.
The amount payable to a Fund by the seller upon its exercise
of a put will normally be (i) such Fund's acquisition cost of the
securities (excluding any accrued interest which such Fund paid on
their acquisition), less any amortized market premium plus any
amortized market or original issue discount during the period such
Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during the period the
securities were owned by such Fund. Absent unusual circumstances,
each Fund values the underlying securities at their amortized cost.
Accordingly, the amount payable by a broker-dealer or bank during the
time a put is exercisable will be substantially the same as the value
of the underlying securities.
The Funds' right to exercise a put is unconditional and
unqualified. A put is not transferable by the Funds, although the
Funds may sell the underlying securities to a third party at any time.
The Funds expect that puts will generally be available without any
additional direct or indirect cost. However, if necessary and
advisable, the Funds may pay for certain puts either separately in
cash or
- 10 -
by paying a higher price for portfolio securities which are acquired
subject to such a put (thus reducing the yield to maturity otherwise
available to the same securities). Thus, the aggregate price paid for
securities with put rights may be higher than the price that would
otherwise be paid.
The acquisition of a put will not affect the valuation of the
underlying security, which will continue to be valued in accordance
with the amortized cost method. The actual put will be valued at zero
in determining net asset value. Where a Fund pays directly or
indirectly for a put, its cost will be reflected as an unrealized loss
for the period during which the put is held by that Fund and will be
reflected in realized gain or loss when the put is exercised or
expires. If the value of the underlying security increases, the
potential for unrealized or realized gain is reduced by the cost of
the put.
REPURCHASE AGREEMENTS
Securities held by the Cash Management, U.S. Government and
U.S. Treasury Funds may be subject to repurchase agreements. A repurchase
agreement is a transaction in which the seller of a security commits itself at
the time of the sale to repurchase that security from the buyer at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting an agreed upon interest rate effective for the period the buyer owns
the security subject to repurchase. The agreed-upon rate is unrelated to the
interest rate on that security. The Adviser will monitor the value of the
underlying security at the time the transaction is entered into and at all
times during the term of the repurchase agreement to ensure that the value of
the security always equals or exceeds the repurchase price. In the event of
default by the seller under the repurchase agreement, a Fund may experience a
loss of income from the loaned securities and a decrease in the value of any
collateral maintained, problems in exercising its rights to the underlying
securities, and costs and time delays in connection with the disposition of
such securities, and will have to take into account the maturities of the
underlying securities in calculating its dollar weighted average portfolio
maturity. Repurchase agreements may be considered to be loans under the
Investment Company Act of 1940, collateralized by the underlying securities.
LOANS OF PORTFOLIO SECURITIES
Except for the 100% U.S. Treasury Fund, portfolio securities
may be lent to unaffiliated brokers, dealers and financial institutions if U.S.
Government securities, cash or letters of credit maintained on a daily
mark-to-market basis in an amount equal to at least 100% of the current market
value of the securities loaned (including accrued dividends and interest
thereon) plus the interest payable with respect to the loan are maintained by
the borrower with the lending Fund in a segregated
- 11 -
account with such Fund's custodian. In determining whether to lend a security
to a particular broker, dealer or financial institution, the Adviser will
consider all relevant facts and circumstances, including the credit worthiness
of the broker, dealer or financial institution. No Fund will enter into any
portfolio security lending arrangement having a duration of longer than one
year. Any securities which a lending Fund may receive as collateral will not
become part of such Fund's portfolio at the time of the loan and, in the event
of a default by the borrower, the Fund will, if permitted by law, dispose of
such collateral except for such part thereof which is a security in which the
Fund is permitted to invest. During the time securities are on loan, the
borrower will pay the lending Fund an amount equal to any accrued income on
those securities, and that Fund may invest the cash collateral and earn
additional income or receive an agreed upon fee from a borrower which has
delivered cash equivalent collateral. No Fund will lend securities having a
value which exceeds 10% (5% with respect to the Pennsylvania Tax-Free Money
Market Fund) of the current value of its total assets. Loans of securities
will be subject to termination at the lender's or the borrower's option. Each
Fund may pay reasonable administrative and custodial fees in connection with a
securities loan and may pay a negotiated portion of the interest or fee earned
with respect to the collateral to the borrower or the placing broker.
Borrowers and placing brokers may not be affiliated, directly or indirectly,
with the Trust or its Adviser.
Lending portfolio securities involves certain risks such as
the possibility that the borrower will delay in returning securities or default
on its obligation to return them. A Fund may be unable to recover its
securities or lose its rights in any collateral held.
VARIABLE RATE DEMAND NOTES
The Cash Management Fund may from time to time buy variable
rate demand notes issued by corporations, bank holding companies, financial
institutions and government agencies and instrumentalities (but only taxable
securities). These securities will typically have a maturity in the 5-20 year
range but carry with them the right of the holder to put the securities to a
remarketing agent or other entity on short notice, typically seven days or
less. The obligation of the issuer of the put to repurchase the securities is
backed by a letter of credit or other obligation issued by a bank. The
purchase price is ordinarily par plus accrued and unpaid interest. Ordinarily,
the remarketing agent will adjust the interest rate every seven days (or at
other intervals corresponding to the notice period for the put), in order to
maintain the interest rate at the prevailing market rate for securities with a
seven-day maturity.
- 12 -
VARIABLE RATE MASTER DEMAND NOTES
The obligations which the Cash Management Fund and U.S.
Government Fund may buy include variable rate master demand notes. The terms
of these obligations permit the investment of fluctuating amounts by these
Funds at varying rates of interest pursuant to direct arrangements between the
Funds, as lenders, and the borrower. They permit weekly, and in some
instances, daily, changes in the amounts borrowed. The Funds have the right to
increase the amount under the note at any time up to the full amount provided
by the note agreement, or to decrease the amount, and the borrower may prepay
up to the full amount of the note without penalty. The notes may or may not be
backed by bank letters of credit. Because the notes are direct lending
arrangements between the lender and borrower, the Funds' Adviser does not
generally contemplate that they will be traded, and there is no secondary
market for them, although they are redeemable (and thus immediately repayable
by the borrower) at principal amount, plus accrued interest, at any time. The
Cash Management and the U.S. Government Fund have no limitations on the type of
issuer from whom the notes will be purchased, except that in the case of the
U.S. Government Fund the issuer must be a Federal agency or instrumentality.
However, in connection with such purchases and on an ongoing basis, First
Fidelity will consider the earning power, cash flow and other liquidity ratios
of the issuer, and its ability to pay principal and interest on demand,
including a situation in which all holders of such notes make demand
simultaneously. While master demand notes, as such, are not typically rated by
credit rating agencies, if not so rated, the Cash Management and U.S.
Government Funds may, under their minimum rating standards, invest in them only
if at the time of an investment the issuer meets the criteria set forth in the
Prospectus for all other debt obligations.
RULE 144A SECURITIES. Each Fund has adopted a fundamental investment
restriction which prohibits such Funds from investing an amount equal to 10% or
more of the current value of the Fund's net assets in illiquid securities,
including those securities which do not have readily available market
quotations (including repurchase agreements and fixed time deposits not subject
to withdrawal penalties having maturities, in either case, of more than seven
calendar days).
Historically, the notion of illiquid securities has included
securities subject to contractual or legal restrictions on resale because they
have not been registered under the Securities Act of 1933, as amended
("Securities Act"), securities that are otherwise not readily marketable and
repurchase agreements having a maturity of longer than seven days. Securities
that have not been registered under the Securities Act are referred to as
private placements or restricted securities and are purchased directly from the
issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the
- 13 -
potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has
developed for certain securities that are not registered under the Securities
Act, including repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. Institutional investors
depend on an efficient institutional market in which an unregistered security
can be readily resold or on an issuer's ability to honor a demand for
repayment. The fact that there are contractual or legal restrictions on resale
to the general public or to certain institutions may not be indicative of the
liquidity of such investments.
Pursuant to Rule 144A under the Securities Act, which allows a
broader institutional trading market for securities otherwise subject to
restrictions on resale to the general public. Rule 144A establishes a "safe
harbor" from the registration requirements of the Securities Act applicable to
resales of certain securities to qualified institutional buyers. The Adviser
anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of Rule 144A and
the development of automated systems for the trading, clearance and settlement
of unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc. (the
"NASD"). Consequently, it is the intent of the Tax-Free Money Market Funds and
the Cash Management Fund to invest, pursuant to procedures established by the
Board of Trustees and subject to applicable investment restrictions, in
securities eligible for resale under Rule 144A which are determined to be
liquid based upon the trading markets for the securities.
The Adviser will monitor the liquidity of restricted securities in
each of the Tax-Free Money Market and Cash Management Funds' portfolios under
the supervision of the Trustees. In reaching liquidity decisions, the Adviser
will consider, inter alia, the following factors: (1) the frequency of trades
and quotes for the security over the course of six months or as determined in
the discretion of the Adviser; (2) the number of dealers wishing to purchase or
sell the security and the number of other potential purchasers over the course
of six months or as determined in the discretion of the Adviser; (3) dealer
undertakings to make a market in the security; (4) the nature of the
- 14 -
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer); and (5) other factors, if any, which the Adviser deems relevant.
The Adviser will also monitor the purchase of Rule 144A securities to assure
compliance with each Money Market Fund's 10% limitation with respect to
illiquid securities. Rule 144A securities which are determined to be liquid
based upon their trading markets will not, however, be required to be included
among the securities considered to be illiquid for purposes of this 10%
limitation.
----------
Subject to the following investment restrictions, and except
for Fund investment objectives and policies with respect to loans of portfolio
securities, and securities with put rights, which are fundamental policies of
the Funds, the Adviser's discretion to make use of a particular investment
technique or activity are not fundamental policies and may be changed by the
Board of Trustees of the Trust without the approval of the Shareholders.
INVESTMENT RESTRICTIONS
The following restrictions are in addition to those described
under "Investment Restrictions" in the Prospectus, a Fund may not:
(1) purchase the securities of issuers conducting their
principal business activity in the same industry if, immediately after
the purchase and as a result thereof, the value of the investments of
the Fund in that industry would exceed 25% of the current value of the
total assets of the Fund, except that there is no limitation with
respect to investments in obligations of the United States Government,
its agencies or instrumentalities; negotiable certificates of deposit
issued by domestic branches of U.S. banks or bankers' acceptances and,
with respect to the Tax-Free Money Market Funds, investments in
Municipal Obligations (for the purpose of this restriction, industrial
development and pollution control bonds shall not be deemed Municipal
Obligations if the payment of principal and interest on such bonds is
the ultimate responsibility of non-governmental users);
(2) invest more than 5% of the current value of the total
assets of the Fund in the securities of any one issuer, other than
obligations of the United States Government or its agencies or
instrumentalities;
(3) purchase securities on margin (except for short-term
credits necessary for the clearance of transactions) or make short
sales of securities;
- 15 -
(4) underwrite securities of other issuers except, with
respect to the Tax-Free Money Market Funds, to the extent that the
purchase of municipal obligations, or other permitted investments,
directly from the issuer thereof or from an underwriter for an issuer
and the later disposition of such securities in accordance with each
Fund's investment objective and policies may be deemed to be an
underwriting;
(5) purchase restricted securities, which are securities
that must be registered under the Securities Act of 1933 before they
may be offered or sold to the public. (This restriction does not apply
to the Cash Management Fund and the Tax-Free Money Market Funds);
(6) write, purchase or sell puts, calls, warrants or
options or any combination thereof, except that the Tax-Free Funds may
purchase securities with put or demand rights;
(7) purchase or sell real estate (although a Fund may,
consistent with its investment objective, purchase securities secured
by real estate or interests therein, or securities issued by companies
which invest in real estate, or interests therein);
(8) purchase or sell commodities or commodities contracts
or oil, gas or mineral programs; or
(9) borrow money, issue senior securities, or pledge,
mortgage or hypothecate its assets, except that a Fund may borrow from
banks if immediately after each borrowing there is asset coverage of
at least 300%.
In addition, the U.S. Treasury Fund may not purchase
securities other than direct obligations of the United States Treasury or
repurchase agreements pertaining thereto or backed by the full faith and credit
of the United States (there being no limit on the amount of the assets of the
U.S. Treasury Fund which may be invested in the securities of any one issuer of
such obligations).
The 100% U.S. Treasury Fund may not purchase securities other
than direct obligations of the United States Treasury or backed by the full
faith and credit of the United States (there being no limit on the amount of
the assets of the 100% U.S. Treasury Fund which may be invested in the
securities of any one issuer of such obligations).
The U.S. Government Fund may not purchase securities other
than obligations issued or guaranteed by the United States Government or its
agencies or instrumentalities or repurchase agreements pertaining thereto
(there being no limit on the amount of the assets of the Government Fund which
may be invested in the securities of any one issuer of such obligations).
- 16 -
The Tax-Free Money Market Funds may not purchase equity
securities or other securities convertible into equity securities.
For certain investments of the Funds, Rule 2a-7 under the 1940
Act may impose more restrictive limitations than that set forth in restriction
(2) above.
For each Fund, the investment restrictions described above and
in the Prospectus are fundamental policies which may be changed only when
permitted by law and approved by the holders of a majority of the outstanding
voting securities of that Fund, as described under "Other Information".
SPECIAL RISK CONSIDERATIONS
INVESTING IN PENNSYLVANIA MUNICIPAL OBLIGATIONS
The following information as to certain Pennsylvania considerations is
given to investors in view of the Fund's policy of investing primarily in
securities of Pennsylvania issuers. Such information is derived from sources
that are generally available to investors and is believed by the Adviser to be
accurate. Such information constitutes only a brief summary, does not purport
to be a complete description and is based on information from official
statements relating to securities offerings of Pennsylvania issuers.
EMPLOYMENT. The industries traditionally strong in Pennsylvania, such
as coal, steel and railway, have declined and account for a decreasing share of
total employment. Service industries (including trade, health care, government
and finance) have grown, however, contributing increasing shares to the
Commonwealth's gross product and exceeding the manufacturing sector in each
year since 1985 as the largest single source of employment.
While the level of Pennsylvania's population increased 2.3% from 1985
through 1993, nonagricultural employment increased by 8.0% from 1983 through
1993. In contrast, increases in U.S. nonagricultural employment have been
greater for the same period, with U.S. employment increasing by 13% from 1985
through 1993. Trends in the unemployment rates of Pennsylvania and the U.S.
have been similar from 1985 through 1993. From 1986 to 1990, Pennsylvania's
unemployment rate was lower than the U.S. rate. For example, Pennsylvania's
unemployment rate for 1989 and 1990 was 4.5% and 5.4%, respectively, while the
unemployment rate for the U.S. was 5.3% and 5.5% for the same years. In 1991,
1992 and 1993, Pennsylvania's unemployment rate was 6.9%, 7.5% and 7.1%,
respectively, which slightly exceeded the U.S. employment rate of 6.7%, 7.4%
and 6.8% for the same years.
COMMONWEALTH DEBT. Debt service on general obligation bonds of
Pennsylvania, except those issued for highway purposes or the
- 17 -
benefit of other special revenue funds, is payable from Pennsylvania's general
fund, the recipient of all Commonwealth revenues that are not required to be
deposited in other funds.
As of June 30, 1994, the Commonwealth had $5,076 million of long-term
bonds outstanding, with debt for capital projects constituting the largest
dollar amount. Although Pennsylvania's Constitution permits the issuance of an
aggregate amount of capital project debt equal to 1.75 times the average annual
tax revenues of the preceding five fiscal years, the General Assembly may
authorize and historically has authorized a smaller amount. This
constitutional limit does not apply to other types of Pennsylvania debt such as
electorate approved debt or debt issued to rehabilitate areas affected by
disaster. However, the former may be incurred only after the enactment of
legislation calling for a referendum and usually specifying the purpose and
amount of such debt, followed by electoral approval. Similarly, debt issued to
rehabilitate a disaster area must be authorized by legislation which sets the
debt limits. These statutory and constitutional limitations imposed on bonds
are also applicable to bond anticipation notes.
Pennsylvania cannot use tax anticipation notes or any other form of
debt to fund budget deficits between fiscal years. All year-end deficits must
be funded within the succeeding fiscal year's budget. Moreover, the principal
amount of tax anticipation notes issued and outstanding for the account of a
fund during a fiscal year may not exceed 20 percent of that fund's estimated
revenues for that fiscal year.
MORAL OBLIGATIONS. The debt of the Pennsylvania Housing Finance
Agency ("PHFA"), a state agency which provides housing for lower and moderate
income families, and certain obligations of The Hospitals and Higher Education
Facilities Authority of Philadelphia (the "Hospitals Authority") are the only
debt bearing Pennsylvania's moral obligation. PHFA's bonds, but not its notes,
are partially secured by a capital reserve fund required to be maintained by
PHFA in an amount equal to the maximum annual debt service on its outstanding
bonds in any succeeding calendar year. If there is a potential deficiency in
the capital reserve fund or if funds are necessary to avoid default on
interest, principal or sinking fund payments on bonds or notes of PHFA, the
Governor must place in Pennsylvania's budget for the next succeeding year an
amount sufficient to make up any such deficiency or to avoid any such default.
The budget which the General Assembly adopts may or may not include such
amount. PHFA is not permitted to borrow additional funds as long as any
deficiency exists in the capital reserve fund.
In fiscal 1976, the Commonwealth purchased $32.0 million principal
amount of notes from PHFA, issued for the purpose of redeeming all outstanding
bond anticipation notes and paying unfunded liabilities of PHFA. All such
notes have been redeemed by PHFA and the funds returned, with interest, to
Pennsylvania.
- 18 -
As of December 31, 1994, PHFA had $2,300 million of bonds and notes
outstanding.
The Hospitals Authority is a municipal authority organized by the City
of Philadelphia (the "City") to, inter alia, acquire and prepare various sites
for use as intermediate care facilities for the mentally retarded. In 1986 the
Hospitals Authority issued $20.4 million of bonds, which were refunded in 1993
by a $21.1 million bond issue of the Hospitals Authority (the "Hospitals
Authority Bonds") for such facilities for the City. The Hospitals Authority
Bonds are secured by leases with the City and a debt service reserve fund for
which the Pennsylvania Department of Public Welfare (the "Department") has
agreed with the Hospitals Authority to request in the Department's annual
budget submission to the Governor, an amount of funds sufficient to alleviate
any deficiency in the debt service reserve fund that may arise. The budget as
finally adopted may or may not include the amount requested. If funds are paid
to the Hospitals Authority, the Department will obtain certain rights in the
property financed with the Hospitals Authority Bonds in return for such
payment.
In response to a delay in the availability of billable beds and the
revenues from these beds to pay debt service on the Hospitals Authority Bonds,
PHFA agreed in June 1989 to provide a $2.2 million low interest loan to the
Hospitals Authority. The loan enabled the Hospitals Authority to make all debt
service payments on the Hospitals Authority Bonds during 1990. Enough beds
were completed in 1991 to provide sufficient revenues to the Hospitals
Authority to meet its debt service payments and to begin repaying the loan from
PHFA. As of December 31, 1994, $1.64 million of the loan was outstanding.
OTHER COMMONWEALTH OBLIGATIONS; PENSIONS. Other obligations of
Pennsylvania include long-term agreements with public authorities to make lease
payments that are pledged as security for those authorities' revenue bonds and
pension plans covering state public school and other employees. The total
unfunded accrued liability under these pension plans for their fiscal years
ended in 1994 was $2,950 million.
PENNSYLVANIA AGENCIES. Certain Pennsylvania-created agencies have
statutory authorization to incur debt for which legislation providing for state
appropriations to pay debt service thereon is not required. The debt of these
agencies is supported solely by assets of, or revenues derived from the various
projects financed and is not an obligation of Pennsylvania. Some of these
agencies, however, are indirectly dependent on Pennsylvania funds through
various state-assisted programs. There can be no assurance that in the future
assistance of the Commonwealth will be available to these agencies. These
entities are as follows: The Delaware River Joint Toll Bridge Commission,
Delaware River Port Authority, Pennsylvania Energy Development Authority,
Pennsylvania Higher
- 19 -
Education Assistance Agency, Pennsylvania Infrastructure Investment Authority,
the Pennsylvania State Public School Building Authority, the Pennsylvania
Turnpike Commission, the Pennsylvania Higher Educational Facilities Authority,
the Pennsylvania Industrial Development Authority, the Philadelphia Regional
Port Authority and the Pennsylvania Economic Development Financing Authority.
DEBT OF POLITICAL SUBDIVISIONS AND THEIR AUTHORITIES. The ability of
Pennsylvania's political subdivisions, such as counties, cites and school
districts, to engage in general obligation borrowing without electorate
approval is generally limited by their recent revenue collection experience,
although generally such subdivisions can levy real property taxes unlimited as
to rate or amount to repay general obligation borrowings.
Political subdivisions can issue revenue obligations which will not
affect their general obligation capacity, but only if such revenue obligations
are either limited as to repayment from a certain type of revenue other than
tax revenues or projected to be repaid solely from project revenues.
Industrial development and municipal authorities, although created by
political subdivisions, can only issue obligations payable solely from the
revenues derived from the financed project. If the user of the project is a
political subdivision, that subdivision's full faith and credit may back the
repayment of the obligations of the industrial development or municipal
authority. Often the user of the project is a nongovernmental entity, such as
a not-for-profit hospital or university, a public utility or an industrial
corporation, and there can be no assurance that it will meet its financial
obligations or that the pledge, if any, of property financed will be adequate.
Factors affecting the business of the user of the project, such as governmental
efforts to control health care costs (in the case of hospitals), declining
enrollment and reductions in governmental financial assistance (in the case of
universities), increasing capital and operational costs (in the case of public
utilities) and economic slowdowns (in the case of industrial corporations) may
adversely affect the ability of the project user to pay the debt service on
revenue bonds issued on its behalf.
Many factors affect the financial condition of the Commonwealth and
its counties, cities, school districts and other political subdivisions, such
as social, environmental and economic conditions, many of which are not within
the control of such entities. As is the case with many states and cities, many
of the programs of the Commonwealth and its political subdivisions,
particularly human services programs, depend in part upon federal
reimbursements which have been steadily declining. In recent years the
Commonwealth and various of its political subdivisions (including particularly
the City of Philadelphia and the City of Scranton) have encountered financial
- 20 -
difficulty due to a slowdown in the pace of economic activity in the
Commonwealth and to other factors. The Fund is unable to predict what effect,
if any, such factors would have on the Fund's investments.
MANAGEMENT OF THE FUNDS
TRUSTEES AND OFFICERS
The principal occupations of the Trustees and executive
officers of the Trust for at least the past five years are listed below. The
address of each, unless otherwise indicated, is 237 Park Avenue, New York, New
York 10017. Trustees deemed to be "interested persons" of the Trust for
purposes of the Investment Company Act of 1940, as amended, are indicated by an
asterisk.
*EDMUND A. HAJIM, Age 58, Chairman of the Board of Trustees - Chairman of the
Board of Furman Selz Incorporated since 1983; Chairman of the Board
and President of Furman Selz Capital Management, Inc. since 1984;
Chairman of the Board and Chief Executive Officer, Lehman Management
Co., Inc. from 1980 to 1983; Managing Director, Lehman Brothers Kuhn
Loeb Incorporated from 1977 to 1983; Chairman of the Board, President
and Director or Trustee of various mutual funds affiliated with Furman
Selz Incorporated.
*ROBERT H. DUNKER, Age 64, Trustee, 303 Washington Boulevard, Sea Girt, New
Jersey 08750 - (Retired); formerly, Executive Vice President, Trust
Administration, First Fidelity Bank, N.A., New Jersey; Director, E.J.
Brooks Co.; Director, Faber-Castell Corp.; Trustee, Hanover Funds,
Inc. (registered investment company).
ROBERT F. KANE, Age 70, Trustee, 105 Glenside Avenue, Scotch Plains, New Jersey
07076 - (Retired); Vice Chairman, Monroe Systems for Business, Inc.
(business systems) from 1984 to 1986; President, Monroe Systems for
Business, a Division of Litton Industries from 1974 to 1986.
BENJAMIN A.LOBEL, Age 51, Trustee, 155 Brentwood Drive, South Orange, New
Jersey 07079 - private investor; formerly Executive Vice President,
Chief Financial Officer of The Baxter Group, Inc. (wholesale
distributors) from 1974 to 1992.
*WALTER J. NEPPL, Age 73, Trustee, The Enclave, 5345 Annabel Lane, Plano, Texas
75093 - (Retired); Management Consultant since 1982; Director, Sun
Company, Inc. since 1976; Trustee, Geraldine R. Dodge Foundation
since 1975; Vice Chairman of the Board, J.C. Penney Company (retail
merchandising) from 1981 to 1982; President and Chief Operating
Officer, J.C. Penney Company from 1976 to 1981.
- 21 -
T. BROCK SAXE, Age 54, Trustee, 930 Oenoke Ridge, New Canaan, Connecticut 06840
- President of Tombrock Corporation (restaurant organization) since
1962; Director of New Canaan Bank and Trust Company.
STEVEN D. BLECHER, Age 52, Executive Vice President - Executive Vice President
and Director of Furman Selz Incorporated since 1983; Vice President,
Secretary and Treasurer of Furman Selz Capital Management, Inc. since
1984.
MICHAEL C. PETRYCKI, Age 52, Executive Vice President - Executive Vice
President of the Sponsor since 1984.
JOAN V. FIORE, Age 39, Vice President and Secretary - Managing Director of the
Sponsor since 1991. Attorney with the Securities and Exchange
Commission from 1986 to 1991.
ROBERT A. HERING, Age 38, Vice President - Managing Director of the Sponsor
since 1986; Assistant Secretary of the Bank of New York from 1984 to
1986.
JOHN J. PILEGGI, Age 36, Vice President and Treasurer - Senior Managing
Director of the Sponsor since 1984; Assistant Vice President, Lehman
Management Co., Inc. from 1981 to 1984.
DONALD BROSTROM, Age 36, Assistant Treasurer - Director, Fund Services, Furman
Selz Incorporated since 1986.
SHERYL HIRSCHFELD, Age 34, Assistant Secretary - Director, Corporate Secretary
Services, Furman Selz Incorporated since November 1994); formerly
Assistant to the Corporate Secretary and General Counsel at The
Dreyfus Corporation.
Trustees not affiliated with Furman Selz receive from the
Trust an annual fee of $6,000 and a fee of $1,000 for each Board of Trustees
and Board committee meeting attended and are reimbursed by the Trust for all
out-of-pocket expenses relating to attendance at meetings. Trustees who are
affiliated with Furman Selz do not receive compensation from the Trust but are
reimbursed by the Trust for all out-of-pocket expenses relating to attendance
at meetings. For the year ended February 28, 1995, the Trustees, as a group,
received from the Cash Management Fund, the U.S. Government Fund, the U.S.
Treasury Fund, the Pennsylvania Tax-Free Money Market Fund and the Tax-Free
Money Market Fund fees and expenses in the amount of $7,000, $7,000, $7,000,
$7,000 and $7,000, respectively. The 100% U.S. Treasury Fund was not in
operation during this time period. The maximum total compensation (not
including expense reimbursements) paid to any one director by the Fund and all
other portfolios of the Trust on a combined basis did not exceed $15,000. As
of the date of June 9, 1995, the Trustees and officers, as a group, owned less
than 1% of the outstanding shares of each Fund.
- 22 -
ADVISER
The Trust retains First Fidelity Bank, National Association,
New Jersey ("First Fidelity" or the "Adviser") to act as the investment adviser
for each of the Funds. First Fidelity also acts as transfer agent for the
Funds. See "Custodian, Transfer Agent, and Dividend Disbursing Agent".
The Adviser is a national banking association which provides
commercial banking and trust business services throughout New Jersey. It is a
wholly-owned subsidiary of First Fidelity Bancorporation, whose principal
business is providing financial and related services through its subsidiary
organizations. The advisory services of the Adviser are provided through the
Asset Management Group of the Trust Division which as of August 31, 1994 had
approximately $16 billion of client assets under management.
Pursuant to a Master Advisory Contract and Supplements thereto
with respect to each Fund ("Advisory Contract") with the Trust, First Fidelity
has agreed to manage the portfolio of each Fund and to furnish to the Trust
investment guidance and policy direction in connection therewith. First
Fidelity has agreed to provide to the Trust, among other things, information
relating to money market portfolio composition, credit conditions and average
maturity of the portfolio of each Fund. First Fidelity also furnishes to the
Trust's Board of Trustees periodic reports on the investment performance of
each Fund.
First Fidelity has also agreed in the Advisory Contract to
provide administrative assistance in connection with the operation of the Trust
and the Funds. Administrative services provided by First Fidelity include,
among other things, (i) data processing, clerical and bookkeeping services
required in connection with maintaining the financial accounts and records for
the Trust and each of the Funds, (ii) compiling statistical and research data
required for the preparation of reports and statements which are periodically
distributed to the Trust's Officers and Trustees, (iii) handling general
shareholder relations with Fund investors, such as advice as to the status of
their accounts, the current yield and dividends declared to date and assistance
with other questions related to their accounts and (iv) compiling information
required in connection with the Trust's filings with the Securities and
Exchange Commission.
SPONSOR AND DISTRIBUTOR
Shares of the Funds are offered on a continuous basis and
without sales charges through FFB Funds Distributor, Inc., which acts as the
Funds' distributor. FFB Funds Distributor, Inc. is not obligated to sell any
specific amount of shares.
- 23 -
ADMINISTRATOR
Pursuant to a Master Administrative Services Contract and
Supplements thereto with respect to each Fund ("Administrative Services
Contract"), Furman Selz Incorporated ("Furman Selz") (i) provides all
management and administrative services reasonably necessary for the operation
of the Trust and the Funds, other than those services which are provided by
First Fidelity pursuant to the Advisory Contract; (ii) provides the Trust with
office space and office facilities reasonably necessary for the operation of
the Trust and the Funds; (iii) employs or associates itself with such persons
as it believes appropriate to assist it in performing its obligations under the
Administrative Services Contract; (iv) provides the Trust with certain persons
satisfactory to the Trust's Board of Trustees to serve as Trustees, Officers
and employees of the Trust, including a president, one or more vice presidents,
a secretary and a treasurer; and (v) pays the entire compensation of all of the
Trust's Officers and employees and the entire compensation of the Trustees of
the Trust who are affiliated persons of Furman Selz.
DISTRIBUTION PLAN
Each Fund, except the 100% U.S. Treasury Fund, has adopted a
Master Distribution Plan and Supplements thereto (the "Plan") pursuant to Rule
l2b-l of the 1940 Act, after having concluded that there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders. The Plan
provides for a monthly payment by each Fund to the Distributor in such amounts
as the Distributor may request or for direct payment by the Funds, for certain
costs incurred under the Plan, subject to periodic Board approval, provided
that each such payment is based on the average daily value of the Fund's net
assets during the preceding month and is calculated at an annual rate not to
exceed 0.25%, except for the Pennsylvania Tax-Free Money Market Fund which is
calculated at an annual rate not to exceed 0.35%. Certain expenses of the
Trust may be reduced in accordance with applicable State expense limitations.
See "Fees and Expenses".
The Distributor will use all amounts received under the Plan
for payments to broker-dealers or financial institutions (but not including
banks) for their assistance in distributing shares of the Funds and otherwise
promoting the sale of Fund shares. The Distributor may also use all or any
portion of such fee to pay Fund expenses such as the printing and distribution
of prospectuses sent to prospective investors, the preparation, printing and
distribution of sales literature and expenses associated with media
advertisements.
The Plan provides for the Distributor to prepare and submit to
the Board of Trustees on a quarterly basis written reports of all amounts
expended pursuant to the Plan and the purpose for which such expenditures were
made. The Plan provides that it may not be amended to increase materially the
costs which
- 24 -
the Funds may bear pursuant to the Plan without shareholder approval and that
other material amendments of the Plan must be approved by the Board of
Trustees, and by the Trustees who neither are "interested persons" (as defined
in the 1940 Act) of the Trust nor have any direct or indirect financial
interest in the operation of the Plan or in any related agreement, by vote cast
in person at a meeting called for the purpose of considering such amendments.
The selection and nomination of the Trustees of the Trust has been committed to
the discretion of the Trustees who are not "interested persons" of the Trust.
The Plan and the related Distribution Contract between the Trust and Furman
Selz have been approved, and are subject to annual approval, by the Board of
Trustees and by the Trustees who neither are "interested persons" nor have any
direct or indirect financial interest in the operation of the Plan or in the
Distribution Contract, by vote cast in person at a meeting called for the
purpose of voting on the Plan. The Board of Trustees and the Trustees who are
not "interested persons" and who have no direct or indirect financial interest
in the operation of the Plan or in the Administrative Services Contract voted
to approve the Plan at a meeting held on March 26, 1987. The Plan was
submitted to the shareholders of the Funds and approved at a special meeting
held June 11, 1987. The Board of Trustees of the Trust approved the
continuance of the Plan and the Distribution Contract with the Sponsor at a
meeting of the Board of Trustees on December 8, 1994. The Plan is terminable
with respect to a particular Fund at any time by a vote of a majority of the
Trustees who are not "interested persons" of the Trust and who have no direct
or indirect financial interest in the operation of the Plan or in the
Administrative Services Contract or by vote of the holders of a majority of the
shares of a Fund. For the year ended February 28, 1995, the Funds accrued
distribution expenses of $24,433; $7,507; $20,015; $3,458 and $1,452,
respectively, for the US Treasury Fund, US Government Fund, Cash Management
Fund, Tax Free Money Market Fund and Pennsylvania Tax Free Money Market Fund,
respectively. No payments were made pursuant to a Plan on behalf of any of the
Funds during the fiscal years ended February 28, 1994 and February 28, 1993.
FEES AND EXPENSES
As compensation for their advisory, administrative and
management services, First Fidelity and Furman Selz are each paid a monthly fee
with respect to each Fund at the following annual rates:
- 25 -
CASH MANAGEMENT FUND, U.S. GOVERNMENT FUND, U.S. TREASURY FUND,
TAX-FREE FUND
FEE RATE
---------------------------------
PORTION OF AVERAGE DAILY VALUE FIRST
FURMAN
OF NET ASSETS OF EACH FUND FIDELITY
SELZ
-------- ------
Not exceeding $500 million . . . . . . . . . . . . . . . . . . . 0.350% 0.150%
In excess of $500 million but not 0.315% 0.135%
exceeding $1 billion . . . . . . . . . . . . . . . . . .
In excess of $l billion but not 0.280% 0.120%
exceeding $1.5 billion . . . . . . . . . . . . . . . . .
In excess of $1.5 billion . . . . . . . . . . . . . . . . . . . . 0.245% 0.105%
PENNSYLVANIA TAX-FREE FUND
FEE RATE
---------------------------------
PORTION OF AVERAGE DAILY VALUE FIRST
FURMAN
OF NET ASSETS OF THE FUND FIDELITY
SELZ
------------------------- -------- ------
Not exceeding $500 million . . . . . . . . . . . . . . . . . . . 0.400% 0.150%
In excess of $500 million but not 0.360% 0.135%
exceeding $1 billion . . . . . . . . . . . . . . . . . .
In excess of $l billion but not 0.320% 0.120%
exceeding $1.5 billion . . . . . . . . . . . . . . . . .
In excess of $1.5 billion . . . . . . . . . . . . . . . . . . . . 0.280% 0.105%
FEE RATE
---------------------------------
FIRST FURMAN
100% U.S. TREASURY FUND FIDELITY
SELZ
------------------------- -------- ------
Portion of average daily value of net assets of the Fund . . . . 0.14% 0.08%
For the year ended February 28, 1995, First Fidelity and
Furman Selz earned fees from each of the Funds as indicated below:
First Furman
Fidelity Selz
-------- ------
U.S. Treasury Fund . . . . . . . . . . . . . . . . . . . . . . . $2,151,171 $915,113
U.S. Government Fund . . . . . . . . . . . . . . . . . . . . . . 730,462 311,418
Cash Management Fund . . . . . . . . . . . . . . . . . . . . . . 1,942,552 828,806
Tax-Free Money Market Fund . . . . . . . . . . . . . . . . . . . 326,408 138,856
- 26 -
First Fidelity and Furman Selz waived their entire fees for
the fiscal year ended February 28, 1995 from the Pennsylvania Tax-Free Money
Market Fund in the amount of $85,049 and $31,893, respectively.
In addition, Furman Selz voluntarily waived partial fees of
$11,435, $11,695, $18,350, and $7,016, respectively, from the U.S. Treasury
Fund, U.S. Government Fund, Cash Management Fund, and Tax-Free Money Market
Fund.
For the years ending February 28, 1994 and February 28, 1993,
respectively, First Fidelity received the following fees from the Funds:
$2,124,992 and $1,637,956 from the Cash Management Fund; $703,264 and $634,539
from the U.S. Government Fund; $2,119,557 and $1,412,042 from the U.S. Treasury
Fund; and $303,034 and $340,802 from the Tax-Free Money Market Fund.
For the same period, Furman Selz earned $844,626 (of which
$12,325 was waived) and $701,980 (of which $13,725 was waived) from the Cash
Management Fund; $277,503 (of which $7,854 was waived) and $271,945 (of which
$8,748 was waived) from the U.S. Government Fund; $844,456 (of which $7,682
was waived) and $605,162 (of which $8,554 was waived) from the U.S. Treasury
Fund; and $119,671 (of which $2,026 was waived) and $146,059 (of which $2,257
was waived) from the Tax-Free Money Market Fund.
For the year ended February 28, 1994, First Fidelity and
Furman Selz each waived its entire fee with respect to the Pennsylvania
Tax-Free Money Market Fund, totalling $59,080 and $31,893, respectively. With
respect to the Pennsylvania Tax-Free Money Market Fund, First Fidelity and
Furman Selz each waived its entire fee for the fiscal period ended February 29,
1993, totalling $73,977 and $27,741, respectively.
The 100% U.S. Treasury Fund was not in operation during any of
the time periods described above.
Certain of the states in which the shares of the Funds may
qualify for sale impose limitations on the expenses of the Funds. The Advisory
Contract and the Administrative Services Contract provide that if, in any
fiscal year, the total expenses of a Fund (excluding taxes, interest, brokerage
commissions and other portfolio transaction expenses (such as dealer markups),
distribution fees, other expenditures which are capitalized in accordance with
generally accepted accounting principles and extraordinary expenses, but
including the advisory and administrative services fees) exceed the expense
limitations applicable to that Fund imposed by the securities regulations of
any state, First Fidelity and Furman Selz will reimburse that Fund monthly in
an amount equal to 70% and 30%, respectively, of that excess. Although there
is no certainty that these limitations will be in effect in the future or that
the Funds will choose to qualify for sale in any such state, the most
restrictive of these limitations
- 27 -
on an annual basis with respect to each Fund are currently 2.5% of the first
$30 million of average daily net assets, 2% of the next $70 million and 1.5% of
the remaining average daily net assets.
For the fiscal year ended February 28, 1995 and February 28,
1994, no payments or reimbursements were required as a result of these
limitations. For the fiscal year ended February 28, 1993, First Fidelity and
Furman Selz voluntarily agreed to reimburse expenses of the Pennsylvania
Tax-Free Fund in the amount of $14,000 and $6,000, respectively.
The Advisory Contract and the Administrative Services Contract
will continue in effect with respect to each Fund from year to year provided
such continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of that Fund or by the Trust's Board of Trustees
and (ii) by a majority of the Trustees of the Trust who are not parties to such
contracts or "interested persons" (as defined in the Investment Company Act of
1940) of any such party. Each contract was approved by the Board of Trustees,
including a majority of the Trustees who are not parties to the contracts or
interested persons of such parties, at its meeting held on March 26, 1987 and
approved by shareholders of the Funds at a special meeting held on June 11,
1987. The Board of Trustees of the Trust approved the continuance of the
Fund's Advisory Contract and Administrative Services Contract at a meeting of
the Board of Trustees on December 8, 1994. Each contract may be terminated
with respect to the Trust at any time, without payment of any penalty, by a
vote of a majority of the outstanding voting securities of the Trust (as
defined in the 1940 Act) or by a vote of a majority of the Trust's entire Board
of Trustees on 60 days' written notice to First Fidelity, or by First Fidelity
on 60 days' written notice to the Trust. The Advisory Contract and the
Administrative Services Contract shall terminate automatically in the event of
their assignment (as defined in the 1940 Act).
PERFORMANCE INFORMATION
FFB Funds Trust may, from time to time, include the yield and
effective yield of the Funds in advertisements or reports to shareholders or
prospective investors. Current yield for a Fund will be based on the change in
the value of a hypothetical investment (exclusive of capital changes) over a
particular 7-day period, less a pro-rata share of Fund expenses accrued over
that period (the "base period"), and stated as a percentage of the investment
at the start of the base period (the "base period return"). The base period
return is then annualized by multiplying by 365/7, with the resulting yield
figure carried to at least the nearest hundredth of one percent. "Effective
yield" for a Fund assumes that all dividends received during an annual period
have been reinvested. Calculation of "effective yield" begins with the same
"base period return" used in the calculation of yield, which is then annualized
to reflect weekly
- 28 -
compounding pursuant to the following formula: Effective Yield = [Base Period
Return) + 1) 365/7] - 1.
For the 7-day period ended February 28, 1005, the yield and
the effective yield of the Cash Management, U.S. Government and U.S. Treasury
Funds were as follows:
YIELD FOR 7 DAYS EFFECTIVE YIELD FOR
ENDED 2/28/95 7 DAYS ENDED 2/28/95
---------------- --------------------
FFB Cash Management Fund 5.59% 5.75%
FFB U.S. Government Fund 5.67% 5.83%
FFB U.S. Treasury Fund 5.37% 5.51%
Tax-Equivalent yield, like yield, is based on a 7-day period
and is computed by dividing that portion of the Fund's yield (computed pursuant
to the general yield formula set forth above) which is tax-exempt by one minus
a stated income tax rate and adding the quotient to that portion, if any, of
the Fund's yield that is not tax-exempt.
For the 7-day period ended February 28, 1995, the yield,
effective yield and tax equivalent yield of the Pennsylvania Tax-Free Fund and
the Tax-Free Fund was as follows:
TAX-EQUIVALENT YIELD
YIELD FOR 7 DAYS ENDED EFFECTIVE YIELD FOR 7 FOR 7
DAYS ENDED
2/28/95 DAYS ENDED 2/28/95 2/28/95
---------------------- --------------------- --------------------
Pa. Tax-Free Fund 4.07% 4.15% 6.03%*
Tax-Free Fund 3.89% 3.97% 5.64%**
* Assuming a marginal tax rate of 32.5%
** Assuming a marginal tax rate of 31.0%
The 100% U.S. Treasury Fund was not in operation during the
time periods described above.
Performance information for a Fund may be compared, in reports
and promotional literature, to, where applicable: (i) the Standard & Poor's 500
Stock Index, Dow Jones Industrial Average, or Fund's results with those of a
group of unmanaged securities widely regarded by investors as representative of
the securities markets in general; (ii) other groups of mutual funds tracked by
Lipper Analytical Services, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives, and assets, or
tracked by other services, companies, publications, or persons who rank mutual
funds on overall performance or other criteria; and (iii) the Consumer Price
Index (measure for inflation) to assess the real rate of return from an
investment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
- 29 -
Performance information for any Fund reflects only the
performance of a hypothetical investment in the Fund during the particular time
period on which the calculations are based. Performance information should be
considered in light of the Fund's investment objectives and policies,
characteristics and quality of the portfolios and the market conditions during
the given time period, and should not be considered as a representation of what
may be achieved in the future.
Investors who purchase and redeem shares of the Funds through
a customer account maintained at a Participating Organization may be charged
one or more of the following types of fees as agreed upon by the Participating
Organization and the investor, with respect to the customer services provided
by the Participating Organization: account fees (a fixed amount per month or
per year); transaction fees (a fixed amount per transaction processed);
compensating balance requirements (a minimum dollar amount a customer must
maintain in order to obtain the services offered); or account maintenance fees
(a periodic charge based upon a percentage of the assets in the account or of
the dividends paid on those assets). Such fees will have the effect of
reducing the yield and effective yield of the Funds for those investors.
Investors who maintain accounts with the Funds' Transfer Agent will not pay
these fees.
DETERMINATION OF NET ASSET VALUE
As indicated under "Determination of Net Asset Value" in the
Prospectus, the Funds' net asset value per share for the purpose of pricing
purchase and redemption orders is determined at 12:00 noon (Eastern Standard
time) on each day the New York Stock Exchange is open for trading with the
exception of certain bank holidays. The Funds will be closed on the following
holidays: New Year's Day, Martin Luther King's Birthday, Lincoln's Birthday,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Election Day, Veterans Day, Thanksgiving Day and Christmas Day.
Also, as indicated under "Determination of Net Asset Value" in
the Prospectus, the Funds use the amortized cost method to determine the value
of their portfolio securities pursuant to Rule 2a-7 under the Investment
Company Act of 1940. The amortized cost method involves valuing a security at
its cost and amortizing any discount or premium over the period until maturity,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which the value, as determined by amortized cost, is higher
or lower than the price which a Fund would receive if the security was sold.
During these periods the yield to a shareholder may differ somewhat from that
which could be obtained from a similar fund which utilizes a method of
valuation based upon market prices. Thus, during periods of declining interest
rates, if the use of the amortized cost method resulted in a lower value of a
Fund's
- 30 -
portfolio on a particular day, a prospective investor in that Fund would be
able to obtain a somewhat higher yield than would result from an investment in
a fund utilizing solely market values, and existing Fund shareholders would
receive correspondingly less income. The converse would apply during periods
of rising interest rates.
Rule 2a-7 provides that in order to value its portfolio using
the amortized cost method, each Fund must maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase securities having remaining
maturities of thirteen months or less (although the Funds have previously
further restricted themselves to securities with remaining maturities of one
year or less) and invest only in securities determined by the Trust's Board of
Trustees to be of high quality with minimal credit risks. Pursuant to Rule
2a-7, the Board is required to establish procedures designed to stabilize, to
the extent reasonably possible, the price per share of each Fund, as computed
for the purpose of sales and redemptions, at $1.00. Such procedures include
review of the Funds' portfolio holdings by the Board of Trustees, at such
intervals as it may deem appropriate, to determine whether the net asset value
of each Fund calculated by using available market quotations deviates from
$1.00 per share based on amortized cost. The extent of any deviation will be
examined by the Board of Trustees. If such deviation exceeds 1/2 of 1%, the
Board will promptly consider what action, if any, will be initiated. In the
event the Board determines that a deviation exists which may result in material
dilution or other unfair results to investors or existing shareholders, the
Board will take such corrective action as it regards as necessary and
appropriate, including the sale of portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity,
withholding dividends or establishing a net asset value per share by using
available market quotations.
PORTFOLIO TRANSACTIONS
Investment decisions for the Funds and for the other
investment advisory clients of the Adviser are made with a view to achieving
their respective investment objectives. Investment decisions are the product
of many factors in addition to basic suitability for the particular client
involved. Thus, a particular security may be bought or sold for certain
clients even though it could have been bought or sold for other clients at the
same time. Likewise, a particular security may be bought for one or more
clients when one or more clients are selling the security. In some instances,
one client may sell a particular security to another client. It also sometimes
happens that two or more clients simultaneously purchase or sell the same
security, in which event each day's transactions in such security are, insofar
as possible, averaged as to price and allocated between such clients in a
manner which in the Adviser's opinion is equitable to each and in accordance
with the amount being
- 31 -
purchased or sold by each. There may be circumstances when purchases or sales
of portfolio securities for one or more clients will have an adverse effect on
other clients.
The Funds have no obligation to deal with any dealer or group
of dealers in the execution of transactions in portfolio securities, except
that portfolio transactions for the Funds will not be executed through the
Sponsor and the Funds will not deal with the Sponsor as agent or principal.
Subject to policies established by the Trust's Board of Trustees, the Adviser
is primarily responsible for portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the Funds to obtain the
best results taking into account the dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities. While the Adviser generally seeks
reasonably competitive spreads or commissions, the Funds will not necessarily
be paying the lowest spread or commission available. The policy of the Funds
of investing in securities with short maturities will result in portfolio
turnover which may be regarded as high. The Funds may also attempt to increase
yield by trading to take advantage of short-term investment variations. High
portfolio turnover should not adversely affect the Funds since they do not
usually pay brokerage commissions when purchasing short-term debt obligations.
Purchases and sales of securities will usually be principal
transactions. Portfolio securities normally will be purchased or sold from or
to issuers directly or to dealers serving as market makers for the securities
at a net price. Generally, money market securities are traded on a net basis
and do not involve brokerage commissions. The cost of executing portfolio
securities transactions for the Funds primarily consists of dealer spreads and
underwriting commissions. Under the 1940 Act, persons affiliated with the
Funds or Furman Selz are prohibited from dealing with the Funds as a principal
in the purchase and sale of securities unless a permissive order allowing such
transactions is obtained from the Securities and Exchange Commission.
The Adviser may, in circumstances in which two or more dealers
are in a position to offer comparable results, give preference to a dealer
which has provided statistical or other research services to the Adviser. By
allocating transactions in this manner, the Adviser is able to supplement its
research and analysis with the views and information of securities firms.
These items, which in some cases may also be purchased for cash, include such
matters as general economic and security market reviews, industry and company
reviews, evaluations of securities and recommendations as to the purchase and
sale of securities. Some of these services are of value to the Adviser in
advising various of its clients (including the Funds), although not all of
these services are necessarily useful and of value in managing
- 32 -
the Funds. The management fee paid by the Funds is not reduced because the
Adviser and its affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act
of 1934, the Adviser may cause a Fund to pay a broker-dealer which provides
"brokerage and research services" (as defined in the Act) to the Adviser an
amount of disclosed commission for effecting a securities transaction for the
Fund in excess of the commission which another broker-dealer would have charged
for effecting that transaction.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking the most
favorable price and execution available and such other policies as the Trustees
may determine, the Adviser may consider sales of shares of the Funds as a
factor in the selection of broker-dealers to execute portfolio transactions for
the Funds.
EXCHANGE PRIVILEGE
Shareholders who have held all or part of their shares in any
of the Funds for at least seven days may exchange those shares for shares (at
their relative asset values) of the same Class of any of the other funds for
which First Fidelity is the Adviser and FFB Funds Distributor, Inc. is also the
Sponsor and Distributor. Call or write the Sponsor for prospectuses and
further information on these funds and on exchanges.
Exchanges may be made by writing FFB Funds Distributor or
through a Participating Organization. For shareholders to whom the minimum
investment restrictions apply, the minimum amount which may be exchanged into
one of the Funds in which shares are not held is $1,000; no partial exchange
may be made if, as a result, such Shareholder's interest in the Fund from which
the exchange is made would be reduced to less than $1,000. There is no charge
for exchanges. Before effecting an exchange, shareholders should review the
Prospectus (and, if applicable, the prospectus for any other fund). The
exchange privilege may be modified or terminated at any time.
Exercise of the exchange privilege is treated as a sale for
Federal income tax purposes and, depending on the circumstances, a short or
long-term capital gain or loss may be realized by the shareholder.
Participating Organizations may impose additional procedural
requirements on exchanges. Customers of Participating Organizations should
consult their organization for further details.
- 33 -
REDEMPTIONS
Payment of redemption proceeds may be made in securities,
subject to regulation by some state securities commissions. The Trust may
suspend the right of redemption during any period when (i) trading on the New
York Stock Exchange is restricted or that Exchange is closed, other than
customary weekend and holiday closings, (ii) the Securities and Exchange
Commission has by order permitted such suspension or (iii) an emergency, as
defined by rules of the Securities and Exchange Commission, exists making
disposal of portfolio securities or determination of the value of net assets of
the Trust not reasonably practicable.
The proceeds of redemption may be more or less than the amount
invested and, therefore, a redemption may result in a gain or loss for income
tax purposes.
A shareholder's account with a Fund remains open for
approximately one year following complete redemption and all costs during the
period will be borne by the Trust. This permits an investor to resume
investments in that Fund during the period in an amount of $250 or more.
To be in a position to eliminate excessive shareholder expense
burdens, the Trust reserves the right to adopt a policy pursuant to which it
may redeem upon not less than 30 days' notice shares of a Fund in an account
which has a value, reduced through redemption, below $500. However, any
shareholder affected by the exercise of this right will be allowed to make
additional investments prior to the date fixed for redemption to avoid
liquidation of the account.
FEDERAL INCOME TAXES
Each Fund has qualified and elected to be treated as a
regulated investment company for its last fiscal year and intends to continue
to so qualify by complying in the future with the provisions of the Internal
Revenue Code (the "Code") applicable to regulated investment companies so that
it will not be subject to Federal income tax on its net investment income and
net realized capital gains that are distributed to shareholders in accordance
with the timing requirements of the Code.
In order to so qualify, each Fund must, among other things,
(a) derive at least 90% of its annual gross income from dividends, interest,
payments with respect to loans of stock and securities and gains from the sale
or other disposition of stock or securities or foreign currency gains related
to investments in stock or securities or other income derived with respect to
the business of investing in stock, securities or currency; (b) derive less
than 30% of its annual gross income from the sale or other disposition of stock
or securities or certain other investments held less than three months; and (c)
diversify its holdings
- 34 -
so that, at the end of each fiscal quarter of its taxable year, (i) at least
50% of the market value of its assets is represented by cash, cash items, U.S.
Government securities, securities of other regulated investment companies and
other securities limited, in the case of other securities for purposes of this
calculation, in respect of any one issuer, to an amount not greater than 5% of
each Fund's assets or 10% of the voting securities of the issuer, and (ii) not
more than 25% of the value of each Fund's assets is invested in the securities
of any one issuer (other than U.S. Government securities and securities of
other regulated investment companies).
Each Fund will be separate for investment and accounting
purposes and will be treated as a separate taxable entity for Federal income
tax purposes. Provided that each Fund qualifies as a regulated investment
company under the Code, it will not be required to pay Massachusetts income or
excise taxes.
Each Fund will be subject to a 4% non-deductible excise tax to
the extent that it fails to distribute to its shareholders during each calendar
year an amount equal to (a) at least 98% of its taxable ordinary income
(excluding long and short-term capital gain income) for the calendar year; plus
(b) at least 98% of its capital gain net income for the one year period ending
on October 31 of such calendar year; plus (c) any ordinary income or capital
gain net income from the preceding calendar year which was neither distributed
to shareholders nor taxed to the Fund during such year. Each Fund intends to
distribute to its shareholders each year an amount sufficient to avoid the
imposition of such excise tax.
Dividends are not expected to qualify for the
dividends-received deduction available to corporations. As to the tax
treatment of redemptions, see "Redemptions" above.
Each Fund is required to report to the IRS all distributions
of dividends and capital gains. Each Fund may be required to withhold Federal
income tax at a rate of 31% ("backup withholding") from dividends (including
capital gain dividends) paid to non-corporate shareholders who have not
furnished the Fund with a correct taxpayer identification number and made
certain required certifications or who have been notified by the Internal
Revenue Service that they are subject to backup withholding. In addition, a
Fund may be required to withhold Federal income tax at a rate of 31% if it is
notified by the IRS or a broker that the taxpayer identification number is
incorrect or that backup withholding applies because of underreporting of
interest or dividend income.
Distributions of net investment income and net realized
capital gains will be taxable as described in the Prospectus whether made in
shares or in cash. In determining amounts of net realized capital gains to be
distributed, any capital loss carryovers from prior years will be applied
against capital gains.
- 35 -
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for Federal income tax purposes in each share so
received equal to the net asset value of a share of the Fund on the
reinvestment date. Fund distributions will also be included in individual and
corporate shareholders' income on which the alternative minimum tax may be
imposed.
Different tax treatment, including a penalty on early
distributions, is accorded to accounts maintained as IRAs. Investors should
consult their tax advisers for more information.
Under the laws of certain states, distributions of net
investment income are taxable to shareholders as dividend income even though a
substantial portion of such distributions may be derived from interest on U.S.
Government obligations which, if received directly by the resident of such
state, would be exempt from such state's income tax.
The amount of capital gains, if any, realized in any given
year will result from sales of securities made with a view to the maintenance
of a portfolio believed by each Fund's management to be most likely to attain
such Fund's objective. Such sales, and any resulting gains or losses, may
therefore vary considerably from year to year.
A Fund's use of equalization accounting, if such method of tax
accounting is used for any taxable year, may affect the amount, timing and
character of its distributions to shareholders.
The foregoing discussion relates only to Federal income tax
law as applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
domestic corporations, partnerships, trusts and estates). Distributions by a
Fund also may be subject to state and local taxes, and their treatment under
state and local income tax laws may differ from the Federal income tax
treatment. Shareholders should consult their tax advisers with respect to
particular questions of Federal, state and local taxation. Shareholders who
are not U.S. persons should consult their tax advisors regarding U.S. and
foreign tax consequences of ownership of shares of a Fund, including the
likelihood that distributions to them would be subject to withholding of U.S.
tax at a rate of 31% (or at a lower rate under a tax treaty).
PENNSYLVANIA
Shareholders who are Pennsylvania resident individuals,
estates or trusts subject to the Pennsylvania income tax will not be subject to
Pennsylvania personal income tax on distributions of income from the
Pennsylvania Tax-Fee Fund which are attributable to obligations issued by the
Commonwealth of Pennsylvania and its political subdivisions, agencies and
instrumentalities, certain qualifying obligations of United
- 36 -
States territories and possessions or United States obligations, the interest
from which are statutorily free from state taxation in the Commonwealth of
Pennsylvania ("exempt obligations"). Distributions attributable to most other
sources will not be exempt from Pennsylvania personal income tax.
Distribution of gains made by the Pennsylvania Tax Free Fund
which are attributable to exempt obligations issued before February 1, 1994
will not be subject to Pennsylvania personal income tax or Pennsylvania
corporate income tax. Distribution of gains attributable to exempt obligations
issued on or after February 1, 1994 are subject to such tax. Due to the short
term nature of the investments to be made by the Pennsylvania tax free fund, it
is not anticipated that the Fund will realize gains which would otherwise be
distributed to shareholders.
Management of the Fund believes that shares of a Fund which
are held by individual shareholders who are Pennsylvania residents and subject
to the Pennsylvania county personal property tax will be exempt from such tax
to the extent that such Fund's portfolio consists of exempt obligations on the
annual assessment date. Corporations are not subject to Pennsylvania personal
property taxes.
Management of the Fund believes that to individual
shareholders who are residents of the City of Philadelphia, distributions of
interest derived from exempt obligations are not taxable for purposes of the
Philadelphia School District Investment Net Income Tax ("Philadelphia School
District Tax"), provided that such exempt obligations comprise, at all times,
at least 80% of a Fund's portfolio assets.
In order to qualify under Pennsylvania tax law to pass through
the tax-free characteristics of each Fund's exempt obligations, each Fund will
invest in securities for income earnings rather than trade for profit and will
observe certain limitations or varying its investments.
Shareholders should consult their own tax advisers with
respect to the tax status of distributions from the Funds in their own states
and localities.
OTHER INFORMATION
The Trust was organized as a Massachusetts business trust on
March 25, 1987, as a successor to FFB Money Trust, which was organized on
December 4, 1985. The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest having a
par value of $0.001 per share and which may be issued in series or classes.
Pursuant to that authority, the Board of Trustees has authorized the issuance
of twelve series of shares, six of which represent shares in the Cash
Management Fund, the U.S. Government Fund, the
- 37 -
U.S. Treasury Fund, the 100% U.S. Treasury Fund, the Tax-Free Fund and the
Pennsylvania Tax-Free Fund. The Board of Trustees may, in the future,
authorize the issuance of other series or classes of stock representing shares
of additional investment portfolios. Each of the six funds described herein
issues two separate classes of shares. The 100% U.S. Treasury Fund issues an
"Institutional Class" and a "Service Class" that includes shareholder servicing
at an additional fee of 0.25%. The other five funds issue Institutional Class
and Service Class shares, which differ in level of shareholder service and
cost.
All shares of the Trust have equal voting rights and will be
voted in the aggregate, and not by class, except where voting by class is
required by law or where the matter involved affects only one class. The Trust
does not intend to hold annual meetings of shareholders. The Trustees may call
special meetings of shareholders for action by shareholder vote, including the
removal of any or all of the Trustees, as may be required by either the
Declaration of Trust or the Investment Company Act of 1940. The Trustees shall
call a meeting of shareholders for the purpose of voting upon the removal of
any Trustee when requested in writing to do so by the record holders of not
less than 10% of the Trust's outstanding shares. As used in the Prospectus and
in this Statement of Additional Information, the term "majority of the
outstanding voting securities", when referring to the approvals to be obtained
from Shareholders in connection with general matters affecting all of the Funds
(e.g., election of Trustees and ratification of independent accountants), means
the vote of the lesser of (i) 67% of the Trust's shares represented at a
meeting if the holders of more than 50% of the outstanding shares are present
in person or by proxy or (ii) more than 50% of the Trust's outstanding shares.
The term "majority", when referring to the approvals to be obtained from
shareholders in connection with matters affecting a single Fund (e.g., approval
of investment advisory contracts), means the vote of the lesser of (i) 67% of
the shares of the Fund represented at a meeting if the holders of more than 50%
of the outstanding shares of the Fund are present in person or by proxy or (ii)
more than 50% of the outstanding shares of the Fund. Shareholders are entitled
to one vote for each full share held and fractional votes for fractional shares
held.
Each share of a Fund represents an equal proportionate
interest in that Fund with each other share of the same class of that Fund and
is entitled to such dividends and distributions out of the income earned on the
assets belonging to that Fund as are declared in the discretion of the Trust's
Board of Trustees. In the event of the liquidation or dissolution of the
Trust, shares of a Fund are entitled to receive the assets belonging to that
Fund which are available for distribution, and a proportionate distribution,
based upon the relative net assets of the Funds, of any general assets not
belonging to a Fund which are available for distribution.
- 38 -
Shareholders are not entitled to any preemptive rights. All
shares, when issued, will be fully paid and non-assessable by the Trust.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims liability of the shareholders,
Trustees or Officers of the Trust of acts or obligations of the Trust, which
are binding only on the assets and property of the Trust and requires that
notice of the disclaimer be given in each contract or obligation entered into
or executed by the Trust or the Trustees. The Declaration of Trust provides
for indemnification out of Trust property for all loss and expense of any
shareholder held personally liable for the obligations of the Trust. The risk
of a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the Trust itself would be unable to meet
its obligations and, should be considered remote.
PRINCIPAL SHAREHOLDERS
As of June 9, 1995, the following persons owned of record or
beneficially 5% or more of each of the Fund's shares:
FFB Pennsylvania Tax-Free Money Market Fund
SHARES OWNED PERCENTAGE OWNED
Anderson & Company 18,585,869 32.3%
c/o First Fidelity Bank
Attn: Beth Dougherty
Broad & Walnut Streets
PSWP 2A
Philadelphia, PA 19109
Daniel J. Keating III 7.2%
c/o Keating Building Corp 4,162,840
One Bala Avenue, Ste. 400
Bala Cynwyd, PA 19004-3207
FFB Cash Management Fund
SHARES OWNED PERCENTAGE OWNED
First Fidelity Bank, N.A. N.J. 535,318,999 75.9%
c/o Asset Management
Attn: Joanne Monteiro
Broad & Walnut Streets
Philadelphia, PA 19109
- 39 -
Pitcairn Trust Company 58,778,858 8.3%
One Pitcairn Place
Jenkintown, PA 19046
FFB U.S. Treasury Fund
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First Fidelity Bank, N.A. N.J. 709,584,077 74.5%
c/o Asset Management
Attn: Joanne Monteiro
Broad & Walnut Streets
Philadelphia, PA 19109
FFB U.S. Government Fund
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SHARES OWNED PERCENTAGE OWNED
First Fidelity Bank, N.A. N.J. 142,167,969 65.7%
c/o Asset Management
Attn: Joanne Monteiro
Broad & Walnut Streets
Philadelphia, PA 19109
National Financial Services 15,187,380 7.0%
for the Exclusive Benefit of
Our Customers
Attn: Mike McLaughlin
200 Liberty Street
New York, NY 10281-1003
FFB Tax-Free Money Market Fund
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SHARES OWNED PERCENTAGE OWNED
First Fidelity Bank, N.A. N.J. 94,571,916 85.9%
c/o Asset Management
Attn: Joanne Monteiro
Broad & Walnut Streets
Philadelphia, PA 19109
FFB 100% U.S. Treasury Money Market Fund
----------------------------------------
SHARES OWNED PERCENTAGE OWNED
Trustmark National Bank 6,122,634 45.5%
Trust Dept.
248 E. Capitol Street
Jackson, MS 39201-2582
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First Fidelity Bank, N.A. N.J. 5,104.258 37.8%
c/o Asset Management
Attn: Joanne Monteiro
Broad & Walnut Streets
Philadelphia, PA 19109
Capital Network Services 2,269,654 16.8%
One Bush Street, 11th floor
San Francisco, CA 94104-4425
CUSTODIAN, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
First Fidelity has been retained to act as custodian, transfer
agent and dividend disbursing agent for the Funds pursuant to a Master
Custodian Agreement and a Master Agency Agreement. First Fidelity's address is
765 Broad Street, Newark, New Jersey 07102.
Under the Master Custodian Agreement ("Custodian Agreement"),
First Fidelity maintains a custody account or accounts in the name of each
Fund; receives and delivers all assets for each Fund upon purchase and upon
sale or maturity; collects and receives all income and other payments and
distributions on account of the assets of each Fund; pays all expenses of the
Funds; receives and pays out cash for purchases and redemptions of shares of
each Fund and pays out cash if requested for dividends on shares of each Fund;
calculates the daily value of the assets of each Fund; determines the daily net
asset value per share, net investment income and daily dividend rate for each
Fund; and maintains records for the foregoing services. Under the Custodian
Agreement, the Trust has agreed to pay First Fidelity monthly for furnishing
custodian services a fee with respect to each Fund at an annual rate of 1/15th
of 1% on the first $20 million, 1/30th of l% on the next $80 million and
1/100th of 1% on all over $100 million of average daily net assets plus certain
transaction charges and out-of-pocket expenses. For the fiscal years ended
February 28, 1993, February 28, 1994 and February 28, 1995, First Fidelity
received the following custodial fees from the Funds: $100,119, $132,723 and
$121,801 from the Cash Management Fund; $67,373, $81,000 and $69,460 from the
U.S. Government Fund; $99,506, $147,960 and $135,889 from the U.S. Treasury
Fund; and $48,521, $76,000 and $47,720 from the Tax-Free Money Market Fund.
For the fiscal years ended February 28, 1995, February 28,
1994 and February 28, 1993 First Fidelity was entitled to and waived custodial
fees of $4,252, $2,954 and $9,374 respectively, with respect to the
Pennsylvania Tax-Free Money Market Fund.
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The 100% U.S. Treasury Fund was not in operation during the
time periods described above.
Under the Master Agency Agreement ("Agency Agreement") First
Fidelity performs general transfer agency and dividend disbursing services. It
maintains an account in the name of each shareholder of record in each Fund
reflecting purchases, redemptions, daily dividend accruals and monthly dividend
disbursements, processes purchase and redemption requests, issues and redeems
shares of each Fund, addresses and mails all communications by the Trust to its
Shareholders, including financial reports, other reports to Shareholders,
dividend and distribution notices, tax notices and proxy material for its
Shareholder meetings, and maintains records for the foregoing services. Under
the Agency Agreement, the Trust has agreed to pay First Fidelity $15.00 per
account and subaccount whether maintained by First Fidelity or a correspondent
bank of First Fidelity (which does not include Participating Organizations) per
annum. In addition, the Trust has agreed to pay First Fidelity certain
transaction charges, wire charges and out-of-pocket expenses incurred by First
Fidelity. Furman Selz acts as Sub-Transfer Agent and receives a $15.00 annual
per account fee plus reimbursement of out-of-pocket expenses.
First Fidelity received the following fees and reimbursements
for out-of-pocket expenses for their transfer agent services for the fiscal
year ended February 28, 1993 and for the fiscal period March 1, 1993 through
October 31, 1993: $3,390 and $3,019 for the U.S. Treasury Fund; $1,910 and
$2,023 for the U.S. Government Fund; $6,960 and $4,642 for the Cash Management
Fund; and $3,166 and $1,720 from the Tax-Free Money Market Fund.
Furman Selz received the following fees for their sub-transfer
agent services for the fiscal period November 1, 1993 through February 28, 1994
and for the fiscal year ended February 28, 1995: $251 and $1,042 for the U.S.
Treasury Fund; $402 and $2,075 for the U.S. Government Fund; $1,180 and $3,804
for the Cash Management Fund and $819 and $1,820 for the Tax-Free Money Market
Fund.
For the Pennsylvania Tax-Free Money Market Fund Furman Selz
waived their sub-transfer agent fee for the fiscal years ended February 28,
1993, February 28, 1994 and February 28, 1995 of $1,641, $1,986 and $1,860.
The 100% U.S. Treasury Fund was not in operation during the
time periods described above.
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SERVICING AGREEMENTS
The Agency Agreement further provides that, except for the
Institutional Class of the 100% U.S. Treasury Fund, First Fidelity may enter
into agreements (the "Servicing Agreements") with Participating Organizations
which will perform certain administrative and subaccounting services for
investors who maintain accounts at the Participating Organizations in lieu of
First Fidelity's transfer agency and dividend disbursing services. Each
Participating Organization will receive monthly payments which will be based
upon expenses that the Participating Organization has incurred in the
performance of its services under the Servicing Agreement. For Institutional
Class Shares of the Cash Management Fund, the U.S. Government Fund, the U.S.
Treasury Fund, the Tax-Free Money Market Fund and the Pennsylvania Tax-Free
Money Market Fund, and Service Class Shares of the 100% U.S. Treasury Fund, the
payments will not exceed on an annualized basis an amount equal to 0.25% of the
average daily value during the month of Fund shares owned by customers in
subaccounts of which the Participating Organization is record owner as nominee
for its customers. For Service Class Shares of the Cash Management Fund, the
U.S. Government Fund, the U.S. Treasury Fund, the Tax-Free Money Market Fund
and the Pennsylvania Tax-Free Money Market Fund, the payments will not exceed
on an annualized basis an amount equal to 0.35% of the average daily value
during the month of Fund shares owned by customers in subaccounts of which the
Participating Organization is record owner as nominee for its customers. Such
payments will be separately negotiated with each Participating Organization and
will vary depending upon such factors as the services provided and the costs
incurred by each Participating Organization. The payments may be more or less
than the fees payable to First Fidelity pursuant to the Agency Agreement for
similar services.
The payments will be made by each Fund to First Fidelity which
will, in turn, pay the Participating Organizations pursuant to the Servicing
Agreements. First Fidelity will not keep any portion of the payments, and will
not receive any compensation as transfer or dividend disbursing agent with
respect to the subaccounts maintained by Participating Organizations. The
Board of Trustees will review, at least quarterly, the amounts paid and the
purposes for which such expenditures were made pursuant to the Servicing
Agreements. First Fidelity received servicing fees of 0.025% from each of the
Funds, except Pennsylvania Tax Free Money Market Fund. For the year ended
February 28, 1995, First Fidelity received $156,838 from the U.S. Treasury
Fund, $52,176 from the U.S. Government Fund, $140,338 from the Cash Management
Fund, and $23,315 from the Tax Free Money Market Fund.
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INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP serves as the independent accountants
for the Trust. KPMG Peat Marwick LLP provides audit services, tax return
preparation and assistance and consultation in connection with review of
Securities and Exchange Commission filings. KPMG's address is 345 Park Avenue,
New York, New York 10154.
FINANCIAL STATEMENTS
Financial statements for the Funds as of February 28, 1995 and
for their fiscal year then ended, including notes thereto, and the Report of
KPMG Peat Marwick LLP thereon are incorporated by reference from the Trust's
Annual Report for the year ended February 28, 1995. Additional copies of such
Annual Report may be obtained without charge by calling the Distributor at the
number listed on the front page of this Statement of Additional Information. A
copy of the Annual Report delivered together with this Statement of Additional
Information should be retained for future reference.
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