1933 Act Registration No. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14AE
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[ ] Pre-Effective [ ] Post-Effective
Amendment No. Amendment No.
EVERGREEN FIXED INCOME TRUST
(Exact Name of Registrant as Specified in Charter)
Area Code and Telephone Number: (617) 210-3200
200 Berkeley Street
Boston, Massachusetts 02116
-----------------------------------
(Address of Principal Executive Offices)
Rosemary D. Van Antwerp, Esq.
Keystone Investment Management Company
200 Berkeley Street
Boston, Massachusetts 02116
-----------------------------------------
(Name and Address of Agent for Service)
Copies of All Correspondence to:
Robert N. Hickey, Esq.
Sullivan & Worcester LLP 1025
Connecticut Avenue, N.W.
Washington, D.C. 20036
Approximate date of proposed public offering: As soon as possible after
the effective date of this Registration Statement.
The Registrant has registered an indefinite amount of securities under
the Securities Act of 1933 pursuant to Section 24(f) under the Investment
Company Act of 1940 (File No. 333- 37453); accordingly, no fee is payable
herewith. Pursuant to Rule 429, this Registration Statement relates to the
aforementioned registration on Form N-1A.
It is proposed that this filing will become effective on January 5,
1998 pursuant to Rule 488 of the Securities Act of 1933.
<PAGE>
EVERGREEN FIXED INCOME TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933
Location in Prospectus/Proxy
Item of Part A of Form N-14 Statement
1. Beginning of Registration Cross Reference Sheet; Cover
Statement and Outside Page
Front Cover Page of
Prospectus
2. Beginning and Outside Table of Contents
Back Cover Page of
Prospectus
3. Fee Table, Synopsis and Comparison of Fees and
Risk Factors Expenses; Summary; Comparison
of Investment Objectives and
Policies; Risks
4. Information About the Summary; Reasons for the
Transaction Reorganization; Comparative
Information on Shareholders'
Rights; Exhibit A (Agreement
and Plan of Reorganization)
5. Information about the Cover Page; Summary; Risks;
Registrant Comparison of Investment
Objectives and Policies;
Comparative Information on
Shareholders' Rights;
Additional Information
6. Information about the Cover Page; Summary; Risks;
Company Being Acquired Comparison of Investment
Objective and Policies;
Comparative Information on
Shareholders' Rights;
Additional Information
<PAGE>
7. Voting Information
Cover Page; Summary; Voting
Information Concerning the
Meeting
8. Interest of Certain Financial Statements and
Persons and Experts Experts; Legal Matters
9. Additional Information Inapplicable
Required for Reoffering
by Persons Deemed to be
Underwriters
Item of Part B of Form N-14
10. Cover Page Cover Page
11. Table of Contents Omitted
12. Additional Information Statement of Additional
About the Registrant Information of Evergreen
Intermediate Term Bond Fund
dated November 10, 1997
13. Additional Information Statement of Additional
about the Company Being Information of Blanchard Funds
Acquired - Blanchard Short-Term
Flexible Income Fund dated
August 31, 1997
14. Financial Statements Financial Statements of
Evergreen Intermediate Term
Bond Fund dated June 30, 1997;
Financial Statements of
Blanchard Short-Term Flexible
Income Fund dated September
30, 1997; Pro Forma Financial
Statements
<PAGE>
Item of Part C of Form N-14
15. Indemnification Incorporated by Reference to
Part A Caption - "Comparative
Information on Shareholders'
Rights - Liability and
Indemnification of Trustees"
16. Exhibits Item 16. Exhibits
17. Undertakings Item 17. Undertakings
<PAGE>
BLANCHARD FUNDS
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
January 5, 1998
Dear Shareholder,
I am writing to shareholders of the Blanchard Short-Term Flexible Income Fund, a
series of Blanchard Funds (the "Fund"), to inform you of a Special Shareholders'
meeting to be held on February 20, 1998. Before that meeting, I would like your
vote on the important issues affecting your Fund as described in the attached
Prospectus/Proxy Statement.
The Prospectus/Proxy Statement includes three proposals. The first proposal
requests that shareholders consider and act upon an Agreement and Plan of
Reorganization whereby all of the assets of the Fund would be acquired by
Evergreen Intermediate Term Bond Fund in exchange for Class A shares of
Evergreen Intermediate Term Bond Fund and the assumption by Evergreen
Intermediate Term Bond Fund of certain liabilities of the Fund. You will receive
shares of Evergreen Intermediate Term Bond Fund having an aggregate net asset
value equal to the aggregate net asset value of your Fund shares. Details about
Evergreen Intermediate Term Bond Fund's investment objective, portfolio
management team, performance, etc. are contained in the attached
Prospectus/Proxy Statement. The transaction is a non-taxable event for
shareholders.
The second proposal requests shareholder consideration of an Interim Investment
Advisory Agreement between the Fund and Virtus
Capital Management, Inc.
The third and final proposal requests shareholder consideration of an Interim
Sub-Advisory Agreement between Virtus Capital
Management, Inc. and OFFITBANK.
Information relating to the Interim Investment Advisory Agreement and the
Interim Sub-Advisory Agreement is contained in the attached Prospectus/Proxy
Statement.
The Board of Trustees has unanimously approved the proposals and recommends that
you vote FOR these proposals.
I realize that this Prospectus/Proxy Statement will take time to review, but
your vote is very important. Please take the time to familiarize yourself with
the proposals presented and sign and
<PAGE>
return your proxy card in the enclosed postage-paid envelope today.
If we do not receive your completed proxy card after several weeks, you may be
contacted by our proxy solicitor, Shareholder Communications Corporation, who
will remind you to vote your shares.
Thank you for taking this matter seriously and participating in this important
process.
<PAGE>
Sincerely,
[Name]
[Title]
Blanchard Funds
<PAGE>
[SUBJECT TO COMPLETION, DECEMBER 5, 1997 PRELIMINARY COPY]
BLANCHARD FUNDS
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 20, 1998
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of Blanchard Short-Term Flexible Income Fund, a series of Blanchard
Funds ("Short-Term"), will be held at the offices of the Evergreen Funds, 200
Berkeley Street, Boston, Massachusetts 02116, on February 20, 1998 at 2:00 p.m.
for the following purposes:
1. To consider and act upon the Agreement and Plan of Reorganization
(the "Plan") dated as of November 26, 1997, providing for the acquisition of all
of the assets of Short-Term by the Evergreen Intermediate Term Bond Fund, a
series of Evergreen Fixed Income Trust ("Evergreen Intermediate"), in exchange
for shares of Evergreen Intermediate and the assumption by Evergreen
Intermediate of certain identified liabilities of Short-Term. The Plan also
provides for distribution of such shares of Evergreen Intermediate to
shareholders of Short-Term in liquidation and subsequent termination of Short-
Term. A vote in favor of the Plan is a vote in favor of the liquidation and
dissolution of Short-Term.
2. To consider and act upon the Interim Management Contract between
Short-Term and Virtus Capital Management, Inc.
3. To consider and act upon the Interim Sub-Advisory Agreement between
Virtus Capital Management, Inc. and OFFITBANK.
4. To transact any other business which may properly come before the
Meeting or any adjournment or adjournments thereof.
The Trustees of Blanchard Funds on behalf of Short-Term have fixed the
close of business on December 26, 1997 as the record date for the determination
of shareholders of Short-Term 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
John W. McGonigle
Secretary
<PAGE>
January 5, 1998
<PAGE>
INSTRUCTIONS FOR EXECUTING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and may help to avoid the time and expense involved in
validating your vote if you fail to sign your proxy card(s) properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in the
Registration on the proxy card(s).
2. JOINT ACCOUNTS: Either party may sign, but the name of the party signing
should conform exactly to a name shown in the Registration on the proxy card(s).
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the proxy
card(s) should be indicated unless it is reflected in the form of Registration.
For example:
REGISTRATION VALID SIGNATURE
CORPORATE
ACCOUNTS
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee Jane B. Doe
u/t/d 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust. John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith, Jr. John B. Smith, Jr.,
Executor
<PAGE>
PROSPECTUS/PROXY STATEMENT DATED JANUARY 5, 1998
Acquisition of Assets of
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
a series of
BLANCHARD FUNDS
Federated Investors Tower
Pittsburgh, Pennsylvania, 15222-3779
By and in Exchange for Shares of
EVERGREEN INTERMEDIATE TERM BOND FUND
a series of
EVERGREEN FIXED INCOME TRUST
200 Berkeley Street
Boston, Massachusetts 02116
This Prospectus/Proxy Statement is being furnished to shareholders of
Blanchard Short-Term Flexible Income Fund ("Short-Term") in connection with a
proposed Agreement and Plan of Reorganization (the "Plan") to be submitted to
shareholders of Short-Term for consideration at a Special Meeting of
Shareholders to be held on February 20, 1998 at 2:00 p.m. at the offices of the
Evergreen Funds, 200 Berkeley Street, Boston, Massachusetts 02116, and any
adjournments thereof (the "Meeting"). The Plan provides for all of the assets of
Short-Term to be acquired by Evergreen Intermediate Term Bond Fund ("Evergreen
Intermediate") in exchange for shares of Evergreen Intermediate and the
assumption by Evergreen Intermediate of certain identified liabilities of
Short-Term (hereinafter referred to as the "Reorganization"). Evergreen
Intermediate and Short-Term are sometimes hereinafter referred to individually
as the "Fund" and collectively as the "Funds." Following the Reorganization,
shares of Evergreen Intermediate will be distributed to shareholders of Short-
Term in liquidation of Short-Term and such Fund will be terminated. Holders of
shares of Short-Term will receive Class A shares of Evergreen Intermediate
having the same Rule 12b-1 distribution-related fees as the shares of Short-
Term held by such holders prior to the Reorganization. No initial sales charge
will be imposed in connection with Class A shares of Evergreen Intermediate
received by holders of shares of Short-Term. As a result of the proposed
Reorganization, shareholders of Short-Term will receive that number of full and
fractional shares of Evergreen Intermediate having an aggregate net asset value
equal to the aggregate net asset value of such shareholder's shares of
Short-Term. The Reorganization is being structured as a tax-free reorganization
for federal income tax purposes.
Evergreen Intermediate is a separate series of Evergreen Fixed Income
Trust, an open-end management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). Evergreen Intermediate seeks
current income by investing primarily in a broad range of investment quality
debt securities and, secondarily, seeks to protect capital. Short-Term seeks to
provide a high level of current income consistent with preservation of capital
by investing primarily in a broad range of short-term debt securities.
<PAGE>
Shareholders of Short-Term are also being asked to approve the Interim
Management Contract with Virtus Capital Management, Inc., a subsidiary of First
Union Corporation ("Virtus"), (the "Interim Advisory Agreement") with the same
terms and fees as the previous advisory agreement between Short-Term and Virtus
and the Interim Sub-Advisory Agreement between Virtus and OFFITBANK with the
same terms and fees as the previous sub-advisory agreement between Virtus and
OFFITBANK. The Interim Advisory Agreement and Interim Sub-Advisory Agreement
will be in effect for the period of time between November 28, 1997, the date on
which the merger of Signet Banking Corporation with and into a wholly-owned
subsidiary of First Union Corporation was consummated, and the date of the
Reorganization (scheduled for on or about February 27, 1998).
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about Evergreen Intermediate
that shareholders of Short-Term 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 January 5, 1998,
relating to this Prospectus/Proxy Statement and the Reorganization which
includes the financial statements of Evergreen (formerly, Keystone) Intermediate
Term Bond Fund, the predecessor of Evergreen Intermediate, dated June 30, 1997
and Short-Term dated September 30, 1997, 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 Evergreen Intermediate at 200 Berkeley Street,
Boston, Massachusetts 02116, or by calling toll-free 1-800-343-2898.
The Prospectus of Evergreen Intermediate relating to Class A, Class B
and Class C shares dated November 10, 1997 is incorporated herein by reference
in its entirety. Shareholders of Short-Term will receive, with this
Prospectus/Proxy Statement, copies of the Prospectus of Evergreen Intermediate.
Additional information about Evergreen Intermediate 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 or
calling Evergreen Intermediate at the address or telephone number listed in the
preceding paragraph.
The Prospectus of Short-Term dated August 31, 1997, insofar as it
relates to Short-Term only, and not to any other funds described therein, is
incorporated herein in its entirety by reference. Copies of the Prospectus and
related Statement of Additional Information dated the same date are available
upon request without charge by writing to Short-Term at the address listed on
the cover page of this Prospectus/Proxy Statement or by calling toll-free
1-800-829-3863.
Included as Exhibits A, B and C to this Prospectus/Proxy Statement are
a copy of the Plan, the Interim Advisory Agreement and Interim Sub-Advisory
Agreement, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
<PAGE>
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The shares offered by this Prospectus/Proxy Statement are not deposits
or obligations of any bank and are not insured or otherwise protected by the
U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board or any other government agency and involve investment risk,
including possible loss of capital.
<PAGE>
TABLE OF CONTENTS
Page
COMPARISON OF FEES AND EXPENSES......................................6
SUMMARY ............................................................8
Proposed Plan of Reorganization.............................9
Tax Consequences...........................................10
Investment Objectives and Policies of the Funds............11
Comparative Performance Information for each Fund..........11
Management of the Funds....................................12
Investment Advisers and Sub-Adviser........................12
Administrator..............................................14
Portfolio Management.......................................14
Distribution of Shares.....................................14
Purchase and Redemption Procedures.........................16
Exchange Privileges........................................16
Dividend Policy............................................17
Risks ..................................................17
REASONS FOR THE REORGANIZATION......................................19
Agreement and Plan of Reorganization.......................22
Federal Income Tax Consequences............................24
Pro-forma Capitalization...................................26
Shareholder Information....................................27
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES....................27
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS.....................30
Forms of Organization......................................30
Capitalization.............................................31
Shareholder Liability......................................31
Shareholder Meetings and Voting Rights.....................32
Liquidation or Dissolution.................................33
Liability and Indemnification of Trustees..................33
INFORMATION REGARDING THE INTERIM ADVISORY AGREEMENT................34
Introduction...............................................34
Comparison of the Interim Advisory Agreement and the
Previous Advisory Agreement............................35
Information about Short-Term's Investment Adviser..........37
INFORMATION REGARDING THE INTERIM SUB-ADVISORY AGREEMENT............37
Introduction...............................................37
Comparison of the Interim Sub-Advisory Agreement
and the Previous Sub-Advisory Agreement...............39
ADDITIONAL INFORMATION..............................................40
VOTING INFORMATION CONCERNING THE MEETING...........................41
FINANCIAL STATEMENTS AND EXPERTS....................................43
<PAGE>
LEGAL MATTERS.......................................................44
OTHER BUSINESS......................................................44
APPENDIX A..........................................................45
APPENDIX B..........................................................46
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT D
<PAGE>
COMPARISON OF FEES AND EXPENSES
The amounts for Class A shares of Evergreen Intermediate set forth in
the following tables and in the examples are based on estimated expenses of
Evergreen Intermediate for the fiscal year ended June 30, 1998. The amounts for
shares of Short-Term set forth in the following tables and in the examples are
based on the expenses for Short-Term for the fiscal year ended September 30,
1997. The pro forma amounts for Class A shares of Evergreen Intermediate are
based on what the combined estimated expenses would have been for Evergreen
Intermediate for the fiscal year ending June 30, 1998. The estimated expenses
for Evergreen Intermediate for the fiscal year ending June 30, 1998 and for
Evergreen Intermediate pro forma are based on the assumption that on or about
January 23, 1998, the assets of Evergreen Intermediate Term Bond Fund II
(formerly Evergreen Intermediate-Term Bond Fund) and Evergreen (formerly,
Keystone) Intermediate Term Bond Fund will be acquired by Evergreen
Intermediate. See "Reasons for the Reorganization - Pro Forma Capitalization."
All amounts are adjusted for voluntary expense waivers.
The following tables show for Evergreen Intermediate, Short-Term and
Evergreen Intermediate pro forma, assuming consummation of the Reorganization,
the shareholder transaction expenses and annual fund operating expenses
associated with an investment in the Class A shares of Evergreen Intermediate
and shares of Short-Term, as applicable.
<TABLE>
<CAPTION>
Comparison of Class A Shares
of Evergreen Intermediate With
Shares of Short-Term
Evergreen
Evergreen Short- Intermediate
Intermediate Term Pro Forma
------------ ----- ------------
Shareholder
Transaction Class A Shares Class A
Expenses ------------ ------ ------------
<S> <C> <C> <C>
Maximum Sales Load 3.25% None 3.25%
Imposed on Purchases
(as a percentage of
offering price)
Maximum Sales Load None None None
Imposed on Reinvested
Dividends (as a
percentage of offering
price)
Contingent Deferred None None None
Sales Charge (as a
percentage of original
purchase price or
redemption proceeds,
whichever is lower)
<PAGE>
Exchange Fee
None None None
Annual Fund Operating
Expenses (as a
percentage of average
daily net assets)
Management Fee (1) 0.64% 0.66% 0.61%
12b-1 Fees (2) 0.25% 0.25% 0.25%
Other Expenses 0.21% 0.47% 0.24%
------ ---- ----
Annual Fund Operating 1.10% 1.38% 1.10%
Expenses (3) ------ ---- ----
------ ---- ----
</TABLE>
- ---------------
(1) The management fee has been reduced to reflect the voluntary waiver by
the investment adviser. The adviser can terminate this voluntary waiver
at any time in its sole discretion.
(2) Class A shares of Evergreen Intermediate can pay up to 0.75% of average
daily net assets as a 12b-1 fee. For the foreseeable future, the Class
A 12b-1 fees will be limited to 0.25% of average daily net assets.
(3) Total Fund Operating Expenses for Short-Term would have been 1.47% absent
the voluntary waivers. Estimated Total Fund Operating Expenses for Class A
shares of Evergreen Intermediate would be 1.17% absent waivers and expense
reimbursements.
Examples. The following tables show for Evergreen Intermediate and
Short-Term, and for Evergreen Intermediate pro forma, assuming consummation of
the Reorganization, examples of the cumulative effect of shareholder transaction
expenses and annual fund operating expenses indicated above on a $1,000
investment in each class of shares for the periods specified, assuming (i) a 5%
annual return, and (ii) redemption at the end of such period. In the case of
Evergreen Intermediate pro forma, the example does not reflect the imposition of
the 3.25% maximum sales load on purchases of Class A Shares since Short-Term
shareholders who receive Class A shares of Evergreen Intermediate in the
Reorganization or who purchase additional Class A shares subsequent to the
Reorganization will not incur any sales load.
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
---- ----- ----- -----
<S> <C> <C> <C> <C>
Evergreen Intermediate $43 $66 $91 $162
Class A
<PAGE>
Short-Term
$14 $44 $76 $166
Evergreen Intermediate $11 $35 $61 $134
- - Pro Forma
Class A
</TABLE>
The purpose of the foregoing examples is to assist Short-Term
shareholders in understanding the various costs and expenses that an investor in
Evergreen Intermediate 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 Short-Term. 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
Prospectus of Evergreen Intermediate dated November 10, 1997 and the Prospectus
of Short- Term dated August 31, 1997 (which are incorporated herein by
reference), the Plan, the Interim Advisory Agreement and the Interim
Sub-Advisory Agreement, forms of which are attached to this Prospectus/Proxy
Statement as Exhibits A, B and C, respectively.
Proposed Plan of Reorganization
The Plan provides for the transfer of all of the assets of Short-Term
in exchange for shares of Evergreen Intermediate and the assumption by Evergreen
Intermediate of certain identified liabilities of Short-Term. The Plan also
calls for the distribution of shares of Evergreen Intermediate to Short-Term
shareholders in liquidation of Short-Term as part of the Reorganization. As a
result of the Reorganization, the shareholders of Short-Term will become the
owners of that number of full and fractional Class A shares of Evergreen
Intermediate having an aggregate net asset value equal to the aggregate net
asset value of the shareholder's shares of Short-Term as of the close of
business immediately prior to the date that Short-Term's assets are exchanged
for shares of Evergreen Intermediate. See "Reasons for the Reorganization
Agreement and Plan of Reorganization."
The Trustees of Blanchard Funds, 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 Short-Term, and that the interests of the
shareholders of Short-Term will not be diluted as a result of the transactions
contemplated by the Reorganization. Accordingly, the Trustees have submitted the
Plan for the approval of Short-Term's shareholders.
THE BOARD OF TRUSTEES OF BLANCHARD FUNDS
RECOMMENDS APPROVAL BY SHAREHOLDERS OF SHORT-TERM
<PAGE>
OF THE PLAN EFFECTING THE REORGANIZATION.
The Trustees of Evergreen Fixed Income Trust have also approved the
Plan and, accordingly, Evergreen Intermediate's participation in the
Reorganization.
Approval of the Reorganization on the part of Short-Term will require
the affirmative vote of a majority of Short-Term's shares voted and entitled to
vote, with all classes voting together as a single class at a Meeting at which a
quorum of the Fund's shares is present. A majority of the outstanding shares
entitled to vote, represented in person or by proxy, is required to constitute a
quorum at the Meeting. See "Voting Information Concerning the Meeting."
The merger (the "Merger") of Signet Banking Corporation ("Signet") with
and into a wholly-owned subsidiary of First Union Corporation ("First Union")
has been consummated and, as a result, by law the Merger terminated the
investment advisory agreement between Virtus and Short-Term and the sub-
advisory agreement between Virtus and OFFITBANK. Prior to consummation of the
Merger, Short-Term received an order from the SEC which permitted the
implementation, without formal shareholder approval, of a new investment
advisory agreement between the Fund and Virtus and a new sub-advisory agreement
between Virtus and OFFITBANK for a period of not more than 120 days beginning on
the date of the closing of the Merger and continuing through the date the
Interim Advisory Agreement and Interim Sub-Advisory Agreement are approved by
the Fund's shareholders (but in no event later than April 30, 1998). The Interim
Advisory Agreement and the Interim Sub-Advisory Agreement have the same terms
and fees as the previous investment advisory agreement between Short-Term and
Virtus and the previous sub-advisory agreement between Virtus and OFFITBANK,
respectively. The Reorganization is scheduled to take place on or about February
27, 1998.
Approval of the Interim Advisory Agreement and Interim Sub-Advisory
Agreement requires the affirmative vote of (i) 67% or more of the shares of
Short-Term present in person or by proxy at the Meeting, if holders of more than
50% of the shares of Short-Term outstanding on the record date are present, in
person or by proxy, or (ii) more than 50% of the outstanding shares of
Short-Term, whichever is less. See "Voting Information Concerning the Meeting."
If the shareholders of Short-Term do not vote to approve the
Reorganization, the Trustees will consider other possible courses of action in
the best interests of shareholders.
Tax Consequences
Prior to or at the completion of the Reorganization, Short-Term will
have received an opinion of counsel that the Reorganization has been structured
so that no gain or loss will be recognized by the Fund or its shareholders for
federal income tax purposes as a result of the receipt of shares of Evergreen
Intermediate in the Reorganization. The holding period and aggregate tax basis
of shares of Evergreen Intermediate that are received by Short-Term's
shareholders will be the same as the holding period and aggregate tax basis of
shares of the Fund previously held by such
<PAGE>
shareholders, provided that shares of the Fund are held as capital assets. In
addition, the holding period and tax basis of the assets of Short-Term in the
hands of Evergreen Intermediate as a result of the Reorganization will be the
same as in the hands of the Fund immediately prior to the Reorganization, and no
gain or loss will be recognized by Evergreen Intermediate upon the receipt of
the assets of the Fund in exchange for shares of Evergreen Intermediate and the
assumption by Evergreen Intermediate of certain identified liabilities.
Investment Objectives and Policies of the Funds
The investment objectives and policies of Evergreen Intermediate and
Short-Term are substantially similar. The investment objectives of Evergreen
Intermediate are to seek current income by investing primarily in a broad range
of investment quality debt securities and, secondly, to protect capital.
The investment objective of Short-Term is to provide a high level of
current income consistent with preservation of capital by investing primarily in
a broad range of short-term debt securities. The Fund invests in U.S. government
securities and investment grade and high yield, high risk securities of domestic
and foreign issuers. See "Comparison of Investment Objectives and Policies"
below.
Comparative Performance Information for each Fund
Discussions of the manner of calculation of total return are contained
in the respective Prospectus and Statement of Additional Information of the
Funds. As of the date of this Prospectus/Proxy Statement, Evergreen Intermediate
had not commenced operations. Accordingly, no performance information for it is
currently available. However, it is anticipated that on or about January 23,
1998, Evergreen Intermediate will acquire all of the assets of Evergreen
Intermediate Term Bond Fund II and Evergreen (formerly, Keystone) Intermediate
Term Bond Fund. The accounting survivor of this fund combination will be
Evergreen Intermediate Term Bond Fund. Therefore, the total return of Evergreen
Intermediate Term Bond Fund for the one, five and ten year periods, the total
return of Short-Term for the one year period ended September 30, 1997, and the
total return for both Funds for the period from inception through September 30,
1997 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.
<TABLE>
<CAPTION>
Average Annual Total Return (1)
1 Year From
Ended 5 Years 10 Years Inception To
September Ended Ended September
30, September September 30, 1997 Inception
1997 30, 1997 30, 1997 --------- Date
------- --------- --------- ---------
<PAGE>
<S> <C> <C> <C> <C> <C>
Evergreen 5.99% 5.32% 7.37% 6.35% 4/14/87
Intermediate
Term Bond Fund
Class A shares
Short-Term 7.24% N/A N/A 5.95% 4/16/93
</TABLE>
- --------------
(1) 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 periods would have been lower.
Important information about Evergreen Intermediate Term Bond Fund is
also contained in management's discussion of Evergreen Intermediate Term Bond
Fund's performance, attached hereto as Exhibit D.
Management of the Funds
The overall management of Evergreen Intermediate and of Short-Term is
the responsibility of, and is supervised by, the Boards of Trustees of Evergreen
Fixed Income Trust and Blanchard Funds, respectively.
Investment Advisers and Sub-Adviser
Keystone Investment Management Company ("Keystone") serves as
investment adviser to Evergreen Intermediate. Keystone has served as investment
adviser to the Keystone family of mutual funds since 1932. Keystone is an
indirect wholly-owned subsidiary of First Union National Bank ("FUNB"). FUNB is
a subsidiary of First Union, the sixth largest bank holding company in the
United States. The Capital Management Group of FUNB, Evergreen Asset Management
Corp. and Keystone manage the Evergreen Keystone family of mutual funds with
assets of approximately $40 billion as of November 30, 1997. For further
information regarding Keystone, FUNB and First Union, see "Management of the
Funds - Investment Adviser" in the Prospectus of Evergreen Intermediate.
Keystone manages investments, provides various administrative services
and supervises the daily business affairs of Evergreen Intermediate subject to
the authority of the Evergreen Fixed Income Trust's Board of Trustees. The Fund
pays Keystone a fee for its services at the annual rate set forth below:
Average Aggregate Net Asset
Value of the Shares of the
Management Fee Income Fund
- ------------------------- ---------------------- ---------------------------
2.0% of Gross
Dividend and
Interest Income
plus
0.50% of the first $100,000,000 plus
0.45% of the next $100,000,000 plus
0.40% of the next $100,000,000 plus
0.35% of the next $100,000,000 plus
<PAGE>
Average Aggregate Net Asset
Value of the Shares of the
Management Fee Income Fund
- ------------------------- ------------------- ---------------------------
0.30% of the next $100,000,000 plus
0.25% of amounts over $500,000,000.
Virtus serves as the investment adviser for Short-Term. As investment
adviser, Virtus is responsible for providing or procuring for the Fund all
management and administrative services. In carrying out its obligations, Virtus
provides or arranges for investment research and supervision of the Fund's
investments; selects and evaluates the performance of the Fund's sub- adviser
(OFFITBANK); and conducts or arranges for a continuous program of appropriate
sale or other disposition of the Fund's assets, subject at all times to the
direction of the Board of Trustees. Virtus compensates OFFITBANK from the
advisory fee received from Short-Term. See "Information Regarding the Interim
Sub-Advisory Agreement." For its services as investment adviser, Virtus receives
a fee at an annual rate of 0.75% of the Fund's average daily net assets.
Each investment adviser may, at its discretion, reduce or waive its fee
or reimburse a Fund for certain of its other expenses in order to reduce its
expense ratios. Each investment adviser may reduce or cease these voluntary
waivers and reimbursements at any time.
Administrator
Federated Administrative Services ("FAS") provides Short-Term with
certain administrative personnel and services including shareholder servicing
and certain legal and accounting services. FAS is entitled to receive a fee for
such services at the following annual rates: 0.15% on the first $250 million of
average daily net assets of combined assets of the funds in the Blanchard/Virtus
mutual fund family; 0.125% on the next $250 million of such assets, 0.10% on the
next $250 million of such assets, and 0.075% on assets in excess of $750
million.
Portfolio Management
The portfolio manager of Evergreen Intermediate is Christopher C.
Conkey. Mr. Conkey has served as Chief Investment Officer of Fixed Income for
the past eleven months and as Head of the High Grade Bond Team of Keystone for
the last three years. During the past five years at Keystone, Mr. Conkey has
also served as portfolio manager of several high grade fixed income funds,
several high grade-high yield fixed income funds and several off-shore
closed-end fixed income funds.
Distribution of Shares
Evergreen Distributor, Inc. ("EDI"), an affiliate of BISYS Fund Services,
acts as underwriter of Evergreen Intermediate's shares. EDI distributes the
Fund's shares directly or through broker-dealers, banks (including FUNB), or
other financial intermediaries. Evergreen Intermediate offers four classes of
shares: Class A, Class B, Class C and Class Y. Each
<PAGE>
class has separate distribution arrangements. (See "Distribution-Related and
Shareholder Servicing-Related Expenses" below.) No class bears the distribution
expenses relating to the shares of any other class.
In the proposed Reorganization, shareholders of Short-Term will receive
Class A shares of Evergreen Intermediate. Class A shares of Evergreen
Intermediate have substantially similar arrangements with respect to the
imposition of Rule 12b-1 distribution and service fees as the shares of Short-
Term. Because the Reorganization will be effected at net asset value without the
imposition of a sales charge, Evergreen Intermediate shares acquired by
shareholders of Short-Term pursuant to the proposed Reorganization would not be
subject to any initial sales charge or contingent deferred sales charge as a
result of the Reorganization.
The following is a summary description of charges and fees for the
Class A shares of Evergreen Intermediate which will be received by Short-Term
shareholders in the Reorganization. More detailed descriptions of the
distribution arrangements applicable to the classes of shares are contained in
the respective Evergreen Intermediate Prospectus and the Short-Term Prospectus
and in each Fund's respective Statement of Additional Information.
Class A Shares. Class A shares are sold at net asset value plus an
initial sales charge and, as indicated below, are subject to distribution-
related fees. For a description of the initial shares charges applicable to
purchases of Class A shares, see "Purchase and Redemption of Shares - How to Buy
Shares" in the Prospectus for Evergreen Intermediate. Holders of shares of
Short-Term who receive Class A shares of Evergreen Intermediate in the
Reorganization will be able to purchase additional Class A shares of Evergreen
Intermediate and of any other Evergreen fund at net asset value. No initial
sales charge will be imposed.
Additional information regarding the classes of shares of each Fund is
included in its respective Prospectus and Statement of Additional Information.
Distribution-Related Expenses. Evergreen Intermediate has adopted a
Rule 12b-1 plan with respect to its Class A shares under which the class may pay
for distribution-related expenses at an annual rate which may not exceed 0.75%
of average daily net assets attributable to the class. Payments with respect to
Class A shares are currently limited to 0.25% of average daily net assets
attributable to the class, which amount may be increased to the full plan rate
for the Fund by the Trustees without shareholder approval.
Short-Term has adopted a Rule 12b-1 plan with respect to its shares
under which such shares may pay for distribution-related expenses at an annual
rate of 0.25% of average daily net assets.
Additional information regarding the Rule 12b-1 plans adopted by each
Fund is included in its respective Prospectus and Statement of Additional
Information.
Purchase and Redemption Procedures
Information concerning applicable sales charges and distribution-related
fees is provided above. Investments in the Funds are not insured. The minimum
<PAGE>
initial purchase requirement for Evergreen Intermediate is $1,000 and the
minimum investment for Short-Term is $3,000 ($2,000 for qualified pension
plans). Short-Term has a minimum investment requirement of $200 for subsequent
investments. There is no minimum for subsequent purchases of shares of Evergreen
Intermediate. Each Fund provides for telephone, mail or wire redemption of
shares at net asset value as next determined after receipt of a redemption
request on each day the New York Stock Exchange ("NYSE") is open for trading.
Additional information concerning purchases and redemptions of shares, including
how each Fund's net asset value is determined, is contained in the respective
Prospectus for each Fund. Each Fund may involuntarily redeem shareholders'
accounts that have less than $1,000 of invested funds. All funds invested in
each Fund are invested in full and fractional shares. The Funds reserve the
right to reject any purchase order.
Exchange Privileges
Short-Term currently permits shareholders to exchange such shares for
shares of another fund in the Blanchard Group of Funds or for Investment shares
of other funds managed by Virtus. In addition, such shares may be exchanged for
shares of Federated Emerging Market Fund. Holders of shares of a class of
Evergreen Intermediate generally may exchange their shares for shares of the
same class of any other Evergreen fund. Short-Term shareholders will be
receiving Class A shares of Evergreen Intermediate in the Reorganization and,
accordingly, with respect to shares of Evergreen Intermediate received by
Short-Term shareholders in the Reorganization, the exchange privilege is limited
to the Class A shares of other Evergreen funds. No sales charge is imposed on an
exchange. An exchange which represents an initial investment in another
Evergreen fund must amount to at least $1,000. The current exchange privileges,
and the requirements and limitations attendant thereto, are described in each
Fund's respective Prospectus and Statement of Additional Information.
Dividend Policy
Each Fund declares dividends from its net investment income daily and
distributes such dividends monthly. Distributions of any net realized gains of a
Fund will be made at least annually. Shareholders begin to earn dividends on the
first business day after shares are purchased unless shares were not paid for,
in which case dividends are not earned until the next business day after payment
is received. Dividends and distributions are reinvested in additional shares of
the same class of the respective Fund, or paid in cash, as a shareholder has
elected. See the respective Prospectus of each Fund for further information
concerning dividends and distributions.
After the Reorganization, shareholders of Short-Term who have elected
to have their dividends and/or distributions reinvested will have dividends
and/or distributions received from Evergreen Intermediate reinvested in shares
of Evergreen Intermediate. Shareholders of Short-Term who have elected to
receive dividends and/or distributions in cash will receive dividends and/or
distributions from Evergreen Intermediate in cash after the Reorganization,
although they may, after the Reorganization, elect to have such dividends and/or
distributions reinvested in additional shares of Evergreen Intermediate.
<PAGE>
Short-Term has qualified and intends to continue to qualify, and
Evergreen Intermediate intends to qualify, to be treated as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). While so qualified, so long as each Fund distributes all of its net
investment company taxable income and any net realized gains to shareholders, it
is expected 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
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.
Evergreen Intermediate may invest up to 25% of its assets in high yield
bonds. Short-Term may invest up to 35% of its assets in high yield bonds. High
yield bonds are rated Ba or lower by Moody's Investors Service ("Moody's") and
BB or lower by Standard & Poor's Ratings Group ("S&P") and are considered
predominantly speculative with respect to the ability of the issuer to meet
principal and interest payments. The lower ratings reflect a greater possibility
that real or perceived adverse changes in the financial condition of the issuer
or in general economic conditions or an unanticipated rise in interest rates may
impair the ability of the issuer to make payments of principal and interest or
to meet specific projected business forecasts or obtain additional financing.
The values of high yield bonds fluctuate in response to changes in interest
rates, and the secondary market for such securities may be less liquid at
certain times than the secondary market for higher quality debt securities,
thereby affecting the market price of the security, the Fund's ability to
dispose of a particular security and to obtain accurate market quotations for
purposes of valuing its assets.
Each Fund stresses earning income by investing in fixed income
securities, which are interest rate sensitive. This means that their market
values (and the Funds' share prices) will tend to vary inversely with changes in
interest rates (i.e., decreasing when interest rates rise and increasing when
interest rates fall). For example, if interest rates increase after a security
is purchased, the security, if sold prior to maturity, may return less than its
cost. Shorter term bonds are less sensitive to interest rate changes, but longer
term bonds generally offer higher yields.
In addition, to the extent that investments are made in debt securities
other than U.S. government securities, or in derivatives or structured
securities, such investments, despite favorable credit ratings, are subject to
some risk of default.
The Funds may also invest in derivatives. The market value of
derivatives or structured securities may vary depending upon the manner in which
the investments have been structured and may fluctuate much more rapidly and to
a much greater extent than investments in other securities. As a
<PAGE>
result, the values of such investments may change at rates in excess of the rate
at which traditional fixed income securities change.
Evergreen Intermediate may not invest more than 5% of its assets in
securities of any one issuer or purchase more than 10% of the outstanding voting
securities of any one issuer. As a diversified portfolio under the 1940 Act,
these restrictions apply to 75% of the assets of Evergreen Intermediate.
However, since Short-Term is a non-diversified portfolio for purposes of the
1940 Act, these 5% restrictions apply to only 50% of the assets of Short-Term.
The remaining 50% of the assets of Short-Term may be invested up to 25% in the
securities of a single issuer. Nondiversification may increase investment risks.
Both Funds may invest in foreign securities. Evergreen Intermediate may
invest up to 50% of its assets in foreign securities. Short-Term may invest up
to 25% of its assets in foreign securities, including up to 10% of its assets in
securities of issuers located in emerging or developing markets countries. These
debt obligations may include bonds, debentures, notes and short-term
obligations. Investment in foreign securities generally entails more risk than
investment in domestic issuers for the following reasons: publicly available
information on issuers and securities may be scarce; many foreign countries do
not follow the same accounting, auditing and financial reporting standards as
are used in the U.S.; market trading volumes may be smaller, resulting in less
liquidity and more price volatility compared to U.S. securities; securities
markets and trading may be less regulated; and the possibility of expropriation,
confiscatory taxation, nationalization, establishment of price controls,
political or social instability exists. Investing in securities of issuers in
emerging markets countries involves exposure to economic systems that are
generally less stable than those of developed countries. Investing in companies
in emerging markets countries may involve exposure to national policies that may
restrict investment by foreigners and undeveloped legal systems governing
private and foreign investments and private property. The typically small size
of the markets for securities issued by companies in emerging markets countries
and the possibility of a low or nonexistent volume of trading in those
securities may also result in a lack of liquidity and in price volatility of
those securities.
REASONS FOR THE REORGANIZATION
On July 18, 1997, First Union entered into an Agreement and Plan of
Merger with Signet, which provided, among other things, for the Merger of Signet
with and into a wholly-owned subsidiary of First Union. The Merger was
consummated on November 28, 1997. As a result of the Merger it is expected that
FUNB and its affiliates will succeed to the investment advisory and
administrative functions currently performed for Short-Term by various units of
Signet and various unaffiliated parties. It is also expected that Signet, or its
successors, will no longer, upon completion of the Reorganization and similar
reorganizations of other funds in the Signet mutual fund family, provide
investment advisory or administrative services to investment companies.
At a regular meeting held on September 16, 1997, the Board of Trustees
of Blanchard Funds considered and approved the Reorganization as in the best
<PAGE>
interests of shareholders of Short-Term and determined that the interests of
existing shareholders of Short-Term will not be diluted as a result of the
transactions contemplated by the Reorganization. In addition, the Trustees
approved the Interim Advisory Agreement and Interim Sub-Advisory Agreement with
respect to Short-Term.
As noted above, Signet has merged with and into a wholly-owned
subsidiary of First Union. Signet is the parent company of Virtus, investment
adviser to the mutual funds which comprise Blanchard Funds. The Merger caused,
as a matter of law, termination of the investment advisory agreement between
each series of Blanchard Funds and Virtus and the sub-advisory agreement between
Virtus and OFFITBANK with respect to the Fund. Blanchard Funds have received an
order from the SEC which permits Virtus and OFFITBANK to continue to act as
Short-Term's investment adviser and sub-adviser, respectively, without
shareholder approval, for a period of not more than 120 days from the date the
Merger was consummated (November 28, 1997) to the date of shareholder approval
of a new investment advisory agreement and sub- advisory agreement. Accordingly,
the Trustees considered the recommendations of Signet in approving the proposed
Reorganization.
In approving the Plan, the Trustees reviewed various factors about the
Funds and the proposed Reorganization. There are substantial similarities
between Evergreen Intermediate and Short-Term. Specifically, Evergreen
Intermediate and Short-Term have substantially similar investment objectives and
policies and comparable risk profiles. See "Comparison of Investment Objectives
and Policies" below. At the same time, the Board of Trustees evaluated the
potential economies of scale associated with larger mutual funds and concluded
that operational efficiencies may be achieved upon the combination of Short-Term
with an Evergreen fund. As of September 30, 1997, Short-Term's net assets were
approximately $134 million. Evergreen Intermediate has not yet commenced
operations and, accordingly, has no net assets. It is expected, however, that on
January 23, 1998, Evergreen Intermediate will acquire all of the assets of the
Evergreen Intermediate Term Bond Fund II (formerly Evergreen Intermediate-Term
Bond Fund) and the Evergreen (formerly Keystone) Intermediate Term Bond Fund. As
of September 30, 1997, these two funds would have an aggregate of approximately
$36 million in net assets after giving effect to the anticipated redemption by
trust shareholders of Class Y shares of Evergreen Intermediate Term Bond Fund
II.
In addition, assuming that an alternative to the Reorganization would
be to propose that Short-Term continue its existence and be separately managed
by Keystone or one of its affiliates, Short-Term would be offered through common
distribution channels with the substantially similar Evergreen Intermediate.
Short-Term would also have to bear the cost of maintaining its separate
existence. Signet and Keystone believe that the prospect of dividing the
resources of the Evergreen mutual fund organization between two substantially
identical funds could result in each Fund being disadvantaged due to an
inability to achieve optimum size, performance levels and the greatest possible
economies of scale. Accordingly, for the reasons noted above and recognizing
that there can be no assurance that any economies of scale or other benefits
will be realized, Signet and Keystone believe that the proposed Reorganization
would be in the best interests of each Fund and its shareholders.
The Board of Trustees of Blanchard Funds met and considered the
recommendation of Signet and Keystone and, in addition, considered among other
<PAGE>
things, (i) the terms and conditions of the Reorganization; (ii) whether the
Reorganization would result in the dilution of shareholders' interests; (iii)
expense ratios, fees and expenses of Evergreen Intermediate and Short-Term; (iv)
the [comparative performance records of each of the Funds;] (v) compatibility of
their investment objectives and policies; (vi) the investment experience,
expertise and resources of Keystone; (vii) the service and distribution
resources available to the Evergreen funds and the broad array of investment
alternatives available to shareholders of the Evergreen funds; (viii) the
personnel and financial resources of First Union and its affiliates; (ix) the
fact that FUNB will bear the expenses incurred by Short- Term in connection with
the Reorganization; (x) the fact that Evergreen Intermediate will assume certain
identified liabilities of Short-Term; and (xi) the expected federal income tax
consequences of the Reorganization.
The Trustees also considered the benefits to be derived by shareholders
of Short-Term from the sale of its assets to Evergreen Intermediate. 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 in such an entity by shareholders of Short-Term.
In addition, the Trustees considered that there are alternatives
available to shareholders of Short-Term, including the ability to redeem their
shares, as well as the option to vote against the Reorganization.
During their consideration of the Reorganization the Trustees met with
Fund counsel and counsel to the Independent Trustees regarding the legal issues
involved. The Trustees of Evergreen Fixed Income Trust also concluded at a
meeting on September 17, 1997 that the proposed Reorganization would be in the
best interests of shareholders of Evergreen Intermediate and that the interests
of the shareholders of Evergreen Intermediate would not be diluted as a result
of the transactions contemplated by the Reorganization.
THE TRUSTEES OF BLANCHARD FUNDS RECOMMEND
THAT THE SHAREHOLDERS OF SHORT-TERM APPROVE
THE PROPOSED REORGANIZATION.
Agreement and Plan of Reorganization
The following summary is qualified in its entirety by reference to the
Plan (Exhibit A hereto).
The Plan provides that Evergreen Intermediate will acquire all of the
assets of Short-Term in exchange for shares of Evergreen Intermediate and the
assumption by Evergreen Intermediate of certain identified liabilities of
Short-Term on or about February 27, 1998 or such other date as may be agreed
upon by the parties (the "Closing Date"). Prior to the Closing Date, Short- Term
will endeavor to discharge all of its known liabilities and obligations.
Evergreen Intermediate will not assume any liabilities or obligations of
Short-Term other than those reflected in an unaudited statement of assets and
liabilities of Short-Term prepared as of the close of regular trading on the
NYSE, currently 4:00 p.m. Eastern time, on the business day immediately prior to
the Closing Date. The number of full and fractional shares of each class of
Evergreen Intermediate to be received by the shareholders of Short-Term will be
determined by multiplying the respective outstanding class of shares
<PAGE>
of Short-Term by a factor which shall be computed by dividing the net asset
value per share of the respective class of shares of Short-Term by the net asset
value per share of the respective class of shares of Evergreen Intermediate.
Such computations will take place as of the close of regular trading on the NYSE
on the business day immediately prior to the Closing Date. The net asset value
per share of each class will be determined by dividing assets, less liabilities,
in each case attributable to the respective class, by the total number of
outstanding shares.
State Street Bank and Trust Company, the custodian for Evergreen
Intermediate, will compute the value of each Fund's respective portfolio
securities. The method of valuation employed will be consistent with the
procedures set forth in the Prospectus and Statement of Additional Information
of Evergreen Intermediate, 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, Short-Term will have declared a
dividend or dividends and distribution or distributions which, together with all
previous dividends and distributions, shall have the effect of distributing to
the Fund's shareholders (in shares of the Fund, or in cash, as the shareholder
has previously elected) all of the Fund's net investment company taxable income
for the taxable period ending on the Closing Date (computed without regard to
any deduction for dividends paid) and all of its net capital gains realized in
all taxable periods ending on the Closing Date (after reductions for any capital
loss carryforward).
As soon after the Closing Date as conveniently practicable, Short-Term
will liquidate and distribute pro rata to shareholders of record as of the close
of business on the Closing Date the full and fractional shares of Evergreen
Intermediate received by Short-Term. Such liquidation and distribution will be
accomplished by the establishment of accounts in the names of the Fund's
shareholders on the share records of Evergreen Intermediate's transfer agent.
Each account will represent the respective pro rata number of full and
fractional shares of Evergreen Intermediate due to the Fund's shareholders. All
issued and outstanding shares of Short-Term, including those represented by
certificates, will be canceled. The shares of Evergreen Intermediate to be
issued will have no preemptive or conversion rights. After such distributions
and the winding up of its affairs, Short- Term will be terminated. In connection
with such termination, Blanchard Funds 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 Short-Term'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 Short-Term's shareholders,
the Plan may be terminated (a) by the mutual agreement of Short- Term and
Evergreen Intermediate; or (b) at or prior to the Closing Date by either party
(i) because of a breach by the other party of any representation, warranty, or
agreement contained therein to be performed at or prior to the Closing Date if
not cured within 30 days, or (ii) because a condition to the obligation of the
terminating party has not been met and it reasonably appears that it cannot be
met.
<PAGE>
The expenses of Short-Term in connection with the Reorganization
(including the cost of any proxy soliciting agent) will be borne by FUNB whether
or not the Reorganization is consummated. No portion of such expenses will be
borne directly or indirectly by Short-Term or its shareholders. There are not
any liabilities or any expected reimbursements in connection with the 12b-1 Plan
of Short-Term. As a result, no 12b-1 liabilities will be assumed by Evergreen
Intermediate following the Reorganization.
If the Reorganization is not approved by shareholders of Short-Term,
the Board of Trustees of Blanchard Funds will consider other possible courses of
action in the best interests of shareholders.
Federal Income Tax Consequences
The Reorganization is intended to qualify for federal income tax
purposes as a tax-free reorganization under section 368(a) of the Code. As a
condition to the closing of the Reorganization, Short-Term 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 all of the assets of Short-Term solely in exchange
for shares of Evergreen Intermediate and the assumption by Evergreen
Intermediate of certain identified liabilities, followed by the distribution of
Evergreen Intermediate's shares by Short-Term in dissolution and liquidation of
Short-Term, will constitute a "reorganization" within the meaning of section
368(a)(1)(D) of the Code, and Evergreen Intermediate and Short-Term 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 Short-Term on the transfer of
all of its assets to Evergreen Intermediate solely in exchange for Evergreen
Intermediate's shares and the assumption by Evergreen Intermediate of certain
identified liabilities of Short-Term or upon the distribution of Evergreen
Intermediate's shares to Short-Term's shareholders in exchange for their shares
of Short-Term;
(3) The tax basis of the assets transferred will be the same to
Evergreen Intermediate as the tax basis of such assets to Short-Term immediately
prior to the Reorganization, and the holding period of such assets in the hands
of Evergreen Intermediate will include the period during which the assets were
held by Short-Term;
(4) No gain or loss will be recognized by Evergreen Intermediate upon
the receipt of the assets from Short-Term solely in exchange for the shares of
Evergreen Intermediate and the assumption by Evergreen Intermediate of certain
identified liabilities of Short-Term;
(5) No gain or loss will be recognized by Short-Term's shareholders
upon the issuance of the shares of Evergreen Intermediate to them, provided they
receive solely such shares (including fractional shares) in exchange for their
shares of Short-Term; and
<PAGE>
(6) The aggregate tax basis of the shares of Evergreen Intermediate,
including any fractional shares, received by each of the shareholders of
Short-Term pursuant to the Reorganization will be the same as the aggregate tax
basis of the shares of Short-Term held by such shareholder immediately prior to
the Reorganization, and the holding period of the shares of Evergreen
Intermediate, including fractional shares, received by each such shareholder
will include the period during which the shares of Short-Term exchanged therefor
were held by such shareholder (provided that the shares of Short-Term 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, shareholders of Short-Term would
recognize a taxable gain or loss equal to the difference between his or her tax
basis in his or her Fund shares and the fair market value of Evergreen
Intermediate shares he or she received. Shareholders of Short-Term should
consult their tax advisers regarding the effect, if any, of the proposed
Reorganization in light of their individual circumstances. It is not anticipated
that the securities of the combined portfolio will be sold in significant
amounts in order to comply with the policies and investment practices of
Evergreen Intermediate. Since the foregoing discussion relates only to the
federal income tax consequences of the Reorganization, shareholders of
Short-Term should also consult their tax advisers as to the state and local tax
consequences, if any, of the Reorganization.
Pro-forma Capitalization
The following table sets forth the capitalizations of Evergreen
Intermediate and Short-Term as of September 30, 1997 and the capitalization of
Evergreen Intermediate on a pro forma basis as of that date, giving effect to
the proposed acquisition of the assets of Evergreen Intermediate Term Bond Fund
II and Evergreen (formerly, Keystone) Intermediate Term Bond Fund (see
"Comparison of Fees and Expenses") along with the anticipated redemption by
trust shareholders of Class Y shares of Evergreen Intermeditae Term Bond Fund II
and the proposed acquisition of assets of Short-Term at net asset value. The pro
forma data reflects an exchange ratio of approximately 0.34 Class A shares of
Evergreen Intermediate issued for each share of Short-Term.
<TABLE>
<CAPTION>
Capitalization of Short-Term,
Evergreen Intermediate and Evergreen
Intermediate Term Bond (Pro Forma)
Evergreen
Intermediate
Evergreen (After Reorgani-
Short-Term Intermediate zation)
--------- -------- ------------
<S> <C> <C> <C>
Net Assets
Shares $133,877,535 N/A N/A
Class A........................ N/A $13,056,915 $146,934,450
Class B........................ N/A $12,013,288 $12,013,288
Class C........................ N/A $6,325,673 $6,325,673
Class Y........................ N/A $4,799,537 $4,799,537
------------ ------------ -------------
<PAGE>
Evergreen
Intermediate
Evergreen (After Reorgani-
Short-Term Intermediate zation)
--------- -------- ------------
Total Net
Assets....................... $133,877,535 $36,195,413 $170,072,948
Net Asset Value Per
Share
Shares $3.04 N/A N/A
Class A........................ N/A $9.06 $9.06
Class B........................ N/A $9.07 $9.07
Class C........................ N/A $9.07 $9.07
Class Y........................ N/A $9.06 $9.07
Shares
Outstanding
Shares 44,036,295 N/A N/A
Class A........................ N/A 11,441,060 16,217,035
Class B........................ N/A 1,324,063 1,324,063
Class C........................ N/A 697,421 697,421
Class Y........................ N/A 529,750 529,750
----------- ----------- -----------
All Classes.................... 44,036,295 3,992,294 18,768,269
</TABLE>
The table set forth above should not be relied upon to reflect the
number of shares to be received in the Reorganization; the actual number of
shares to be received will depend upon the net asset value and number of shares
outstanding of each Fund at the time of the Reorganization.
Shareholder Information
As of December 26, 1997 (the "Record Date"), there were shares of
beneficial interest of Short-Term outstanding.
As of October 31, 1997, the officers and Trustees of Blanchard Funds
beneficially owned as a group less than 1% of the outstanding shares of Short-
Term. To Short-Term's knowledge, no person owned beneficially or of record more
than 5% of Short-Term's total outstanding shares as of October 31, 1997.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion is based upon and qualified in its entirety by
the descriptions of the respective investment objectives, policies and
restrictions set forth in the respective Prospectus and Statement of Additional
Information of the Funds. The investment objective, policies and restrictions of
Evergreen Intermediate can be found in the Prospectus of Evergreen Intermediate
under the caption "Description of the Fund - Investment Objectives and
Policies." The investment objective, policies and restrictions of Short-Term can
be found in the Prospectus of the Fund under the caption "The Funds' Investment
Objectives and Policies." Unlike the investment objective of Short-Term, which
is fundamental, the investment objective of Evergreen Intermediate is
non-fundamental and can be changed by the Board of Trustees without shareholder
approval.
<PAGE>
The investment objectives of Evergreen Intermediate are to seek current
income by investing primarily in a broad range of investment quality debt
securities, and as a secondary objective, to seek to protect capital. Where
appropriate, the Fund will take advantage of opportunities to realize capital
appreciation.
Evergreen Intermediate seeks current income by normally investing at
least 80% of its assets in debt securities, including: U.S. Treasury bills,
notes and bonds; mortgage-backed securities issued by the U.S. government, its
agencies or instrumentalities; mortgage-backed securities issued by private
issuers; corporate debt securities; and commercial paper. The Fund's debt
securities may also include fixed and adjustable rate or stripped bonds,
debentures, notes, equipment trust certificates and debt securities convertible
into or exchangeable for preferred or common stock. The Fund may also invest in
units, which are debt securities with stock or warrants to buy stock attached,
and preferred stock.
Under ordinary circumstances, Evergreen Intermediate expects to invest
at least 65% of its assets in bonds and debentures. The Fund will invest in
securities that, at the time of investment, are rated within the four highest
grades by S&P (AAA, AA, A and BBB), by Moody's (Aaa, Aa, A and Baa, or by Fitch
Investors Services, L.P. ("Fitch") (AAA, AA, A, and BBB), or if not rated or
rated under a different system, are of comparable quality to obligations so
rated, as determined by its investment adviser. The Fund may invest up to 25% of
its assets in below-investment grade securities having a rating range of BB to
CCC by s&P and Ba to Caa by Moody's or if unrated or rated under a different
system believed by its investment adviser to be of comparable quality.
The Fund may also invest up to 50% of its assets in securities that are
principally traded in securities markets located outside the United States.
The Fund currently expects that the dollar weighted average maturity of
its investments will range from 3 to 7 years. However, the Fund may invest in
securities with remaining maturities of ten years or fewer.
Bonds which are rated BBB or Baa are considered to be medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories. Such bonds lack outstanding investment characteristics and may have
speculative characteristics.
When the Fund buys securities, it will consider the ratings of Moody's,
S&P and Fitch assigned to various debt securities as well as many other factors,
including the preservation of capital, the potential for realizing capital
appreciation, maturity and yield to maturity. The Fund will adjust its
investments in particular securities or in types of debt securities in response
to its appraisal of changing economic conditions and trends. The Fund may sell
one security and purchase another security of comparable quality
<PAGE>
and maturity to take advantage of what it believes to be short-term
differentials in market value or yield disparities.
The Fund may invest up to 20% of its total assets under ordinary
circumstances and when in its investment adviser's opinion market conditions
warrant, up to 100% of its assets for temporary defensive purposes in the
following types of money market instruments: (1) commercial paper, including
master demand notes, that at the date of investment is rated A-1, the highest
grade by S&P, P-1, the highest grade by Moody's or, if not rated by such
services, is issued by a company which at the date of investment has an
outstanding issue rated A or better by S&P or Moody's; (2) obligations,
including certificates of deposit and bankers' acceptances, of banks or savings
and loan associations having at least $1 billion in assets that are members of
the Federal Deposit Insurance Corporation including U.S. branches of foreign
banks and foreign branches of U.S. banks; (3) corporate obligations which at the
date of investment are rated A or better by S&P or Moody's; and (4) obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities.
The investment objective of Short-Term is to provide a high level of
current income consistent with preservation of capital by investing primarily in
a broad range of short-term debt securities. The Fund currently intends that the
average maturity of its investments will be three years. However, the Fund
retains the flexibility to increase average maturity to up to five years in
times when abnormal market conditions warrant temporary measures.
Under normal market conditions, at least 65% of Short-Term's assets
will be invested in investment grade bonds. The Fund may invest up to 35% of its
assets in lower-quality debt securities. The Fund will not invest in debt
securities rated lower than Caa by Moody's and CCC by S&P, or, if unrated, of
comparable quality in the opinion of the OFFITBANK. Short-Term may invest up to
20% of its assets in international fixed income securities. This category
consists of obligations of foreign governments, their agencies and
instrumentalities and other fixed income securities denominated in foreign
currencies or composite currencies including: debt obligations issued or
guaranteed by foreign national, provincial, state, municipal or other
governments with taxing authority or by their agencies or instrumentalities;
debt obligations of supranational entities; debt obligations of the U.S.
government issued in non-dollar securities; and debt obligations and other fixed
income securities of foreign and U.S. corporate issuers (non-dollar
denominated). The Fund is not limited to purchasing debt securities rated at the
time of purchase by Moody's or S&P.
Short-Term may invest in any country where its investment adviser sees
potential for high income. It presently expects to invest primarily in non-
dollar denominated securities of issuers in the industrialized Western European
countries; in Canada, Japan, Australia and New Zealand; and in Latin America.
The Fund may also invest up to 10% of its assets in the fixed income securities
of issuers in emerging markets countries.
Each Fund may invest in certain types of derivatives including options
and futures.
<PAGE>
The characteristics of each investment policy and the associated risks
are described in each Fund's respective Prospectus and Statement of Additional
Information. The Funds 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
Forms of Organization
Evergreen Fixed Income Trust and Blanchard Funds are open-end
management investment companies registered with the SEC under the 1940 Act,
which continuously offer shares to the public. Evergreen Fixed Income Trust is
organized as a Delaware business trust and Blanchard Funds is organized as a
Massachusetts business trust. Each Trust is governed by a Declaration of Trust,
By-Laws and a Board of Trustees. Each Trust is also governed by applicable
Delaware, Massachusetts and federal law. Evergreen Intermediate is a series of
Evergreen Fixed Income Trust and Short-Term is a series of Blanchard Funds.
Capitalization
The beneficial interests in Evergreen Intermediate are represented by
an unlimited number of transferable shares of beneficial interest, $.001 par
value per share. The beneficial interests in Short-Term are represented by an
unlimited number of transferable shares of beneficial interest without par
value. The respective Declaration of Trust under which each Fund has been
established permits the 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
represent equal proportionate interests in the assets belonging to the Funds.
Shareholders of each Fund are entitled to receive dividends and other amounts as
determined by the Trustees. Shareholders of each Fund vote separately, by class,
as to matters, such as approval of or amendments to Rule 12b-1 distribution
plans, that affect only their particular class and by series as to matters, such
as approval of or amendments to 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 Declaration of Trust under which Short-Term was
established disclaims shareholder liability for acts or obligations of the
series and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or the Trustees.
The Declaration of Trust provides for indemnification out of the series property
for all losses and expenses of any shareholder held personally liable for the
obligations of the series. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered remote since it is
limited to circumstances in which a disclaimer is inoperative and the series or
the trust itself would be unable to meet its obligations.
<PAGE>
Under Delaware law, shareholders of a Delaware business trust are
entitled to the same limitation of personal liability extended to stockholders
of Delaware corporations. No similar statutory or other authority limiting
business trust shareholder liability exists in any other state. As a result, to
the extent that Evergreen Fixed Income Trust or a shareholder is subject to the
jurisdiction of courts in those states, the courts may not apply Delaware law,
and may thereby subject shareholders of a Delaware trust to liability. To guard
against this risk, the Declaration of Trust of Evergreen Fixed Income Trust (a)
provides that any written obligation of the Trust may contain a statement that
such obligation may only be enforced against the assets of the Trust or the
particular series in question and the obligation is not binding upon the
shareholders of the Trust; however, the omission of such a disclaimer will not
operate to create personal liability for any shareholder; and (b) provides for
indemnification out of trust property of any shareholder held personally liable
for the obligations of Evergreen Fixed Income Trust. Accordingly, the risk of a
shareholder of Evergreen Fixed Income Trust incurring financial loss beyond that
shareholder's investment because of shareholder liability is limited to
circumstances in which: (i) the court refuses to apply Delaware law; (ii) no
contractual limitation of liability was in effect; and (iii) the Trust itself
would be unable to meet its obligations. In light of Delaware law, the nature of
the Trust's business, and the nature of its assets, the risk of personal
liability to a shareholder of Evergreen Fixed Income Trust is remote.
Shareholder Meetings and Voting Rights
Neither Evergreen Fixed Income Trust on behalf of Evergreen
Intermediate nor Blanchard Funds on behalf of Short-Term is required to hold
annual meetings of shareholders. However, a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee must be called when
requested in writing by the holders of at least 10% of the outstanding shares of
Evergreen Fixed Income Trust or Blanchard Funds. In addition, each is required
to call a meeting of shareholders for the purpose of electing Trustees if, at
any time, less than a majority of the Trustees then holding office were elected
by shareholders. Each Trust currently does not intend to hold regular
shareholder meetings. Each Trust does not permit cumulative voting. Except when
a larger quorum is required by applicable law, a majority of the outstanding
shares entitled to vote of each Fund constitutes a quorum for consideration of
such matter. For Evergreen Intermediate and Short-Term, a majority of the votes
cast and entitled to vote, is sufficient to act on a matter (unless otherwise
specifically required by the applicable governing documents or other law,
including the 1940 Act).
Under the Declaration of Trust of Evergreen Fixed Income Trust, each
share of Evergreen Intermediate is entitled to one vote for each dollar of net
asset value applicable to each share. Under the voting provisions governing
Short-Term, each share is entitled to one vote. Over time, the net asset values
of the mutual funds which are each a series of Blanchard Funds have changed in
relation to one another and are expected to continue to do so in the future.
Because of the divergence in net asset values, a given dollar investment in a
fund which is a series of Blanchard Funds and which has a lower net asset value
will purchase more shares and under current voting provisions of Blanchard
Funds, have more votes, than the same investment in a Blanchard Funds' series
with a higher net asset value. Under the Declaration
<PAGE>
of Trust of Evergreen Fixed Income Trust, voting power is related to the dollar
value of a shareholder's investment rather than to the number of shares held.
Liquidation or Dissolution
In the event of the liquidation of Evergreen Intermediate and Short-
Term, 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 a
class of the Fund held by them and recorded on the books of the Fund.
Liability and Indemnification of Trustees
The Declaration of Trust of Blanchard Funds provides that no Trustee
shall be liable for errors of judgment or mistakes of fact or law. No Trustee
shall be subject to liability unless such Trustee is found to have acted in bad
faith, with willful misfeasance, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
The Declaration of Trust of Blanchard Funds provides that a present or
former Trustee or officer is entitled to indemnification against liabilities and
expenses with respect to claims related to his or her position with the Trust,
provided that no indemnification shall be provided to a Trustee or officer
against any liability to the Trust or any series thereof or the shareholders of
any series by reasons of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Under the Declaration of Trust of Evergreen Fixed Income Trust, a
Trustee is liable to the Trust and its shareholders only for such Trustee's own
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of the office of Trustee or the discharge of such
Trustee's functions. As provided in the Declaration of Trust, each Trustee of
the Trust is entitled to be indemnified against all liabilities against him or
her, including the costs of litigation, unless it is determined that the Trustee
(i) did not act in good faith in the reasonable belief that such Trustee's
action was in or not opposed to the best interests of the Trust; (ii) had acted
with willful misfeasance, bad faith, gross negligence or reckless disregard of
such Trustee's duties; and (iii) in a criminal proceeding, had reasonable cause
to believe that such Trustee's conduct was unlawful (collectively, "disabling
conduct"). A determination that the Trustee did not engage in disabling conduct
and is, therefore, entitled to indemnification may be based upon the outcome of
a court action or administrative proceeding or by (a) a vote of a majority of
those Trustees who are neither "interested persons" within the meaning of the
1940 Act nor parties to the proceeding or (b) an independent legal counsel in a
written opinion. The Trust may also advance money for such litigation expenses
provided that the Trustee undertakes to repay the Trust if his or her conduct is
later determined to preclude indemnification and certain other conditions are
met.
<PAGE>
The foregoing is only a summary of certain characteristics of the
operations of the Declarations of Trust, By-Laws, Delaware and Massachusetts law
and is not a complete description of those documents or law. Shareholders should
refer to the provisions of such Declarations of Trust, By-Laws, Delaware and
Massachusetts law directly for more complete information.
INFORMATION REGARDING THE INTERIM ADVISORY AGREEMENT
Introduction
In view of the Merger discussed above, and the factors discussed below,
the Board of Trustees of Blanchard Funds recommends that shareholders of
Short-Term approve the Interim Advisory Agreement. The Merger became effective
on November 28, 1997. Pursuant to an order received from the SEC all fees
payable under the Interim Advisory Agreement will be placed in escrow and paid
to Virtus if shareholders approve the contract within 120 days of its effective
date. The Interim Advisory Agreement will remain in effect until the earlier of
the Closing Date for the Reorganization or two years from its effective date.
The terms of the Interim Advisory Agreement are essentially the same as the
Previous Advisory Agreement (as defined below). The only difference between the
Previous Advisory Agreement and the Interim Advisory Agreement, if approved by
shareholders, is the length of time each Agreement is in effect. A description
of the Interim Advisory Agreement pursuant to which Virtus continues as
investment adviser to Short-Term, as well as the services to be provided by
Virtus pursuant thereto is set forth below under "Advisory Services." The
description of the Interim Advisory Agreement in this Prospectus/Proxy Statement
is qualified in its entirety by reference to the Interim Advisory Agreement,
attached hereto as Exhibit B.
Virtus, a Maryland corporation formed in 1995 to succeed to the
business of Signet Asset Management, is an indirect wholly-owned subsidiary of
First Union. Virtus' address is 707 East Main Street, Suite 1300, Richmond,
Virginia 23219. Virtus has served as investment adviser pursuant to an
Investment Advisory Contract dated July 12, 1995. As used herein, the Investment
Advisory Agreement, as amended, for Short-Term is referred to as the "Previous
Advisory Agreement." At a meeting of the Board of Trustees of Blanchard Funds
held on September 16, 1997, the Trustees, including a majority of the
Independent Trustees, approved the Interim Advisory Agreement for Short-Term.
The Trustees have authorized Blanchard Funds, on behalf of Short-Term,
to enter into the Interim Advisory Agreement with Virtus. Such Agreement became
effective on November 28, 1997. If the Interim Advisory Agreement for Short-Term
is not approved by shareholders, the Trustees will consider appropriate actions
to be taken with respect to Short-Term's investment advisory arrangements at
that time. The Previous Advisory Agreement was last approved by the Trustees,
including a majority of the Independent Trustees, on May 11, 1997.
Comparison of the Interim Advisory Agreement and the Previous Advisory
Agreement
Advisory Services. The management and advisory services to be provided
by Virtus under the Interim Advisory Agreement are identical to those
<PAGE>
currently provided by Virtus under the Previous Advisory Agreement. Under the
Previous Advisory Agreement and Interim Advisory Agreement, Virtus is
responsible for managing the Fund and overseeing the investment of its assets,
subject at all times to the supervision of the Board of Trustees. Virtus
selects, monitors and evaluates the Fund's sub-adviser. Virtus periodically
reviews the sub-adviser's performance record and will make a change, if
necessary, subject to approval of the Board of Trustees and shareholders.
FAS currently acts as administrator of Short-Term. FAS will continue
during the term of the Interim Advisory Agreement as Short-Term's administrator
for the same compensation as currently received; except that on February 9,
1998, FAS' obligations to provide transfer agency services for Short-Term's
shareholders will terminate and such services will be provided for the same fees
by Evergreen Service Company. See "Summary Administrator."
Fees and Expenses. The investment advisory fees and expense limitations for
Short-Term under the Previous Advisory Agreement and the Interim Advisory
Agreement are identical. See "Summary - Investment Advisers and Sub-Adviser."
Expense Reimbursement. Virtus may, if it deems appropriate, assume
expenses of the Fund or class to the extent that the Fund's or classes' expenses
exceed such lower expense limitation as Virtus may, by notice to the Fund,
voluntarily declare to be effective.
The Interim Advisory Agreement contains an identical provision.
Payment of Expenses and Transaction Charges. Under the Previous
Advisory Agreement, Blanchard Funds was required to pay or cause to be paid on
behalf of the Fund, all of the Fund's expenses and the Fund's allocable share of
Blanchard Funds' expenses.
The Interim Advisory Agreement contains an identical provision.
Limitation of Liability. The Previous Advisory Agreement provided that
in the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties under the Agreement on the part of Virtus,
Virtus was not liable to Blanchard Funds or to the Fund or to any shareholder
for any act or omission in the course of or connected in any way with rendering
services or for any losses that may be sustained in the purchase, holding or
sale of any security.
The Interim Advisory Agreement contains an identical provision.
Termination; Assignment. The Interim Advisory Agreement provides that
it may be terminated without penalty by vote of a majority of the outstanding
voting securities of Short-Term (as defined in the 1940 Act) or by a vote of the
Trustees of Blanchard Funds on 60 days' written notice to Virtus or by Virtus on
60 days' written notice to Blanchard Funds. Also, the Interim Advisory Agreement
will automatically terminate in the event of its assignment (as defined in the
1940 Act). The Previous Advisory Agreement contained identical provisions as to
termination and assignment.
Information about Short-Term's Investment Adviser
<PAGE>
Virtus, a registered investment adviser, manages, in addition to the
Fund, other funds of The Virtus Funds, the Blanchard Group of Funds and three
fixed income trust funds. The name and address of each executive officer and
director of Virtus are set forth in Appendix A to this Prospectus/Proxy
Statement.
For the fiscal year ended September 30, 1997 and the period from May 1,
1996 to September 30, 1996, Virtus received from Short-Term management fees of
$1,095,713 and $71,788, respectively, of which $129,528 and $71,788,
respectively, were voluntarily waived. For the fiscal year ended April 30, 1996,
the Fund's investment management fee paid to Virtus and the prior manager was
$162,655, all of which was voluntarily waived. Signet acts as custodian for
Short-Term and received $48,762 for the fiscal year ended September 30, 1997.
Signet will continue to act as Short-Term's custodian during the term of the
Interim Advisory Agreement.
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 "Reasons for the Reorganization."
The Board of Trustees also considered the fact that there were no material
differences between the terms of the Interim Advisory Agreement and the terms of
the Previous Advisory Agreement.
THE TRUSTEES OF BLANCHARD FUNDS RECOMMEND THAT
THE SHAREHOLDERS OF SHORT-TERM APPROVE THE
INTERIM ADVISORY AGREEMENT
INFORMATION REGARDING THE INTERIM SUB-ADVISORY AGREEMENT
Introduction
In view of the Merger discussed above, and the factors discussed below,
the Board of Trustees of Blanchard Funds recommends that shareholders of
Short-Term approve the Interim Sub-Advisory Agreement. Such Agreement became
effective on November 28, 1997. Pursuant to an order from the SEC, all fees
payable under the Interim Sub-Advisory Agreement will be placed in escrow and
paid to OFFITBANK if shareholders approve the contract within 120 days of its
effective date. The Interim Sub-Advisory Agreement will remain in effect until
the earlier of the Closing Date for the Reorganization or two years from its
effective date. The terms of the Interim Sub-Advisory Agreement are essentially
the same as the Previous Sub-Advisory Agreement (as defined below). The only
difference between the Previous Sub-Advisory Agreement and the Interim
Sub-Advisory Agreement, if approved by shareholders, is the length of time the
Agreement is in effect. A description of the Interim Sub-Advisory Agreement
pursuant to which OFFITBANK continues as the investment sub-adviser to
Short-Term, as well as the services to be provided by OFFITBANK pursuant
thereto, is set forth below under "Sub-Advisory Services." The description of
the Interim Sub-Advisory Agreement in this Prospectus/Proxy Statement is
qualified in its entirety by reference to the Interim Sub-Advisory Agreement,
attached hereto as Exhibit C.
OFFITBANK, 520 Madison Avenue, New York, New York 10022 has served as
investment adviser to Short-Term pursuant to a Sub-Advisory Agreement, dated
July 12, 1995. OFFITBANK, a New York State chartered trust bank, is the
<PAGE>
continuation of the business of Offit Associates, Inc., a registered investment
adviser founded in December, 1982. The firm converted to a trust bank in July,
1990. The core business of OFFITBANK is portfolio management for institutions,
non-profit organizations and wealthy family groups. OFFITBANK specializes in
fixed income management and offers its clients a complete range of fixed income
investments in capital markets throughout the world. As of July 31, 1997,
OFFITBANK had in excess of $8 billion in assets under management. Jack D. Burks,
Managing Director of OFFITBANK, has over 10 years of experience in Fixed Income
Portfolio Management and is responsible for the day-to-day management of the
Fund's portfolio. See "Summary Investment Advisers and Sub-Adviser." As used
herein, the Sub-Advisory Agreement for Short-Term is referred to as the
"Previous Sub-Advisory Agreement." At a meeting of the Board of Trustees of
Blanchard Funds held on September 16, 1997, the Trustees, including a majority
of the Independent Trustees, approved the Interim Sub-Advisory Agreement for
Short-Term.
The Trustees have authorized Blanchard Funds, on behalf of Short-Term,
to enter into the Interim Sub-Advisory Agreement with Virtus and OFFITBANK. Such
Agreement became effective on November 28, 1997. If the Interim Sub- Advisory
Agreement for Short-Term is not approved by shareholders, the Trustees will
consider appropriate actions to be taken with respect to Short- Term's
investment sub-advisory arrangements at that time. The Previous Sub- Advisory
Agreement was last approved by the Trustees, including a majority of the
Independent Trustees, on May 11, 1997.
Comparison of the Interim Sub-Advisory Agreement and the Previous Sub-Advisory
Agreement
Sub-Advisory Services. The management and advisory services to be
provided by OFFITBANK under the Interim Sub-Advisory Agreement are identical to
those currently provided by OFFITBANK under the Previous Sub-Advisory Agreement.
Under the Previous Sub-Advisory Agreement, OFFITBANK supervised the investment
and reinvestment of the cash, securities or other properties comprising the
Fund's portfolio, subject at all times to the direction of Virtus and the
policies and control of Blanchard Funds' Board of Trustees.
Fees and Expenses. The investment sub-advisory fees under the Previous
Sub-Advisory Agreement and the Interim Sub-Advisory Agreement are identical. As
compensation for its sub-advisory services under the Previous Sub-Advisory
Agreement OFFITBANK was paid by Virtus a monthly fee at the annual rate of 0.30%
of the first $25 million of the Fund's average daily net assets; plus 0.25% of
the Fund's average daily net assets in excess of $25 million but less than $50
million; plus 0.20% of the Fund's average daily net assets in excess of $50
million.
The fee paid to OFFITBANK by Virtus for the fiscal year ended September
30, 1997 was $329,690. The fee paid to OFFITBANK by Virtus for the period from
May 1, 1996 through September 30, 1996 was $154,199. The fee paid to OFFITBANK
by the prior manager and by Virtus for the fiscal year ended April 30, 1996 was
$101,549.
The name and address of the principal executive officers and directors
of OFFITBANK are set forth in Appendix B to this Prospectus/Proxy Statement.
<PAGE>
Limitation of Liability. The Previous Sub-Advisory Agreement provided
that in the absence of willful misfeasance, bad faith or gross negligence on the
part of OFFITBANK or reckless disregard by OFFITBANK of its duties under the
Agreement, OFFITBANK shall not be liable to Virtus, Blanchard Funds or to any
shareholder of Blanchard Funds for any act or omission in the course of, or
connected with, rendering services thereunder or for any losses that may
sustained in the purchase, holding or sale of any security. The Interim Sub-
Advisory Agreement contains an identical provision.
Termination; Assignment. The Interim Sub-Advisory Agreement provides
that it may be terminated without penalty by vote of a majority of the
outstanding voting securities of Short-Term (as defined in the 1940 Act) or by a
vote of a majority of Blanchard Funds' entire Board of Trustees on 60 days'
written notice to OFFITBANK or by Virtus or OFFITBANK on 60 days' written notice
to the other party to the Agreement. Also, the Interim Sub-Advisory Agreement
will automatically terminate in the event of its assignment (as defined in the
1940 Act). The Previous Sub-Advisory Agreement contained identical provisions as
to termination and assignment.
The Board of Trustees considered the Interim Sub-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 "Reasons for the
Reorganization." The Board of Trustees also considered the fact that there were
no material differences between the terms of the Interim Sub-Advisory Agreement
and the terms of the Previous Sub-Advisory Agreement.
THE TRUSTEES OF BLANCHARD FUNDS RECOMMEND THAT
THE SHAREHOLDERS OF SHORT-TERM APPROVE THE
INTERIM SUB-ADVISORY AGREEMENT
ADDITIONAL INFORMATION
Evergreen Intermediate. Information concerning the operation and
management of Evergreen Intermediate is incorporated herein by reference from
the Prospectus dated November 10, 1997, a copy of which is enclosed, and
Statement of Additional Information dated November 10, 1997. A copy of such
Statement of Additional Information is available upon request and without charge
by writing to Evergreen Intermediate at the address listed on the cover page of
this Prospectus/Proxy Statement or by calling toll-free 1-800-343- 2898.
Short-Term. Information about the Fund is included in its current
Prospectus dated August 31, 1997 and in the Statement of Additional Information
of the same date, that have been filed with the SEC, all of which are
incorporated herein by reference. Copies of the Prospectus and Statement of
Additional Information are available upon request and without charge by writing
to Short-Term at the address listed on the cover page of this Prospectus/Proxy
Statement or by calling toll-free 1-800-829-3863.
Evergreen Intermediate and Short-Term 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
<PAGE>
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 Trustees of Blanchard Funds to be used at the
Special Meeting of Shareholders to be held at 2:00 p.m., February 20, 1998, at
the offices of the Evergreen Funds, 200 Berkeley Street, Boston, Massachusetts
02116, and at any adjournments thereof. This Prospectus/Proxy Statement, along
with a Notice of the meeting and a proxy card, is first being mailed to
shareholders of Short-Term on or about January 5, 1998. Only shareholders of
record as of the close of business on the Record Date will be entitled to notice
of, and to vote at, the Meeting or any adjournment thereof. The holders of a
majority of the outstanding shares entitled to vote, at the close of business on
the Record Date, present in person or represented by proxy, will constitute a
quorum for the Meeting. If the enclosed form of proxy is properly executed and
returned in time to be voted at the Meeting, the proxies named therein will vote
the shares represented by the proxy in accordance with the instructions marked
thereon. Unmarked proxies will be voted FOR the proposed Reorganization, FOR the
Interim Advisory Agreement, FOR the Interim Sub-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 not be counted as shares voted and will have no effect on the vote
regarding the Plan. However, such "broker non-votes" will have the effect of
being counted as votes against the Interim Advisory Agreement and the Interim
Sub-Advisory Agreement which must be approved by a percentage of the shares
present at the Meeting or a majority of the outstanding votes securities. A
proxy may be revoked at any time on or before the Meeting by written notice to
the Secretary of Blanchard Funds, Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. 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, FOR approval of the Interim Advisory Agreement and FOR approval of the
Interim Sub-Advisory Agreement.
Approval of the Plan will require the affirmative vote of a majority of
the shares voted and entitled to vote at the Meeting at which a quorum of the
Fund's shares is present. Approval of the Interim Advisory Agreement and Interim
Sub-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. 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
<PAGE>
solicitations conducted by officers and employees of Keystone or Signet, their
affiliates or other representatives of Short-Term (who will not be paid for
their soliciting activities). Shareholders Communications Corporation has been
engaged by Short-Term to assist in soliciting proxies.
If you wish to participate in the Meeting, you may submit the proxy
card included with this Prospectus/Proxy Statement or attend in person. Any
proxy given by you is revocable.
In the event that sufficient votes to approve the Reorganization are
not received by February 20, 1998, the persons named as proxies may propose one
or more adjournments of the Meeting to permit further solicitation of proxies.
In determining whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the information
to be provided to shareholders with respect to the reasons for the solicitation.
Any such adjournment will require an affirmative vote by the holders of a
majority of the shares present in person or by proxy and entitled to vote at the
Meeting. The persons named as proxies will vote upon such adjournment after
consideration of all circumstances which may bear upon a decision to adjourn the
Meeting.
A shareholder who objects to the proposed Reorganization will not be
entitled under either Massachusetts law or the Declaration of Trust of Blanchard
Funds to demand payment for, or an appraisal of, his or her shares. However,
shareholders should be aware that the Reorganization as proposed is not expected
to result in recognition of gain or loss to shareholders for federal income tax
purposes and that, if the Reorganization is consummated, shareholders will be
free to redeem the shares of Evergreen Intermediate which they receive in the
transaction at their then-current net asset value. Shares of Short-Term may be
redeemed at any time prior to the consummation of the Reorganization.
Shareholders of Short-Term may wish to consult their tax advisers as to any
differing consequences of redeeming Fund shares prior to the Reorganization or
exchanging such shares in the Reorganization.
Short-Term does not hold annual shareholder meetings. If the
Reorganization is not approved, shareholders wishing to submit proposals for
consideration for inclusion in a proxy statement for a subsequent shareholder
meeting should send their written proposals to the Secretary of Blanchard Funds
at the address set forth on the cover of this Prospectus/Proxy Statement such
that they will be received by the Fund in a reasonable period of time prior to
any such meeting.
The votes of the shareholders of Evergreen Intermediate 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 Short-Term 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
<PAGE>
The financial statements of Evergreen (formerly, Keystone) Intermediate
Term Bond Fund as of June 30, 1997, and the financial statements and financial
highlights for the periods indicated therein, have been incorporated by
reference herein and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing.
The financial statements and financial highlights of Short-Term
incorporated in this Prospectus/Proxy Statement by reference from the Annual
Report of Short-Term for the year ended September 30, 1997 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Evergreen
Intermediate will be passed upon by Sullivan & Worcester LLP, Washington, D.C.
OTHER BUSINESS
The Trustees of Blanchard Funds 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 TRUSTEES OF BLANCHARD FUNDS RECOMMEND APPROVAL OF THE PLAN, THE
INTERIM ADVISORY AGREEMENT AND THE INTERIM SUB-ADVISORY AGREEMENT, AND ANY
UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN FAVOR OF
APPROVAL OF THE PLAN, THE INTERIM ADVISORY AGREEMENT AND THE INTERIM SUB-
ADVISORY AGREEMENT.
January 5, 1998
<PAGE>
APPENDIX A
The names and addresses of the principal executive officers and
directors of Virtus Capital Management, Inc. are as follows:
OFFICERS:
Name Address
- ---- -------
Tanya Orr Bird Virtus Capital Management, Inc.
707 East Main Street
Suite 1300
Richmond, Virginia 23219
Josie Clemons Rosson Virtus Capital Management, Inc.
707 East Main Street
Suite 1300
Richmond, Virginia 23219
DIRECTORS:
Name Address
- ---- -------
Tanya Orr Bird Virtus Capital Management, Inc.
707 East Main Street
Suite 1300
Richmond, Virginia 23219
<PAGE>
APPENDIX B
The names and addresses of the principal executive officers and
directors of OFFITBANK are as follows:
OFFICERS AND DIRECTORS:
Name Address
- ---- -------
Leslie F.B. Ashburner OFFITBANK
520 Madison Avenue
New York, New York 10022
Albert C. Bellas OFFITBANK
520 Madison Avenue
New York, New York 10022
Jack D. Burks OFFITBANK
520 Madison Avenue
New York, New York 10022
Carolyn N. Dolan OFFITBANK
520 Madison Avenue
New York, New York 10022
John H. Haldeman, Jr. OFFITBANK
520 Madison Avenue
New York, New York 10022
Richard M. Johnston OFFITBANK
520 Madison Avenue
New York, New York 10022
Wallace Mathai-Davis OFFITBANK
520 Madison Avenue
New York, New York 10022
Morris W. Offit OFFITBANK
520 Madison Avenue
New York, New York 10022
Stephen T. Shapiro OFFITBANK
520 Madison Avenue
New York, New York 10022
Stephen B. Wells OFFITBANK
520 Madison Avenue
New York, New York 10022
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 26th day of November, 1997, by and between the Evergreen Fixed Income
Trust, a Delaware business trust, with its principal place of business at 200
Berkeley Street, Boston, Massachusetts 02116 (the "Trust"), with respect to the
Evergreen Intermediate Term Bond Fund series (the "Acquiring Fund"), and
Blanchard Funds, a Massachusetts business trust, with its principal place of
business at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779, with
respect to its Blanchard Short-Term Flexible Income Fund series (the "Selling
Fund").
This Agreement is intended to be, and is adopted as, a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(D) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of (i) the transfer of all of
the assets of the Selling Fund in exchange solely for Class A shares of
beneficial interest, $.001 par value per share, of the Acquiring Fund (the
"Acquiring Fund Shares"); (ii) the assumption by the Acquiring Fund of certain
identified liabilities of the Selling Fund; and (iii) the distribution, after
the Closing Date hereinafter referred to, of the Acquiring Fund Shares to the
shareholders of the Selling Fund in liquidation of the Selling Fund as provided
herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Selling Fund and the Acquiring Fund are each a separate
investment series of an open-end, registered investment company of the
management type and the Selling Fund owns securities that generally are assets
of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, both Funds are authorized to issue their shares of beneficial
interest;
WHEREAS, the Trustees of the Trust have determined that the exchange of
all of the assets of the Selling Fund for Acquiring Fund Shares and the
assumption of certain identified liabilities of the Selling Fund by the
Acquiring Fund on the terms and conditions hereinafter set forth are in the best
interests of the Acquiring Fund's shareholders;
WHEREAS, the Trustees of Blanchard Funds have determined that the
Selling Fund should exchange all of its assets and certain identified
liabilities for Acquiring Fund Shares and that the interests of the existing
shareholders of the Selling Fund will not be diluted as a result of the
transactions contemplated herein;
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
<PAGE>
TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR
THE ACQUIRING FUND SHARES AND ASSUMPTION OF SELLING FUND
LIABILITIES AND LIQUIDATION OF THE SELLING FUND
1.1 THE EXCHANGE. Subject to the terms and conditions herein set forth
and on the basis of the representations and warranties contained herein, the
Selling Fund agrees to transfer all of the Selling Fund's assets as set forth in
paragraph 1.2 to the Acquiring Fund. The Acquiring Fund agrees in exchange
therefor (i) to deliver to the Selling Fund the number of Acquiring Fund Shares,
including fractional Acquiring Fund Shares, determined by multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by dividing
the net asset value per share of each such class of the Selling Fund by the net
asset value per share of the corresponding class of Acquiring Fund Shares
computed in the manner and as of the time and date set forth in paragraph 2.2;
and (ii) to assume certain identified liabilities of the Selling Fund, as set
forth in paragraph 1.3. Such transactions shall take place at the closing
provided for in paragraph 3.1 (the "Closing Date").
1.2 ASSETS TO BE ACQUIRED. The assets of the Selling Fund to be
acquired by the Acquiring Fund shall consist of all property, including, without
limitation, all cash, securities, commodities, and interests in futures and
dividends or interest receivables, that is owned by the Selling Fund and any
deferred or prepaid expenses shown as an asset on the books of the Selling Fund
on the Closing Date.
The Selling Fund has provided the Acquiring Fund with its most recent
audited financial statements, which contain a list of all of Selling Fund's
assets as of the date thereof. The Selling Fund hereby represents that as of the
date of the execution of this Agreement there have been no changes in its
financial position as reflected in said financial statements other than those
occurring in the ordinary course of its business in connection with the purchase
and sale of securities and the payment of its normal operating expenses.
The Acquiring Fund will, within a reasonable time prior to the Closing
Date, furnish the Selling Fund with a list of the securities, if any, on the
Selling Fund's list referred to in the second sentence of this paragraph that do
not conform to the Acquiring Fund's investment objectives, policies, and
restrictions. The Selling Fund will, within a reasonable time prior to the
Closing Date, furnish the Acquiring Fund with a list of its portfolio securities
and other investments. In the event that the Selling Fund holds any investments
that the Acquiring Fund may not hold, the Selling Fund, if requested by the
Acquiring Fund, will dispose of such securities prior to the Closing Date. In
addition, if it is determined that the Selling Fund and the Acquiring Fund
portfolios, when aggregated, would contain investments exceeding certain
percentage limitations imposed upon the Acquiring Fund with respect to such
investments, the Selling Fund if requested by the Acquiring Fund will dispose of
a sufficient amount of such investments as may be necessary to avoid violating
such limitations as of the Closing Date. Notwithstanding the foregoing, nothing
herein shall require the Selling Fund to dispose of any investments or
securities if, in the reasonable judgment of the Selling Fund, such disposition
would adversely affect the tax-free nature of the Reorganization or would
violate the Selling Fund's fiduciary duty to its shareholders.
<PAGE>
1.3 LIABILITIES TO BE ASSUMED. The Selling Fund will endeavor to
discharge all of its known liabilities and obligations prior to the Closing
Date. The Acquiring Fund shall assume only those liabilities, expenses, costs,
charges and reserves reflected on a Statement of Assets and Liabilities of the
Selling Fund prepared on behalf of the Selling Fund, as of the Valuation Date
(as defined in paragraph 2.1), in accordance with generally accepted accounting
principles consistently applied from the prior audited period. The Acquiring
Fund shall assume only those liabilities of the Selling Fund reflected in such
Statement of Assets and Liabilities and shall not assume any other liabilities,
whether absolute or contingent, known or unknown, accrued or unaccrued, all of
which shall remain the obligation of the Selling Fund.
In addition, upon completion of the Reorganization, for purposes of
calculating the maximum amount of sales charges (including asset based sales
charges) permitted to be imposed by the Acquiring Fund under the National
Association of Securities Dealers, Inc. Conduct Rule 2830 ("Aggregate NASD
Cap"), the Acquiring Fund will add to its Aggregate NASD Cap immediately prior
to the Reorganization the Aggregate NASD Cap of the Selling Fund immediately
prior to the Reorganization, in each case calculated in accordance with such
Rule 2830.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing Date
as is conveniently practicable (the "Liquidation Date"), (a) the Selling Fund
will liquidate and distribute pro rata to the Selling Fund's shareholders of
record, determined as of the close of business on the Valuation Date (the
"Selling Fund Shareholders"), the Acquiring Fund Shares received by the Selling
Fund pursuant to paragraph 1.1; and (b) the Selling Fund will thereupon proceed
to dissolve as set forth in paragraph 1.8 below. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Selling Fund on the books of the Acquiring
Fund to open accounts on the share records of the Acquiring Fund in the names of
the Selling Fund Shareholders and representing the respective pro rata number of
the Acquiring Fund Shares due such shareholders. All issued and outstanding
shares of the Selling Fund will simultaneously be canceled on the books of the
Selling Fund. The Acquiring Fund shall not issue certificates representing the
Acquiring Fund Shares in connection with such exchange.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be
shown on the books of the Acquiring Fund's transfer agent. Shares of the
Acquiring Fund will be issued in the manner described in the combined Prospectus
and Proxy Statement on Form N-14 to be distributed to shareholders of the
Selling Fund as described in paragraph 5.7.
1.6 TRANSFER TAXES. Any transfer taxes payable upon issuance of the
Acquiring Fund Shares in a name other than the registered holder of the Selling
Fund shares on the books of the Selling Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of the Selling
Fund is and shall remain the responsibility of the Selling Fund up to
<PAGE>
and including the Closing Date and such later date on which the Selling Fund is
terminated.
1.8 TERMINATION. The Selling Fund shall be terminated promptly
following the Closing Date and the making of all distributions pursuant to
paragraph 1.4.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Selling Fund's assets to be
acquired by the Acquiring Fund hereunder shall be the value of such assets
computed as of the close of business on the New York Stock Exchange on the
business day next preceding the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures set
forth in the Trust's Declaration of Trust and the Acquiring Fund's then current
prospectuses and statement of additional information or such other valuation
procedures as shall be mutually agreed upon by the parties.
2.2 VALUATION OF SHARES. The net asset value per share of the Acquiring
Fund Shares shall be the net asset value per share computed as of the close of
business on the New York Stock Exchange on the Valuation Date, using the
valuation procedures set forth in the Trust's Declaration of Trust and the
Acquiring Fund's then current prospectuses and statement of additional
information.
2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund Shares of
each class to be issued (including fractional shares, if any) in exchange for
the Selling Fund's assets shall be determined by multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by dividing
the net asset value per share of the Selling Fund attributable to each of its
classes by the net asset value per share of the respective classes of the
Acquiring Fund determined in accordance with paragraph 2.2. Holders of shares of
the Selling Fund will receive Class A shares of the Acquiring Fund.
2.4 DETERMINATION OF VALUE. All computations of value shall be made by
State Street Bank and Trust Company in accordance with its regular practice in
pricing the shares and assets of the Acquiring Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The Closing (the "Closing") shall take place on or
about February 27, 1998 or such other date as the parties may agree to in
writing (the "Closing Date"). All acts taking place at the Closing shall be
deemed to take place simultaneously immediately prior to the opening of business
on the Closing Date unless otherwise provided. The Closing shall be held as of
9:00 a.m. at the offices of the Evergreen Funds, 200 Berkeley Street, Boston, MA
02116, or at such other time and/or place as the parties may agree.
<PAGE>
3.2 CUSTODIAN'S CERTIFICATE. Signet Trust Company, as custodian for the
Selling Fund (the "Custodian"), shall deliver at the Closing a certificate of an
authorized officer stating that (a) the Selling Fund's portfolio securities,
cash, and any other assets shall have been delivered in proper form to the
Acquiring Fund on the Closing Date; and (b) all necessary taxes including all
applicable federal and state stock transfer stamps, if any, shall have been
paid, or provision for payment shall have been made, in conjunction with the
delivery of portfolio securities by the Selling Fund.
3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on the Valuation
Date (a) the New York Stock Exchange or another primary trading market for
portfolio securities of the Acquiring Fund or the Selling Fund shall be closed
to trading or trading thereon shall be restricted; or (b) trading or the
reporting of trading on said Exchange or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the Acquiring Fund or the
Selling Fund is impracticable, the Valuation Date shall be postponed until the
first business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.4 TRANSFER AGENT'S CERTIFICATE. Evergreen Service Company, as
transfer agent for the Selling Fund as of the Closing Date shall deliver at the
Closing a certificate of an authorized officer stating that its records contain
the names and addresses of the Selling Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver or
cause Evergreen Service Company, its transfer agent as of the Closing Date, to
issue and deliver a confirmation evidencing the Acquiring Fund Shares to be
credited on the Closing Date to the Secretary of Blanchard Funds 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
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 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.
<PAGE>
(c) The current prospectuses and statement of additional
information of the Selling Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(d) The Selling Fund is not, and the execution, delivery, and
performance of this Agreement (subject to shareholder approval) will not result,
in violation of any provision of Blanchard Funds' Declaration of Trust or
By-Laws or of any material agreement, indenture, instrument, contract, lease, or
other undertaking to which the Selling Fund is a party or by which it is bound.
(e) The Selling Fund has no material contracts or other
commitments (other than this Agreement) that will be terminated with liability
to it prior to the Closing Date, except for liabilities, if any, to be
discharged or reflected on the Statement of Assets and Liabilities as provided
in paragraph 1.3 hereof.
(f) Except as otherwise disclosed in writing to and accepted
by the Acquiring Fund, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Selling Fund or any of its properties
or assets, which, if adversely determined, would materially and adversely affect
its financial condition, the conduct of its business, or the ability of the
Selling Fund to carry out the transactions contemplated by this Agreement. The
Selling Fund knows of no facts that might form the basis for the institution of
such proceedings and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the transactions
herein contemplated.
(g) The financial statements of the Selling Fund at September
30, 1997 are in accordance with generally accepted accounting principles
consistently applied, and such statements (copies of which have been furnished
to the Acquiring Fund) fairly reflect the financial condition of the Selling
Fund as of such date, and there are no known contingent liabilities of the
Selling Fund as of such date not disclosed therein.
(h) Since September 30, 1997 there has not been any material
adverse change in the Selling Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Selling Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquiring Fund. For the purposes of this subparagraph (h), a
decline in the net asset value of the Selling Fund shall not constitute a
material adverse change.
(i) At the Closing Date, all federal and other tax returns and
reports of the Selling Fund required by law to have been filed by such dates
shall have been filed, and all federal and other taxes shown due on said
<PAGE>
returns and reports shall have been paid, or provision shall have been made for
the payment thereof. To the best of the Selling Fund's knowledge, no such return
is currently under audit, and no assessment has been asserted with respect to
such returns.
(j) For each fiscal year of its operation, the Selling Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and 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 that may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations thereunder applicable thereto.
(o) The Proxy Statement of the Selling Fund to be included in
the Registration Statement (as defined in paragraph 5.7)(other than information
therein that relates to the Acquiring Fund) will, on the effective date of the
Registration Statement and on the Closing Date, not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading.
<PAGE>
4.2.1 REPRESENTATIONS OF THE ACQUIRING FUND. The Acquiring Fund represents
and warrants to the Selling Fund as follows:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust that is registered as an investment company classified
as a management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect.
(c) The current 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 violation of the Trust's
Declaration of Trust or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the Acquiring Fund is
a party or by which it is bound.
(e) Except as otherwise disclosed in writing to the Selling
Fund and accepted by the Selling Fund, no litigation, administrative proceeding
or investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets, which, if adversely determined, would materially and
adversely affect its financial condition and the conduct of its business or the
ability of the Acquiring Fund to carry out the transactions contemplated by this
Agreement. The Acquiring Fund knows of no facts that might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental body
that materially and adversely affects its business or its ability to consummate
the transactions contemplated herein.
(f) The financial statements of the Acquiring Fund at June 30,
1997 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 June 30, 1997 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 Selling Fund. For the purposes of this
<PAGE>
subparagraph (g), a decline in the net asset value of the Acquiring Fund shall
not constitute a material adverse change.
(h) At the Closing Date, all federal and other tax returns and
reports of the Acquiring Fund required by law then to be filed by such dates
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid or provision shall have been made for the
payment thereof. To the best of the Acquiring Fund's knowledge, no such return
is currently under audit, and no assessment has been asserted with respect to
such returns.
(i) 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. 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.
(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 that may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto.
(n) The Prospectus and Proxy Statement (as defined in
paragraph 5.7) to be included in the Registration Statement (only insofar as it
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not misleading.
(o) The Acquiring Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940
<PAGE>
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.
4.2.2 REPRESENTATIONS OF PREDECESSOR FUND. The representations and
warranties set forth in Section 4.2.1 shall be deemed to include, to the extent
applicable, representations and warranties made by and on behalf of Keystone
Intermediate Term Bond Fund (the "Predecessor Fund"), a Massachusetts business
trust, as of the date hereof. The Acquiring Fund shall deliver to the Selling
Fund a certificate of the Predecessor Fund of even date making the
representations set forth in Section 4.2.1 with respect to the Predecessor Fund
to the extent applicable to the Predecessor Fund as of the date hereof.
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. Blanchard Funds will call a meeting of
the Selling Fund Shareholders to consider and act upon this Agreement and to
take all other action necessary to obtain approval of the transactions
contemplated herein.
5.3 INVESTMENT REPRESENTATION. The Selling Fund covenants that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof other than in accordance with the
terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Selling Fund will assist the Acquiring
Fund in obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Selling Fund shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, the
Acquiring Fund and the Selling Fund will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, including any actions required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but
in any case within sixty days after the Closing Date, the Selling Fund shall
furnish the Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Selling Fund for
federal income tax purposes that will be carried over by the Acquiring Fund as a
result of Section 381 of the Code, and which will be reviewed by KPMG Peat
Marwick LLP and certified by Blanchard Funds' President and Treasurer.
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
<PAGE>
to in paragraph 4.1(o) (the "Prospectus and Proxy Statement"), all to be
included in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act in
connection with the meeting of the Selling Fund Shareholders to consider
approval of this Agreement and the transactions contemplated herein.
5.8 CAPITAL LOSS CARRYFORWARDS. As promptly as practicable, but in any
case within sixty days after the Closing Date, the Acquiring Fund and the
Selling Fund shall cause KPMG Peat Marwick LLP to issue a letter addressed to
the Acquiring Fund and the Selling Fund, in form and substance satisfactory to
the Funds, setting forth the federal income tax implications relating to capital
loss carryforwards (if any) of the Selling Fund and the related impact, if any,
of the proposed transfer of all of the assets of the Selling Fund to the
Acquiring Fund and the ultimate dissolution of the Selling Fund, upon the
shareholders of the Selling Fund.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING FUND
The obligations of the Selling Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1 All representations, covenants, and warranties of the Acquiring
Fund contained in this Agreement shall be true and correct as of the date hereof
and as of the Closing Date with the same force and effect as if made on and as
of the Closing Date, and the Acquiring Fund shall have delivered to the Selling
Fund a certificate executed in its name by the Trust's President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
reasonably satisfactory to the Selling Fund and dated as of the Closing Date, to
such effect and as to such other matters as the Selling Fund shall reasonably
request.
6.2 The Selling Fund shall have received on the Closing Date an opinion
from Sullivan & Worcester LLP, counsel to the Acquiring Fund, dated as of the
Closing Date, in a form reasonably satisfactory to the Selling Fund, covering
the following points:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the power to own all of its
properties and assets and to carry on its business as presently conducted.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed, and
delivered by the Acquiring Fund, and, assuming due authorization, execution
<PAGE>
and delivery of this Agreement by the Selling Fund, is a valid and binding
obligation of the Acquiring Fund enforceable against the Acquiring Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights generally and to general equity principles.
(d) Assuming that a consideration therefor not less than the
net asset value thereof has been paid, the Acquiring Fund Shares to be issued
and delivered to the Selling Fund on behalf of the Selling Fund Shareholders as
provided by this Agreement are duly authorized and upon such delivery will be
legally issued and outstanding and fully paid and non-assessable. No shareholder
of the Acquiring Fund has any preemptive rights in respect thereof.
(e) The Registration Statement, to such counsel's knowledge,
has been declared effective by the Commission and no stop order under the 1933
Act pertaining thereto has been issued, and to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the State of Delaware is required for consummation by
the Acquiring Fund of the transactions contemplated herein, except such as have
been obtained under the 1933 Act, the 1934 Act and the 1940 Act, and as may be
required under state securities laws.
(f) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of the Trust's Declaration of Trust or By-Laws or any provision of any
material agreement, indenture, instrument, contract, lease or other undertaking
(in each case known to such counsel) to which the Acquiring Fund is a party or
by which it or any of its properties may be bound or to the knowledge of such
counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree to which the Acquiring Fund is
a party or by which it is bound.
(g) Only insofar as they relate to the Acquiring Fund, the
descriptions in the Prospectus and Proxy Statement of statutes, legal and
governmental proceedings and material contracts, if any, are accurate and fairly
present the information required to be shown.
(h) Such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Acquiring Fund, existing on or
before the effective date of the Registration Statement or the Closing Date
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement which are not described or filed as
required.
(i) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Acquiring Fund or
any of its properties or assets and the Acquiring Fund is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body, which materially and adversely affects its business, other
than as previously disclosed in the Registration Statement.
<PAGE>
Such counsel shall also state that they have participated in
conferences with officers and other representatives of the Acquiring Fund at
which the contents of the Prospectus and Proxy Statement and related matters
were discussed and, although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Prospectus and Proxy Statement (except to the extent indicated
in paragraph (g) of their above opinion), on the basis of the foregoing (relying
as to materiality to a large extent upon the opinions of the Trust's officers
and other representatives of the Acquiring Fund), no facts have come to their
attention that lead them to believe that the Prospectus and Proxy Statement as
of its date, as of the date of the Selling Fund Shareholders' meeting, and as of
the Closing Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein regarding the Acquiring Fund
or necessary, in the light of the circumstances under which they were made, to
make the statements therein regarding the Acquiring Fund not misleading. Such
opinion may state that such counsel does not express any opinion or belief as to
the financial statements or any financial or statistical data, or as to the
information relating to the Selling Fund, contained in the Prospectus and Proxy
Statement or the Registration Statement, and that such opinion is solely for the
benefit of Blanchard Funds and the Selling Fund. Such opinion shall contain such
other assumptions and limitations as shall be in the opinion of Sullivan &
Worcester LLP appropriate to render the opinions expressed therein.
In this paragraph 6.2, references to 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 Signet Banking
Corporation shall be completed prior to the Closing Date.
6.4 The acquisition of the assets of the Predecessor Fund by the
Acquiring Fund shall have 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 Blanchard Funds'
President or Vice President and the Treasurer or Assistant Treasurer, in form
and substance satisfactory to the Acquiring Fund and dated as of the Closing
Date, to such effect and as to such other matters as the Acquiring Fund shall
reasonably request.
<PAGE>
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 Blanchard Funds.
7.3.1 The Acquiring Fund shall have received on the Closing Date an
opinion of Dickstein Shapiro Morin & Oshinsky LLP, counsel to the Selling Fund,
in a form satisfactory to the Acquiring Fund covering the following points:
(a) The Selling Fund is a separate investment series of a
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) 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 knowledge, such registration with the Commission as
an investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed and
delivered by the Selling Fund, and, assuming due authorization, execution, and
delivery of this Agreement by the Acquiring Fund, is a valid and binding
obligation of the Selling Fund enforceable against the Selling Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and to general equity principles.
(d) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the United
States or The Commonwealth of Massachusetts is required for consummation by the
Selling Fund of the transactions contemplated herein, except such as have been
obtained under the 1933 Act, the 1934 Act and the 1940 Act, and as may be
required under state securities laws.
(e) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of Blanchard Funds' 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.
(f) The descriptions in the Prospectus and Proxy Statement of
this Agreement, as set forth under the caption "Reasons for the Reorganization -
Agreement and Plan of Reorganization," the Interim Advisory Agreement and the
Previous Advisory Agreement, as set forth under the caption "Information
Regarding the Interim Advisory Agreement," the Interim Sub-Advisory Agreement
and the Previous Sub-Advisory Agreement, as set forth under the caption
<PAGE>
"Information Regarding the Interim Sub-Advisory Agreement" and the description
of voting requirements applicable to approval of the Interim Advisory Agreement
and Interim Sub-Advisory Agreement, as set forth under the caption "Voting
Information Concerning the Meeting," insofar as the latter constitutes a summary
of applicable voting requirements under the Investment Company Act of 1940, as
amended, are, in each case, accurate and fairly present the information required
to be shown by the applicable requirements of Form N-14.
(g) Such counsel does not know of any legal or governmental
proceedings, insofar as they relate to the Selling Fund existing on or before
the date of mailing of the Prospectus and Proxy Statement and the Closing Date,
required to be described in the Prospectus and Proxy Statement or to be filed as
an exhibit to the Registration Statement which are not described or filed as
required.
(h) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Selling Fund or
any of its respective properties or assets and the Selling Fund is neither a
party to nor subject to the provisions of any order, decree or judgment of any
court or governmental body, which materially and adversely affects its business
other than as previously disclosed in the Prospectus and Proxy Statement.
7.3.2 The Acquiring Fund shall have received on the closing Date an
opinion of C. Grant Anderson, Esq., Assistant Secretary of the Blanchard Funds,
in form satisfactory to the Acquiring Fund as follows: Assuming that a
consideration therefor of not less than the net asset value thereof has been
paid, and assuming that such shares were issued in accordance with the terms of
the Selling Fund's registration statement, or any amendment thereto, in effect
at the time of such issuance, all issued and outstanding shares of the Selling
Fund are legally issued and fully paid and non-assessable (except that, under
Massachusetts law, Selling Fund Shareholders could under certain circumstances
be held personally liable for obligations of the Selling Fund).
Mr. Anderson shall also state that he has reviewed and is familiar with
the contents of the Prospectus and Proxy Statement and, although he is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Prospectus and Proxy
Statement on the basis of the foregoing, no facts have come to his attention
that lead him 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 he 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.
The opinions set forth in paragraphs 7.3.1 and 7.3.2 may state that
such opinions are solely for the benefit of the Acquiring Fund. Such opinions
shall contain such other assumptions and limitations as shall be in the opinion
of
<PAGE>
Dickstein Shapiro Morin & Oshinsky LLP and C. Grant Anderson, as applicable,
appropriate to render the opinions expressed therein, and shall indicate, with
respect to matters of Massachusetts law, that as Dickstein Shapiro Morin &
Oshinsky LLP and C. Grant Anderson are not admitted to the bar of Massachusetts,
such opinions are based either upon the review of published statutes, 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 Signet Banking
Corporation 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 Blanchard Funds'
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.
<PAGE>
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 net investment
company taxable income for all taxable periods 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 periods 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 LLP, addressed to the Acquiring Fund and the Selling Fund
substantially to the effect that for federal income tax purposes:
(a) The transfer of all of the Selling Fund assets in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of
certain stated 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)(D) 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 stated
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 stated liabilities of the Selling Fund or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to Selling Fund
Shareholders in exchange for their shares of the Selling Fund.
(d) No gain or loss will be recognized by the Selling Fund
Shareholders upon the exchange of their Selling Fund shares for the Acquiring
Fund Shares in liquidation of the Selling Fund.
(e) The aggregate tax basis for the Acquiring Fund Shares
received by each Selling Fund Shareholder pursuant to the Reorganization will be
the same as the aggregate tax basis of the Selling Fund shares held by such
shareholder immediately prior to the Reorganization, and the holding period of
the Acquiring Fund Shares to be received by each Selling Fund Shareholder will
include the period during which the Selling Fund shares exchanged therefor were
held by such shareholder (provided the Selling Fund shares were held as capital
assets on the date of the Reorganization).
<PAGE>
(f) The tax basis of the Selling Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the Selling
Fund immediately prior to the Reorganization, and the holding period of the
assets of the Selling Fund in the hands of the Acquiring Fund will include the
period during which those assets were held by the Selling Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Selling Fund may waive the conditions set forth in this paragraph
8.6.
8.7 The Acquiring Fund shall have received from KPMG Peat Marwick LLP a
letter addressed to the Acquiring Fund, in form and substance satisfactory to
the Acquiring Fund, to the effect that:
(a) 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;
(b) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards) 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 Blanchard Funds responsible for financial and accounting
matters, nothing came to their attention that 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 requirement of the 1933 Act and
the published rules and regulations thereunder;
(c) 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;
(d) 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 that 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 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;
(e) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the data utilized in the
calculations of the projected expense ratios appearing in the Registration
Statement and Prospectus and Proxy Statement agree with underlying accounting
records of the Selling Fund or with written estimates by Selling Fund's
management and were found to be mathematically correct.
<PAGE>
In addition, the Acquiring Fund shall have received from KPMG Peat
Marwick LLP a letter addressed to the Acquiring Fund dated on the Closing Date,
in form and substance satisfactory to the Acquiring Fund, to the effect, that on
the basis of limited procedures agreed upon by the Acquiring Fund (but not an
examination in accordance with generally accepted auditing standards), the
calculation of net asset value per share of the Selling Fund as of the Valuation
Date was determined in accordance with generally accepted accounting practices
and the portfolio valuation practices of the Acquiring Fund.
8.8 The Selling Fund shall have received from KPMG Peat Marwick LLP a
letter addressed to the Selling Fund, in form and substance satisfactory to the
Selling Fund, to the effect that:
(a) they are independent certified public accountants with
respect to the Acquiring Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder;
(b) on the basis of limited procedures agreed upon by the
Selling Fund and described in such letter (but not an examination in accordance
with generally accepted auditing standards), the Capitalization Table appearing
in the Registration Statement and Prospectus and Proxy Statement has been
obtained from and is consistent with the accounting records of the Acquiring
Fund; and
(c) on the basis of limited procedures agreed upon by the
Selling Fund (but not an examination in accordance with generally accepted
auditing standards), the data utilized in the calculations of the projected
expense ratio appearing in the Registration Statement and Prospectus and Proxy
Statement agree with written estimates by each Fund's management and were found
to be mathematically correct.
ARTICLE IX
EXPENSES
9.1 Except as otherwise provided for herein, all expenses of the
transactions contemplated by this Agreement incurred by the Selling Fund and the
Acquiring Fund will be borne by First Union National Bank. Such expenses
include, without limitation, (a) expenses incurred in connection with the
entering into and the carrying out of the provisions of this Agreement; (b)
expenses associated with the preparation and filing of the Registration
Statement under the 1933 Act covering the Acquiring Fund Shares to be issued
pursuant to the provisions of this Agreement; (c) registration or qualification
fees and expenses of preparing and filing such forms as are necessary under
applicable state securities laws to qualify the Acquiring Fund Shares to be
issued in connection herewith in each state in which the Selling Fund
Shareholders are resident as of the date of the mailing of the Prospectus and
Proxy Statement to such shareholders; (d) postage; (e) printing; (f)
<PAGE>
accounting fees; (g) legal fees; and (h) solicitation costs of the transaction.
Notwithstanding the foregoing, the Acquiring Fund shall pay its own federal and
state registration fees.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Selling Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties, and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall not survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Fund and the Selling Fund. In addition, either the Acquiring Fund or
the Selling Fund may at its option terminate this Agreement at or prior to the
Closing Date because:
(a) of a breach by the other of any representation, warranty,
or agreement contained herein to be performed at or prior to the Closing Date,
if not cured within 30 days; or
(b) a condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the
Acquiring Fund, the Selling Fund, the Trust, Blanchard Funds, the respective
Trustees or officers, to the other party or its Trustees or officers.
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 Selling Fund pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring Fund Shares
to be issued to the Selling Fund Shareholders under this Agreement to the
detriment of such shareholders without their further approval.
ARTICLE XIII
<PAGE>
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
13.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to the conflicts
of laws provisions thereof; provided, however, that the due authorization,
execution and delivery of this Agreement, in the case of the Selling Fund, shall
be governed and construed in accordance with the laws of the Commonwealth of
Massachusetts, without giving effect to the conflicts of laws provisions
thereof.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but, except as provided in
this paragraph, no assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of the other
party. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation, other than the parties
hereto and their respective successors and assigns, any rights or remedies under
or by reason of this Agreement.
13.5 It is expressly agreed that the obligations of the Selling Fund
and the Acquiring Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of Blanchard Funds or the
Evergreen Equity Trust personally, but shall bind only the trust property of the
Selling Fund and the Acquiring Fund, as provided in the Declarations of Trust of
Blanchard Funds and the Trust. The execution and delivery of this Agreement have
been authorized by the Trustees of Blanchard Funds on behalf of the Selling Fund
and the Trust on behalf of the Acquiring Fund and signed by authorized officers
of Blanchard Funds and the Trust, acting as such, and neither such authorization
by such Trustees nor such execution and delivery by such officers shall be
deemed to have been made by any of them individually or to impose any liability
on any of them personally, but shall bind only the trust property of the Selling
Fund and the Acquiring Fund as provided in the Declarations of Trust of
Blanchard Funds and the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed and sealed this
Agreement, all as of the date first written above.
EVERGREEN FIXED INCOME TRUST
ON BEHALF OF EVERGREEN INTERMEDIATE
TERM BOND FUND
By:
Name:
Title:
BLANCHARD FUNDS
ON BEHALF OF BLANCHARD SHORT-TERM FLEXIBLE
INCOME FUND
By:
Name:
Title:
<PAGE>
EXHIBIT B
BLANCHARD FUNDS
INTERIM MANAGEMENT CONTRACT
This Contract is made this 22nd day of November, 1997 between Virtus
Capital Management, Inc., a Maryland corporation having its principal place of
business in Richmond, Virginia (the "Manager"), and Blanchard Funds, a
Massachusetts business trust having its principal place of business in
Pittsburgh, Pennsylvania (the "Trust").
WHEREAS the Trust is an open-end management investment company as that
term is defined in the Investment Company Act of 1940, as amended, and
is registered as such with the Securities and Exchange Commission; and
WHEREAS Manager is engaged in the business of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. The Trust hereby appoints Manager as manager for each of the
portfolios ("Funds") of the Trust which executes an exhibit to this Contract,
and Manager accepts the appointments. Subject to the direction of the Trustees
of the Trust, Manager shall provide or procure on behalf of each of the Funds
all management and administrative services. In carrying out its obligations
under this paragraph, the Manager shall; (i) provide or arrange for investment
research and supervision of the investments of the Funds; (ii) select and
evaluate the performance of each Fund's Portfolio Sub-Adviser; (iii) select and
evaluate the performance of the Administrator; and (iv) conduct or arrange for a
continuous program of appropriate sale or other disposition and reinvestment of
each Fund's assets.
2. Manager, in its supervision of the investments of each of the Funds,
will be guided by each of the Fund's investment objective and policies and the
provisions and restrictions contained in the Declaration of Trust and By-Laws of
the Trust and as set forth in the Registration Statements and exhibits as may be
on file with the Securities and Exchange Commission.
3. Each Fund shall pay or cause to be paid all of its own expenses and
its allocable share of Trust expenses, including, without limitation, the
expenses of organizing the Trust and continuing its existence; fees and expenses
of Trustees and officers of the Trust; fees for management services and
administrative personnel and services; expenses incurred in the distribution of
its shares ("Shares"), including expenses of administrative support services;
fees and expenses of preparing and printing its Registration Statements under
the Securities Act of 1933 and the Investment Company Act of 1940, as amended,
and any amendments thereto; expenses of registering and qualifying the Trust,
the Funds, and Shares of the Funds under federal and state laws and regulations;
expenses of preparing, printing, and distributing prospectuses (and any
amendments thereto) to shareholders; interest expense, taxes, fees, and
commissions of every kind; expenses of issue (including cost of Share
certificates), purchase, repurchase, and redemption of Shares,
<PAGE>
including expenses attributable to a program of periodic issue; charges and
expenses of custodians, transfer agents, dividend disbursing agents, shareholder
servicing agents, and registrars; printing and mailing costs, auditing,
accounting, and legal expenses; reports to shareholders and governmental
officers and commissions; expenses of meetings of Trustees and shareholders and
proxy solicitations therefor; insurance expenses; association membership dues
and such nonrecurring items as may arise, including all losses and liabilities
incurred in administering the Trust and the Funds. Each Fund will also pay its
allocable share of such extraordinary expenses as may arise including expenses
incurred in connection with litigation, proceedings, and claims and the legal
obligations of the Trust to indemnify its officers and Trustees and agents with
respect thereto.
4. Each of the Funds shall pay to Manager, for all services rendered to
each Fund by Manager hereunder, the fees set forth in the exhibits attached
hereto.
5. If, for any fiscal year, the total of all ordinary business expenses
of the Fund, including all investment advisory fees but excluding distribution
fees, taxes, interest and extraordinary expenses and certain other excludable
expenses, would exceed the most restrictive expense limits imposed by any
statute or regulatory authority of any jurisdiction in which Shares of the Fund
are offered for sale Manager shall reduce its management fee in order to reduce
such excess expenses, but will not be required to reimburse the Fund for any
ordinary business expenses which exceed the amount of its management fee for
such fiscal year. The amount of any such reduction is to be borne by the Manager
and shall be deducted from the monthly management fee otherwise payable to the
Manager during such fiscal year. For the purposes of this paragraph, the term
"fiscal year" shall exclude the portion of the current fiscal year which shall
have elapsed prior to the date hereof and shall include the portion of the then
current fiscal year which shall have elapsed at the date of termination of this
Agreement.
6. The net asset value of each Fund's Shares as used herein will be
calculated to the nearest 1/10th of one cent.
7. The Manager may from time to time and for such periods as it deems
appropriate reduce its compensation (and, if appropriate, assume expenses of one
or more of the Funds) to the extent that any Fund's expenses exceed such lower
expense limitation as the Manger may, by notice to the Fund, voluntarily declare
to be effective.
8. This Contract shall begin for each Fund as of the date of execution
of the applicable exhibit and shall continue in effect with respect to each Fund
presently set forth on an exhibit (and any subsequent Funds added pursuant to an
exhibit during the initial term of this Contract) until the earlier of the
Closing Date defined in the Agreement and Plan of Reorganization dated as of
November 20, 1997 with respect to each Fund or for two years from the date of
this Contract set forth above and thereafter for successive periods of one year,
subject to the provisions for termination and all of the other terms and
conditions hereof if: (a) such continuation shall be specifically approved at
least annually by the vote of a majority of the Trustees of the Trust, including
a majority of the Trustees who are not parties to this Contract or interested
persons of any such party cast in
<PAGE>
person at a meeting called for that purpose; and (b) Manager shall not have
notified a Fund in writing at least sixty (60) days prior to the anniversary
date of this Contract in any year thereafter that it does not desire such
continuation with respect to that Fund. If a Fund is added after the first
approval by the Trustees as described above, this Contract will be effective as
to that Fund upon execution of the applicable exhibit and will continue in
effect until the next annual approval of the Contract by the Trustees and
thereafter for successive periods of one year, subject to approval as described
above.
9. Notwithstanding any provision in this Contract, it may be terminated
at any time with respect to any Fund, without the payment of any penalty, by the
Trustees of the Trust or by a vote of the shareholders of that Fund on sixty
(60) days' written notice to Manager.
10. This Contract may not be assigned by Manager and shall
automatically terminate in the event of any assignment. Manager may employ or
contract with such other person, persons, corporation, or corporations at its
own cost and expense as it shall determine in order to assist it in carrying out
this Contract.
11. In the absence of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the obligations or duties under this Contract on the
part of Manager, Manager shall not be liable to the Trust or to any of the Funds
or to any shareholder for any act or omission in the course of or connected in
any way with rendering services or for any losses that may be sustained in the
purchase, holding, or sale of any security.
12. This Contract may be amended at any time by agreement of the
parties provided that the amendment shall be approved both by the vote of a
majority of the Trustees of the Trust, including a majority of the Trustees who
are not parties to this Contract or interested persons of any such party to this
Contract (other than as Trustees of the Trust) cast in person at a meeting
called for that purpose, and where required by Section 15(a)(2) of the Act, on
behalf of a Fund by a majority of the outstanding voting securities of such Fund
as defined in Section 2(a)(42) of the Act.
13. The Manager acknowledges that all sales literature for investment
companies (such as the Trust) are subject to strict regulatory oversight. The
Manager agrees to submit any proposed sales literature for the Trust (or any
Fund) or for itself or its affiliates which mentions the Trust (or any Fund) to
the Trust's distributor for review and filing with the appropriate regulatory
authorities prior to the public release of any such sales literature, provided,
however, that nothing herein shall be construed so as to create any obligation
or duty on the part of the Manager to produce sales literature for the Trust (or
any Fund). The Trust agrees to cause its distributor to promptly review all such
sales literature to ensure compliance with relevant requirements, to promptly
advise Manager of any deficiencies contained in such sales literature, to
promptly file complying sales literature with the relevant authorities, and to
cause such sales literature to be distributed to prospective investors in the
Trust.
14. A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
<PAGE>
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees, or any of the officers,
employees, agents or shareholders of the Trust individually but are binding only
upon the assets and property of the Trust. Notice is also hereby given that the
obligations pursuant to this instrument of a particular Fund and of the Trust
with respect to that particular Fund shall be limited solely to the assets of
that particular Fund.
15. This Contract shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
16. This Contract will become binding on the parties hereto upon their
execution of the attached exhibits to this Contract.
<PAGE>
EXHIBIT A
to the
Management Contract
Blanchard Global Growth Fund
Blanchard Flexible Income Fund
Blanchard Short-Term Bond Fund
Blanchard Flexible Tax-Free Bond Fund
Blanchard Growth & Income Fund
For all services rendered by Manager hereunder, the above-named Funds
of the Trust shall pay to Manager and Manager agrees to accept as full
compensation for all services rendered hereunder, an annual management fee equal
to the following percentage ("the applicable percentage") of the average daily
net assets of each Fund
Name of Fund Percentage of Net Assets
Blanchard Global Growth Fund 1% of the first $150 million of
average daily net
assets, .875% of the
Fund's average daily
net assets in excess
of $150 million but
not exceeding $300
million and .75% of
the Fund's average
daily net assets in
excess of $300
million.
Blanchard Flexible Income Fund .75%
Blanchard Growth & Income Fund 1.10% of the Fund's average daily net
assets, .40% of which, which would
otherwise be received by Manager and
paid to the Chase Manhattan Bank,
N.A. ("Chase") for portfolio advisory
services, shall be paid to Chase
directly by the Fund under a separate
investment advisory agreement between
Chase and the Fund.
Blanchard Short-Term Bond Fund .75%
Blanchard Flexible Tax-Free Bond Fund .75%
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of the applicable percentage
applied to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Manager daily except for
the Blanchard Growth & Income Fund which shall be paid to Manager monthly.
Witness the execution hereof this 22nd day of November, 1997.
<PAGE>
Attest: Virtus Capital Management, Inc.
________________________ By: ___________________________
Secretary Executive Vice President
Attest: Blanchard Funds
________________________ By: ____________________________
Assistant Secretary Vice President
<PAGE>
EXHIBIT C
INTERIM SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made this 22nd day of November, 1997 by and between
VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the "Manager"), and
OFFITBANK, a New York banking corporation (the "Sub-Adviser" or "OFFITBANK")
with respect to the following recital of fact:
R E C I T A L
WHEREAS, Blanchard Funds (the "Trust") is registered as an open-end,
non-diversified, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the Sub-Adviser is a New York banking corporation and engages
in the business of acting as an investment adviser; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest
in separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in one series called the Blanchard
Flexible Income Fund (such series, being referred to as the "Fund"); and
WHEREAS, the Trust and the Manager have entered into an agreement of
even date herewith to provide for management services for the Fund on the terms
and conditions set forth therein (the "Interim Management Agreement"); and
WHEREAS, OFFITBANK proposes to render investment advisory services to
the Manager in connection with the Manager's responsibilities to the Fund's
portfolio on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. Investment Management. OFFITBANK shall act as a Sub-Adviser for the
Fund and shall, in such capacity, supervise the investment and reinvestment of
the cash, securities or other properties comprising the Fund's portfolio,
subject at all times to the direction of the Manager and the policies and
control of the Trust's Board of Trustees. OFFITBANK shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its services
as Sub-Adviser.
2. Investment Analysis and Implementation. In carrying out its
obligation under paragraph 1 hereof, the Sub-Adviser shall:
<PAGE>
a. use the same skill and care in providing such service as it
uses in providing services to fiduciary accounts for which it has
investment responsibilities;
b. obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
Fund's portfolio and whether concerning the individual issuers whose
securities are included in the Fund's portfolio or the activities in
which the issuers engage, or with respect to securities which the Sub-
Adviser considers desirable for inclusion in the Fund's portfolio;
c. determine which issuers and securities shall be represented in
the Fund's portfolio and regularly report thereon to the Trust's Board
of Trustees;
d. formulate and implement continuing programs for the
purchases and sales of the securities of such issuers and regularly
report thereon to the Trust's Board of Trustees;
e. be authorized to give instructions to the custodian and/or
sub-custodian of the Fund appointed by the Trust's Board of Trustees,
as to deliveries of securities, transfers of currencies and payments of
cash for the account of the Fund, in relation to the matters
contemplated by this Agreement; and
f. take, on behalf of the Fund, all actions which appear to
the Trust and the Manager necessary to carry into effect such purchase
and sale programs and supervisory functions as aforesaid, including the
placing of orders for the purchase and sale of securities for the Fund
and the prompt reporting to the Manager of such purchases and sales.
3. Broker-Dealer Relationships. The Sub-Adviser is responsible for
decisions to buy and sell securities for the Fund's portfolio, broker-dealer
selection, and negotiation of brokerage commission rates. The Sub-Adviser's
primary consideration in effecting a security transaction will be execution at
the most favorable price. In selecting a broker-dealer to execute each
particular transaction, the Sub-Adviser will take the following into
consideration: the best net price available, the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
Accordingly, the price to the Fund in any transaction may be less favorable than
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered. Subject
to such policies as the Board of Trustees may determine, the Sub- Adviser shall
not be deemed to have acted unlawfully or to have breached any duty created by
this Agreement or otherwise solely by reason of its having caused the Fund to
pay a broker or dealer for effecting a portfolio investment transaction in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction, if the Sub-Adviser determines in good faith that
such amount of commission was reasonable in
<PAGE>
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Sub-Adviser's overall responsibilities with respect to the Fund and to its other
clients as to which it exercises investment discretion. Subject to such policies
as the Board of Trustees may determine, the Sub-Adviser will purchase and sell
foreign currency contracts and other securities for the Fund. The Sub-Adviser is
further authorized to allocate the orders placed by it on behalf of the Fund to
any affiliated broker-dealer of the Fund or to such brokers and dealers who also
provide research or statistical material, or other services to the Fund, the
Manager or the Sub-Adviser. Such allocation shall be in such amounts and
proportions as the Sub-Adviser shall determine and the Sub-Adviser will report
on said allocations regularly to the Board of Trustees of the Trust indicating
the brokers to whom such allocations have been made and the basis therefor.
4. Control by Board of Trustees. Any investment program undertaken by
the Sub-Adviser pursuant to this Agreement, as well as any other activities
undertaken by the Sub-Adviser on behalf of the Fund pursuant thereto, shall at
all times be subject to any directives of the Board of Trustees of the Trust.
The Manager shall provide the Sub-Adviser with written notice of all such
directives, so long as this Agreement remains in effect.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Sub-Adviser shall at all times conform
to:
a. all applicable provisions of the 1940 Act;
b. the provisions of the Registration Statement of the Trust
under the Securities Act of 1933 and the 1940 Act; and
c. any other applicable provisions of state and federal law.
6. Expenses. The Sub-Adviser shall maintain, at its expense and without
cost to the Manager or the Fund, a trading function in order to carry out its
obligations under subparagraph (f) of paragraph 2 hereof to place orders for the
purchase and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with
the approval of the Trust's Board of Trustees, the Sub-Adviser may perform
services on behalf of the Fund which are not required by this Agreement. Such
services will be performed on behalf of the Fund and the Sub- Adviser's cost in
rendering such services may be billed monthly to the Manager, subject to
examination by the Manager's independent accountants. Payment or assumption by
the Sub-Adviser of any Fund expense that the Sub- Adviser is not required to pay
or assume under this Agreement shall not relieve the Manager or the Sub-Adviser
of any of their obligations to the Fund or obligate the Sub-Adviser to pay or
assume any similar Fund expense on any subsequent occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Manager shall pay the Sub-Adviser a monthly fee at
<PAGE>
the annual rate of .30% of the Fund's first $25 million of average daily net
assets; plus .25% of the Fund's average daily net assets in excess of $25
million but less than $50 million; plus .20% of the Fund's average daily net
assets in excess of $50 million. Compensation under this Agreement shall be
calculated and accrued daily and the amounts of the daily accruals shall be paid
monthly. The compensation paid to the Sub-Adviser will not be reduced by the
amount of brokerage commissions received by the Sub-Adviser or its affiliated
broker-dealer pursuant to Section 17(e)(2) of the 1940 Act. If this Agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fees as set forth above. Payment of the Sub- Adviser's
compensation for the preceding month shall be made as promptly as possible after
the end of each month.
9. Exclusivity. OFFITBANK agrees that it will not render advisory or
sub-advisory services to any other similar publicly offered no-load or low- load
open-end investment company registered with the Securities and Exchange
Commission while this Agreement is in effect. In the event of the termination of
this Agreement by the Sub-Adviser such exclusivity shall continue for a period
of [ ] months from the effective date of such termination. For the purposes of
this Agreement, low-load shall be defined as a sales charge of 3% or less. The
Sub-Adviser, however, shall be free to render investment advisory or other
services to others (including unit trusts and registered investment companies
other than no load or low load investment companies) and to engage in other
activities, so long as its services under this Agreement are not impaired
thereby.
10. Term. This Agreement shall become effective at the close of
business on the date hereof and shall remain in force and effect until the
earlier of the Closing Date defined in the Agreement and Plan of Reorganization
dated November 20, 1997 with respect to the Fund or for an initial term of two
years, and shall remain in effect thereafter if approved in the manner set forth
in Section 10 hereof.
11. Renewal. Following the expiration of its initial two year term,
this Agreement shall continue in force and effect from year to year, provided
that such continuance is specifically approved at least annually:
a. (i) by the Trust's Board of Trustees or (ii) by the vote of a
majority of the Fund's outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act), and
b. by the affirmative vote of a majority of the Trustees who
are not parties to this agreement or interested persons of a party to
this Agreement (other than as a Trustee of the Trust), by votes cast in
person at a meeting specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by vote of the Trust's Board of Trustees or by vote
of a majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), or by the Manager or the Sub- Adviser, on sixty (60)
days' written notice to the other party. This Agreement shall automatically
terminate: (a) in the event of its assignment, the term "assignment" having the
meaning defined in Section 2(a)(4) of the 1940 Act, or (b) in the event that the
Interim Management Agreement between the Fund and the Manager shall terminate.
13. Liability of the Sub-Adviser. In the absence of willful
misfeasance, bad faith or gross negligence on the part of the Sub-Adviser or its
officers, directors or employees, or reckless disregard by the Sub-Adviser of
its duties under this Agreement, the Sub-Adviser shall not be liable to the
Manager, the Trust or to any shareholder of the Trust for any act or omission in
the course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
14. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Manager
for this purpose shall be 707 East Main Street, Suite 1300, Richmond, Virginia
23219, that of the Trust for this purpose shall be Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779, and the address of the Sub-Adviser for this
purpose shall be 520 Madison Avenue, New York, New York 10022.
15. Questions of Interpretation. Any questions of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
courts, by rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said Act. In addition, where the effect of a
requirement of the 1940 Act reflected in a provision of this Agreement is
revised by rule, regulation or order of the Securities and Exchange Commission,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: OFFITBANK
By
Title: Managing Director Title: Managing Director
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
By
Title: Senior Vice President Title: Senior Vice President
KEYSTONE
INTERMEDIATE TERM BOND FUND
(logo and picture of stars)
FUND-AT-A-GLANCE
As of June 30, 1997
<TABLE>
<CAPTION>
ONE YEAR PERFORMANCE CLASS A CLASS B CLASS C
<S> <C> <C> <C>
One year with sales charge 5.30 % 3.17 % 7.06 %
One year w/o sales charge 8.83 % 8.17 % 8.06 %
One year dividends per share 52.0 (cents) 46.3(cents) 46.3 (cents)
30-day SEC Yield
(as of 6/30/97) 5.82 % 5.25 % 5.26 %
<CAPTION>
AVERAGE
ANNUAL RETURNS** CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Three years 6.34 % 5.82 % 6.67 %
Five years 5.89 % N/A N/A
Ten years 6.56 % N/A N/A
Since Inception* N/A 4.61 % 4.96 %
<CAPTION>
CUMULATIVE RETURNS** CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Eleven months w/o sales charge 8.40 % 7.81 % 7.70 %
Three years 20.24 % 18.51 % 21.38 %
Five years 33.11 % N/A N/A
Ten years 88.72 % N/A N/A
Since Inception* N/A 22.01 % 23.80 %
</TABLE>
* CLASSES B AND C BEGAN 2/1/93.
** ALL RETURNS INCLUDE THE MAXIMUM APPLICABLE SALES CHARGE. FOR CLASSES WITH
MORE THAN A 10-YEAR HISTORY, THE 10-YEAR HISTORY IS PRESENTED.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
<S> <C>
Total Net Assets (all classes) $29.0 million
Average Credit Quality AA-
Average Maturity 6.3 years
Duration 4.6 years
</TABLE>
PORTFOLIO QUALITY JUNE 30, 1997
(AS A PERCENTAGE OF PORTFOLIO ASSETS)
(A pie graph appears here. See table below for plot points.)
BBB 18%
A 32%
AAA 38%
AA 12%
PORTFOLIO ALLOCATIONS ARE SUBJECT TO CHANGE.
OBJECTIVE
Keystone Intermediate Term Bond Fund seeks current income and, secondarily,
capital preservation from investments in investment grade and high quality
bonds.
STRATEGY
The Fund is designed to balance the benefits of short-and long-term bonds, by
providing more income than short-term bonds and greater price stability than
long-term bonds. The Fund invests primarily in government and corporate bonds
and mortgage-backed securities with maturities of less than 10 years.
PORTFOLIO MANAGER
(photo of Christopher P. Conkey, Senior Vice President and Chief
Christopher Investment Officer, Fixed Income, of Keystone Investment
P. Conkey) Management Company, is Portfolio Manager of Keystone
Intermediate Term Bond Fund. An investment professional with
more than 14 years' experience, Mr. Conkey also is Portfolio
Manager of Keystone Diversified Bond Fund (B-2). Mr. Conkey
joined Keystone in 1988 from Constitution Capital, where he
was a Vice President. A Chartered Financial Analyst, Mr.
Conkey is a member of the Government Bond Club of New England
and the Bond Analysts Society of Boston. He is a graduate of
Clark University and received his M.B.A. from Boston
University.
6
<PAGE>
KEYSTONE
INTERMEDIATE TERM BOND FUND (logo and picture
of stars)
MANAGEMENT REPORT
August 1997
Dear Shareholder:
We are pleased to report to you on the Keystone Intermediate Term Bond Fund for
the fiscal period that ended on June 30, 1997. This report is an annual report,
reflecting the new fiscal year ending date of June 30, replacing the former
fiscal year ending each July 31.
PERFORMANCE
Your Fund performed very well during the past year. In an environment of
moderate economic growth, modest inflation, and relatively stable interest
rates, your Fund was able to take advantage of opportunities among better
quality corporate bonds and mortgage-backed securities to provide generous
income consistent with limited price fluctuation.
ENVIRONMENT
During the past year, the U.S. economy enjoyed healthy economic growth and low
inflation. If one were to look at interest rates at the beginning and end of the
year, despite some near-term volatility one would see remarkable stability in
rates. For example, the yield on a 30-year Treasury bond was 6.78% on June 30,
just slightly below the 6.97% of July 31, 1996. This was an environment in which
corporate bonds tended to do very well, as credit risk was low because of the
overall strength of the economy.
STRATEGY
In the relatively stable interest rate environment of the past year, your Fund
did not try to manage the portfolio maturities significantly in an effort to
anticipate the direction of interest rate movements. Rather, the portfolio
management team has searched for relative value among the various sectors in
which the Fund invests.
Your Fund took advantage of the strong economy to increase its emphasis on high
grade and investment grade corporate bonds and mortgage-backed securities, while
de-emphasizing U.S. Treasuries. Between December 31, 1996 and June 30, 1997, for
example, the allocation to U.S. government bonds in the portfolio was reduced
from 21% to 9% of net assets, while the allocation to industrial bonds was
increased from 13% to 16% and the allocation to collateralized mortgage
obligations was increased from 21% to 28%.
The Fund also has increased its allocation to foreign securities from 9% on
December 31, 1996 to approximately 24% at the end of the fiscal year. The
foreign emphasis was increased to take advantage of the yield advantage of
foreign bonds and to give the portfolio greater diversification. The Fund, which
has hedged all foreign securities back into the U.S. dollar to protect against
currency fluctuations, has invested in government bonds issued in Canada,
Denmark and Germany. All three countries are enjoying low inflation and
benefiting from sound fiscal policies.
PORTFOLIO COMPOSITION JUNE 30, 1997
(AS A PERCENTAGE OF NET ASSETS)
(A pie graph appears here. See table below for plot points)
Repurchase agreements and other net assets 2.2%
U.S Government 8.8%
Financial Corp. 15.3%
Industrial Corp. 15.9%
International/U.S.$ 15.4%
International/non-U.S.$* 8.8%
Mortgage-backed 27.5%
Asset-backed 6.1%
* NON-U.S.-DOLLAR-DENOMINATED BONDS WERE FULLY HEDGED BACK INTO U.S. CURRENCY.
PORTFOLIO ALLOCATIONS ARE SUBJECT TO CHANGE.
OUTLOOK
We believe the economy may increase its growth rate in the third quarter of 1997
after the apparent slowdown of the second, with gross domestic product growing
at an anticipated annualized rate of 2 1/2-to-3% during the second half of the
year. At the same time, we believe inflation can be contained within the present
2 1/2-to-3% range, and that interest rates will remain stable. We will continue,
however, to monitor wage costs very closely to watch for early signs of
inflation. With this favorable outlook, we anticipate a continued emphasis on
corporate and mortgage-backed securities for at least the next several months.
Thank you for your support of Keystone Intermediate Term Bond Fund.
Sincerely,
/s/ALBERT H. ELFNER, III
ALBERT H. ELFNER, III
CHAIRMAN
Keystone Investment Management Company
/s/CHRISTOPHER P. CONKEY
CHRISTOPHER P. CONKEY
SENIOR VICE PRESIDENT
CHIEF INVESTMENT OFFICER, FIXED INCOME
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the Assets of
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
a Series of
BLANCHARD FUNDS
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(800) 829-3863
By and In Exchange For Shares of
EVERGREEN INTERMEDIATE TERM BOND FUND
a Series of
EVERGREEN FIXED INCOME TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 343-2898
This Statement of Additional Information, relating specifically to the
proposed transfer of the assets and liabilities of Blanchard Short-Term Flexible
Income Fund ("Short-Term"), a series of Blanchard Funds, to Evergreen
Intermediate Term Bond Fund ("Evergreen Intermediate"), in exchange for Class A
shares of beneficial interest, $.001 par value per share, of Evergreen
Intermediate, consists of this cover page and the following described documents,
each of which is attached hereto and incorporated by reference herein:
(1) The Statement of Additional Information of Evergreen
Intermediate dated November 10, 1997; (To be filed by
amendment)
(2) The Statement of Additional Information of Short-Term dated
August 31, 1997; (To be filed by amendment)
(3) Annual Report of Short-Term for the year ended September 30,
1997; (To be filed by amendment)
(4) Annual Report of Evergreen Intermediate Term Bond Fund
(formerly known as Keystone Intermediate Term Bond Fund) for
the year ended June 30, 1997; (To be filed by amendment) and
(5) Pro Forma Combining Financial Statements (unaudited) dated June
30, 1997.
This Statement of Additional Information, which is not a prospectus,
supplements, and should be read in conjunction with, the Prospectus/Proxy
Statement of Evergreen Intermediate and Short-Term dated January 5, 1998. A copy
of the Prospectus/Proxy Statement may be obtained without charge by
<PAGE>
calling or writing to Evergreen Intermediate or Flexible Income at the telephone
numbers or addresses set forth above.
The date of this Statement of Additional Information is January 5,
1998.
Evergreen Intermediate Term Bond Fund
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
SCHEDULE OF INVESTMENTS (000's omitted)
June 30, 1997
<TABLE>
<CAPTION>
Evergreen IntermediateBlanchard Short-Term Pro Forma
Term Bond Fund Flexible Income Fund Combined
Maturity Market Market Market
Coupon Date Principal Value Principal Value AdjustmPrincipal Value
Asset-Backed Securities -1.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Southern Pacific Secured Assets Corp. 7.60% 10/25/27 1,000 1,002 1,000 $1,002
U.S. Home Equity Loan Asset Backed 9.13 4/15/21 750 753 750 753
Total Asset-Backed Securities (Cost $1,748) 1,755 1,755
Corporate Bonds and Notes-28.7%
Aerospace/Defense - 0.7%
Sequa Corp. 8.75 12/15/01 $ 500 512 500 512
UNC Inc. 9.13 7/15/03 700 740 700 740
1,252 1,252
Airlines - 0.1%
US Air Inc. 9.80 1/15/00 200 208 200 208
Banks - 0.1%
Cenfed Financial Corp ., Senior
Debenture (a) 11.17 12/15/01 8 8 8 8
Harris Bancorp. 9.38 6/1/01 12 13 12 13
Nations Bank Corp. 8.13 6/15/02 31 33 31 33
NBD Bank N.A., Subordinated Note 8.25 11/1/24 62 69 62 69
123 123
Chemicals -1.9%
Borden Chemicals & Plastics Operating
Limited Partnership 9.50 5/1/05 500 528 500 528
Harris Chemical North America 10.25 7/15/01 500 519 500 519
ISP Holdings Inc. 9.00 10/15/03 300 312 300 312
Kaiser Aluminum & Chemical Group 9.88 2/15/02 500 516 500 516
SIFTO Canada Inc. 8.50 7/15/00 600 606 600 606
Uniroyal Chemical Corp. 9.00 9/1/00 700 730 700 730
3,211 3,211
Consumer Related - 3.0%
Chiquita Brands International 9.63 1/15/04 750 800 750 800
HMH Properties, Inc. 9.50 5/15/05 800 836 800 836
Revlon Consumer Products Corp. 9.38 4/1/01 1,000 1,033 1,000 1,033
RJR Nabisco, Inc. 8.75 7/15/07 2,460 2,496 2,460 2,496
5,165 5,165
Containers-Paper/Plastic - 1.0%
Container Corp. of America 11.25 5/1/04 500 550 500 550
Gaylord Container Corp. 11.50 5/15/01 700 738 700 738
Sea Containers Ltd, 9.50 7/1/03 500 521 500 521
1,809 1,809
Diversified -0.3%
Belo (A. H.) Corporation 7.13 6/1/07 500 496 500 496
Entertainment - 3.0%
Caesars World, Inc. 8.88 8/15/97 1,000 1,035 1,000 1,035
Harrah's Operations, Inc. 8.75 3/15/00 1,000 1,033 1,000 1,033
Station Casions, Inc. 9.63 6/1/03 900 896 900 896
Time Warner, Inc. 9.63 5/1/02 1,000 1,107 1,000 1,107
Trump Hotels & Casino Resorts, Inc. 11.25 5/1/06 600 588 600 588
Viacom, Inc. 8.00 7/7/06 500 485 500 485
5,144 5,144
Finance & Banking - 3.9%
Amsouth Bancorporation 6.75 11/1/25 1,000 978 1,000 978
Associates Corporation North America, Note 5.96 5/15/37 100 101 100 101
Chase Manhattan Corporation 9.38 7/1/01 1,250 1,359 1,250 1,359
CIT Group Holdings Inc. 9.25 3/15/01 1,000 1,084 1,000 1,084
General Electric Capital Corp. 6.29 12/15/07 39 38 39 38
General Motors Acceptance Corp. 7.13 5/1/01 500 506 500 506
Goldman Sachs Group L.P. (a) 6.38 6/15/00 15 15 15 15
Grand Metropolitan Investment Corp. 6.50 9/15/99 23 23 23 23
KFW International Finance, Guaranteed N 8.85 6/15/99 15 16 15 16
Navistar Financial Corp. 8.88 11/15/98 500 511 500 511
Presidential Life Corp. 9.50 12/15/00 500 520 500 520
Prudential Insurance 7.13 7/1/07 500 499 500 499
Reliance Group Holdings, Inc. 9.00 11/15/00 1,000 1,038 1,000 1,038
4,619 2,069 6,688
Industrials - 3.9%
Armco Inc. 9.38 11/1/00 850 875 850 875
Baxter International, Inc. 9.25 12/15/99 31 33 31 33
Bethlehem Steel Corp. 10.38 9/1/03 350 367 350 367
Deer & Co. 8.95 6/15/19 9 10 9 10
Exide Corp. 10.75 12/15/02 500 529 500 529
Ford Motor Co. 9.00 9/15/01 700 756 700 756
Jet Equipment Trust, (a) 9.41 6/15/10 31 35 31 35
John Q. Hammons Hotels 8.88 2/15/04 500 508 500 508
Occidental Petroleum Corp. 8.50 11/9/01 800 847 800 847
Philip Morris Cos Inc. 7.20 2/1/07 1,000 987 1,000 987
Transocean Offshore Inc. 7.45 4/15/27 1,000 1,029 1,000 1,029
Unisys Corp., 9.50 7/15/98 500 504 500 504
Unisys Corp., 10.63 10/1/99 300 312 300 312
3,697 3,095 6,792
Oil Refining - 2.0%
Clark Refining & Marketing Inc. 10.50 12/1/01 1,000 1,037 1,000 1,037
PDV America 7.25 8/1/98 500 503 500 503
USX Marathon Corp. 5.75 7/1/01 2,000 1,928 2,000 1,928
3,468 3,468
Paper Products 1.8%
Fort Howard Corp. 9.00 2/1/06 500 529 500 529
Repap New Brunswick Inc 8.88 7/15/02 500 497 500 497
Repap New Brunswick Inc 9.88 7/15/02 500 505 500 505
Repap Wisconsin, Inc. 9.25 2/1/02 700 709 700 709
Stone Container Corp. 9.88 2/1/01 700 700 700 700
Stone Container Corp. 11.00 8/15/99 200 206 200 206
3,146 3,146
Printing & Publishing -0.4%
World Color Press 9.13 3/15/03 600 624 600 624
Real Estate & Lodging - 0.5%
Host Marriott Travel Plaza 9.50 5/15/05 405 425 405 425
Williams Scotsman Inc. 9.88 6/1/07 500 503 500 503
928 928
Services - 0.3%
Prime Hospitality Corp. 9.25 1/15/06 500 517 500 517
Steel - 0.4%
Wheeling Pittsburgh Corp. 9.38 11/15/03 750 727 750 727
Telecommunications -3.8%
Cablevision Systems Corp. 10.75 4/1/04 1,000 1,037 1,000 1,037
Centennial Cellular Corp. 8.88 11/1/01 750 748 750 748
Century Communications Corp. 9.75 2/15/02 750 780 750 780
Comcast Corp. 9.38 5/15/05 1,000 1,056 1,000 1,056
Lenfest Communications Inc. 8.38 11/1/05 1,000 989 1,000 989
Marcus Cable Operations Co. 13.50 8/1/04 500 436 500 436
Olympus Communications 10.63 11/15/06 500 528 500 528
Rogers Cablesystems 9.63 8/1/02 1,000 1,057 1,000 1,057
6,631 6,631
Textile Products - 0.3%
Dominion Textiles Inc. 8.88 11/1/03 500 515 500 515
Transportation - 0.3%
Norfolk Southern Corp. 7.05 5/1/37 500 507 500 507
Utilities-Electric -0.9%
ALLTEL Corp. 6.50 11/1/13 48 44 48 44
Carolina Power & Light Co. 8.63 9/15/21 31 35 31 35
Jones Intercable, Inc. 9.63 3/15/02 500 526 500 526
Long Island Lighting Co. 7.30 7/15/99 1,000 1,012 1,000 1,012
79 1,538 1,617
Total Corporate Bonds and Notes (Cost $48,118) 9,521 40,047 49,568
Collateralized Mortgage Obligations - 8.7%
Independent National Mtge Corp. (a)(b) 7.84 12/26/26 998 1,001 998 1,001
CMC Securities Corp. 7.50 2/25/23 595 595 595 595
Chase Commercial Mortgage Secs Corp. (b) 7.37 6/19/29 500 508 500 508
Chase Mortgage Finance Corp. (a)(b) 7.87 11/25/25 479 468 479 468
Criimi Mae Financial Corp. (b) 7.00 1/1/33 444 434 444 434
Federal National Mortgage Assoc. (b) (c) 3.26 8/25/23 1,000 758 1,000 758
GE Capital Mortgage Services Inc. (b) 6.50 3/25/24 654 626 654 626
Merrill Lynch Trust (b) 8.45 11/1/18 500 525 500 525
Merrill Lynch Mortgage Investors 1990-I
Class A 9.20 1/15/11 733 732 733 732
Morgan Stanley Capital I Inc., 1997 C1
Class B (b) 7.69 1/15/07 700 725 700 725
Paine Webber Mortgage Acceptance Corp.(b) 7.50 5/25/23 953 951 953 951
Resolution Trust Corp., (b) 7.50 10/25/2 1,250 1,256 1,250 1,256
Resolution Trust Corp 1992-C1, Class A1 8.80 8/25/23 849 855 849 855
Resolution Trust Corp 1992-3, Class A2 6.89 9/25/19 2,001 1,995 2,001 1,995
Resolution Trust Corp 1992-3, Class A3 6.96 5/25/21 1,385 1,375 1,385 1,375
Resolution Trust Corp 1992-6, Class A4 7.52 11/25/25 1,486 1,492 1,486 1,492
Ryland Acceptance Corp. Four (b) 7.95 1/1/19 698 709 698 709
Total Collateralized Mortgage Obligations (Cost $14,801) 7,961 7,044 15,005
Mortgage-Backed Securities -0.7%
Federal Home Loan Mortgage Corp 6.55 9/1/26 39 40 39 40
Federal Home Loan Mortgage Corp., Global
Note 6.70 1/5/07 750 745 750 745
Federal Home Loan Mortgage Corp 7.50 5/1/09 31 32 31 32
Federal Home Loan Mortgage Corp 8.00 10/1/25 19 19 19 19
Federal National Mortgage Assn. 6.69 12/1/25 20 21 20 21
Govenmnet National Mortgage Assn. 6.00 6/20/26 22 22 22 22
Govenmnet National Mortgage Assn. 6.50 10/15/23-
10/15/26 129 129 129 129
Govenmnet National Mortgage Assn. 7.00 9/20/25-
3/15/26 61 60 61 60
Govenmnet National Mortgage Assn. 7.13 7/20/25 48 49 48 49
Govenmnet National Mortgage Assn. 7.50 9/15/23-
3/15/26 56 56 56 56
Govenmnet National Mortgage Assn. 8.00 10/15/24 49 50 49 50
Govenmnet National Mortgage Assn. 9.00 4/15/20-
8/15/21 19 20 19 20
Govenmnet National Mortgage Assn. 9.50 2/15/21 9 9 9
Paine Webber Trust 9.00 10/1/12 6 6 6
Total Mortgage-Backed Securities (cost $1,253) 1,258 1,258
U.S. Agency Obligations -0.1%
Farm Credit Systems Financial Assistanc 8.80 6/10/05 39 43 39 43
Federal Home Loan Bank, Consolidated Bond 7.70 9/20/00 46 49 46 49
Total U.S. Agency Obligations (cost $91) 92 92
U. S. Treasury Obligations - 50.8%
U.S. Treasury Bonds 6.88 8/15/25 177 178 177 178
U.S. Treasury Bonds 7.50 11/15/16 69 74 69 74
U.S. Treasury Bonds 8.75 5/15/17 22 26 22 26
U.S. Treasury Bonds 8.88 8/15/17 61 74 61 74
U.S. Treasury Notes 5.13 12/31/9 22 21 22 21
U.S. Treasury Notes 5.63 8/31/97 199 200 199 200
U.S. Treasury Notes 5.75 12/31/98 15,000 14,958 15,000 14,958
U.S. Treasury Notes 6.25 3/31/99 20,000 20,075 20,000 20,075
U.S. Treasury Notes 6.38 1/15/99 94 95 94 95
U.S. Treasury Notes 6.88 8/31/99 30,000 30,459 30,000 30,459
U.S. Treasury Notes 6.13 5/15/98 20,000 20,062 20,000 20,062
U.S. Treasury Notes 6.50 10/15/07 1,810 1,802 1,810 1,802
U.S. Treasury Notes 8.25 7/15/98 25 25 25
Total U. S. Treasury Notes (Cost $87,549) 2,495 85,554 88,049
Yankee Obligations- 0.2%
Bayerische Landesbank Girozen New York,
Tranche Sr 00001 6.38 8/31/00 39 38 39 38
Bayerische Landesbank Girozen New York,
Tranche Sr 00007 6.20 2/9/06 31 29 31 29
Hydro-Quebec 8.00 2/1/13 46 49 46 49
Japan Finance Corp. Municipal Enterprises,
Guaranteed Bond 6.85 4/15/06 54 54 54 54
Manitoba Province (Canada) 8.00 4/15/02 31 33 31 33
Petro Canada Ltd. 8.60 1/15/10 12 14 12 14
Philips Electers N.V., Debenture 7.13 5/15/25 82 82 82 82
Svenska Handelsbanken 8.13 8/15/07 31 33 31 33
Svenska Handelsbanken 8.35 7/15/04 15 17 15 17
Westpac Banking Subordinated Debenture 9.13 8/15/01 11 12 11 12
Total Yankee Obligations (cost $351) 361 361
Foreign Bond ( US Dollar Denominated) - 3.2%
Export Import Bank Korea, Note 7.10 3/15/07 500 505 500 505
Fomento Economico Mexico, Euro-Dollars 9.50 7/22/97 1,250 1,250 1,250 1,250
Korea Elec Power Corp, Debenture 7.00 2/1/27 500 490 500 490
Southern Peru Limited, Secured
Export Notes (a) 7.90 5/30/07 1,000 1,019 1,000 1,019
Telebras 10.38 9/9/97 1,200 1,211 1,200 1,211
Videotron Group 10.63 2/15/05 1,000 1,110 1,000 1,110
Total Foreign Bond ( US Dollar Denominated) (Cost $5,473) 4,475 1,110 5,585
Foreign Bond ( Non-US Dollar Denominated) -1.5 %
Canada Government, Canadian Series A79 8.75 12/1/05 1,150 968 1,150 CAD 968
Denmark Kingdom 7.00 11/15/07 3,698 585 3,698 DKK 585
Germany Federal Republic 6.88 5/12/05 1,575 986 1,575 DEM 986
Nykredit 6.00 10/1/26 18 2 18 DKK 2
Total Foreign Bond ( Non-US Dollar Denominated) (Cost $2,689) 2,541 2,541
Repurchase Agreements - 3.2%
Credit Suisse First Boston, dated 6/30/97 (d) 5.75 7/1/97 4,850 4,850 4,850 4,850
Donaldson, Lufkin & Jenrette Securities (d) 5.90 7/1/97 316 316 316 316
Keystone Joint Repurchase Agreement,
(investments in
repurchase agreements in a joint trading
account, dated 6/30/97, maturity value
$243)(d) 6.04 7/1/97 243 243 243 243
Total Repurchase Agreements (Cost $5,409) 559 4,850 5,409
Total Investments (Cost $167,482) 31,018 138,605 169,623
Other Assets and Liabilities (net) 2,206 1,335 3,541
Net Assets 33,224 $139,940 173,164
(a) Securities that may be sold to qualified institutional buyers under Rule 144A or securities offered pursuant
to Section 4(2) of the Securities Act of 1933, as amended. These securities have been determined to be liquid
under the guidelines established by the Board of Trustees.
(b) The estimated maturity of a Collateralized Mortgage Obligation ("CMO") is based on current and projected
prepayment rates. Changes in interest rates can cause the estimated maturity to differ from the listed date.
(c) Inverse floater, resets monthly.
(d) The repurchase agreements are fully collateralized by U.S. government and/or agency obligations based on market
prices at the date of the portfolio.
Forward Foreign Currency Exchange Transactions Net
Unrealized
Exchange U.S. $ Value In Exchange Appreciation/
Date June 30, 1997 for U.S. $ (Depreciation)
Forward Foreign Currency Exchange Contracts to Buy:
Contracts to Receive
8/12/97 1,150 Deutsche Marks $ 661 679 $ (18)
Forward Foreign Currency Exchange Contracts to Sell:
Contracts to Deliver
8/27/97 1,324 Canadian Dollar 962 971 9
8/12/97 2,860 Deutsche Marks 1,645 1,675 30
8/20/97 4,042 Danish Krone 611 627 16
$ 55
See Notes to Pro Forma Combining Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN INTERMEDIATE TERM BOND FUND Pro Forma Combining Financial Statements
(unaudited) Statement of Assets and Liabilities (000's) June 30, 1997
Evergreen Blanchard
Intermediate Short-Term Flexible Pro Forma
Bond Fund Income Fund Adjustments Combined
<S> <C> <C> <C> <C>
Assets:
Investments at value (cost $165,078) $31,018 $138,605 $169,623
Cash 2 0 2
Interest receivable 2,539 2,708 5,247
Receivable for investment sold 1,389 0 1,389
Receivable for Fund shares sold 14 0 14
Unrealized appreciation from forward foreign currency
contracts 55 0 55
Due from investment adviser 17 0 17
Prepaid expenses 35 17 52
Total Assets 35,069 141,330 176,399
Liabilities:
Payable for investments purchased 1,358 0 1,358
Dividends payable 69 663 732
Payable for Fund shares redeemed 175 0 175
Unrealized depreciation from forward foreign
currency contracts 18 0 18
Distribution fee payable 9 34 43
Due to related parties 137 87 224
Due to custodian 0 429 429
Accrued liabilities and other expenses 79 177 256
Total Liabilities 1,845 1,390 3,235
Net Assets $33,224 $139,940 $173,164
Net assets are comprised of:
Paid-in capital 41,548 137,752 179,300
Undistributed net investment income (accumulated
distributions in excess of net investment income) (8,533) 604 (7,929)
Accumulmated net realized gain (loss) on investments
and foreign currency related transactions 238 (623) (385)
Net unrealized appreciation (depreciation) on
investments and foreign currency related transactions (29) 2,207 2,178
Net Assets $33,224 $139,940 $173,164
Class A Shares
Net Assets $13,379 $139,940 $153,319
Shares of Beneficial Interest Outstanding 1,499 46,285 (30,640) 17,144
Net Asset Value $8.93 $3.02 $8.93
Maximum Offering Price (3.25%) $9.23 $9.23
8.943
Class B Shares
Net Assets $12,381 $12,381
Shares of Beneficial Interest Outstanding 1,385 1,385
Net Asset Value $8.95 $8.95
Class C Shares
Net Assets $7,288 $7,288
Shares of Beneficial Interest Outstanding 815 815
Net Asset Value $8.94 $8.94
Class C Shares
Net Assets $176 $176
Shares of Beneficial Interest Outstanding 20 20
Net Asset Value $8.93 $8.93
EVERGREEN INTERMEDIATE TERM BOND FUND Pro Forma Combining Financial Statements
(unaudited) Statement of Operations (000's) Year ended June 30, 1997
Evergreen Blanchard
Intermediate Short-Term Flexible Pro Forma
Bond Fund Income Fund Adjustment Combined
Investment Income:
Interest income $2,894 $10,508 $13,402
Expenses:
Advisory fee 272 1,139 (218)a 1,193
Administrative services fees 11 147 (108)b 50
Distribution fee 269 380 649
Transfer agent fee 115 399 (354)c 160
Custodian fee 53 51 138 b 242
Reports and notices to shareholders 27 57 (48)c 36
Registration and filing fees 29 17 (17)c 29
Professional fees 29 86 (47)c 68
Other 0 23 (5)b 18
Less: Fee waivers and/or reimbursements (166) (202) 248 (120)
Total Expenses 639 2,097 (411) 2,325
Less: Indirectly paid expenses (7) 0 (8) (15)
Net expenses 632 2,097 (419) 2,310
Net investment income 2,262 8,411 419 11,092
Net realized and unrealized gain (loss) on investments
and foreign currency
related transactions:
Net realized gain on investments and foreign currency
related transactions (1,495) 430 (1,065)
Net change in unrealized appreciation (depreciation) on
investments and foreign currency related transaction 1,144 1,683 2,827
Net realized and unrealized gain on investments
and foreign currency related transactions (351) 2,113 0 1,762
Net increase in net assets resulting from operations $1,911 $10,524 (419) $12,854
a Reflects a decrease based on the surviving fund's fee schedule.
b Reflects an increase (decrease) based on the assets of the combined fund.
c Reflects expected cost savings based on combining the two funds.
</TABLE>
Evergreen Intermediate Term Bond Fund
Notes to Pro Forma Combining Financial Statements (Unaudited)
June 30, 1997
1. Basis of Combination - The Pro Forma Combining Statement of Assets and
Liabilities, including the Pro Forma Schedule of Investments, and the related
Pro Forma Combining Statement of Operations (APro Forma Statements@) reflect the
accounts of Evergreen Intermediate Term Bond Fund (AEvergreen@) and Blanchard
Short-Term Flexible Income Fund (ABlanchard@) at June 30, 1997 and for the year
then ended. The information relating to Evergreen gives effect to the proposed
acquisition of the assets of Evergreen Intermediate Term Bond Fund II and
Evergreen (formerly, Keystone) Intermediate Term Bond Fund (expected to occur on
or about January 23, 1998) and the anticipated liquidation of Trust shareholders
in Class Y of Evergreen Intermediate Term Bond Fund II prior to January 23, 1998
(the date of the acquisition).
The Pro Forma Statements give effect to the proposed Agreement and Plan of
Reorganization (the AReorganization@) to be submitted to shareholders of
Blanchard. The Reorganization provides for the acquisition of all assets and
liabilities of Blanchard by Evergreen, in exchange for Class A shares of
Evergreen. Thereafter, there will be a distribution of Class A shares of
Evergreen to shareholders of Blanchard in liquidation and subsequent termination
thereof. As a result of the Reorganization, the shareholders of Blanchard will
become the owners of that number of full and fractional Class A shares of
Evergreen having an aggregate net asset value equal to the aggregate net asset
value of their shares of Blanchard as of the close of business immediately prior
to the date that Blanchard assets are exchanged for Class A shares of Evergreen.
The Pro Forma Statements reflect the expenses of each Fund in carrying out
its obligations under the Reorganization as though the merger occurred at the
beginning of the period presented.
The information contained herein is based on the experience of each Fund
for the year ended June 30, 1997 and is designed to permit shareholders of the
consolidating mutual funds to evaluate the financial effect of the proposed
Reorganization. The expenses of Blanchard in connection with the Reorganization
(including the cost of any proxy soliciting agents) will be borne by First Union
National Bank of North Carolina.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of Blanchard which are incorporated by reference in the
Statement of Additional Information.
2. Shares of Beneficial Interest - The Pro Forma net asset values per share
assume the issuance of Class A shares of Evergreen which would have been issued
at June 30, 1997 in connection with the proposed Reorganization. Shareholders of
Blanchard would receive Class A shares of Evergreen based on a conversion ratio
determined on June 30, 1997. The conversion ratio is calculated by dividing the
net asset value of Blanchard by the net asset value per share of the Class A
shares of Evergreen.
3. Pro Forma Operations - The Pro Forma Combining Statement of Operations
assumes similar rates of gross investment income for the investments of each
Fund. Accordingly, the combined gross investment income is equal to the sum of
the Funds= gross investment income. Pro Forma operating expenses include the
actual expenses of the Funds adjusted to reflect the expected expenses of the
combined entity. The investment advisory and distribution fees have been charged
to the combined Fund based on the fee schedule in effect for Evergreen at the
combined level of average net assets for the year ended June 30, 1997.
<PAGE>
EVERGREEN FIXED INCOME TRUST
PART C
OTHER INFORMATION
Item 15. Indemnification.
The response to this item is incorporated by reference to "Liability
and Indemnification of Trustees" under the caption "Comparative Information on
Shareholders' Rights" in Part A of this Registration Statement.
Item 16. Exhibits:
1. Declaration of Trust. Incorporated by reference to Registrant's
Registration Statement on Form N-1A filed on October 8, 1997 - Registration
No. 333-37433 ("Form N-1A Registration Statement").
2. Bylaws. Incorporated by reference to the Form N-1A Registration Statement.
3. Not applicable.
4. Agreement and Plan of Reorganization. Exhibit A to Prospectus contained in
Part A of this Registration Statement.
5. Declaration of Trust Articles II., III.(6)(c), IV.(3), IV.(8), V., VI., VII.
and VIII. and By-Laws Articles II., III and VIII.
6(a). Form of Investment Advisory Agreement between Keystone Investment
Management Company and the Registrant. Incorporated by reference to the Form
N-1A Registration Statement.
6(b). Form of Interim Management Contract. Exhibit B to Prospectus
contained in Part A of this Registration Statement.
6(c). Form of Interim Sub-Advisory Agreement. Exhibit C to Prospectus
contained in Part A of this Registration Statement.
7(a). Principal Underwriting Agreement between Evergreen Distributor,
Inc. and the Registrant. Incorporated by reference to the Form N-1A
Registration Statement.
7(b). Form of Dealer Agreement for Class A, Class B and Class C shares used by
Evergreen Distributor, Inc. Incorporated by reference to the Form N- 1A
Registration Statement.
8. Deferred Compensation Plan. Incorporated by reference to the Form N-1A
Registration Statement.
<PAGE>
9. Custody Agreement between State Street Bank and Trust Company and the
Registrant. Incorporated by reference to the Form N-1A Registration Statement.
10(a). Rule 12b-1 Distribution Plan. Incorporated by reference to the Form N-1A
Registration Statement.
10(b). Multiple Class Plan. Incorporated by reference to the Form N-1A
Registration Statement.
11. Opinion and consent of Sullivan & Worcester LLP. To be filed by amendment.
12. Tax opinion and consent of Sullivan & Worcester LLP. To be filed by
amendment.
13. Not applicable.
14(a). Consent of KPMG Peat Marwick LLP. Filed herewith.
14(b). Consent of Deloitte & Touche LLP. To be filed by amendment.
15. Not applicable.
16. Powers of Attorney. Filed herewith.
17(a). Form of Proxy Card. Filed herewith.
17(b). Registrant's Rule 24f-2 Declaration. Incorporated by reference to the
Form N-1A Registration Statement.
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus that is
a part of this Registration Statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933,
the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file, by post-effective
amendment, an opinion of counsel or copy of an Internal Revenue Service ruling
<PAGE>
supporting the tax consequences of the proposed Reorganization within a
reasonable time after receipt of such opinion or ruling.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant, in the City of New York and State
of New York, on the 3rd day of December, 1997.
EVERGREEN FIXED INCOME TRUST
By: /s/ John J. Pileggi
----------------------
Name: John J. Pileggi
Title: President
As required by the Securities Act of 1933, the following persons have
signed this Registration Statement in the capacities indicated on the 3rd day of
December, 1997.
Signatures Title
- ---------- -----
/s/John J. Pileggi President and
- ------------------ Treasurer
John J. Pileggi
/s/Laurence B. Ashkin* Trustee
- ---------------------
Laurence B. Ashkin
/s/Charles A. Austin III* Trustee
- -------------------------
Charles A. Austin III
/s/K. Dun Gifford* Trustee
- -----------------
K. Dun Gifford
/s/James S. Howell* Trustee
- ------------------
James S. Howell
/s/Leroy Keith, Jr.* Trustee
- -------------------
Leroy Keith, Jr.
/s/Gerald M. McDonnell* Trustee
- ----------------------
Gerald M. McDonnell
/s/Thomas L. McVerry* Trustee
- --------------------
Thomas L. McVerry
<PAGE>
/s/William Walt Pettit* Trustee
- ---------------------
William Walt Pettit
/s/David M. Richardson* Trustee
- ----------------------
David M. Richardson
/s/Russell A. Salton III* Trustee
- -------------------------
Russell A. Salton III
/s/Michael S. Scofield* Trustee
- ----------------------
Michael S. Scofield
/s/Richard J. Shima* Trustee
- -------------------
Richard J. Shima
* By: /s/Martin J. Wolin
------------------
Martin J. Wolin
Attorney-in-Fact
Martin J. Wolin, by signing his name hereto, does hereby sign this
document on behalf of each of the above-named individuals pursuant to powers of
attorney duly executed by such persons and included as Exhibit 16 to this
Registration Statement.
<PAGE>
INDEX TO EXHIBITS
N-14
EXHIBIT NO.
14 Consent of KPMG Peat Marwick LLP
16 Powers of Attorney
17(a) Form of Proxy
- --------------------
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Trustees and Shareholders
Evergreen Intermediate Term Bond Fund
We consent to the use of our report dated August 8, 1997 for Evergreen
Intermediate Term Bond Fund incorporated by reference herein and to the
references to our firm under the caption "FINANCIAL STATEMENTS AND EXPERTS" in
the Prospectus/proxy statement.
/s/KPMG Peat Marwick LLP
------------------------
KPMG Peat Marwick LLP
Boston, Massachusetts
December 3, 1997
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/Laurence B. Ashkin Director/Trustee
- ---------------------
Laurence B. Ashkin
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/Charles A. Austin, III Director/Trustee
- -------------------------
Charles A. Austin, III
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/K. Dun Gifford Director/Trustee
- -----------------
K. Dun Gifford
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/James S. Howell Director/Trustee
- ------------------
James S. Howell
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/Leroy Keith, Jr. Director/Trustee
- -------------------
Leroy Keith, Jr.
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/Gerald M. McDonnell Director/Trustee
- ----------------------
Gerald M. McDonnell
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/Thomas L. McVerry Director/Trustee
- --------------------
Thomas L. McVerry
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/William Walt Pettit Director/Trustee
- ----------------------
William Walt Pettit
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/David M. Richardson Director/Trustee
- ----------------------
David M. Richardson
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/Russell A. Salton, III MD Director/Trustee
- ----------------------------
Russell A. Salton, III MD
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/Michael S. Scofield Director/Trustee
- ----------------------
Michael S. Scofield
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/Richard J. Shima Director/Trustee
- -------------------
Richard J. Shima
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE TODAY!
Please detach at perforation before mailing.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
PROXY FOR THE MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 20, 1998
The undersigned, revoking all Proxies heretofore given, hereby appoints
, and or any of them as Proxies of the undersigned, with full power of
substitution, to vote on behalf of the undersigned all shares of Blanchard
Short-Term Flexible Income Fund ("Short-Term") that the undersigned is entitled
to vote at the special meeting of shareholders of Short-Term to be held at 2:00
p.m. on Friday, February 20, 1998 at the offices of the Evergreen Funds, 200
Berkeley Street, Boston, Massachusetts 02116, and at any adjournments thereof,
as fully as the undersigned would be entitled to vote if personally present.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON
THIS PROXY. If joint owners, EITHER may sign this
Proxy. When signing as attorney, executor,
administrator, trustee, guardian, or custodian for a
minor, please give your full title. When signing on
behalf of a corporation or as a partner for a
partnership, please give the full corporate or
partnership name and your title, if any.
Date , 199
----------------------------------------
----------------------------------------
Signature(s) and Title(s), if applicable
<PAGE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF BLANCHARD
FUNDS. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO
BE TAKEN ON THE FOLLOWING PROPOSALS. THE SHARES REPRESENTED HEREBY WILL BE VOTED
AS INDICATED OR FOR THE PROPOSALS IF NO CHOICE IS INDICATED. THE BOARD OF
TRUSTEES OF BLANCHARD FUNDS RECOMMENDS A VOTE FOR THE PROPOSALS. PLEASE MARK
YOUR VOTE BELOW IN BLUE OR BLACK INK. DO NOT USE RED INK. EXAMPLE: X ---
1. To approve an Agreement and Plan of Reorganization whereby Evergreen
Intermediate Term Bond Fund, a series of Evergreen Fixed Income Trust, will (i)
acquire all of the assets of Short-Term in exchange for shares of Evergreen
Intermediate Term Bond Fund; and (ii) assume certain identified liabilities of
Short-Term, as substantially described in the accompanying Prospectus/Proxy
Statement.
- ---- FOR ---- AGAINST ---- ABSTAIN
2. To approve the proposed Interim Management Contract with Virtus
Capital Management, Inc.
- ---- FOR ---- AGAINST ---- ABSTAIN
3. To approve the proposed Interim Sub-Advisory Agreement between Virtus
Capital Management, Inc. and OFFITBANK.
- ---- FOR ---- AGAINST ---- ABSTAIN
4. To consider and vote upon such other matters as may properly come
before said meeting or any adjournments thereof.
<PAGE>
