-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ui0HLqWF4WMSCSD+T87JYmSFyNetsxgI6sVIOrV4w/1WVOvjAxxzGOGENNhHsaSE TNH5+kJUVgxVjkpFnL6BQg== 0000908737-95-000104.txt : 19951011 0000908737-95-000104.hdr.sgml : 19951011 ACCESSION NUMBER: 0000908737-95-000104 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19951010 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EVERGREEN INVESTMENT TRUST CENTRAL INDEX KEY: 0000757440 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046599663 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 002-94560 FILM NUMBER: 95579618 BUSINESS ADDRESS: STREET 1: 2500 WESTCHESTER AVE CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 9146412305 MAIL ADDRESS: STREET 1: 2500 WESTCHESTER AVE CITY: PURCHASE STATE: NY ZIP: 10577 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION FUNDS/ DATE OF NAME CHANGE: 19940628 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 497 1 THE FFB LEXICON FUND SELECT VALUE FUND 2 OLIVER STREET BOSTON, MASSACHUSETTS 02109 September 28 October 2, 1995 Dear Shareholders: On June 18, 1995, First Fidelity Bancorporation agreed to merge (the "Merger") with and into a wholly-owned subsidiary of First Union Corporation. First Fidelity Bancorporation is the parent of First Fidelity Bank, N.A. ("First Fidelity"), the investment adviser to a group of mutual funds with assets of $2.55 billion as of June 30, 1995. Your Fund, the Select Value Fund ("FFB Fund"), is a fund included within the First Fidelity family of mutual funds. First Union National Bank of North Carolina ("FUNB") is a subsidiary of First Union Corporation. The Capital Management Group ("CMG") of FUNB and Evergreen Asset Management Corp. ("Evergreen Asset"), a wholly-owned subsidiary of FUNB, manage or otherwise oversee the investment of over $29.1 billion in assets belonging to a wide-range of clients, including the Evergreen family of mutual funds with assets of $8.7 billion as of June 30, 1995. To facilitate the investment management of assets and the delivery of shareholder services to the First Fidelity and Evergreen family of mutual funds, the Trustees of your Fund are proposing your approval is sought to combine certain of the investment companies in the First Fidelity family of mutual funds with investment companies in the Evergreen family of mutual funds which have similar investment objectives and policies. The proposal proposals contained in the accompanying Prospectus/Proxy Statement provides following the Merger for a provide for the combination of your Fund with the Evergreen Value Fund (the "Evergreen Fund"), a mutual fund advised by CMG, following the Merger . Your Fund and the Evergreen Fund have substantially similar investment objectives and policies. Under the proposed Agreement and Plan of Reorganization (the "Plan"), the Evergreen Fund will acquire substantially all the assets of your Fund in exchange for shares of the Evergreen Fund (the "Reorganization"). In addition, shareholders of the FFB Equity Fund, a series of FFB Funds Trust, are also being asked to approve a combination of their fund with the Evergreen Fund. As of June 30, 1995, the Select Value FFB Fund and the FFB Equity Fund had net assets of approximately $82.4 million and $12.9 million, respectively, and the Evergreen Fund had approximately $1 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 $1.1 billion. I believe that the combinations will achieve the goal of efficient investment management and delivery of shareholder services. Since Assuming the Merger is consummated, it will take place prior to the closing date for the Reorganization and because the Merger by law terminates the investment advisory contract between First Fidelity and your Fund, the Trustees of The FFB Lexicon Fund are also seeking your approval is sought of an Interim Investment Advisory Agreement with CMG. The Interim Investment Advisory Agreement will have the same terms and fees as the current investment advisory agreement between your Fund and First Fidelity and will be in effect for the period of time between the effective date of the Merger and the closing date for the Reorganization. The Reorganization is scheduled to take place on or about January 19, 1996. If shareholders of the FFB Fund approve the Plan, upon consummation of the transaction contemplated in the Plan, shareholders will receive Class Y shares of the Evergreen Fund. Class Y shares are not charged any distribution-related and shareholder servicing-related expenses. The proposed transaction will not result in any federal income tax liability for you or for the FFB Fund. As a shareholder of the Evergreen Fund you will have the ability to exchange your shares for shares of the other funds in the Evergreen family of mutual funds comparable to your present right to exchange among funds of the First Fidelity family of mutual funds. Following completion of the Reorganization, your Fund will be liquidated. The Trustees of The FFB Lexicon Fund have called a special meeting of shareholders of the FFB Fund to be held on November 13 21, 1995 to consider the proposed transaction. I STRONGLY INVITE YOUR PARTICIPATION BY ASKING YOU TO REVIEW, COMPLETE AND RETURN YOUR PROXY AS SOON AS POSSIBLE. Detailed information about the proposed transaction is described in the enclosed Prospectus/Proxy Statement. I thank you for your participation as a shareholder and urge you to please exercise your right to vote by completing, dating and signing the enclosed proxy card. A self-addressed, postage-paid envelope has been enclosed for your convenience. A copy of the Evergreen Fund Prospectus accompanies the Prospectus/Proxy Statement. I urge you to read the Prospectus and retain it for future reference. If you have any questions regarding the proposed transaction or if you would like additional information about the Evergreen family of mutual funds, please telephone 1-800-833-8974. IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED AS SOON AS POSSIBLE. Sincerely, _________________________ David G. Lee, President The FFB Lexicon Fund -3- [SUBJECT TO COMPLETION, AUGUST 25, 1995 PRELIMINARY COPY] THE FFB LEXICON FUND SELECT VALUE FUND 2 OLIVER STREET BOSTON, MASSACHUSETTS 02109 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON NOVEMBER 13 21, 1995 Notice is hereby given that a Special Meeting (the "Meeting") of Shareholders of the Select Value Fund (the "FFB Fund"), a series of The FFB Lexicon Fund, will be held at the offices of SEI Financial Management Corporation, 680 East Swedesford Road, Wayne, Pennsylvania 19087 on November 13, 1995 at 10:00 a.m First Fidelity Bank, N.A., 123 South Broad Street, 5th Floor, Philadelphia, Pennsylvania 19109 on November 21, 1995 at 2:00 p.m. for the following purposes: 1. To consider and act upon approve or disapprove the Agreement and Plan of Reorganization (the "Plan") dated as of _______________September 19 , 1995, providing for the acquisition of substantially all of the assets of the FFB Fund by the Evergreen Value Fund (the "Evergreen Fund"), a series of Evergreen Investment Trust, in exchange for Class Y shares of the Evergreen Fund, and the assumption by the Evergreen Fund of certain identified liabilities of the FFB Fund. The Plan also provides for distribution of such shares of the Evergreen Fund to shareholders of the FFB Fund in liquidation and subsequent termination of the FFB Fund. A vote in favor of the Plan is a vote in favor of the liquidation and dissolution of the FFB Fund. 2. To consider and act upon approve or disapprove 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 The FFB Lexicon Fund have fixed the close of business on September 8, 1995 as the record date for the determination of shareholders of the FFB Fund entitled to notice of and to vote at the Meeting or any adjournment thereof. IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND IN PERSON ARE URGED WITHOUT DELAY TO SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE, SO THAT THEIR SHARES MAY BE REPRESENTED AT THE MEETING. YOUR PROMPT ATTENTION TO THE ENCLOSED PROXY WILL HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION. By Order of the Board of Trustees Richard W. Grant Secretary September 28 October 2, 1995 -2- INSTRUCTIONS FOR EXECUTING PROXY CARDS The following general rules for signing proxy cards may be of assistance to you and may help to avoid the time and expense involved in validating your vote if you fail to sign your proxy card(s) properly. 1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in the Registration on the proxy card(s). 2. JOINT ACCOUNTS: Either party may sign, but the name of the party signing should conform exactly to a name shown in the Registration on the proxy card(s). 3. ALL OTHER ACCOUNTS: The capacity of the individual signing the proxy card(s) should be indicated unless it is reflected in the form of Registration. For example: REGISTRATION VALID SIGNATURE CORPORATE ACCOUNTS (1) ABC Corp. (1) ABC Corp. John Doe, Treasurer (2) ABC Corp. (2) John Doe, Treasurer c/o John Doe, Treasurer (3) ABC Corp. Profit Sharing Plan (3) John Doe, Trustee TRUST ACCOUNTS (1) ABC Trust (1) Jane B. Doe, Trustee (2) Jane B. Doe, Trustee (2) Jane B. Doe u/t/d 12/28/78 CUSTODIAL OR ESTATE ACCOUNTS (1) John B. Smith, Cust. (1) John B. Smith f/b/o John B. Smith, Jr. UGMA (2) John B. Smith, Jr. (2) John B. Smith, Jr., Executor -3- PROSPECTUS/PROXY STATEMENT DATED SEPTEMBER 25, 1995 Acquisition of Assets of SELECT VALUE FUND OF THE FFB LEXICON FUND 2 Oliver Street Boston, Massachusetts 02109 By and in Exchange for Shares of EVERGREEN VALUE FUND OF EVERGREEN INVESTMENT TRUST 2500 Westchester Avenue Purchase, New York 10577 This Prospectus/Proxy Statement is being furnished to shareholders of Select Value Fund (the "FFB Fund"), a series of The FFB Lexicon Fund, in connection with a proposed Agreement and Plan of Reorganization (the "Plan"), to be submitted to shareholders of the FFB Fund for consideration at a Special Meeting of Shareholders to be held on November 13, 21, 1995 at 10: 2:00 a.m p.m. Eastern Time, at the offices of SEI Financial Management Corporation, 680 East Swedesford Road, Wayne, Pennsylvania 19087 First Fidelity Bank, N.A., 123 South Broad Street, 5th Floor, Philadelphia, Pennsylvania 19109, and any adjournments thereof (the "Meeting"). The Plan provides for substantially all of the assets of the FFB Fund to be acquired by the Evergreen Value Fund (the "Evergreen Fund"), a series of Evergreen Investment Trust, in exchange for Class Y shares of the Evergreen Fund and the assumption by the Evergreen Fund of certain identified liabilities of the FFB Fund (hereinafter referred to as the "Reorganization"). Following the Reorganization, Class Y shares of the Evergreen Fund will be distributed to shareholders of the FFB Fund in liquidation of the FFB Fund and the FFB Fund will be terminated. As a result of the proposed Reorganization, shareholders of the FFB Fund will receive that number of full and fractional Class Y shares of the Evergreen Fund determined by dividing the value of the assets multiplying the shares outstanding of each class of the FFB Fund to be acquired by the ratio of computed by dividing the net asset value per share of the Evergreen Fund and each such class of the FFB Fund by the net asset value per share of the Evergreen Fund. The Reorganization is being structured as a tax-free reorganization for federal income tax purposes. Shareholders of the FFB Fund are also being asked to approve the Interim Investment Advisory Agreement with the Capital Management Group of First Union National Bank of North Carolina (the "Interim Advisory Agreement") with the same terms and fees as the current advisory agreement between the FFB Fund and First Fidelity Bank, N.A. The Interim Advisory Agreement will be in effect for the period of time between the date on which the merger of First Fidelity Bancorporation with and into a wholly-owned subsidiary of First Union Corporation is effected (currently anticipated to be by January 1, 1996) and the date on which the Evergreen Fund and the FFB Fund are combined together (scheduled for on or about January 19, 1996). The FFB Lexicon Fund currently consists of the FFB Fund and six other series with shares outstanding. As is the case with the FFB Fund, the shareholders of certain of these series are being asked to approve similar Agreements and Plans of Reorganization providing for the combination of such series with other Evergreen Funds having similar investment objectives and policies. The Intermediate Government Securities Fund and the Fixed Income Fund will not be combined with any of the funds in the Evergreen family of mutual funds and therefore shareholders of those Funds will vote on the approval of new investment advisory agreements between the Funds and the Capital Management Group of First Union National Bank of North Carolina and the election of new Trustees for The FFB Lexicon Fund. The vote on the election of new Trustees will take place after all the combinations of the FFB Funds and the Evergreen Funds are effective. Evergreen Investment Trust is an open-end diversified management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"). Evergreen Investment Trust is comprised of 17 series, one of which, the Evergreen Fund, is a party to the Reorganization. The Evergreen Fund seeks long-term capital growth with current income as a secondary objective. This Prospectus/Proxy Statement, which should be retained for future reference, sets forth concisely the information about the Evergreen Fund that shareholders of the FFB Fund should know before voting on the Reorganization. Certain relevant documents listed below, which have been filed with the Securities and Exchange Commission ("SEC"), are incorporated in whole or in part by reference. A Statement of Additional Information dated September 25, 1995, relating to this Prospectus/Proxy Statement and the Reorganization, incorporating by reference the financial statements of the Evergreen Fund dated December 31, 1994 and June 30, 1995 and the financial statements of the FFB Fund dated August 31, 1994 and February 28, 1995 has been filed with the SEC and is incorporated by reference in its entirety into this Prospectus/Proxy Statement. A copy of such Statement of Additional Information is available upon request and without charge by writing to the Evergreen Fund at 2500 Westchester Avenue, Purchase, New York 10577 or by calling toll-free 1-800-807-2940. On June 30, 1995, the Evergreen Fund, pursuant to an Agreement and Plan of Reorganization dated as of March 15, 1995, acquired all of the net assets of ABT Growth and Income Trust. At the time of this combination the total net assets of the Evergreen Fund were -2- approximately $1 billion, while the total net assets of ABT Growth and Income Trust were approximately $63.4 million. The effect of this combination is reflected in the financial information presented as of June 30, 1995 in this Prospectus/Proxy Statement and in the pro-forma financial statements contained in the Statement of Additional Information. The Prospectuses of the Evergreen Fund dated July 7, 1995, its Annual Report for the fiscal year ended December 31, 1994 and its Semi- Annual Report for the six months ended June 30, 1995 are incorporated herein by reference in their entirety, insofar as they relate to the Evergreen Fund only, and not to any other fund described therein. The two Prospectuses, which pertain (i) to Class Y shares and (ii) to Class A, Class B and Class C shares, differ only insofar as they describe the separate distribution and shareholder servicing arrangements applicable to the Classes. Shareholders of the FFB Fund will receive, with this Prospectus/Proxy Statement, copies of the Prospectus pertaining to the Class Y shares of the Evergreen Fund that they will receive as a result of the consummation of the Reorganization. Additional information about the Evergreen Fund is contained in its Statement of Additional Information of the same date which has been filed with the SEC and which is available upon request and without charge by writing to the Evergreen Fund at the address listed in the preceding paragraph or by calling toll-free 1-800-807-2940. The Prospectus of the FFB Fund dated December 30, 1994 is incorporated herein in its entirety by reference. Copies of the Prospectus and a Statement of Additional Information dated the same date are available upon request without charge by writing to the FFB Fund at 680 East Swedesford Road, Wayne, Pennsylvania 19087 or by calling toll-free 1-800-833-8974. Included as Exhibit A of this Prospectus/Proxy Statement is a copy of the Plan. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR OBLIGATIONS OF FIRST UNION CORPORATION ("FIRST UNION") OR ANY OF ITS SUBSIDIARIES, ARE NOT ENDORSED OR GUARANTEED BY FIRST UNION OR ANY OF ITS SUBSIDIARIES, AND ARE NOT INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. -3- TABLE OF CONTENTS COMPARISON OF FEES AND EXPENSES....................................... SUMMARY............................................................... PROPOSED PLAN OF REORGANIZATION................................. TAX CONSEQUENCES................................................ INVESTMENT OBJECTIVES AND POLICIES OF THE EVERGREEN FUND AND THE FFB FUND............................ COMPARATIVE PERFORMANCE INFORMATION OF EACH FUND................ MANAGEMENT OF THE FUNDS......................................... INVESTMENT ADVISERS, SUB-ADVISERS AND ADMINISTRATORS............ PORTFOLIO MANAGEMENT............................................ DISTRIBUTION OF SHARES.......................................... DISTRIBUTION-RELATED AND SHAREHOLDER SERVICING-RELATED EXPENSES................................. PURCHASE AND REDEMPTION PROCEDURES.............................. EXCHANGE PRIVILEGES............................................. DIVIDEND POLICY................................................. RISKS................................................................. INFORMATION ABOUT THE REORGANIZATION.................................. DESCRIPTION OF THE MERGER....................................... REASONS FOR THE REORGANIZATION.................................. AGREEMENT AND PLAN OF REORGANIZATION............................ FEDERAL INCOME TAX CONSEQUENCES................................. PRO-FORMA CAPITALIZATION........................................ SHAREHOLDER INFORMATION......................................... COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES...................... COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS....................... FORM OF ORGANIZATION............................................ CAPITALIZATION.................................................. SHAREHOLDER LIABILITY........................................... SHAREHOLDER MEETINGS AND VOTING RIGHTS.......................... LIQUIDATION OR DISSOLUTION...................................... LIABILITY AND INDEMNIFICATION OF TRUSTEES....................... RIGHTS OF INSPECTION............................................ INFORMATION REGARDING THE PROPOSED INTERIM ADVISORY AGREEMENT......... INTRODUCTION.................................................... COMPARISON OF THE INTERIM ADVISORY AGREEMENT AND THE EXISTING ADVISORY AGREEMENT................................ INFORMATION ABOUT THE FFB FUND'S CURRENT AND PROPOSED INTERIM INVESTMENT ADVISERS................................ ADDITIONAL INFORMATION................................................ VOTING INFORMATION CONCERNING THE MEETING............................. -4- FINANCIAL STATEMENTS AND EXPERTS...................................... LEGAL MATTERS......................................................... OTHER BUSINESS........................................................ -5- COMPARISON OF FEES AND EXPENSES The amounts for Class Y shares of the Evergreen Fund set forth in the following table and in the examples are based on the expenses of the Fund for the fiscal year ended December 31, 1995 1994. The amounts for Investor Class and Institutional Class shares of the FFB Fund set forth in the following table and in the examples are estimated based on the experience of the FFB Fund Investor Class and Institutional Class shares for the fiscal year period ended August 31, 1994, in each case adjusted for voluntary expense waivers 1995. The FFB Fund Investor Class commenced operations on May 2, 1995. The amounts for the Evergreen Fund Pro Forma are based on the combined expenses expected for the twelve month period ended June 30, 1995. The following tables show for the Evergreen Fund and the FFB Fund the shareholder transaction expenses and annual fund operating expenses associated with an investment in the Class Y shares of the Evergreen Fund and Investor Class and Institutional Class shares of the FFB Fund, and such costs and expenses associated with an investment in Class Y shares of the Evergreen Fund assuming consummation of the Reorganization. The pro forma expenses of the Evergreen Fund also assume the consummation of the reorganization between the Evergreen Fund and the FFB Equity Fund, a series of FFB Funds Trust. COMPARISON OF CLASS Y SHARES OF THE EVERGREEN FUND WITH INVESTOR AND INSTITUTIONAL CLASS SHARES OF THE FFB FUND
FFB FUND EVERGREEN EVERGREEN INVESTOR INSTITUTIONAL FUND FUND CLASS CLASS PRO FORMA SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Load Imposed on Purchases (as a percentage of offering price).................. 0% 4.50% 0% 0% Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)............................ None None None None Contingent Deferred Sales Charge.... None None None None Exchange Fee (applies only after 4 exchanges per year)....... $5 None None $5 Redemption Fees..................... None None None None ANNUAL FUND OPERATING EXPENSES (as a percentage of average daily net assets) Management Fees................... 0.50% 0.75% (1) 0.75%(1) 0.50% 12b-1 Fees........................ ----- 0.00% (2) ---- ---- Other Expenses.................... 0.16% 0.25% 0.25% 0.13% Annual Fund Operating Expenses.... 0.66% 1.00% (3) 1.00%(3) 0.63%(4)
(1) The investment adviser has agreed to voluntarily waive a portion of its fees. Investor Class shares commenced operations on May 2, 1995. Advisory fees after voluntary fee waivers of 0.05% were 0.70% for the Investor Class for the fiscal period ended August 31, 1995. Advisory fees after voluntary fee waivers of 0.18% for the Institutional Class were 0.57% for the fiscal year ended August 31, 1995. Fee waivers are voluntary and may be terminated at any time. Absent fee waivers, Advisory Fees would be 0.75%. The Advisory Fee includes amounts paid to the investment adviser for custody services. (2) Although the FFB Fund has adopted a 12b-1 Plan for the Investor Class shares, no payments have been made to date and no payments will be made for the fiscal year ended August 31, 1995 through January 19, 1996, the scheduled closing date of the Reorganization. Absent this agreement, 12b-1 fees would be 0.50%. (3) Includes administrative expenses of 0.07% of average net assets. Absent waivers, administrative expenses would have been 0.17%. (4) Without waiver or reimbursement of certain Fund expenses, Annual Fund Operating Expenses would be 1.52% net of fee waivers were 0.95% for Investor Class shares and 1.02% 0.82% for Institutional Class shares for the period ended August 31, 1995. (5)(4) The Evergreen Fund Pro Forma Annual Fund Operating Expenses assume the consummation of the Reorganization of both the FFB Fund and the FFB Equity Fund with the Evergreen Fund. If the Reorganization of the FFB Equity Fund is not approved, the total Pro Forma Annual Fund Operating Expenses would have been 0.66% of average net assets. EXAMPLES. The following tables show for each Fund, and for the Evergreen Fund, assuming consummation of the Reorganization, examples of the cumulative effect of shareholder transaction expenses and annual fund operating expenses indicated above on a $1,000 investment in Class -7- Y shares of the Evergreen Fund and Investor Class and Institutional Class shares of the FFB Fund for the periods specified, assuming (i) a 5% annual return, and (ii) redemption at the end of such period. EVERGREEN FFB FUND EVERGREEN FUND FUND CLASS Y INVESTOR INSTITUTIONAL CLASS Y SHARES SHARES CLASS CLASS PRO FORMA After 1 year............ $7 $55 $10 $6 After 3 years........... $21 $75 $32 $20 After 5 years........... $37 $98 $55 $35 After 10 years.......... $82 $162 $122 $79 The purpose of the foregoing examples is to assist an FFB Fund shareholder in understanding the various costs and expenses that an investment in the Class Y shares of the Evergreen Fund as a result of the Reorganization would bear directly and indirectly, as compared with the various direct and indirect expenses currently borne by a shareholder in the FFB Fund. These examples should not be considered a representation of past or future expenses or annual return. Actual expenses may be greater or less than those shown. SUMMARY THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ADDITIONAL INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS/PROXY STATEMENT, AND, TO THE EXTENT NOT INCONSISTENT WITH SUCH ADDITIONAL INFORMATION, THE PROSPECTUSES OF THE EVERGREEN FUND DATED JULY 7, 1995 AND THE PROSPECTUS OF THE FFB FUND DATED DECEMBER 30, 1994 (WHICH ARE INCORPORATED HEREIN BY REFERENCE), THE PLAN AND THE INTERIM ADVISORY AGREEMENT, FORMS OF WHICH ARE ATTACHED TO THIS PROSPECTUS/PROXY STATEMENT AS EXHIBITS A AND B, RESPECTIVELY. PROPOSED PLAN OF REORGANIZATION The Plan provides for the transfer of substantially all of the assets of the FFB Fund in exchange for Class Y shares of the Evergreen Fund and the assumption by the Evergreen Fund of certain identified liabilities of the FFB Fund. (The FFB Fund and the Evergreen Fund each may also be referred to in this Prospectus/Proxy Statement as a "Fund" and together, as the "Funds")."Funds".) The Plan also calls for the distribution of Class Y shares of the Evergreen Fund to FFB Fund shareholders in liquidation of the FFB Fund as part of the Reorganization. As a result of the Reorganization, the shareholders of the FFB Fund will become the owners of that number of full and fractional Class Y shares of the Evergreen Fund determined by dividing the value of the assets multiplying the shares outstanding of each class of the FFB Fund to be acquired by the ratio of computed by dividing the -8- net asset value per share of the Evergreen Fund and the FFB each such class of the FFB Fund by the net asset value per share of the Evergreen Fund as of the close of business on the date that the FFB Fund's assets are exchanged for shares of the Evergreen Fund. See "Information About the Reorganization." The Trustees of The FFB Lexicon Fund, including the Trustees who are not "interested persons," as such term is defined in the 1940 Act (the "Independent Trustees"), have concluded that the Reorganization would be in the best interests of shareholders of the FFB Fund and that the interests of the shareholders of the FFB Fund will not be economically diluted as a result of the transactions contemplated by the Reorganization. Accordingly, the Trustees have submitted the Plan for the approval of FFB Fund's shareholders. THE BOARD OF TRUSTEES OF THE FFB LEXICON FUND RECOMMENDS APPROVAL BY SHAREHOLDERS OF THE FFB FUND OF THE PLAN EFFECTING THE REORGANIZATION. The Trustees of the Evergreen Investment Trust have also approved the Plan, and accordingly, the Evergreen Fund's participation in the Reorganization. Approval of the Reorganization Plan on the part of the FFB Fund will require the affirmative vote of more than 50% of its outstanding voting securities. See "Voting Information Concerning the Meeting." Since Assuming the merger (the "Merger") of First Fidelity Bancorporation ("FFB") with and into a wholly-owned subsidiary of First Union Corporation ("First Union") is consummated, it will take place prior to the closing date for the Reorganization and because the Merger by law terminates the investment advisory contract between First Fidelity Bank, N.A. ("First Fidelity") and the FFB Fund, arrangements have been made to enter into the Interim Advisory Agreement with the Capital Management Group of First Union National Bank of North Carolina. The Interim Advisory Agreement will have the same terms and fees as the current investment advisory agreement between the FFB Fund and First Fidelity and will be in effect for the period of time between the effective date of the Merger and the closing date for the Reorganization. The Reorganization is scheduled to take place on or about January 19, 1996. Approval of the Interim Advisory Agreement requires the affirmative vote of (i) 67% or more of the shares of the FFB Fund present in person or by proxy at the Meeting, if holders of more than 50% of the shares of the FFB Fund outstanding on the record date are present, in person or by proxy, or (ii) more than 50% of the outstanding shares of the FFB Fund, whichever is less. See "Voting Information Concerning the Meeting." If the shareholders of the FFB Fund do not vote to approve the Reorganization, the Trustees of The FFB Lexicon Fund will consider other possible courses of action in the best interests of shareholders. If -9- the Merger is not completed, the Reorganization of the FFB Fund and the Evergreen Fund will not be completed regardless of the vote of the FFB Fund's shareholders. TAX CONSEQUENCES Prior to or at the completion of the Reorganization, the FFB Fund will have received an opinion of counsel that the Reorganization has been structured so that no gain or loss will be recognized by the FFB Fund or its shareholders for federal income tax purposes as a result of the receipt of shares of the Evergreen Fund in the Reorganization. The holding period and aggregate tax basis of Class Y shares of the Evergreen Fund that are received by FFB Fund shareholders will be the same as the holding period and aggregate tax basis of shares of the FFB Fund previously held by such shareholders, provided that shares of the FFB Fund are held as capital assets. In addition, the holding period and tax basis of the assets of the FFB Fund in the hands of the Evergreen Fund as a result of the Reorganization will be the same as in the hands of the FFB Fund immediately prior to the Reorganization and no gain or loss will be recognized by the Evergreen Fund upon the receipt of the assets of the FFB Fund in exchange for Class Y shares of the Evergreen Fund and the assumption by the Evergreen Fund of certain identified liabilities. INVESTMENT OBJECTIVES AND POLICIES OF THE EVERGREEN FUND AND THE FFB FUND The investment objective of the Evergreen Fund is long-term capital appreciation with current income as a secondary objective. Normally, at least 75% of the Fund's assets will be invested in equity securities of U.S. companies with prospects for earnings growth and dividends. The investment objective of the FFB Fund is long-term growth of capital. In pursuing this objective, the Fund normally invests at least 75% of its assets in a diversified portfolio of quality common stocks which, in the investment adviser's opinion, are undervalued in the marketplace at the time of purchase. See "Comparison of Investment Objectives and Policies" below. COMPARATIVE PERFORMANCE INFORMATION OF EACH FUND Discussions of the manner of calculation of total return are contained in the respective Prospectuses and Statements of Additional Information of the Funds. The total return of the Class Y shares of the Evergreen Fund and the Investor Class and Institutional Class shares of the FFB Fund for the one year period ended June 30, 1995 and the period from inception through June 30, 1995 are set forth in the table below. The calculations of total return assume the reinvestment of all dividends and capital gains distributions on the reinvestment date and the deduction of all recurring expenses (including sales charges) that were charged to shareholders' accounts. -10- AVERAGE ANNUALIZED COMPOUNDED TOTAL RETURN ONE SINCE INCEPTION YEAR INCEPTION DATE Evergreen Fund Class Y shares.......... 21.79% 13.82%* 1/3/91 FFB Fund* Investor Class shares.... N/A 6.33%** 5/2/95 Institutional Class shares................. 28.96% 17.76% 11/2/92 ---------------------- * Reflects waiver of advisory fees and reimbursements and/or waivers of expenses. Without such reimbursements and/or waivers, the average annual total return during the period would have been lower. ** Not annualized. MANAGEMENT OF THE FUNDS The overall management of the Evergreen Investment Trust and of The FFB Lexicon Fund is the responsibility of, and is supervised by, their respective Board of Trustees. INVESTMENT ADVISERS, SUB-ADVISERS AND ADMINISTRATORS Evergreen Fund. The Capital Management Group ("CMG"), a division of the First Union National Bank of North Carolina ("FUNB"), serves as investment adviser to the Evergreen Fund. The address of FUNB is One First Union Center, 301 S. College Street, Charlotte, North Carolina 28288. FUNB is a subsidiary of First Union, one of the ten largest banking holding companies in the United States. First Union is a bank holding company headquartered in Charlotte, North Carolina, which had $83.1 billion in consolidated assets as of June 30, 1995. First Union and its subsidiaries provide a broad range of financial services to individuals and businesses through offices in 36 37 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 0.50% of the -11- Fund's average daily net assets. Evergreen Asset Management Corp. serves as administrator to the Evergreen Fund. Evergreen Asset, with its predecessors, has served as investment adviser and administrator to the Evergreen family of mutual funds since 1971. In its capacity as administrator, Evergreen Asset is entitled to receive a fee based on the average daily net assets of the Evergreen Fund at a rate based on the total assets of the mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset also serve as investment adviser, calculated in accordance with the following schedule: 0.050% of the first $7 billion; 0.035% on the next $3 billion; 0.030% on the next $5 billion; 0.020% on the next $10 billion; 0.015% on the next $5 billion; and 0.010% on assets in excess of $30 billion. Furman Selz Incorporated ("Furman Selz"), an affiliate of Evergreen Funds Distributor, Inc., distributor for the Evergreen family of mutual funds, serves as sub-administrator to the Evergreen Fund and is entitled to receive a fee from the Fund calculated on the average daily net assets of the Fund at a rate based on the total assets of the mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset also serve as investment adviser, calculated in accordance with the following schedule: 0.0100% of the first $7 billion; 0.0075% on the next $3 billion; 0.0050% on the next $15 billion; and 0.0040% on assets in excess of $25 billion. The total assets of the mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset serve as investment adviser as of June 30, 1995 were approximately $8.7 billion. For further information regarding Evergreen Asset, FUNB and First Union, see "Management of the Funds -- Investment Advisers" in the Prospectus of the Evergreen Fund. FFB Fund. First Fidelity Bank, N.A. ("First Fidelity") serves as the investment adviser for the FFB Fund and provides investment guidance consistent with the Fund's investment objective and policies and provides administrative assistance in connection with the operation of the FFB Fund. First Fidelity also acts as custodian for the FFB Fund. Fees for custodian services are included in First Fidelity's advisory fee. SEI Financial Management Corporation ("SEI"), a wholly-owned subsidiary of SEI Corporation, acts as administrator of the FFB Fund. SEI provides personnel, office space and all management and administrative services reasonably necessary for the operation of The FFB Lexicon Fund and the FFB Fund (such as maintaining the FFB Fund's books and records, monitoring compliance with various state and Federal federal laws and assisting the Trustees in the execution of their duties) other than those services which are provided by First Fidelity. As compensation for their investment advisory, administrative or management services, First Fidelity and SEI are entitled to a monthly fee at an annual rate of 0.75% and 0.17%, respectively, of the FFB Fund's average daily net assets. The advisory fee paid by the FFB Fund -12- is higher than the rate paid by most investment companies. For the fiscal year ended August 31, 1994 1995, First Fidelity and SEI received a an aggregate fee equal to 0.27% 0.57% and 0.07% 0.17%, respectively, of the FFB Fund's average daily net assets. PORTFOLIO MANAGEMENT The Evergreen Fund is currently managed by experienced members of the CMG staff. Mr. William T. Davis, Jr. was the Evergreen Fund's portfolio manager from March, 1991 until his resignation in July, 1995. DISTRIBUTION OF SHARES Evergreen Funds Distributor, Inc. ("EFD"), an affiliate of Furman Selz, acts as underwriter of the Evergreen Fund's shares. EFD distributes the Evergreen Fund shares directly or through broker-dealers, including an affiliate of FUNB, banks, including FUNB, or other financial intermediaries. The Evergreen Fund offers four classes of shares, Class A, Class B, Class C and Class Y. Each Class has separate distribution arrangements. (See "Distribution-Related and Shareholder Servicing-Related Expenses" below.) No Class bears the distribution expenses relating to the shares of any other Class. Class Y shares of the Evergreen Fund, which will be received by the FFB Fund's shareholders if the Reorganization is approved consummated, are sold without a sales load or distribution fee only to (i) all shareholders of record in one or more of the Evergreen family of funds for which Evergreen Asset serves as investment adviser as of December 30, 1994, (ii) certain institutional investors and (iii) investment advisory clients of CMG, Evergreen Asset or their affiliates. FFB Fund shareholders who wish to make subsequent purchases of the Evergreen Fund's shares will be able to purchase Class Y shares. Class A, Class B and Class C shares of the Evergreen Fund are sold with either an initial or contingent deferred sales charge and are subject to certain distribution-related and shareholder servicing-related expenses. For a description of the Classes of shares issued by the Evergreen Fund see "Purchase and Redemption of Shares" and "General Information - Organization; Other Classes of Shares" in the Evergreen Fund's Prospectus. Class A, Class B and Class C shares are further described in a separate Evergreen Fund prospectus. SEI Financial Services Company ("SEI Financial"), a wholly-owned subsidiary of SEI Corporation, acts as underwriter of the FFB Fund's shares. There are two classes of shares outstanding, Investor Class and Institutional Class. Investor Class shares are sold with an initial sales charge ranging from 4.50% to 1%. Institutional Class shares are sold without any sales charges. The FFB Fund has adopted for its Investor Class shares a Rule 12b-1 distribution plan as described in "Distribution-Related and Shareholder Servicing-Related Expenses" below. DISTRIBUTION-RELATED AND SHAREHOLDER SERVICING-RELATED EXPENSES . -13- Evergreen Fund. The Evergreen Fund has not adopted a Rule 12b-1 plan or shareholder servicing plan for its Class Y shares. FFB Fund. The FFB Fund has adopted for its Investor Class shares a distribution plan (the "FFB Plan") pursuant to Rule 12b-1 of the 1940 Act. The FFB Plan provides for a fee payable by the FFB Fund to SEI Financial at the annual rate of up to 0.50% of the Fund's average daily net assets. No payments under the FFB Plan have been made to date and no payments will be made for the fiscal year ended August 31, 1995. through January 19, 1996, the scheduled closing date of the Reorganization. PURCHASE AND REDEMPTION PROCEDURES Information concerning applicable sales charges, distribution-related fees and shareholder servicing-related fees are is described above. Class Y shares of the Evergreen Fund are offered at net asset value, and the FFB Fund's shares are offered at net asset value (plus any applicable sales charges), by their respective distributors. Investments in the Funds are not insured. The minimum initial purchase requirement for Class Y shares of the Evergreen Fund and Investor Class and Institutional Class shares of the FFB Fund is $1,000 ($250 for FFB Fund IRA accounts). There is no minimum for subsequent purchases of Evergreen Fund shares. The minimum for subsequent purchases of FFB Fund Investor Class and Institutional Class shares is $100 ($50 for FFB Fund IRA accounts). Each Fund provides for telephone, mail or wire redemption of shares at net asset value as next determined after receipt of a redemption request on each day the New York Stock Exchange is open for trading. Additional information concerning purchases and redemptions of shares, including how each Fund's net asset value is determined, is contained in the respective Prospectuses for each Fund. The Evergreen Fund and the FFB Fund (with respect to its Investor Class shares) each may involuntarily redeem shareholders' accounts that have less than $1,000 (less than $250 for FFB Fund IRA accounts) of invested funds. The minimum investment requirements in the FFB Fund may be waived or lowered for investments effected on a group basis by certain other institutions and their employees. All funds invested in each Fund are invested in full and fractional shares. The Funds reserve the right to reject any purchase order. EXCHANGE PRIVILEGES The FFB Fund currently permits shareholders to exchange shares for shares of the same Class of other funds managed by First Fidelity. Holders of shares of a Class of the Evergreen Fund generally may exchange their shares for shares of the same Class of any other funds of the Evergreen mutual fund family. FFB Fund shareholders will be receiving Class Y shares of the Evergreen Fund in the Reorganization and, accordingly, with respect to shares of the Evergreen Fund received by FFB Fund shareholders in the Reorganization, the exchange privilege is limited to the Class Y shares of other funds of the Evergreen mutual -14- fund family. The Evergreen Fund imposes a fee of $5 per exchange on shareholders who exchange in excess of four times per calendar year. No sales charge is imposed on an exchange. An exchange which represents an initial investment in another fund of the Evergreen mutual fund family must amount to at least $1,000. The current exchange privileges, and the requirements and limitations attendant thereto, are described in the Funds' respective Prospectuses and Statements of Additional Information. DIVIDEND POLICY The Evergreen Fund distributes its investment company taxable income quarterly. The FFB Fund distributes its net investment income monthly. Each Fund distributes net long-term capital gains at least annually. Dividends and distributions are reinvested in additional shares of the same Class of the respective Fund, or paid in cash, as a shareholder has elected. See the respective Prospectuses of the Funds for further information concerning dividends and distributions. After the Reorganization, shareholders of the FFB Fund that have elected (or that so elect no later than November 13 21, 1995), to have their dividends and/or distributions reinvested, will have dividends and/or distributions received from the FFB Evergreen Fund reinvested in shares of the Evergreen Fund. Shareholders of the FFB Fund that have elected (or that so elect no later than November 13 21, 1995) to receive dividends and/or distributions in cash will receive dividends and/or distributions from the Evergreen Fund in cash after the Reorganization, although they may, after the Reorganization, elect to have such dividends and/or distributions reinvested in additional shares of the Evergreen Fund. Each Fund has qualified and intends to continue to qualify to be treated as a regulated investment company under the Internal Revenue Code of 1986, as amended (the "Code"). While so qualified, so long as each Fund distributes all of its investment company taxable income and any net realized gains to shareholders, it is expected that a Fund will not be required to pay any federal income taxes on the amounts so distributed. A 4% nondeductible excise tax will be imposed on amounts not distributed if a Fund does not meet certain distribution requirements by the end of each calendar year. Each Fund anticipates meeting such distribution requirements. RISKS Since the investment objectives and policies of each Fund are substantially comparable, the risks involved in investing in each Fund's shares are similar. There is no assurance that investment performances will be positive and that the Funds will meet their investment objectives. In addition, both Funds may employ for hedging purposes the strategy of writing covered call options and the Evergreen Fund may write put options and purchase put and call options on national securities exchanges. The risks involved in these strategies are -15- described in the "Investment Practices and Restrictions - Options and Futures" section in the Evergreen Fund's Prospectus. The Evergreen Fund, unlike the FFB Fund, also may enter into futures contracts and options on futures contracts for hedging purposes. See limitations discussed in "Comparison of Investment Objectives and Policies." However, the Evergreen Fund does not currently engage in these investment strategies. For a discussion of the risks involved in entering into futures contracts and options on futures contracts, see the "Investment Practices and Restrictions - Options and Futures" section in the Evergreen Fund's Prospectus. The Evergreen Fund may invest in foreign securities or, unlike the FFB Fund, securities denominated in or indexed to foreign currencies. These may involve additional risks. Specifically, they may be affected by the strength of foreign currencies relative to the U.S. dollar, or by political or economic developments in foreign countries. Accounting procedures and government supervision may be less stringent than those applicable to U.S. companies. There may be less publicly available information about a foreign company than about a U.S. company. Foreign markets may be less liquid or more volatile than U.S. markets and may offer less protection to investors. It may also be more difficult to enforce contractual obligations abroad than would be the case in the United States because of differences in the legal systems. Foreign securities may be subject to foreign taxes, which may reduce yield, and be less marketable than comparable U.S. securities. All these factors are considered by CMG before making any of these types of investments. The FFB Fund may invest in U.S. dollar denominated securities of foreign issuers including American Depositary receipts that are traded on exchanges or listed on NASDAQ. INFORMATION ABOUT THE REORGANIZATION DESCRIPTION OF THE MERGER On June 18, 1995, First Union entered into an Agreement and Plan of Merger (the "Merger Agreement") with FFB, the corporate parent of First Fidelity, which provides, among other things, for the Merger of FFB with and into a wholly-owned subsidiary of First Union, subject to the terms and conditions contained in the Merger Agreement. It is currently expected that the Merger will be consummated by January 1, 1996, subject to the satisfaction of various conditions of closing set forth in the Merger Agreement. Consummation of the Merger is expected to result in the nations's nation's sixth largest bank holding company, with assets of approximately $118.5 billion based on total assets. Currently First Union is the nation's ninth largest bank holding company, with assets of $83.1 billion as of June 30, 1995, and FFB is the 25th 27th largest, having $35.4 billion in assets as of June 30, 1995. Consummation of the Merger is subject to receipt of regulatory and stockholder approvals, as well as other conditions set forth in the -16- Merger Agreement. No assurance can be given that the Merger will be consummated. Also, in connection with the execution of the Merger Agreement, Banco Santander, S.A. ("Santander"), the owner of approximately 30 percent of the outstanding shares of FFB's common stock, agreed, among other things, to vote such shares in favor of the Merger Agreement. It is anticipated that subsequent to the Merger, Santander will own approximately 11% of First Union's outstanding shares of common stock. The Merger is not in any way conditioned upon the approval by shareholders of any mutual fund currently managed by First Fidelity, and it is expected that the Merger will take place whether or not the transaction described herein is approved by such shareholders. As a result of the Merger, it is expected that FUNB and Evergreen Asset will succeed to the investment advisory and administrative functions currently performed for the FFB Fund by various units of First Fidelity. It is also expected that First Fidelity, or its successors, will no longer provide investment advisory or administrative services to investment companies. REASONS FOR THE REORGANIZATION The Board of Trustees of The FFB Lexicon Fund has considered and approved the Reorganization, including entry by The FFB Lexicon Fund on behalf of the FFB Fund into the Plan, as in the best interests of the shareholders. In addition, the Trustees have approved the Interim Advisory Agreement with respect to the FFB Fund. As noted above, FFB has agreed to merge with and into a wholly- owned subsidiary of First Union. FFB is the parent company of First Fidelity, investment adviser to the mutual funds which comprise The FFB Lexicon Fund. The Merger will cause, as a matter of law, termination of the investment advisory agreement between each of the First Fidelity Funds portfolio of The FFB Lexicon Fund and First Fidelity. Accordingly, the Trustees have considered the recommendation of First Fidelity that the Trustees approve the proposed Reorganization. In making their recommendation to the Trustees, the representatives of the respective banks First Fidelity and FUNB reviewed with the Trustees various factors about the Funds and the proposed Reorganization. There are substantial similarities between the Evergreen Fund and the FFB Fund. Specifically, the Evergreen Fund and the FFB Fund have substantially similar investment objectives and policies, and comparable risk profiles. See, "Comparison of Investment Objectives and Policies" below. In terms of total net assets, the FFB Fund and the FFB Equity Fund, a series of FFB Funds Trust, at June 30, 1995, had net assets of approximately $82.4 million and $12.9 million, respectively. The Evergreen Fund's net assets at such date (including the effect of the combination of the Evergreen Fund and the ABT Growth and Income Trust) were approximately $1 billion. If the Reorganization had taken place as of June 30, 1995 and assuming the combination between the Evergreen Fund and the FFB Equity Fund, the Evergreen Fund's net assets would be approximately $1.1 billion and. First Fidelity and FUNB -17- expect that the increased assets of the Evergreen Fund will result in the delivery of more efficient investment management and shareholder services. In addition, assuming that an alternative to the Reorganization would be to propose that the FFB Fund be separately managed by Evergreen Asset CMG or another affiliate of FUNB following the consummation of the Merger, the FFB Fund would thereafter share the same investment management resources and be offered through common distribution channels with the substantially identical Evergreen Fund. The FFB Fund would also have to bear the cost of maintaining its separate existence. First Fidelity and FUNB believe that the prospect of dividing the resources of the FUNB/Evergreen mutual fund organization between two substantially identical funds Funds could result in both funds Funds being disadvantaged due to an inability to achieve optimum size, performance levels and the greatest possible economies of scale. Accordingly, for the reasons noted above and recognizing that there can be no assurance that any economies of scale or other benefits will be realized, both First Fidelity and FUNB believe that the proposed Reorganization would be in the best interest of each Fund and its shareholders. The Board of Trustees of The FFB Lexicon Fund met and considered the recommendation of First Fidelity and FUNB, and, in addition, considered among other things, (i) the terms and conditions of the Reorganization; (ii) whether the Reorganization would result in the economic dilution of shareholder interests; (iii) expense ratios, fees and expenses of the FFB Fund and the Evergreen Fund and of similar funds; the comparative performance records of each of the Funds; compatibility of their investment objectives and policies; service features available to shareholders in the respective funds Funds; the investment experience, expertise and resources of Evergreen Asset CMG; the service and distribution resources available to the Evergreen family of mutual funds and the broad array of investment alternatives available to shareholders of the Evergreen family of mutual funds, including the future marketing plans and resources expected to be used in connection with the Evergreen family of mutual funds; and the personnel and financial resources of First Union and its affiliates; (iv) the fact that FUNB will bear the expenses incurred by the FFB Fund in connection with the Reorganization; (v) the fact that the Evergreen Fund will assume certain identified liabilities of the FFB Fund; and (vi) the expected federal income tax consequences of the Reorganization. The Trustees also considered the benefits to be derived by shareholders of the FFB Fund from the sale of its assets to the Evergreen Fund. In this regard, the Trustees considered the potential benefits of being associated with a larger entity and the economies of scale that could be realized by the participation by shareholders of the FFB Fund in the combined fund. In addition, the Trustees considered that there are alternatives available to shareholders of the FFB Fund, including the ability to redeem their shares, as well as the option to vote against the Reorganization. -18- During their consideration of the Reorganization, the Trustees met with FFB Fund counsel as well as counsel to the Independent Trustees regarding the legal issues involved. The Trustees of Evergreen Investment Trust also concluded at a regular meeting on July 27, 1995 that the proposed Reorganization would be in the best interests of shareholders of the Evergreen Fund and that the interests of the shareholders of the Evergreen Fund will not be diluted as a result of the transactions contemplated by the Reorganization. THE TRUSTEES OF THE FFB LEXICON FUND RECOMMEND THAT THE SHAREHOLDERS OF THE FFB FUND APPROVE THE PROPOSED REORGANIZATION. AGREEMENT AND PLAN OF REORGANIZATION The following summary is qualified in its entirety by reference to the Plan (Exhibit A hereto). The Plan provides that the Evergreen Fund will acquire substantially all of the assets of the FFB Fund in exchange for Class Y shares of the Evergreen Fund and the assumption by the Evergreen Fund of certain identified liabilities of the FFB Fund on or about January 19, 1996 or such other date as may be agreed upon by the parties (the "Closing Date"). Prior to the Closing Date, the FFB Fund will endeavor to discharge all of its known liabilities and obligations. The Evergreen Fund will not assume any liabilities or obligations of the FFB Fund other than those reflected in an unaudited statement of assets and liabilities of the FFB Fund prepared as of the close of regular trading on the New York Stock Exchange, Inc. (the "NYSE"), currently 4:00 p.m. Eastern Time, on the Closing Date. The number of full and fractional Class Y shares of the Evergreen Fund to be received by the shareholders of the FFB Fund will be determined by dividing the value of the assets multiplying the shares outstanding of each class of the FFB Fund to be acquired by the ratio of computed by dividing the net asset value of the Evergreen Fund and each Class of the FFB Fund per share of each such class of the FFB Fund by the net asset value per share of the Evergreen Fund, computed as of the close of regular trading on the NYSE on the Closing Date. The net asset value per share of each Class class will be determined by dividing assets, less liabilities, in each case attributable to the respective Class class, by the total number of outstanding shares. State Street Bank and Trust Company, the custodian for the Evergreen Fund, will compute the value of the Funds' each Fund's respective portfolio securities. The method of valuation employed will be consistent with the procedures set forth in the Prospectuses and Statement of Additional Information of the Evergreen Fund, Rule 22c-1 under the 1940 Act, and with the interpretations of such rule by the SEC's Division of Investment Management. At or prior to the Closing Date, the FFB Fund shall have declared a dividend or dividends and distribution or distributions which, together with all previous dividends and distributions, shall have the effect of -19- distributing to the FFB Fund's shareholders (in shares of the FFB Fund, or in cash, as the shareholder has previously elected) all of the FFB Fund's investment company taxable income for the taxable year ending on or prior to the Closing Date (computed without regard to any deduction for dividends paid) and all of its net capital gains realized in all taxable years ending on or prior to the Closing Date (after reductions for any capital loss carryforward). As soon after the Closing Date as conveniently practicable, the FFB Fund will liquidate and distribute pro rata to shareholders of record as of the close of business on the Closing Date the full and fractional Class Y shares of the Evergreen Fund received by the FFB Fund. Such liquidation and distribution will be accomplished by the establishment of accounts in the names of the FFB Fund's shareholders on the share records of the Evergreen Fund's transfer agent. Each account will represent the respective pro rata number of full and fractional Class Y shares of the Evergreen Fund due to the FFB Fund's shareholders. All issued and outstanding shares of the FFB Fund, including those represented by certificates, will be canceled. The Evergreen Fund does not issue share certificates to shareholders. The shares of the Evergreen Fund to be issued will have no preemptive or conversion rights. After such distribution and the winding up of its affairs, the FFB Fund will be terminated. In connection with such termination, the FFB Fund will file with the SEC an application for termination as a registered investment company. The consummation of the Reorganization is subject to the conditions set forth in the Plan, including approval by the FFB Fund's shareholders, accuracy of various representations and warranties and receipt of opinions of counsel, including opinions with respect to those matters referred to in "Federal Income Tax Consequences" below. Notwithstanding approval of the FFB Fund's shareholders, the Plan may be terminated (a) by the mutual agreement of the FFB Fund and the Evergreen Fund; or (b) at or prior to the Closing Date by either party (i) because of a breach by the other party of any representation, warranty, or agreement contained therein to be performed at or prior to the Closing Date if not cured within 30 days, or (ii) because a condition to the obligation of the terminating party has not been met and it reasonably appears that it cannot be met. The expenses of the FFB Fund in connection with the Reorganization (including the cost of any proxy soliciting agents) and the expenses of the Evergreen Fund (other than securities registration fees) will be borne by FUNB. No portion of such expenses shall be borne directly or indirectly by the FFB Fund or its shareholders. Following the Reorganization, the Evergreen Fund will not be assuming any liabilities or making any reimbursements in connection with the 12b-1 Plan or shareholder servicing arrangements of the FFB Fund. No portion of such expenses shall be borne directly or indirectly by the FFB Fund or its shareholders. If the Merger of FFB and First Union is not completed, First Fidelity will bear the expenses of the FFB Fund and FUNB will bear the expenses of the Evergreen Fund. -20- If the Reorganization is not approved by shareholders of the FFB Fund, the Board of Trustees of The FFB Lexicon Fund will consider other possible courses of action in the best interests of shareholders. If the merger Merger between FFB and First Union is not completed, the Reorganization will not be completed regardless of the vote of the FFB Fund's shareholders. FEDERAL INCOME TAX CONSEQUENCES The Reorganization is intended to qualify for federal income tax purposes as a tax-free reorganization under section 368(a) of the Code. As a condition to the closing of the Reorganization, the FFB Fund will receive an opinion of counsel to the effect that, on the basis of the existing provisions of the Code, U.S. Treasury regulations issued 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 -21- shareholders of the FFB Fund pursuant to the Reorganization will be the same as the aggregate tax basis of the shares of the FFB Fund held by such shareholder immediately prior to the Reorganization, and the holding period of the shares of the Evergreen Fund, including fractional shares, received by each such shareholder will include the period during which the shares of the FFB Fund exchanged therefor were held by such shareholder (provided that the shares of the FFB Fund were held as a capital asset on the date of the Reorganization). Opinions of counsel are not binding upon the Internal Revenue Service or the courts. If the Reorganization is consummated but does not qualify as a tax-free reorganization under the Code, each FFB Fund shareholder would recognize a taxable gain or loss equal to the difference between his or her tax basis in his or her FFB Fund shares and the fair market value of the Evergreen Fund shares he or she received. Shareholders of the FFB Fund should consult their tax advisers regarding the effect, if any, of the proposed Reorganization in light of their individual circumstances. Since the foregoing discussion relates only to the federal income tax consequences of the Reorganization, shareholders of the FFB Fund should also consult their tax advisers as to state and local tax consequences, if any, of the Reorganization. It is not expected that the securities of the combined portfolio will be sold in significant amounts in order to comply with the policies and investment practices of the Evergreen Fund. PRO-FORMA CAPITALIZATION The following tables show the capitalization of the Evergreen Fund and the FFB Fund as of August 31, 1995 individually and on a pro forma basis as of that date, giving effect to the proposed acquisition of assets at net asset value: CAPITALIZATION OF THE FFB FUND AND THE EVERGREEN FUND
FFB FUND INVESTOR INSTITUTIONAL EVERGREEN CLASS Y SHARES CLASS Y SHARES CLASS CLASS FFB EQUITY FUND CLASS PRO FORMA FOR PRO FORMA FOR SHARES SHARES FUND SHARES Y SHARES REORGANIZATION* REORGANIZATION** Net Assets............ $159,682 $86,693,791 $13,504,920 $693,171,932 $793,530,325 $780,025,505 Shares Outstanding***. 11,471 6,227,290 990,401 34,789,078 39,825,889 39,148,101 Net Asset Value per Share............... $ 13.92 $ 13.92 $ 13.64 $ 19.92 $ 19.92 $ 19.92
* Assumes the combination of the FFB Fund and the FFB Equity Fund. ** Assumes only the combination of the FFB Fund. *** Had the Reorganization been consummated on August 31, 1995, the FFB Fund would have received ________4,360,114 Class Y shares of the -22- Evergreen Fund, which would then be available for distribution to shareholders. No assurance can be given as to how many Class Y shares of the Evergreen Fund FFB Fund shareholders will receive on the date that the Reorganization takes place, and the foregoing should not be relied upon to reflect the number of Class Y shares of the Evergreen Fund that will actually be received on or after such date. SHAREHOLDER INFORMATION . As of September 8, 1995 (the "Record Date"), there were the following number of each Class of beneficial interest of the FFB Fund outstanding: Investor Class - 11,471; Institutional Class - 6,329,781. As of the Record Date, the officers and Trustees of The FFB Lexicon Fund beneficially owned as a group less than 1% of the outstanding shares of the FFB Fund. To The FFB Lexicon Fund's knowledge, the following persons owned beneficially or of record more than 5% of the FFB Fund's total outstanding shares as of the Record Date:
PERCENTAGE OF NUMBER OF PERCENTAGE TOTAL SHARES NAME AND ADDRESS CLASS SHARES OF CLASS OUTSTANDING FFB Saving Value Equity Fund Institutional 558,814 8.83% 8.82% First Fidelity Bank, N.A., N.J. Broad and Walnut Streets Philadelphia, PA 19109 FFB Bancorporation Institutional 1,166,817 18.44% 18.40% Pension Plan First Fidelity Bank, N.A., N.J. Broad and Walnut Streets Philadelphia, PA 19109
* Most of the shares held by are in accounts for the Bank's fiduciary, agency or custodial customers. As of September 8, 1995, the following number of each Class of the shares of the Evergreen Fund were outstanding: Class A -- _____________ 13,997,124; Class B -- ___________6,391,090; Class C -- __________32,511 and Class Y -- _____________35,001,508. As of the Record Date, the officers and Trustees of the Evergreen Investment Trust beneficially owned as a group less than 1% of the outstanding shares of the Evergreen Fund. To the Evergreen Fund's knowledge, the following persons owned beneficially or of record more than 5% of the Evergreen Fund's total outstanding shares as of the Record Date: PERCENTAGE OF NUMBER OF PERCENTAGE TOTAL SHARES NAME AND ADDRESS CLASS SHARES OF CLASS OUTSTANDING First Union Y 4,146,018 11.75% 7.48% National Bank Trust Accounts (Cash) 301 S. Tryon St. Charlotte, NC 28288 First Union Y 31,133,470 88.24% 56.18% National Bank Trust Accounts (Reinvest) 301 S. Tryon St. Charlotte, NC 28288 COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES The following discussion is based upon and qualified in its entirety by the descriptions of the respective investment objectives, policies and restrictions set forth in the respective Prospectuses and Statements of Additional Information of the Funds. The investment objectives, policies and restrictions of the Evergreen Fund can be found in the Prospectus of the Evergreen Fund under the caption "Investment Objectives and Policies." The Evergreen Fund's Prospectus also offers additional funds advised by Evergreen Asset or CMG. These additional funds are not involved in the Reorganization, their investment objectives, policies and restrictions are not discussed in this Prospectus/Proxy Statement and their shares are not offered hereby. The investment objectives, policies and restrictions of the FFB Fund can be found in the Prospectus of the FFB Fund under the caption "Investment Objectives and Policies." The investment objective of the Evergreen Fund is long-term capital appreciation with current income as a secondary objective. The Fund's objective is a fundamental policy and may not be changed without shareholder approval. Normally, at least 75% of the Fund's assets will be invested in equity securities of U.S. companies with prospects for earnings growth and dividends. There can be no assurance that the Fund's investment objective will be achieved. The Evergreen Fund's investments, in order of priority, consist of: * common and preferred stocks, bonds and convertible preferred stock of U.S. companies with a minimum market capitalization of $100 million which are listed on the New York or American Stock Exchanges or trade in over-the-counter markets. The primary consideration is for those industries and companies with the potential for capital appreciation; income is a secondary consideration; * American Depositary Receipts ("ADRs") of foreign companies traded on the New York or American Stock Exchanges or the over-the- -24- counter market; * foreign securities (either foreign or U.S. securities traded in foreign markets). The Fund may also invest in obligations denominated in foreign currencies. In making these decisions, the Fund's investment adviser will consider such factors as the condition and growth potential of various economies and securities markets, currency and taxation implications and other pertinent financial, social, national and political factors; * convertible bonds rated no lower than BBB by Standard & Poor's Ratings Group ("S&P") or Baa by Moody's Investor Services Investors Service , Inc. ("Moody's") or, if not rated, determined to be of comparable quality by the Fund's investment adviser; * money market instruments; * fixed rate notes and bonds and adjustable and variable rate notes of companies whose common stock the Fund may acquire rated no lower than BBB by S&P or Baa by Moody's or which, if not rated, determined to be of comparable quality by the Fund's investment adviser (up to 5% of total assets); * zero coupon bonds issued or guaranteed by the U.S. government, its agencies or instrumentalities (up to 5% of total assets); * obligations, including certificates of deposit and bankers' acceptances, of banks or savings and loan associations having at least $1 billion in deposits and insured by the Bank Insurance Fund or the Savings Association Insurance Fund, including U.S. branches of foreign banks and foreign branches of U.S. banks; and * prime commercial paper, including master demand notes rated no lower than A-1 by S&P or Prime 1 by Moody's. Bonds rated BBB by S&P or Baa by Moody's may have speculative characteristics. Changes in economic conditions or other circumstances are more likely to weaken such bonds' prospects for principal and interests interest payments than higher rated bonds. However, like the higher rated bonds, these securities are considered investment grade. If any security invested in by the Evergreen Fund loses its credit rating or has its rating reduced after the Fund has purchased it, the Fund is not required to sell or otherwise dispose of the security, but may consider doing so. As of December 31, 1992, 1993 and 1994, approximately 92%, 95% and 97%, respectively, of the Evergreen Fund's portfolio consisted of equity securities. The investment objective of the FFB Fund is long-term growth of capital. The FFB Fund invests primarily in a diversified portfolio of securities which, in the opinion of its investment adviser, are -25- undervalued in the marketplace at the time of purchase. The investment adviser characterizes undervalued quality of common stocks as those that have lower than average debt to equity ratios and lower than average price to book ratios as measured by the Standard & Poor's 500 Composite Stock Price Index. The investment adviser also considers other factors such as fixed charge coverage, price to gross cash flow, and market capitalization, as well as industry outlook and market share. Under normal conditions, at least 75% of the FFB Fund's assets will be invested in common stocks of the type described above. The remainder of the Fund's assets may also be invested in the following: preferred stocks, securities (debt securities, warrants and preferred stocks) convertible into common stocks, covered call options, U.S. dollar denominated securities of foreign issuers) including ADRs that are traded on exchanges or listed on NASDAQ, money market securities and repurchase agreements. The FFB Fund has not adopted a policy with respect to the minimum acceptable credit ratings for debt securities, convertible securities and money market securities. Both the Evergreen Fund and the FFB Fund may write covered call options. The Evergreen Fund may write covered put options and may purchase put and call options on securities. Although there are no restrictions on the amount of assets which may be invested in such securities, the Evergreen Fund does not currently intend to invest more than 5% of its net assets in options transactions. In addition, the Evergreen Fund, unlike the FFB Fund, may sell or purchase currency and other financial futures contracts and may purchase exchange listed put options on financial futures contracts. Margin deposits on futures contracts and premiums paid for related options are generally limited by applicable law to 5% of total assets. The Evergreen Fund does not use these transactions for speculation or leverage. The Evergreen Fund does not currently engage in futures transactions and related options. See "Investment Practices and Restrictions - Options and Futures" in the Evergreen Fund's Prospectus for additional information regarding these investment strategies. The characteristics of each investment policy and the associated risks are described in the Prospectus and Statement of Additional Information of each Fund. Both the Evergreen Fund and the FFB Fund have other investment policies and restrictions which are also set forth in the Prospectus and Statement of Additional Information of each Fund. COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS FORM OF ORGANIZATION The FFB Lexicon Fund and 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 federal law. The FFB Fund is a -26- series of The FFB Lexicon Fund. The Evergreen Fund is a series of Evergreen Investment Trust. CAPITALIZATION The beneficial interests in both the Evergreen Fund and the FFB Fund are represented by an unlimited number of transferable shares of beneficial interest with no par value per share. 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 The FFB Lexicon Fund's Trustees or Evergreen Investment Trust's Trustees. Shareholders of each Fund vote separately, by class, as to matters, such as approval or amendments of Rule 12b-1 distribution plans that affect only their particular class and by series as to matters, such as approval or amendments of investment advisory agreements or proposed reorganizations, that affect only their particular series. SHAREHOLDER LIABILITY Under Massachusetts law, shareholders of a business trust could, under certain circumstances, be held personally liable for the obligations of the business trust. However, the respective Declarations of Trust under which the Funds were established disclaim shareholder liability for acts or obligations of the series and require that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Funds or the Trustees. The Declarations of Trust provide for indemnification out of the series' property for all losses and expenses of any shareholder held personally liable for the obligations of the series. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is considered remote since it is limited to circumstances in which a disclaimer is inoperative and the series itself would be unable to meet its obligations. A substantial number of mutual funds in the United States are organized as Massachusetts business trusts. SHAREHOLDER MEETINGS AND VOTING RIGHTS Neither Evergreen Investment Trust nor The FFB Lexicon Fund, 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 -27- 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 either The FFB Lexicon Fund or Evergreen Investment Trust fail or refuse to call a meeting for a period of 30 days (14 days in the case of Evergreen Investment Trust) after a request in writing by shareholders holding an aggregate of at least 10% (25% in the case of Evergreen Investment Trust) of the outstanding shares, then shareholders holding said 10% (25% in the case of Evergreen Investment Trust) may call and give notice of such meeting. Evergreen Investment Trust and The FFB Lexicon Fund currently do not intend to hold regular shareholder meetings. Neither permits cumulative voting. A majority of shares entitled to vote on a matter constitutes a quorum for consideration of such matter. In either case, a majority of the shares voting is sufficient to act on a matter (unless otherwise specifically required by the applicable governing documents or other law, including the 1940 Act). LIQUIDATION OR DISSOLUTION In the event of the liquidation of a Fund the shareholders are entitled to receive, when, and as declared by the Trustees, the excess of the assets belonging to such Fund or attributable to the class over the liabilities belonging to the Fund or attributable to the class. In either case, the assets so distributable to shareholders of the Fund will be distributed among the shareholders in proportion to the number of shares of the Fund held by them and recorded on the books of the Fund. LIABILITY AND INDEMNIFICATION OF TRUSTEES The Declaration of Trust of Evergreen Investment Trust provides that no Trustee or officer shall be liable to the Fund or to any shareholder, Trustee, officer, employee or agent of the Fund for any action or failure to act except for his or her own bad faith, willful misfeasance, gross negligence or reckless disregard of his or her duties. The Declaration of Trust provides that a Trustee or officer is entitled to indemnification against liabilities and expenses with respect to claims related to his or her position with Evergreen Investment Trust unless such Trustee or officer shall have been adjudicated to have acted with bad faith, willful misfeasance, gross negligence or reckless disregard of his or her duties, or not to have acted in good faith that his or her action was in the best interest of the Trust. The Declaration of Trust also provides that a Trustee or officer is not entitled to indemnification against liabilities in the event of settlement unless there has been a determination that such 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 The FFB Lexicon Fund provides that no Trustee, officer or agent shall be personally liable to any person for any action or failure to act, except for his or her own bad faith, -28- willful misfeasance, or gross negligence, or reckless disregard of his or her duties. The Declaration of Trust provides that a Trustee or officer is entitled to indemnification against liabilities and expenses with respect to claims related to his or her position with The FFB Lexicon Fund, unless such Trustee or officer shall have been adjudicated to have acted with bad faith, willful misfeasance, or gross negligence, or in reckless disregard of his or her duties, or not to have acted in good faith in the reasonable belief that his or her action was in the best interest of The FFB Lexicon Fund, or, in the event of settlement, unless there has been a determination that such Trustee or officer has not engaged in willful misfeasance, bad faith, gross negligence, or reckless disregard of his or her duties. RIGHTS OF INSPECTION Shareholders of the respective Funds have the same right to inspect in Massachusetts the governing documents, records of meetings of shareholders, shareholder lists, share transfer records, accounts and books of the Fund as are permitted shareholders of a corporation under the Massachusetts corporation law. The purpose of inspection must be for interests of shareholders relative to the affairs of the Fund. The foregoing is only a summary of certain characteristics of the operations of the Declarations of Trust, By-Laws and Massachusetts law and is not a complete description of those documents or law. Shareholders should refer to the provisions of such respective Declarations of Trust, By-Laws, and Massachusetts law directly for more complete information. INFORMATION REGARDING THE PROPOSED INTERIM ADVISORY AGREEMENT INTRODUCTION In view of the Merger Agreement discussed above, and the factors discussed below, the Board of Trustees of The FFB Lexicon Fund recommends that shareholders of the FFB Fund approve the proposed Interim Advisory Agreement. The Interim Advisory Agreement would become effective as of the consummation of the Merger which, as noted earlier, is currently anticipated to occur by January 1, 1996. The Interim Advisory Agreement would remain in effect until the closing date Closing Date for the Reorganization. The terms of the Interim Advisory Agreement are essentially the same as the Existing Advisory Agreement (as defined below). The only differences between the Existing Advisory Agreement and the Interim Advisory Agreement, if approved by shareholders, are that the investment adviser would be CMG instead of First 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 the FFB Fund, as well as the services to be provided by CMG pursuant thereto is set forth below under "Advisory -29- Services"." The description of the Interim Advisory Agreement in this Prospectus/Proxy Statement is qualified in its entirety by reference to a Form form of the Interim Advisory Agreement, which will be used for the FFB Fund, attached hereto as Exhibit B. First Fidelity, 765 Broad Street, Newark, New Jersey 07102, has served as investment adviser to the FFB Fund since the commencement of operations of the FFB Fund pursuant to a Master Advisory Contract, dated October 18, 1991. As used herein, the Master Advisory Contract is referred to, as the FFB Fund's "Existing Advisory Agreement." At a meeting of the Board of Trustees of The FFB Lexicon Fund held on August 7, 1995, the Trustees, including all of the Independent Trustees, approved the proposed Interim Advisory Agreement for the FFB Fund. The Trustees have authorized The FFB Lexicon Fund, on behalf of the FFB Fund and subject to shareholder approval of the Interim Advisory Agreement, to enter into the Interim Advisory Agreement with CMG to become effective upon consummation of the Merger. If the Interim Advisory Agreement for the FFB Fund is not approved by shareholders, the Trustees will consider appropriate actions to be taken with respect to the FFB Fund's investment advisory arrangements at that time. The Existing Advisory Agreement for the FFB Fund was most recently approved by shareholders of the Fund on February 23, 1993. The Existing Advisory Agreement was last approved by the Trustees, including a majority of the Independent Trustees, on August 7, 1995. COMPARISON OF THE INTERIM ADVISORY AGREEMENT AND THE EXISTING ADVISORY AGREEMENT Advisory Services. The management and advisory services to be provided by CMG under the Interim Advisory Agreement are identical to those currently provided by First Fidelity under the Existing Advisory Agreement. Under the Existing Advisory Agreement, First Fidelity manages the FFB Fund and furnishes to the FFB Fund investment guidance and policy direction in connection therewith. First Fidelity provides to the FFB Fund, among other things, information relating to portfolio composition, credit conditions and average maturity of the portfolio of the FFB Fund. First Fidelity also furnishes to the Trustees periodic reports on the investment performance of the FFB Fund. Pursuant to the Existing Advisory Agreement, First Fidelity provides administrative assistance in connection with the operations of the FFB Fund. Administrative services provided by First Fidelity include, among other things, (i) data processing, clerical and bookkeeping services required in connection with maintaining the financial accounts and records for the Fund, (ii) compiling statistical and research data required for the preparation of reports and statements which are periodically distributed to The FFB Lexicon Fund's officers and the Trustees, (iii) handling general shareholder relations with investors, such as advice as to the status of their accounts, the current yield and dividends declared to date and assistance with other questions related to their accounts and (iv) compiling information -30- required in connection with the The FFB Funds Trust's Lexicon Fund's filings with the SEC. SEI currently acts as administrator of the FFB Fund. SEI has its offices at 680 East Swedesford Road, Wayne, Pennsylvania 19087. If the Interim Advisory Agreement is approved by shareholders of the FFB Fund, SEI will continue during the term of the Interim Advisory Agreement as the FFB Fund's administrator for the same compensation as currently received. See "Summary-Investment Advisers, Sub-Adviser and Administrators." Fees and Expenses. The investment advisory fees and expense limitations for the FFB Fund under the Existing Advisory Agreement and the proposed Interim Advisory Agreement are identical. See "Summary- Investment Advisers, Sub-Adviser and Administrators." Expense Reimbursement. The Existing Advisory Agreement includes a provision calling for expense limitations equal to the most restrictive limitation imposed from time to time by states where the FFB Fund's shares are qualified for sale. Currently, the most restrictive state expense limitation provision applicable to the FFB Fund limits the Fund's annual expenses to 2.5% of the first $30 million of average net assets, 2.0% of the next $70 million of such assets and 1.5% of any such assets in excess of $100 million. The Interim Advisory Agreement contains an identical provision. Payment of Expenses and Transaction Charges. Under the Existing Advisory Agreement, the FFB Fund is responsible for all of its expenses and liabilities, including compensation of the Independent Trustees of The FFB Lexicon Fund; taxes and governmental fees; interest charges; fees and expenses of the Fund's independent accountants and legal counsel; trade association membership dues; fees and expenses of any custodian (including fees and expenses for keeping books and accounts and calculating the net asset value of shares of the Fund), transfer agent, registrar and dividend disbursing agent of the Fund; expenses of issuing, redeeming, registering and qualifying for sale the Fund's shares; expenses of preparing and printing share certificates, prospectuses, shareholders' reports, notices, proxy statements and reports to regulatory agencies; the cost of office supplies; travel expenses of all officers, Trustees and employees; insurance premiums; brokerage and other expenses of executing portfolio transactions; expenses of shareholders' meetings; organizational expenses; and extraordinary expenses. The Interim Advisory Agreement contains an identical provision. Limitation of Liability. The Existing Advisory Agreement provides that First Fidelity shall not be liable to the FFB Fund for any mistake in judgment or in any other event whatsoever except for lack of good faith, provided that nothing in the Existing Advisory Agreement shall be deemed to protect or purport to protect First Fidelity against the liability to The FFB Lexicon Fund or its shareholders to which First -31- Fidelity would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of First Fidelity's duties under the Agreement or by reason of First Fidelity's reckless disregard of its obligations and duties. The Interim Advisory Agreement contains an identical provision in terms of CMG's liability. Term. If approved by the shareholders of the FFB Fund, the Interim Advisory Agreement between the FFB Fund and CMG will become effective on the consummation of the Merger. The Interim Advisory Agreement will be in effect for the period of time between the effective date of the Merger and the Closing Date for the Reorganization. The Existing Advisory Agreement provides for an initial term of two years. Thereafter, the Existing Advisory Agreement will be continued from year to year, provided that its continuation is specifically approved at least annually (a) by the vote of a majority of the outstanding voting securities of the FFB Fund (as defined in the 1940 Act) or by the Board of Trustees and (b) by the vote, cast in person at a meeting called for the purpose, of a majority of the Independent Trustees. The Interim Advisory Agreement for the FFB Fund contains an identical provision. Termination; Assignment. The Interim Advisory Agreement provides that it may be terminated without penalty by vote of a majority of the outstanding voting securities of the FFB Fund (as defined in the 1940 Act) or by a vote of a majority of The FFB Lexicon Fund's entire Board of Trustees on 60 days' written notice to CMG or by CMG on 60 days' written notice to The FFB Funds Trust Lexicon Fund. Also, the Interim Advisory Agreement will automatically terminate in the event of its assignment (as defined in the 1940 Act). The Existing Advisory Agreement for the FFB Fund contains identical provisions as to termination and assignment. INFORMATION ABOUT THE FFB FUND'S CURRENT AND PROPOSED INTERIM INVESTMENT ADVISERS First Fidelity. First Fidelity currently serves as the investment adviser for the FFB Fund. First Fidelity is a national banking association which provides commercial banking and trust business services throughout New Jersey and in Pennsylvania, Maryland and New York. It is a wholly-owned subsidiary of First Fidelity Incorporated, originally established in 1812, which, as a result of a reorganization with Fidelcor, Inc., a Pennsylvania bank holding company, is now a wholly-owned subsidiary of FFB. FFB, a New Jersey corporation, provides financial and related services through its subsidiary organizations. The investment advisory services of First Fidelity are provided through the Asset Management Group of the Trust Division which, as of June 30, 1995, had approximately $15 billion of client assets under management. First Fidelity has provided investment advisory services to investment companies since 1986 and currently acts as investment adviser to the First Fidelity family of mutual funds. -32- For the fiscal year ended August 31, 1995, First Fidelity received an aggregate of $ $383,350 in management fees which is equal to an annual fee of $0. % 0.57% of the FFB Fund's average daily net assets. Absent voluntary waivers, First Fidelity, for such period, would have received $ $506,141 in management fees (0. %(0.75% of the FFB Fund's average daily net assets). First Fidelity also acts as custodian for the FFB Fund for a fee included in the management fee. First Fidelity will continue to act as the FFB Fund's custodian during the term of the Interim Advisory Agreement. The table below shows: (a) total brokerage commissions paid during the fiscal year ended August 31, 1995; (b) the amount of brokerage commissions, if any, paid to SEI ESI Securities Company ("ESI"), which is an "Affiliated Broker" of the FFB Fund as such term is defined in the 1940 Act, (by virtue of its being an affiliate of SEI Financial and serving as the FFB Fund's administrator) First Fidelity) during that fiscal year; (c) the percentage that those payments to SEI ESI represent of aggregate brokerage commissions paid; and (d) the percentage of the aggregate dollar amount of transactions involving the payment of commissions effected through SEI ESI. Percentage Percentage Commissions Paid To of Aggregate of Dollar Total SEI ESI Commissions Amount $151,302 $ 0 --- --- CMG. For information about CMG, FUNB, Evergreen Asset and First Union, see "Summary-Investment Advisers, Sub-Adviser and Administrators." The name, address and principal occupation of the principal executive officers and directors of FUNB are set forth in Appendix A to this Prospectus/Proxy Statement. During the term of the Interim Advisory Agreement, CMG will receive compensation for managing the FFB Fund at the same effective annual rate ( %)(0.57%) as received by First Fidelity, pursuant to the Existing Advisory Agreement (net of any waivers). CMG is the investment adviser to the Evergreen Fund which, if approved by shareholders of the FFB Fund, will acquire substantially all of the assets of the FFB Fund. CMG receives an annual management fee equal to 0.50% of the Evergreen Fund's average daily net assets. For the fiscal year ended December 31, 1994, CMG received $3,850,673 in management fees. See "Summary-Investment Advisers, Sub-Adviser and Administrators." The Board of Trustees considered the Interim Advisory Agreement as part of its overall approval of the Plan. The Board of Trustees considered, among other things, the factors set forth above in "Information about the Reorganization - Reasons for the Reorganization." -33- The Board of Trustees also considered the fact that there were no material differences between the terms of the Interim Advisory Agreement and the terms of the Existing Advisory Agreement. ADDITIONAL INFORMATION Evergreen Fund. Information concerning the operation and management of the Evergreen Fund is incorporated herein by reference from the Prospectus dated July 7, 1995, a copy of which is enclosed, and Statement of Additional Information dated July 7, 1995. A copy of such Statement of Additional Information is available upon request and without charge by writing to the Evergreen Fund, at the address listed on the cover page of this Prospectus/Proxy Statement or by calling toll- free 1-800-807-2940. FFB Fund. Information about the FFB Fund is included in its current Prospectus dated December 30, 1994 and in the Statement of Additional Information of the same date that have been filed with the SEC, all of which are incorporated herein by reference. A copy Copies of the Prospectus and Statement of Additional Information and the Fund's Report dated August 31, 1994 and Semi-Annual Report dated February 28, 1995 are available upon request and without charge by writing to the FFB Fund at 680 East Swedesford Road, Wayne, Pennsylvania 19087 or by calling toll-free 1-800-833-8974. Evergreen Investment Trust and The FFB Lexicon Fund are each subject to the informational requirements of the Securities Exchange Act of 1934 and the 1940 Act, and in accordance therewith file reports and other information, including proxy material, and charter documents, with the SEC. These items can be inspected and copies obtained at the Public Reference Facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional Offices located at Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois 60661-2511 and Seven World Trade Center, Suite 1300, New York, New York 10048. VOTING INFORMATION CONCERNING THE MEETING This Prospectus/Proxy Statement is furnished in connection with a solicitation of proxies by the Board of Trustees of The FFB Lexicon Fund to be used at the Special Meeting of Shareholders to be held at 10: 2:00 a.m. p.m. November 13 21, 1995, at the offices of the FFB Fund, 680 East Swedesford Road, Wayne, Pennsylvania 19087 First Fidelity Bank, N.A., 123 South Broad Street, 5th Floor, Philadelphia, Pennsylvania 19109 and at any adjournments thereof. This Prospectus/Proxy Statement, along with a Notice of the Meeting and a proxy card, is are first being mailed to shareholders on or about September 28 October 2, 1995. Only shareholders of record as of the close of business on the Record Date will be entitled to notice of, and to vote at, the Meeting or any adjournment thereof. The holders of a majority of the shares outstanding at the close of business on the Record Date present in person or represented by proxy will constitute a quorum for the Meeting. If the -34- enclosed form of proxy is properly executed and returned in time to be voted at the Meeting, the proxies named therein will vote the shares represented by the proxy in accordance with the instructions marked thereon. Unmarked proxies will be voted FOR the proposed Reorganization Plan, FOR the Interim Advisory Agreement and FOR any other matters deemed appropriate. Proxies that reflect abstentions and "broker non-votes" (i.e., shares held by brokers or nominees as to which (i) instructions have not been received from the beneficial owners or the persons entitled to vote or (ii) the broker or nominee does not have discretionary voting power on a particular matter) will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum, but will have the effect of being counted as votes against the Plan and the Interim Advisory Agreement. A proxy may be revoked at any time on or before the Meeting by written notice to the Secretary of The FFB Lexicon Fund, 680 East Swedesford Road, Wayne, Pennsylvania 19087. Unless revoked, all valid proxies will be voted in accordance with the specifications thereon or, in the absence of such specifications, FOR approval of the Plan and the Reorganization contemplated thereby and FOR approval of the Interim Advisory Agreement. Approval of the Plan will require the affirmative vote of more than 50% of the outstanding voting securities, with all classes voting together as one class. Approval of the Interim Advisory Agreement will require the affirmative vote of (i) 67% or more of the outstanding voting securities if holders of more than 50% of the outstanding voting securities are present, in person or by proxy, at the Meeting, or (ii) more than 50% of the outstanding voting securities, whichever is less, with all classes voting together as one class. Each full share outstanding is entitled to one vote and each fractional share outstanding is entitled to a proportionate share of one vote. Proxy solicitations will be made primarily by mail, but proxy solicitations may also be made by telephone, telegraph or personal solicitations conducted by officers and employees of FUNB or First Fidelity, their affiliates or other representatives of The FFB Lexicon Fund (who will not be paid for their solicitation activities). Shareholder Communications Corp. ("SCC") has been engaged by First Fidelity to assist in soliciting proxies, and may contact certain shareholders of the FFB Fund over the telephone. Shareholders that are contacted by SCC may be asked to cast their vote by telephonic proxy. Such proxies will be recorded in accordance with the procedures set forth below. First Fidelity believes these procedures are reasonably designed to ensure that the identity of the shareholder casting the vote is accurately determined and that the voting instructions of the shareholder are accurately reflected. SCC has received an opinion of Dechert Price & Rhoads that address addresses the validity, under the applicable law of the Commonwealth of Massachusetts, of a proxy given orally. The opinion given by Dechert Price & Rhoads concludes that a Massachusetts court would find that there is no Massachusetts law or Massachusetts public policy against the acceptance of proxies signed by an orally-authorized agent. -35- In all cases where a telephonic proxy is solicited, the SCC representative will ask you for your full name, address, social security or employer identification number, title (if you are authorized to act on behalf of an entity, such as a corporation), and number of shares owned. If the information solicited agrees with the information provided to SCC by First Fidelity, then the SCC representative will explain the process, read the proposals listed on the proxy card and ask for your instructions on each proposal. The SCC representative, although he or she will answer questions about the process, will not recommend to the shareholder how he or she should vote, other than to read any recommendations set forth in the proxy statement this Prospectus/Proxy Statement. Within 72 hours, SCC will send you a letter or mailgram to confirm your vote and asking you to call SCC immediately if your instructions are not correctly reflected in the confirmation. If you wish to participate in the Meeting, but do not wish to give your proxy by telephone, you may still submit the proxy card included with this Prospectus/Proxy Statement or attend in person. Any proxy given by you, whether in writing or by telephone, is revocable. In the event that sufficient votes to approve the Reorganization Plan are not received by November 13 21, 1995, the persons named as proxies may propose one or more adjournments of the Meeting to permit further solicitation of proxies. In determining whether to adjourn the Meeting, the following factors may be considered: the percentage of votes actually cast, the percentage of negative votes actually cast, the nature of any further solicitation and the information to be provided to shareholders with respect to the reasons for the solicitation. Any such adjournment will require an affirmative vote by the holders of a majority of the shares present in person or by proxy and entitled to vote at the Meeting. The persons named as proxies will vote upon such adjournment after consideration of all circumstances which may bear upon a decision to adjourn the Meeting. A shareholder who objects to the proposed Reorganization Plan will not be entitled under either Massachusetts law or the Declaration of Trust of The FFB Lexicon Fund to demand payment for, or an appraisal of, his or her shares. However, shareholders should be aware that the Reorganization as proposed is not expected to result in recognition of gain or loss to shareholders for federal income tax purposes and that, if the Reorganization is consummated, shareholders will be free to redeem the shares of the Evergreen Fund which they receive in the transaction at their then-current net asset value. Shares of the FFB Fund may be redeemed at any time prior to the consummation of the Reorganization. FFB Fund shareholders may wish to consult their tax advisers as to any differing consequences of redeeming FFB Fund shares prior to the Reorganization or exchanging such shares in the Reorganization. The FFB Lexicon Fund does not hold annual shareholder meetings. If the Reorganization Plan is not approved, shareholders wishing to submit proposals for consideration for inclusion in a proxy statement for a -36- subsequent shareholder meeting should send their written proposals to the Secretary of The FFB Lexicon Fund at the address set forth on the cover of this Prospectus/Proxy Statement, 680 East Swedesford Road, Wayne, Pennsylvania 19087, such that they will be received by The FFB Lexicon Fund in a reasonable period of time prior to any such meeting. The votes of the shareholders of the Evergreen Fund are not being solicited by this Prospectus/Proxy Statement and are not required to carry out the Reorganization. NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES. Please advise the FFB Fund whether other persons are beneficial owners of shares for which proxies are being solicited and, if so, the number of copies of this Prospectus/Proxy Statement needed to supply copies to the beneficial owners of the respective shares. FINANCIAL STATEMENTS AND EXPERTS The audited financial statements of the Evergreen Fund as of December 31, 1994 and the financial highlights for the period indicated therein have been incorporated by reference into this Prospectus/Proxy Statement in reliance on the report of KPMG Peat Marwick LLP, independent accountants for the Evergreen Fund, given on the authority of said firm as experts in accounting and auditing. The financial statements of the FFB Fund as of August 31, 1994 and the financial highlights have been incorporated by reference into this Prospectus/Proxy Statement and have been audited by Arthur Andersen LLP, independent public accountants as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. LEGAL MATTERS Certain legal matters concerning the issuance of shares of the Evergreen Fund will be passed upon by Sullivan & Worcester, Washington, D.C. OTHER BUSINESS The Trustees of The FFB Lexicon Fund do not intend to present any other business at the Meeting. If, however, any other matters are properly brought before the Meeting, the persons named in the accompanying form of proxy will vote thereon in accordance with their judgment. THE BOARD OF TRUSTEES OF THE FFB LEXICON FUND, INCLUDING THE INDEPENDENT TRUSTEES, RECOMMENDS APPROVAL OF THE PLAN AND THE INTERIM ADVISORY AGREEMENT, AND ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN FAVOR OF APPROVAL OF THE PLAN AND THE INTERIM ADVISORY AGREEMENT. -37- September 28 October 2, 1995 -38- 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: Daniel T. Blue, Jr. Partner of Thigpen, Thigpen, Blue, Stephens & Blue, Stephens & Fellows Fellows Legislative Bldg., Room 2304 Raleigh, NC 27601-1096 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 James F. Goodmon President & Chief Capitol Broadcasting Company, Executive Officer of Inc. Capitol Broadcasting 2619 Eastern Blvd. Company, Inc. Raleigh, NC 27605 Charles L. Grace President of Cummins Cummins Atlantic, Inc. Atlantic, Inc. P.O. Box 240729 Charlotte, NC 28224-0729 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 Principal Occupation Name and Address During Past 5 Years J. William Disher Chairman & CEO of Lance Lance Incorporated Incorporated P.O. Box 32368 Charlotte, NC 28232 Malcolm E. Everett, III Chairman & CEO 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 Mackey J. McDonald President & CEO of VF VF Corporation Corporation P.O. Box 1022 Reading, PA 19603 Earl N. Phillips, Jr. President & CEO of First Factors Corporation First Factors P.O. Box 2730 Corporation 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 Chairman of Shinn Shinn Enterprises, Inc. Enterprises, Inc. One Hive Drive Charlotte, NC 28217 -2- Principal Occupation Name and Address During Past 5 Years John P. Rostan, III General Partner of Heritage Investments Heritage Investments P.O. Box 220 Valdese, NC 28690 Charles M. Shelton, Sr. General Partner of The The Shelton Companies, Inc. Shelton Companies, Inc. 3600 One First Union Center Charlotte, NC 28202 Harley F. Shuford, Jr. President & CEO of Century Furniture Industries Century Furniture P.O. Box 608 Industries Hickory, NC 28603 Principal Executive Officers: Austin A. Adams Executive Vice President Robert T. Atwood Executive Vice President and Chief Financial Officer Marion A. Cowell, Jr. Executive Vice President and General Counsel Edward E. Crutchfield, Jr. Chairman, CEO of First Union Corporation, Vice Chairman of FUNB Malcolm E. Everett, III President John R. Georgius President of First Union Corporation James Hatch Senior Vice President and Corporate Controller Richard C. Highfield Senior Vice President of First Union Corporation -3- Principal Occupation Name and Address During Past 5 Years Don R. Johnson Executive Vice President Ben C. Maffitt Executive Vice President Barbara K. Massa Senior Vice President Donald A. McMullen Executive Vice President H. Burt Melton Executive Vice President Malcolm T. Murray, Jr. Executive Vice President Alvin T. Sale Executive Vice President Ken Stancliff Senior Vice President and Corporate Treasurer Richard K. Wagoner Executive Vice President and General Fund Officer B. J. Walker Vice Chairman Fred Winkler Senior Vice President James B. Wolf Senior Vice President of First Union Corporation 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- VOTE THIS PROXY CARD TODAY YOUR PROMPT RESPONSE WILL SAVE THE EXPENSE OF ADDITIONAL MAILINGS (Please Detach at Perforation Before Mailing) ................................................................ THE FFB LEXICON FUND - SELECT VALUE FUND SPECIAL MEETING OF SHAREHOLDERS -- NOVEMBER 13 21, 1995 The undersigned hereby appoints, and Joseph Ready, Ben L. Jones and Mark Sipe and each of them, attorneys and proxies for the undersigned, with full powers of substitution and revocation, to represent the undersigned and to vote on behalf of the undersigned all shares of the Select Value Fund (the "Fund"), which the undersigned is entitled to vote at a Meeting of Shareholders of the Fund to be held at 680 East Swedesford Road, Wayne, 123 South Broad Street, 5th Floor, Philadelphia, Pennsylvania 19087 19109 on November 13 21, 1995, at 10: 2:00 a.m p.m. and any adjournments thereof (the "Meeting"). The undersigned hereby acknowledges receipt of the Notice of Meeting and Prospectus/Proxy Statement, and hereby instructs said attorneys and proxies to vote said shares as indicated hereon. In their discretion, the proxies are authorized to vote upon such other matters as may properly come before the Meeting. A majority of the proxies present and acting at the Meeting in person or by substitute (or, if only one shall be so present, then that one) shall have and may exercise all of the powers and authority of said proxies hereunder. The undersigned hereby revokes any proxy previously given. NOTE: Please sign exactly as your name appears on this Proxy. If joint owners, EITHER may sign this Proxy. When signing as attorney, executor, administrator, trustee, guardian, or corporate officer, please give your full title. DATE:______________, 1995 _____________________________ ______________________________ Signature(s) ______________________________ Title(s), if applicable PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. PLEASE INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSALS. IN THE ABSENCE OF ANY SPECIFICATION, THIS PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS. 1. To approve the proposed Agreement and Plan of Reorganization with the Evergreen Value Fund. [ ] YES [ ] NO [ ] ABSTAIN 2. To approve the proposed Interim Investment Advisory Agreement with the Capital Management Group of First Union National Bank of North Carolina. [ ] YES [ ] NO [ ] ABSTAIN 3. To consider and vote upon such other matters as In their discretion, the Proxies, and each of them, are authorized to vote upon any other business that may properly come before the Meeting, or any adjournment(s) thereof, including any adjournment(s) necessary to obtain the requisite quorums and for approvals. said meeting or any adjournments thereof. [ ] YES [ ] NO [ ] ABSTAIN These items are discussed in greater detail in the attached Prospectus/Proxy Statement. The Board of Trustees of The FFB Lexicon Fund has fixed the close of business on September 8, 1995, as the record date for the determination of shareholders entitled to notice of and to vote at the meeting Meeting. SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE SPECIAL MEETING ARE REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. INSTRUCTIONS FOR THE PROPER EXECUTION OF PROXIES ARE SET FORTH ON THE INSIDE COVER OF THE PROSPECTUS/PROXY STATEMENT. Richard W. Grant Secretary September 28, 1995 In their discretion, the Proxies, and each of them, are authorized to vote upon any other business that may properly come before the meeting, or any adjournment(s) thereof, including any adjournment(s) necessary to obtain the requisite quorums and for approvals. -2- EX-1 2 Exhibit A AGREEMENT AND PLAN OF REORGANIZATION THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of this 19th day of September, 1995, by and between Evergreen Investment Trust, a Massachusetts business trust (the "Evergreen Trust"), with its principal place of business at 2500 Westchester Avenue, Purchase, New York 10577, with respect to its Evergreen Value Fund series (the "Acquiring Fund"), and The FFB Lexicon Fund (the "FFB Trust"), a Massachusetts business trust, with respect to its Select Value Fund series, with its principal place of business at 2 Oliver Street, Boston, Massachusetts 02109 (the "Selling Fund"). This Agreement is intended to be and is adopted as a plan of reorganization and liquidation within the meaning of Section 368 (a)(1)(C) of the United States Internal Revenue Code of 1986 (the "Code"). The reorganization (the "Reorganization") will consist of the transfer of substantially all of the assets of the Selling Fund in exchange solely for Class Y shares of beneficial interest, without par value, of the Acquiring Fund (the "Acquiring Fund Shares") and the assumption by the Acquiring Fund of certain stated liabilities of the Selling Fund and the distribution, after the Closing Date hereinafter referred to, of the Acquiring Fund Shares to the shareholders of the Selling Fund in liquidation of the Selling Fund as provided herein, all upon the terms and conditions hereinafter set forth in this Agreement. WHEREAS, the Selling Fund and the Acquiring Fund are separate investment series of open-end, registered investment companies of the management type and the Selling Fund owns securities which generally are assets of the character in which the Acquiring Fund is permitted to invest; WHEREAS, both Funds are authorized to issue their shares of beneficial interest; WHEREAS, the Trustees of the Evergreen Trust have determined that the exchange of substantially all of the assets of the Selling Fund for Acquiring Fund Shares and the assumption of certain stated liabilities by the Acquiring Fund on the terms and conditions hereinafter set forth is are in the best interests of the Acquiring Fund shareholders and that the interests of the existing shareholders of the Acquiring Fund will not be diluted as a result of the transactions contemplated herein; WHEREAS, the Trustees of the FFB Trust have determined that the Selling Fund should exchange substantially all of its assets and certain of its liabilities for Acquiring Fund Shares and that the interests of the existing shareholders of the Selling Fund will not be diluted as a result of the transactions contemplated herein; NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows: ARTICLE I TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR THE ACQUIRING FUND SHARES AND ASSUMPTION OF SELLING FUND LIABILITIES AND LIQUIDATION OF THE SELLING FUND 1.1 The Exchange. Subject to the terms and conditions herein set forth and on the basis of the representations and warranties contained herein, the Selling Fund agrees to transfer substantially all of the Selling Fund's assets as set forth in paragraph 1.2 to the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor (i) to deliver to the Selling Fund the number of Acquiring Fund Shares, including fractional Acquiring Fund Shares, determined by multiplying the shares outstanding of each class of the Selling Fund by the ratio computed by dividing the net asset value per share of each such class of the Selling Fund by the net asset value per share of the Acquiring Fund Shares computed in the manner and as of the time and date set forth in paragraph 2.2 and (ii) to assume certain liabilities of the Selling Fund, as set forth in paragraph 1.3. Such transactions shall take place at the closing provided for in paragraph 3.1 (the "Closing Date"). 1.2 Assets to be Acquired. The assets of the Selling Fund to be acquired by the Acquiring Fund shall consist of all property, including without limitation all cash, securities, commodities and futures interests and dividends or interest receivable, which are owned by the Selling Fund and any deferred or prepaid expenses shown as an asset on the books of the Selling Fund on the Closing Date. The Selling Fund has provided the Acquiring Fund with its most recent audited financial statements which contain a list of all of Selling Fund's assets as of the date thereof. The Selling Fund hereby represents that as of the date of the execution of this Agreement there have been no changes in its financial position as reflected in said financial statements other than those occurring in the ordinary course of its business in connection with the purchase and sale of securities and the payment of its normal operating expenses. The Selling Fund reserves the right to sell any of such securities but will not, without the prior written approval of the Acquiring Fund, acquire any additional securities other than securities of the type in which the Acquiring Fund is permitted to invest. The Acquiring Fund will, within a reasonable time prior to the Closing Date, furnish the Selling Fund with a statement of the Acquiring Fund's investment objectives, policies and restrictions and a list of the securities, if any, on the Selling Fund's list referred to in the second sentence of this paragraph which do not conform to the Acquiring Fund's investment objectives, policies, and restrictions. In the event that the Selling Fund holds any investments which the Acquiring Fund may not hold, the Selling Fund will dispose of such securities prior to the Closing Date. In addition, if it is determined that the Selling Fund and the Acquiring Fund portfolios, when aggregated, would contain investments exceeding certain percentage limitations imposed upon the Acquiring Fund with respect to such investments, the Selling Fund if requested by the Acquiring Fund will dispose of a sufficient amount of such investments as may be necessary to avoid violating such limitations as of the Closing Date. 1.3 Liabilities to be Assumed. The Selling Fund will endeavor to discharge all of its known liabilities and obligations prior to the Closing Date. The Acquiring Fund shall assume only those liabilities, expenses, costs, charges and reserves reflected on a Statement of Assets and Liabilities of the Selling Fund prepared by SEI Financial Management Corporation, the administrator of the Selling Fund, as of the Valuation Date (as defined in paragraph 2.1), in accordance with generally accepted accounting principles consistently applied from the prior audited period. The Acquiring Fund shall assume only those liabilities of the Selling Fund reflected in such Statement of Assets and Liabilities and shall not assume any other liabilities, whether absolute or contingent, known or unknown, accrued or unaccrued, all of which shall remain the obligation of the Selling Fund. 1.4 Liquidation and Distribution. As soon after the Closing Date as is conveniently practicable (the "Liquidation Date"), (a) the Selling Fund will liquidate and distribute pro rata to the Selling Fund's shareholders of record, determined as of the close of business on the Closing Date (the "Selling Fund Shareholders"), the Acquiring Fund Shares received by the Selling Fund pursuant to paragraph 1.1. and (b) the Selling Fund will thereupon proceed to dissolve as set forth in paragraph 1.8 below. Such liquidation and distribution will be accomplished by the transfer of the Acquiring Fund Shares then credited to the account of the Selling Fund on the books of the Acquiring Fund, to open accounts on the share records of the Acquiring Fund in the names of the Selling Fund Shareholders and representing the respective pro rata number of the Acquiring Fund Shares due such shareholders. All issued and outstanding shares of the Selling Fund will simultaneously be canceled on the books of the Selling Fund. The Acquiring Fund shall not issue certificates representing the Acquiring Fund Shares in connection with such exchange. 1.5 Ownership of Shares. Ownership of Acquiring Fund Shares will be shown on the books of the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be issued in the manner described in the combined Prospectus and Proxy Statement on Form N-14 to be distributed to shareholders of the Selling Fund as described in Section 5 paragraph 5.7. 1.6 Transfer Taxes. Any transfer taxes payable upon issuance of the Acquiring Fund Shares in a name other than the registered holder of the Selling Fund shares on the books of the Selling Fund as of that time shall, as a condition of such issuance and transfer, be paid by the person to whom such Acquiring Fund Shares are to be issued and transferred. 1.7 Reporting Responsibility. Any reporting responsibility of the Selling Fund is and shall remain the responsibility of the Selling Fund up to and including the Closing Date and such later date on which the Selling Fund is terminated. 1.8 Termination. The Selling Fund shall be terminated promptly following the Closing Date and the making of all distributions pursuant to paragraph 1.4. ARTICLE II VALUATION 2.1 Valuation of Assets. The value of the Selling Fund's assets to be acquired by the Acquiring Fund hereunder shall be the value of such assets computed as of the close of business on the New York Stock Exchange on the Closing Date (such time and date being hereinafter called the "Valuation Date"), using the valuation procedures set forth in the 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 per share of the Acquiring Fund Shares shall be the net asset value per share computed as of the close of business on the New York Stock Exchange on the Valuation Date, using the valuation procedures set forth in the 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 multiplying the shares outstanding of each class of the Selling Fund by the ratio computed by dividing the net asset value per share of the Selling Fund attributable to each of its classes by the net asset value per share of the respective classes of the Acquiring Fund determined in accordance with paragraph 2.2. 2.4 Determination of Value. All computations of value shall be made by State Street Bank and Trust Company in accordance with its regular practice in pricing the shares and assets of the Acquiring Fund. ARTICLE III CLOSING AND CLOSING DATE 3.1 Closing Date. The Closing (the "Closing") shall take place on January 12 19, 1996 or such other date as the parties may agree to in writing (the "Closing Date"). All acts taking place at the Closing shall be deemed to take place simultaneously as of the close of business on the Closing Date unless otherwise provided. The Closing shall be held as of 9:00 o'clock a.m. at the offices of Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York 10577, or at such other time and/or place as the parties may agree. 3.2 Custodian's Certificate. First Fidelity Bank, N.A., as custodian for the Selling Fund (the "Custodian"), shall deliver at the Closing a certificate of an authorized officer stating that: (a) the Selling Fund's portfolio securities, cash, and any other assets shall have been delivered in proper form to the Acquiring Fund on the Closing Date and (b) all necessary taxes including all applicable Federal and state stock transfer stamps, if any, shall have been paid, or provision for payment shall have been made, in conjunction with the delivery of portfolio securities by the Selling Fund. 3.3 Effect of Suspension in Trading. In the event that on the Valuation Date (a) the New York Stock Exchange or another primary trading market for portfolio securities of the Acquiring Fund or the Selling Fund shall be closed to trading or trading thereon shall be restricted, or (b) trading or the reporting of trading on said Exchange or elsewhere shall be disrupted so that accurate appraisal of the value of the net assets of the Acquiring Fund or the Selling Fund is impracticable, the Closing Date shall be postponed until the first business day after the day when trading shall have been fully resumed and reporting shall have been restored. 3.4 Transfer Agent's Certificate. Supervised Service Company and SEI Financial Management Corporation, as transfer agents for the Selling Fund shall each deliver at the Closing a certificate of an authorized officer stating that its records contain the names and addresses of the Selling Fund Shareholders and the number and percentage ownership of outstanding shares owned by each such shareholder immediately prior to the Closing. The Acquiring Fund shall issue and deliver or cause its transfer agent to issue and deliver a confirmation evidencing the Acquiring Fund Shares to be credited on the Closing Date to the Secretary of the FFB Trust , or provide evidence satisfactory to the Selling Fund that such Acquiring Fund Shares have been credited to the Selling Fund's account on the books of the Acquiring Fund. At the Closing each party shall deliver to the other such bills of sale, checks, assignments, share certificates, if any, receipts and other documents as such other party or its counsel may reasonably request. ARTICLE IV REPRESENTATIONS AND WARRANTIES 4.1 Representations of the Selling Fund. The Selling Fund represents and warrants to the Acquiring Fund as follows: (a) The Selling Fund is a separate investment series of a Massachusetts business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts; (b) The Selling Fund is a separate investment series of a registered investment company classified as a management company of the open-end type and its registration with the Securities and Exchange Commission (the "Commission") as an investment company under the Investment Company Act of 1940, as amended (the "1940 Act") is in full force and effect; (c) The current prospectus and statement of additional information of the Selling Fund conform in all material respects to the applicable requirements of the Securities Act of 1933, as amended (the "1933 Act") and the 1940 Act and the rules and regulations of the Commission thereunder and do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading; (d) The Selling Fund is not, and the execution, delivery and performance of this Agreement (subject to shareholder approval) will not, result in a violation of any provision of the FFB Trust's Declaration of Trust or By-Laws or of any agreement, indenture, instrument, contract, lease or other undertaking to which the Selling Fund is a party or by which it is bound; (e) The Selling Fund has no material contracts or other commitments (other than this Agreement) which will be terminated with liability to it prior to the Closing Date; (f) Except as otherwise disclosed in writing to and accepted by the Acquiring Fund, no litigation, administrative proceeding or investigation of or before any court or governmental body is presently pending or to its knowledge threatened against the Selling Fund or any of its properties or assets which, if adversely determined, would materially and adversely affect its financial condition, the conduct of its business or the ability of the Selling Fund to carry out the transactions contemplated by this Agreement. The Selling Fund knows of no facts which might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects its business or its ability to consummate the transactions herein contemplated; (g) The financial statements of the Selling Fund at August 31, 1994 have been audited by Arthur Andersen LLP, certified public accountants, and are in accordance with generally accepted accounting principles consistently applied, and such statements (copies of which have been furnished to the Acquiring Fund) fairly reflect the financial condition of the Selling Fund as of such date, and there are no known contingent liabilities of the Selling Fund as of such date not disclosed therein; (h) Since August 31, 1994 there has not been any material adverse change in the Selling Fund's financial condition, assets, liabilities or business other than changes occurring in the ordinary course of business, or any incurrence by the Selling Fund of indebtedness maturing more than one year from the date such indebtedness was incurred, except as otherwise disclosed to and accepted by the Acquiring Fund. For the purposes of this subparagraph (h), a decline in the net asset value of the Selling Fund shall not constitute a material adverse change; (i) At the Closing Date, all Federal and other tax returns and reports of the Selling Fund required by law to have been filed by such dates shall have been filed, and all Federal and other taxes shown due on said returns and reports shall have been paid, or provision shall have been made for the payment thereof and to the best of the Selling Fund's knowledge no such return is currently under audit and no assessment has been asserted with respect to such returns; (j) For each fiscal year of its operation, the Selling Fund has met the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company and has distributed in each such year all net investment income and realized capital gains; (k) All issued and outstanding shares of the Selling Fund are, and at the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable by the Selling Fund (except that, under Massachusetts law, Selling Fund Shareholders could, under certain circumstances be held personally liable for obligations of the Selling Fund). All of the issued and outstanding shares of the Selling Fund will, at the time of the Closing Date, be held by the persons and in the amounts set forth in the records of the transfer agent as provided in paragraph 3.4. The Selling Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any of the Selling Fund shares, nor is there outstanding any security convertible into any of the Selling Fund shares; (l) At the Closing Date, the Selling Fund will have good and marketable title to the Selling Fund's assets to be transferred to the Acquiring Fund pursuant to paragraph 1.2 and full right, power, and authority to sell, assign, transfer and deliver such assets hereunder, and upon delivery and payment for such assets, the Acquiring Fund will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, including such restrictions as might arise under the 1933 Act, other than as disclosed to the Acquiring Fund and accepted by the Acquiring Fund; (m) The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Selling Fund and, subject to approval by the Selling Fund Shareholders, this Agreement constitutes a valid and binding obligation of the Selling Fund, enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights and to general equity principles; (n) The information to be furnished by the Selling Fund for use in no-action letters, applications for orders, registration statements, proxy materials and other documents which may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply in all material respects with Federal securities and other laws and regulations thereunder applicable thereto; (o) The proxy statement of the Selling Fund to be included in the Registration Statement referred to in paragraph 5.7 (other than information therein that relates to the Acquiring Fund) will, on the effective date of the Registration Statement and on the Closing Date, not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading. 4.2 Representations of the Acquiring Fund. The Acquiring Fund represents and warrants to the Selling Fund as follows: (a) The Acquiring Fund is a 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; (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 of the Acquiring Fund as of such date not disclosed therein; (g) Since December 31, 1994 there has not been any material adverse change in the Acquiring Fund's financial condition, assets, liabilities or business other than changes occurring in the ordinary course of business, or any incurrence by the Acquiring Fund of indebtedness maturing more than one year from the date such indebtedness was incurred, except as otherwise disclosed to and accepted by the Acquiring Fund. For the purposes of this subparagraph (g), a decline in the net asset value of the Acquiring Fund shall not constitute a material adverse change; (h) At the Closing Date, all Federal and other tax returns and reports of the Acquiring Fund required by law then to be filed by such dates shall have been filed, and all Federal and other taxes shown due on said returns and reports shall have been paid or provision shall have been made for the payment thereof and to the best of the Acquiring Fund's knowledge, no such return is currently under audit and no assessment has been asserted with respect to such returns; (i) For each fiscal year of its operation the Acquiring Fund has met the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company and has distributed in each such year all net investment income and realized capital gains; (j) All issued and outstanding Acquiring Fund Shares are, and at the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable (except that, under Massachusetts law, shareholders of the Acquiring Fund could, under certain circumstances, be held personally liable for obligations of the Acquiring Fund). The Acquiring Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any Acquiring Fund Shares, nor is there outstanding any security convertible into any Acquiring Fund Shares; (k) The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Acquiring Fund, and this Agreement constitutes a valid and binding obligation of the Acquiring Fund enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights and to general equity principles; (l) The Acquiring Fund Shares to be issued and delivered to the Selling Fund, for the account of the Selling Fund Shareholders, pursuant to the terms of this Agreement will at the Closing Date have been duly authorized and, when so issued and delivered, will be duly and validly issued Acquiring Fund Shares, and will be fully paid and non-assessable (except that, under Massachusetts law, shareholders of the Acquiring Fund could, under certain circumstances, be held personally liable for obligations of the Acquiring Fund); (m) The information to be furnished by the Acquiring Fund for use in no- action letters, applications for orders, registration statements, proxy materials and other documents which may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply in all material respects with Federal securities and other laws and regulations applicable thereto; (n) The Prospectus and Proxy Statement to be included in the Registration Statement (only insofar as it relates to the Acquiring Fund) will, on the effective date of the Registration Statement and on the Closing Date, not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading; and (o) The Acquiring Fund agrees to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act and such of the state Blue Sky or securities laws as it may deem appropriate in order to continue its operations after the Closing Date. ARTICLE V COVENANTS OF THE ACQUIRING FUND AND THE SELLING FUND 5. 1 Operation in Ordinary Course. The Acquiring Fund and the Selling Fund each will operate its business in the ordinary course between the date hereof and the Closing Date, it being understood that such ordinary course of business will include customary dividends and distributions. 5.2 Approval of Shareholders. The FFB Trust will call a meeting of the Selling Fund Shareholders to consider and act upon this Agreement and to take all other action necessary to obtain approval of the transactions contemplated herein. 5.3 Investment Representation. The Selling Fund covenants that the Acquiring Fund Shares to be issued hereunder are not being acquired for the purpose of making any distribution thereof other than in accordance with the terms of this Agreement. 5.4 Additional Information. The Selling Fund will assist the Acquiring Fund in obtaining such information as the Acquiring Fund reasonably requests concerning the beneficial ownership of the Selling Fund shares. 5.5 Further Action. Subject to the provisions of this Agreement, the Acquiring Fund and the Selling Fund will each take, or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, including any actions required to be taken after the Closing Date. 5.6 Statement of Earnings and Profits. As promptly as practicable, but in any case within sixty days after the Closing Date, the Selling Fund shall furnish the Acquiring Fund, in such form as is reasonably satisfactory to the Acquiring Fund, a statement of the earnings and profits of the Selling Fund for Federal income tax purposes which will be carried over by the Acquiring Fund as a result of Section 381 of the Code, and which will be certified by the FFB Trust's President, its Treasurer and its independent auditors. 5.7 Preparation of Form N-14 Registration Statement. The Selling Fund will provide the Acquiring Fund with information reasonably necessary for the preparation of a prospectus which will include the proxy statement, referred to in paragraph 4.1(o) (the "Prospectus and Proxy Statement"), all to be included in a Registration Statement on Form N-14 of the Acquiring Fund (the "Registration Statement"), in compliance with the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act") and the 1940 Act in connection with the meeting of the Selling Fund Shareholders to consider approval of this Agreement and the transactions contemplated herein. ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING FUND The obligations of the Selling Fund to consummate the transactions provided for herein shall be subject, at its election, to the performance by the Acquiring Fund of all the obligations to be performed by it hereunder on or before the Closing Date, and, in addition thereto, the following further conditions: 6.1 All representations, covenants and warranties of the Acquiring Fund contained in this Agreement shall be true and correct as of the date hereof and as of the Closing Date with the same force and effect as if made on and as of the Closing Date, and the Acquiring Fund shall have delivered to the Selling Fund a certificate executed in its name by the 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 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 FFB Trust and the Selling Fund. Such opinion shall contain such other assumptions and limitations as shall be in the opinion of Sullivan & Worcester appropriate to render the opinions expressed therein. In this paragraph 6.2, references to Prospectus and Proxy Statement include and relate to only the text of such Prospectus and Proxy Statement and not to any exhibits or attachments thereto or to any documents incorporated by reference therein. 6.3 The merger between First Union Corporation and First Fidelity Bancorporation has been completed prior to the Closing Date. ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND The obligations of the Acquiring Fund to complete the transactions provided for herein shall be subject, at its election, to the performance by the Selling Fund of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following conditions: 7.1 All representations, covenants and warranties of the Selling Fund contained in this Agreement shall be true and correct as of the date hereof and as of the Closing Date with the same force and effect as if made on and as of the Closing Date, and the Selling Fund shall have delivered to the Acquiring Fund on the Closing Date a certificate executed in its name by the FFB Trust's President or Vice President and its Treasurer or Assistant Treasurer, in form and substance satisfactory to the Acquiring Fund and, dated as of the Closing Date, to such effect and as to such other matters as the Acquiring Fund shall reasonably request; 7.2 The Selling Fund shall have delivered to the Acquiring Fund a statement of the Selling Fund's assets and liabilities, together with a list of the Selling Fund's portfolio securities showing the tax costs of such securities by lot and the holding periods of such securities, as of the Closing Date, certified by the Treasurer of the FFB Trust; and 7.3 The Acquiring Fund shall have received on the Closing Date an opinion of Morgan, Lewis & Bockius counsel to the Selling Fund, in a form satisfactory to the Acquiring Fund covering the following points: That (a) the Selling Fund is a separate investment series of a Massachusetts business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts and has the power to own all of its properties and assets and to carry on its business as presently conducted; (b) this Agreement has been duly authorized, executed and delivered by the Selling Fund, and, assuming that the Prospectus and Proxy Statement, and Registration Statement comply with the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder and, assuming due authorization, execution and delivery of this Agreement by the Acquiring Fund, is a valid and binding obligation of the Selling Fund enforceable against the Selling Fund in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights generally and to general equity principles; (c) the execution and delivery of this Agreement did not, and the consummation of the transactions contemplated hereby will not, result in a violation of the FFB Trust's Declaration of Trust or By-laws, or any provision of any material agreement, indenture, instrument, contract, lease or other undertaking (in each case known to such counsel) to which the Selling Fund is a party or by which it or any of its properties may be bound or, to the knowledge of such counsel, result in the acceleration of any obligation or the imposition of any penalty, under any agreement, judgment, or decree to which the Selling Fund is a party or by which it is bound; (d) to the knowledge of such counsel, no consent, approval, authorization or order of any court or governmental authority of the United States or the Commonwealth of Massachusetts is required for the consummation by the Selling Fund of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act, and such as may be required under state securities laws; (e) only insofar as they relate to the Selling Fund, the descriptions in the Prospectus and Proxy Statement of statutes, legal and governmental proceedings and material contracts, if any, are accurate and fairly present the information required to be shown; (f) such counsel does not know of any legal or governmental proceedings, only insofar as they relate to the Selling Fund existing on or before the date of mailing of the Prospectus and Proxy Statement and the Closing Date, required to be described in the Prospectus and Proxy Statement or to be filed as an exhibit to the Registration Statement which are not described or filed as required; (g) the Selling Fund is a separate investment series of a Massachusetts business trust registered as an investment company under the 1940 Act and to such counsel's best knowledge, such registration with the Commission as an investment company under the 1940 Act is in full force and effect; (h) to the knowledge of such counsel, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened as to the Selling Fund or any of its respective properties or assets and the Selling Fund is neither a party to nor subject to the provisions of any order, decree or judgment of any court or governmental body, which materially and adversely affects its business other than as previously disclosed in the Prospectus and Proxy Statement; (i) assuming that a consideration therefor not less than the net asset value thereof has been paid, and assuming that such shares were issued in accordance with the terms of the Selling Fund's registration statement, or any amendment thereto, in effect at the time of such issuance, all issued and outstanding shares of the Selling Fund are legally issued and fully paid and non-assessable (except that, under Massachusetts law, Selling Fund Shareholders could, under certain circumstances be held personally liable for obligations of the Selling Fund). Such counsel shall also state that they have participated in conferences with officers and other representatives of the Selling Fund at which the contents of the Prospectus and Proxy Statement and related matters were discussed and, although they are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Prospectus and Proxy Statement (except to the extent indicated in paragraph (e) of their above opinion ), on the basis of the foregoing (relying as to materiality to a large extent upon the opinions of the FFB Trust's officers and other representatives of the Selling Fund), no facts have come to their attention that lead them to believe that the Prospectus and Proxy Statement as of its date, as of the date of the Selling Fund Shareholders' meeting, and as of the Closing Date, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein regarding the Selling Fund or necessary, in the light of the circumstances under which they were made, to make the statements therein regarding the Selling Fund not misleading. Such opinion may state that such counsel does not express any opinion or belief as to the financial statements or any financial or statistical data, or as to the information relating to the Acquiring Fund, contained in the Prospectus and Proxy Statement or Registration Statement, and that such opinion is solely for the benefit of the Evergreen Trust and the Acquiring Fund. Such opinion shall contain such other assumptions and limitations as shall be in the opinion of Morgan, Lewis & Bockius appropriate to render the opinions expressed therein and shall indicate, with respect to matters of Massachusetts law, that as Morgan, Lewis & Bockius are not admitted to the bar of Massachusetts, such opinions are based either upon the review of published statutes, case cases and rules and regulations of the Commonwealth of Massachusetts or upon an opinion of Massachusetts counsel. In this paragraph 7.3, references to Prospectus and Proxy Statement include and relate to only the text of such Prospectus and Proxy Statement and not to any exhibits or attachments thereto or to any documents incorporated by reference therein. 7.4 The merger between First Union Corporation and First Fidelity Bancorporation shall be completed prior to the Closing Date. ARTICLE VIII FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE SELLING FUND If any of the conditions set forth below do not exist on or before the Closing Date with respect to the Selling Fund or the Acquiring Fund, the other party to this Agreement shall, at its option, not be required to consummate the transactions contemplated by this Agreement: 8.1 This Agreement and the transactions contemplated herein shall have been approved by the requisite vote of the holders of the outstanding shares of the Selling Fund in accordance with the provisions of the FFB Trust's Declaration of Trust and By-Laws and certified copies of the resolutions evidencing such approval shall have been delivered to the Acquiring Fund. Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor the Selling Fund may waive the conditions set forth in this paragraph 8.1; 8.2 On the Closing Date, the Commission shall not have issued an unfavorable report under Section 25(b) of the 1940 Act, nor instituted any proceeding seeking to enjoin the consummation of the transactions contemplated by this Agreement under Section 25(c) of the 1940 Act and no action, suit or other proceeding shall be threatened or pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transactions contemplated herein; 8.3 All required consents of other parties and all other consents, orders and permits of Federal, state and local regulatory authorities (including those of the Commission and of state Blue Sky securities authorities. including any necessary "no-action" positions of and exemptive orders from such Federal and state authorities) to permit consummation of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order or permit would not involve a risk of a material adverse effect on the assets or properties of the Acquiring Fund or the Selling Fund, provided that either party hereto may for itself waive any of such conditions; 8.4 The Registration Statement shall have become effective under the 1933 Act and no stop orders suspending the effectiveness thereof shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act; 8.5 The Selling Fund shall have declared a dividend or dividends which, together with all previous such dividends, shall have the effect of distributing to the Selling Fund Shareholders all of the Selling Fund's investment company taxable income for all taxable years ending on or prior to the Closing Date (computed without regard to any deduction for dividends paid) and all of its net capital gain realized in all taxable years ending on or prior to the Closing Date (after reduction for any capital loss carryforward); 8.6 The parties shall have received a favorable opinion of Sullivan & Worcester, addressed to the Acquiring Fund and the Selling Fund substantially to the effect that for Federal income tax purposes: (a) The transfer of substantially all of the Selling Fund assets in exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund of certain identified liabilities of the Selling Fund followed by the distribution of the Acquiring Fund Shares to the Selling Fund in dissolution and liquidation of the Selling Fund, will constitute a "reorganization" within the meaning of Section 368(a)(1)(C) of the Code and the Acquiring Fund and the Selling Fund will each be a "party to a reorganization" within the meaning of Section 368(b) of the Code; (b) no gain or loss will be recognized by the Acquiring Fund upon the receipt of the assets of the Selling Fund solely in exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund of certain identified liabilities of the Selling Fund; (c) no gain or loss will be recognized by the Selling Fund upon the transfer of the Selling Fund assets to the Acquiring Fund in exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund of certain identified liabilities of the Selling Fund or upon the distribution ( whether actual or constructive ) of the Acquiring Fund Shares to Selling Fund Shareholders in exchange for their shares of the Selling Fund; (d) no gain or loss will be recognized by Selling Fund Shareholders upon the exchange of their Selling Fund shares for the Acquiring Fund Shares in liquidation of the Selling Fund; (e) the aggregate tax basis for the Acquiring Fund Shares received by each Selling Fund Shareholder pursuant to the Reorganization will be the same as the aggregate tax basis of the Selling Fund shares held by such shareholder immediately prior to the Reorganization, and the holding period of the Acquiring Fund Shares to be received by each Selling Fund Shareholder will include the period during which the Selling Fund shares exchanged therefor were held by such shareholder (provided the Selling Fund shares were held as capital assets on the date of the Reorganization); and (f) the tax basis of the Selling Fund assets acquired by the Acquiring Fund will be the same as the tax basis of such assets to the Selling Fund immediately prior to the Reorganization, and the holding period of the assets of the Selling Fund in the hands of the Acquiring Fund will include the period during which those assets were held by the Selling Fund. Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor the Selling Fund may waive the conditions set forth in this paragraph 8.6. 8.7 The Acquiring Fund shall have received from Arthur Andersen LLP a letter addressed to the Acquiring Fund, in form and substance satisfactory to the Acquiring Fund, to the effect that (i) they are independent certified public accountants with respect to the Selling Fund within the meaning of the 1933 Act and the applicable published rules and regulations thereunder; (ii) on the basis of limited procedures agreed upon by the Acquiring Fund and described in such letter (but not an examination in accordance with generally accepted auditing standards) consisting of a reading of any unaudited pro forma financial statements included in the Registration Statement and Prospectus and Proxy Statement, and inquiries of appropriate officials of the FFB Trust responsible for financial and accounting matters, nothing came to their attention which caused them to believe that such unaudited pro forma financial statements do not comply as to form in all material respects with the applicable accounting requirements of the 1933 Act and the published rules and regulations thereunder; or (iii) on the basis of limited procedures agreed upon by the Acquiring Fund and described in such letter (but not an examination in accordance with generally accepted auditing standards), the Capitalization Table appearing in the Registration Statement and Prospectus and Proxy Statement, has been obtained from and is consistent with the accounting records of the Selling Fund; (iv) on the basis of limited procedures agreed upon by the Acquiring Fund and described in such letter (but not an examination in accordance with generally accepted auditing standards), the pro forma financial statements which are included in the Registration Statement and Prospectus and Proxy Statement, were prepared based on the valuation of the Selling Fund's assets in accordance with the 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 Arthur Andersen LLP in writing by the Acquiring Fund); and (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 Arthur Andersen LLP a letter addressed to the Acquiring Fund dated on the Closing Date, in form and substance satisfactory to the Acquiring Fund, to the effect that on the basis of limited procedures agreed upon by the Acquiring Fund (but not an examination in accordance with generally accepted auditing standards) the calculation of net asset value per share of the Selling Fund as of the Valuation Date was determined in accordance with generally accepted accounting practices and the portfolio valuation practices of the Acquiring Fund. 8.8 The Selling Fund shall have received from 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 Arthur Andersen LLP a letter addressed to the Acquiring Fund and the Selling Fund, dated on the Closing Date in form and substance satisfactory to the Funds, setting forth the Federal income tax implications relating to capital loss carryforwards (if any) of the Selling Fund and the related impact, if any, of the proposed transfer of all or substantially all of the assets of the Selling Fund to the Acquiring Fund and the ultimate dissolution of the Selling Fund, upon the shareholders of the Selling Fund. ARTICLE IX BROKERAGE FEES AND EXPENSES 9.1 The Acquiring Fund and the Selling Fund each represents and warrants to the other that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein. 9.2 Except as otherwise provided for herein, all expenses of the transactions contemplated by this Agreement incurred by the Selling Fund and the Acquiring Fund will be borne by First Union National Bank of North Carolina ("FUNB"). Such expenses include, without limitation, (i) expenses incurred in connection with the entering into and the carrying out of the provisions of this Agreement; (ii) expenses associated with the preparation and filing of the Registration Statement under the 1933 Act covering the Acquiring Fund Shares to be issued pursuant to the provisions of this Agreement; (iii) registration or qualification fees and expenses of preparing and filing such forms as are necessary under applicable state securities laws to qualify the Acquiring Fund Shares to be issued in connection herewith in each state in which the Selling Fund Shareholders are resident as of the date of the mailing of the Prospectus and Proxy Statement to such shareholders; (iv) postage; (v) printing; (vi) accounting fees; (vii) legal fees; and (viii) solicitation cost of the transaction. Not withstanding Notwithstanding the foregoing, the Acquiring Fund shall pay its own Federal and state registration fees. In the event that the merger of First Fidelity Bancorporation and First Union Corporation is not completed, this Agreement shall terminate. In such event, all expenses of the transactions 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 this Agreement constitutes the entire agreement between the parties. 10.2 The representations, warranties and covenants contained in this Agreement or in any document delivered pursuant hereto or in connection herewith shall survive the consummation of the transactions contemplated hereunder. ARTICLE XI TERMINATION 11.1 In addition to the termination provisions set forth in paragraph 9.2, this Agreement may be terminated by the mutual agreement of the Acquiring Fund and the Selling Fund. In addition, either the Acquiring Fund or the Selling Fund may at its option terminate this Agreement at or prior to the Closing Date because: (a) of a breach by the other of any representation, warranty or agreement contained herein to be performed at or prior to the Closing Date, if not cured within 30 days; or (b) a condition herein expressed to be precedent to the obligations of the terminating party has not been met and it reasonably appears that it will not or cannot be met. 11.2 In the event of any such termination, in the absence of willful default, there shall be no liability for damages on the part of either the Acquiring Fund or the Selling Fund, 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. 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 The FFB Lexicon Fund c/o SEI Financial Management Corporation 680 East Swedesford Road Wayne, Pennsylvania 19087-1658 Attention: David G. Lee ARTICLE XIV HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY 14.1 The Article and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 14.2 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 14.3 This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. 14.4 This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement. 14.5 It is expressly agreed to that the obligations of the Selling Fund and the Acquiring Fund hereunder shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents, or employees of the FFB Trust or the 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. IN WITNESS WHEREOF, the parties have duly executed and sealed this Agreement, all as of the date first written above. EVERGREEN INVESTMENT TRUST on behalf of Evergreen Value Fund By:/s/ John J. Pileggi Name: John J. Pileggi Title: President (Seal) THE FFB LEXICON FUND on behalf of Select Value Fund By:/s/ David G. Lee Name: David G. Lee Title: President EX-2 3 Exhibit B INTERIM INVESTMENT ADVISORY AGREEMENT AGREEMENT made this ____ day of December, 1995, by and between The FFB Lexicon Fund, a Massachusetts business trust (the "Trust"), and First Union National Bank of North Carolina (the "Adviser"). WHEREAS, the Trust is an open-end, diversified management investment company registered under the Investment Company Act of 1940, as amended, consisting of several series of shares, each having its own investment policies; and WHEREAS, the Trust has retained SEI Financial Management Corporation (the "Administrator") to provide administration of the Trust's operations, subject to the control of the Board of Trustees; WHEREAS, the Trust desires to retain the Adviser to render investment management services with respect to the portfolio listed on Schedule A hereto and such other portfolios as the Trust and the Adviser may agree upon (the "Funds"), and the Adviser is willing to render such services: NOW, THEREFORE, in consideration of mutual covenants herein contained, the parties hereto agree as follows: 1. Duties of Adviser. The Trust employs the Adviser to manage the investment and reinvestment of the assets, and to continuously review, supervise, and administer the investment program of the Funds, to determine in its discretion the securities to be purchased or sold, to provide the Administrator and the Trust with records concerning the Adviser's activities which the Trust is required to maintain, and to render regular reports to the Administrator and to the Trust's Officers and Trustees concerning the Adviser's discharge of the foregoing responsibilities. The Adviser shall discharge the foregoing responsibilities subject to the control of the Board of Trustees of the Trust and in compliance with such policies as the Trustees may from time to time establish, and in compliance with the objectives, policies, and limitations for each such Fund set forth in the Trust's prospectus and statement of additional information as amended from time to time, and applicable laws and regulations. The Adviser accepts such employment and agrees, at its own expense, to render the services and to provide the office space, furnishings and equipment and the personnel required by it to perform the services on the terms and for the compensation provided herein. 2. Fund Transactions. The Adviser is authorized to select the brokers or dealers that will execute the purchases and sales of portfolio securities for the Funds and is directed to use its best efforts to obtain the best net results as described in the Trust's prospectus and statement of additional information from time to time. The Adviser will promptly communicate to the Administrator and to the officers and the Trustees of the Trust such information relating to portfolio transactions as they may reasonably request. It is understood that the Adviser will not be deemed to have acted unlawfully, or to have breached a fiduciary duty to the Trust or be in breach of any obligation owing to the Trust under this Agreement, or otherwise, solely by reason of its having directed a securities transaction on behalf of the Trust to a broker-dealer in compliance with the provisions of Section 28(e) of the Securities Exchange Act of 1934. 3. Compensation of the Adviser. For the services to be rendered by the Adviser as provided in Sections 1 and 2 of this Agreement as well as Custody Services, the Trust shall pay to the Adviser compensation at the rate specified in the Schedule(s) which are attached hereto and made a part of this Agreement. Such compensation shall be paid to the Adviser at the end of each month, and calculated by applying a daily rate, based on the annual percentage rates as specified in the attached Schedule(s), to the assets. The fee shall be based on the average daily net assets for the month involved (less any assets of such Funds held in non-interest bearing special deposits with a Federal Reserve Bank). All rights of compensation under this Agreement for services performed as of the termination date shall survive the termination of this Agreement. 4. Excess Expenses. If the expenses for any Fund for any fiscal year (including fees and other amounts payable to the Adviser, but excluding interest, taxes, brokerage costs, litigation, and other extraordinary costs) as calculated every business day would exceed the expense limitations imposed on investment companies by any applicable statute or regulatory authority of any jurisdiction in which Shares are qualified for offer and sale, the Adviser shall bear such excess cost. However, the Adviser will not bear expenses of the Trust or any Fund which would result in the Trust's inability to qualify as a regulated investment company under provisions of the Internal Revenue Code. Payment of expenses by the Adviser pursuant to this Section 4 shall be settled on a monthly basis (subject to fiscal year end reconciliation) by a reduction in the fee payable to the Adviser for such month pursuant to Section 3 and, if such reduction shall be insufficient to offset such expenses, by reimbursing the Trust. 5. Reports. The Trust and the Adviser agree to furnish to each other, if applicable, current prospectuses, proxy statements, reports to shareholders, certified copies of their financial statements, and such other information with regard to their affairs as each may reasonably request. 6. Status of Adviser. The services of the Adviser to the Trust are not to be deemed exclusive, and the Adviser shall be free to render similar services to others so long as its services to the Trust are not impaired thereby. The Adviser shall be deemed to be an independent contractor and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent the Trust in any way or otherwise be deemed an agent of the Trust. 7. Certain Records. Any records required to be maintained and preserved pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Investment Company Act of 1940 (the "1940 Act") which are prepared or maintained by the Adviser on behalf of the Trust are the property of the Trust and will be surrendered promptly to the Trust on request. 8. Limitation of Liability Adviser. The duties of the Adviser shall be confined to those expressly set forth herein, and no implied duties are assumed by or may be asserted against the Adviser hereunder. The Adviser shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission in carrying out its duties hereunder, except a loss resulting from willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties hereunder, except as may otherwise be provided under provisions of applicable state law or Federal securities law which cannot be waived or modified hereby. (As used in this Paragraph 8, the term "Adviser" shall include directors, officers, employees and other corporate agents of the Adviser as well as that corporation itself). So long as the Adviser acts in good faith and with due diligence and without gross negligence, the Trust assumes full responsibility and shall indemnify the Adviser and hold it harmless from and against any and all actions, suits and claims, whether groundless or otherwise, and from and against any and all losses, damages, costs, charges, reasonable counsel fees and disbursements, payments, expenses and liabilities (including reasonable investigation expenses) arising directly or indirectly out of any Advisory Service rendered to the Trust hereunder except to the extent such indemnification would be prohibited by Federal securities laws. The indemnity and defense provisions set forth herein shall indefinitely survive the termination of this Agreement. The rights hereunder shall include the right to reasonable advances of defense expenses in the event of any pending or threatened litigation with respect to which indemnification hereunder may ultimately be merited. In order that the indemnification provision contained herein shall apply, however, it is understood that if in any case the Trust may be asked to indemnify or hold the Adviser harmless, the Trust shall be fully and prompted advised of all pertinent facts concerning the situation in question, and it is further understood that the Adviser will use all reasonable care to identify and notify the Trust promptly concerning any situation which presents or appears likely to present the probability of such a claim for indemnification against the Trust, but failure to do so in good faith shall not effect the rights hereunder. The Adviser may apply to the Trust at any time for instructions and may consult counsel for the Trust or its own counsel and with accountants and other experts with respect to any matter arising in connection with the Adviser's duties, and the Adviser shall not be liable or accountable for any action taken or omitted by it in good faith in accordance with such instruction or with the opinion of such counsel, accountants or other experts. Also, the Adviser shall be protected in acting upon any document which it reasonably believes to be genuine and to have been signed or presented by the proper person or persons. Nor shall the Adviser be held to have notice of any change of authority of any officers, employee or agent of the Trust until receipt of written notice thereof from the Trust. 9. Permissible Interests. Trustees, agents, and shareholders of the Trust are or may be interested in the Adviser (or any successor thereof) as directors, partners, officers, or shareholders, or otherwise; directors, partners, officers, agents, and shareholders of the Adviser are or may be interested in the Trust as Trustees, shareholders or otherwise; and the Adviser (or any successor) is or may be interested in the Trust as a shareholder or otherwise. In addition, brokerage transactions for the Trust may be effected through affiliates of the Adviser if approved by the Board of Trustees, subject to the rules and regulations of the Securities and Exchange Commission ("SEC"). 10. Duration and Termination. This Agreement, unless sooner terminated as provided herein, shall remain in effect until the earlier of the Closing Date defined in the Agreements and Plans of Reorganization dated September __, 1995 approved by shareholders of the Funds, or two years from date of execution, and thereafter, for periods of one year so long as such continuance thereafter is specifically approved at least annually (a) by the vote of a majority of those Trustees of the Trust who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the Trustees of the Trust or by vote of a majority of the outstanding voting securities of each Fund; provided, however, that if the shareholders of any Fund fail to approve the Agreement as provided herein, the Adviser may continue to serve hereunder in the manner and to the extent permitted by the 1940 Act and rules and regulations thereunder. The foregoing requirement that continuance of this Agreement be "specifically approved at least annually" shall be construed in a manner consistent with the 1940 Act and the rules and regulations thereunder. This Agreement may be terminated as to any Fund at any time, without the payment of any penalty by vote of a majority of the Trustees of the Trust or by vote of a majority of the outstanding voting securities of the Fund on 60 days written notice to the Adviser, or by the Adviser at any time without the payment of any penalty, on 90 days written notice to the Trust. This Agreement will automatically and immediately terminate in the event of its assignment. Any notice under this Agreement shall be given in writing, addressed and delivered, or mailed postpaid, to the other party at any office of such party. As used in this Section 10, the terms "assignment", "interested persons", and a "vote of a majority of the outstanding voting securities" shall have the respective meanings set forth in the 1940 Act and the rules and regulations thereunder; subject to such exemptions as may be granted by the SEC under said Act. 11. Notice. Any notice required or permitted to be given by either party to the other shall be deemed sufficient if sent by registered or certified mail, postage prepaid, addressed by the party giving notice to the other party at the last address furnished by the other party to the party giving notice: if to the Trust, the Trust Administrator c/o the Trust Administrator, SEI Financial Management Corporation, at 680 East Swedesford Road, Wayne, PA and if to the Adviser at One First Union Center, Charlotte, North Carolina 28228, to the attention of Malcolm E. Everett, III, President. 12. Severability. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. 13. Governing Law. This Agreement shall be construed in accordance with the laws of the Commonwealth of Massachusetts and the applicable provisions of the 1940 Act. To the extent that the applicable laws of the Commonwealth of Massachusetts, or any of the provisions herein, conflict with the applicable provisions of the 1940 Act, the latter shall control. A copy of the Declaration of Trust of the Trust is on file with the Secretary of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Trust as Trustees, and are not binding upon any of the Trustees, officers, or shareholders of the Trust individually but binding only upon the assets and property of the Trust. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the day and year first written above. THE FFB LEXICON FUND By: _________________________ Attest: _____________________ FIRST UNION NATIONAL BANK OF NORTH CAROLINA By: _________________________ Attest: _____________________ SCHEDULE A to the Interim Investment Advisory Agreement between The FFB Lexicon Fund and First Union National Bank of North Carolina Select Value Fund SCHEDULE B to the Interim Investment Advisory Agreement between The FFB Lexicon Fund and First Union National Bank of North Carolina Pursuant to Article 3, the Trust shall pay the Adviser compensation at an annual rate as follows: Fund Fee (in basis points) ================================================================= Select Value Fund 75 -----END PRIVACY-ENHANCED MESSAGE-----