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.
KEYSTONE GROWTH AND INCOME FUND (S-1)
(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. 2-10661); accordingly, no fee is payable herewith.
Pursuant to Rule 429, this Registration Statement relates to the aforementioned
registration on Form N-1A. A Rule 24f-2 Notice for the Registrant's fiscal year
ended August 31, 1997 was filed with the Commission on or about October 31,
1997.
It is proposed that this filing will become effective on January 2,
1998 pursuant to Rule 488 of the Securities Act of 1933.
<PAGE>
KEYSTONE GROWTH AND INCOME FUND (S-1)
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 Keystone Growth
and Income Fund (S-1) dated
December ___, 1997
13. Additional Information Statement of Additional
about the Company Being Information of Blanchard Funds
Acquired - Blanchard Growth & Income
Fund dated February 28, 1997
14. Financial Statements Financial Statements dated
August 31, 1997 of Keystone
Growth and Income Fund (S-1);
Financial Statements of
Blanchard Growth & Income Fund
dated October 31, 1997
Item of Part C of Form N-14
Incorporated by Reference to
15. Indemnification Part A Caption - "Comparative
Information on Shareholders'
Rights - Liability and
Indemnification of Trustees"
<PAGE>
16. Exhibits
Item 16. Exhibits
17. Undertakings Item 17. Undertakings
<PAGE>
BLANCHARD FUNDS
BLANCHARD GROWTH & INCOME FUND
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
January 5, 1998
Dear Shareholder,
I am writing to shareholders of the Blanchard Growth & 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 the withdrawal by the Fund of its investment
in Growth and Income Portfolio, in order to permit the current two-tier
structure of the Fund to be replaced, temporarily, by a one-tier structure
common to most mutual funds.
The second 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 Keystone Growth and Income Fund (S-1) in exchange for Class A
shares of Keystone Growth and Income Fund (S-1) and the assumption by Keystone
Growth and Income Fund (S-1) of certain liabilities of the Fund. You will
receive shares of Keystone Growth and Income Fund (S-1) having an aggregate net
asset value equal to the aggregate net asset value of your Fund shares. Details
about Keystone Growth and Income Fund (S-1)'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 third and final proposal requests shareholder consideration of an Interim
Investment Advisory Agreement between the Fund and Virtus Capital Management,
Inc. Information relating to the Interim Investment 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
<PAGE>
sign and 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.
Sincerely,
[Name]
[Title]
Blanchard Funds
<PAGE>
[SUBJECT TO COMPLETION, DECEMBER 3, 1997 PRELIMINARY COPY]
BLANCHARD FUNDS
BLANCHARD GROWTH & 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 Growth & Income Fund, a series of Blanchard Funds
("Growth & Income"), will be held at the offices of the Evergreen Funds, 200
Berkeley Street, 26th Floor, Boston, Massachusetts 02116, on February 20, 1998
at 2:00 p.m. for the following purposes:
1. To consider and act upon the proposal whereby Growth & Income would
withdraw its investment in Growth and Income Portfolio.
2. 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 Growth & Income by the Keystone Growth and Income Fund (S-1), a
series of Evergreen Equity Trust, ("Keystone Growth and Income") in exchange for
shares of Keystone Growth and Income and the assumption by Keystone Growth and
Income of certain identified liabilities of Growth & Income. The Plan also
provides for distribution of such shares of Keystone Growth and Income to
shareholders of Growth & Income in liquidation and subsequent termination of
Growth & Income. A vote in favor of the Plan is a vote in favor of the
liquidation and dissolution of Growth & Income.
3. To consider and act upon the Interim Management Contract between
Growth & Income and Virtus Capital
Management, Inc.
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 Blanchard Growth & Income
Fund have fixed the close of business on December 26, 1997 as the record date
for the determination of shareholders of Growth & Income entitled to notice of
and to vote at the Meeting or any adjournment thereof.
<PAGE>
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
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 GROWTH & INCOME FUND
a series of
Blanchard Funds
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By and in Exchange for Shares of
KEYSTONE GROWTH AND INCOME FUND (S-1)
a series of
Evergreen Equity Trust
200 Berkeley Street
Boston, Massachusetts 02116
This Prospectus/Proxy Statement is being furnished to shareholders of
Blanchard Growth & Income Fund ("Growth & Income") in connection with the
proposal whereby Growth & Income would (i) withdraw its investment in the Growth
and Income Portfolio (the "Portfolio"), thereby replacing Growth & Income's
current two-tier structure with a one-tier structure currently used by Keystone
Growth and Income Fund (S-1) ("Keystone Growth and Income") (hereinafter
referred to as the "Restructuring"); and (ii) all of the assets of Growth &
Income would be acquired by Keystone Growth and Income in exchange for shares of
Keystone Growth and Income and the assumption by Keystone Growth and Income of
certain identified liabilities of Growth & Income (hereinafter referred to as
the "Reorganization").
Unlike many other mutual funds, including Keystone Growth and Income,
which directly acquire and manage their own portfolios of securities, Growth &
Income seeks to achieve its investment objective by investing all of its assets
in the Portfolio, which is a separate registered investment company with an
identical investment objective to that of Growth & Income.
The Restructuring and a proposed Agreement and Plan of Reorganization
(the "Plan") are being submitted to shareholders of Growth & Income 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").
<PAGE>
Keystone Growth and Income and Growth & Income are sometimes
hereinafter referred to individually as the "Fund" and collectively as the
"Funds." Following the Reorganization, shares of Keystone Growth and Income will
be distributed to shareholders of Growth & Income in liquidation of Growth &
Income and such Fund will be terminated. Holders of shares of Growth & Income
will receive Class A shares of Keystone Growth and Income having the same Rule
12b-1 distribution-related fees as the shares of Growth & Income held by such
holders prior to the Reorganization. No initial sales charge will be imposed in
connection with Class A shares of Keystone Growth and Income received by holders
of shares of Growth & Income. As a result of the proposed Reorganization,
shareholders of Growth & Income will receive that number of full and fractional
shares of Keystone Growth and Income having an aggregate net asset value equal
to the aggregate net asset value of such shareholder's shares of Growth &
Income. The Reorganization is being structured as a tax-free reorganization for
federal income tax purposes.
Keystone Growth and Income is a separate series of Evergreen Equity
Trust, an open-end management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). Keystone Growth and Income
seeks the best possible growth of capital and long-term growth of income. Such
investment objective is substantially similar to that of Growth & Income which
seeks long-term capital appreciation and dividend income.
Shareholders of Growth & Income 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 Growth &
Income and Virtus. The Interim 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 Keystone Growth and Income
that shareholders of Growth & Income 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
<PAGE>
includes the financial statements of Keystone Growth and Income dated August 31,
1997 and Growth & Income dated October 31, 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 Keystone Growth and Income at 200
Berkeley Street, Boston, Massachusetts 02116, or by calling toll-free
1-800-343-2898.
The Prospectus of Keystone Growth and Income dated December __, 1997,
as supplemented, and its Annual Report for the period ended August 31, 1997 are
incorporated herein by reference in their entirety. Shareholders of Growth &
Income will receive, with this Prospectus/Proxy Statement, copies of the
Prospectus of Keystone Growth and Income. Additional information about Keystone
Growth and Income 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 Keystone Growth and Income at the
address or telephone number listed in the preceding paragraph.
The Prospectus of Growth & Income dated February 28, 1997 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 Growth & Income 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 and B to this Prospectus/Proxy Statement are a
copy of the Plan and the Interim 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
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 ....................................................................9
Proposed Restructuring and Plan of Reorganization...................9
Tax Consequences...................................................11
Investment Objectives and Policies of the Funds....................11
Comparative Performance Information for each Fund..................12
Management of the Funds............................................13
Investment Advisers................................................13
Portfolio Management...............................................15
Distribution of Shares.............................................15
Purchase and Redemption Procedures.................................16
Exchange Privileges................................................17
Dividend Policy....................................................17
Risks ..........................................................18
REASONS FOR THE REORGANIZATION..............................................19
The Restructuring..................................................22
Agreement and Plan of Reorganization...............................23
Federal Income Tax Consequences....................................25
Pro-forma Capitalization...........................................26
Shareholder Information............................................27
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES............................28
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 Growth & Income's Investment
Adviser.......................................................37
ADDITIONAL INFORMATION......................................................37
VOTING INFORMATION CONCERNING THE MEETING...................................38
FINANCIAL STATEMENTS AND EXPERTS............................................40
<PAGE>
LEGAL MATTERS...............................................................41
OTHER BUSINESS..............................................................41
APPENDIX A..................................................................42
EXHIBIT A
EXHIBIT B
EXHIBIT C
<PAGE>
COMPARISON OF FEES AND EXPENSES
It is anticipated that on or about January 9, 1998 Keystone Growth and
Income will become a multiple class fund. As of that date the Fund will offer
Class A, Class B and Class C shares. It is further anticipated that at that time
current outstanding shares of Keystone Growth and Income will become Class B
shares of the Fund. On or before January 16, 1998, it is anticipated that any
Class B shares of Keystone Growth and Income purchased prior to January 1, 1995
will convert to Class A shares of the Fund. The amounts for shares of Keystone
Growth and Income set forth in the following tables and in the examples are
based on the expenses of Keystone Growth and Income for the fiscal year ended
August 31, 1997. The amounts for shares of Growth & Income set forth in the
following tables and in the examples are based on the expenses for Growth &
Income for the fiscal year ended October 31, 1997. The pro forma amounts for
Class A shares of Keystone Growth and Income are based on what the combined
expenses would have been for Keystone Growth and Income for the fiscal year
ending August 31, 1997. The pro forma numbers reflect the events described in
the first paragraph of this section. All amounts are adjusted for voluntary
expense waivers.
The following tables show for Keystone Growth and Income, Growth &
Income and Keystone Growth and Income pro forma, assuming consummation of the
Reorganization, the shareholder transaction expenses and annual fund operating
expenses associated with an investment in the shares of Keystone Growth and
Income and shares of Growth & Income, as applicable.
Comparison of Shares
of Keystone Growth and Income With
Shares of Growth & Income
<TABLE>
<CAPTION>
Keystone
Keystone Growth and
Growth and Growth & Income Pro
Income Income Forma
--------- -------- --------
Shareholder
Transaction Shares Shares Class A
Expenses ------ ------ -------
<S> <C> <C> <C>
Maximum Sales Load None None 4.75%
Imposed on Purchases
(as a percentage of
offering price)
<PAGE>
Maximum Sales Load
Imposed on None None None
Reinvested Dividends
(as a percentage of
offering price)
Contingent Deferred 4.00% None None
Sales Charge (as a
percentage of
original purchase
price or redemption
proceeds, whichever
is lower)
Exchange Fee None None None
Annual Fund
Operating Expenses
(as a percentage of
average daily net
assets)
Management Fee (1) 0.65% 0.40% 0.65%
12b-1 Fees (2) 0.56% 0.00% 0.25%
Other Expenses 0.36% 1.35% 0.36%
------ ------ -----
Annual Fund 1.57% 1.75% 1.26%
Operating Expenses ------ ------ ------
(3) ------ ------ ------
</TABLE>
- ---------------
(1) The management fee for Growth & Income 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. The maximum
management fee is 1.10%.
(2) Class A shares of Keystone Growth and Income 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. The 12b-1 fees from Growth & Income reflect the voluntary
waiver by the Fund's distributor. The maximum 12b-1 fee is 0.25%.
(3) Total Fund Operating Expenses for Growth and Income would
have been 2.70% absent the voluntary waivers. Total Fund
Operating Expenses for Keystone Growth and Income
<PAGE>
include, indirectly paid expenses which represent offset expense
arrangements with the Fund's custodian.
Examples. The following tables show for Keystone Growth and Income and
Growth & Income, and for Keystone Growth and Income 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 a 5% annual return. In the case of Keystone Growth and Income pro
forma, the example does not reflect the imposition of the maximum 4.75% maximum
sales load on purchases since Growth & Income shareholders who receive Class A
shares of Keystone Growth and Income 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>
Keystone Growth $16 $50 $86 $187
and Income
Growth & Income $18 $55 $95 $206
Keystone Growth $13 $40 $69 $152
and Income - Pro
Forma
Class A
</TABLE>
The purpose of the foregoing examples is to assist Growth & Income
shareholders in understanding the various costs and expenses that an investor in
Keystone Growth and Income 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 Growth & Income. 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
<PAGE>
Prospectus/Proxy Statement and, to the extent not inconsistent with such
additional information, the Prospectus of Keystone Growth and Income dated
December __, 1997, as supplemented, and the Prospectus of Growth & Income dated
February 28, 1997 (which are incorporated herein by reference), the Plan and the
Interim Advisory Agreement, forms of which are attached to this Prospectus/Proxy
Statement as Exhibits A and B, respectively.
Proposed Restructuring and Plan of Reorganization
The Board of Trustees of Blanchard Funds has voted to recommend to
shareholders of Growth & Income the approval of a proposal whereby Growth &
Income would (i) withdraw its investment in the Portfolio in order to permit the
current two-tier structure of Growth & Income to be replaced temporarily, by a
one-tier structure currently used by Keystone Growth and Income and (ii)
enter into the Plan. The Plan provides for the transfer of all of the assets of
Growth & Income in exchange for shares of Keystone Growth and Income and the
assumption by Keystone Growth and Income of certain identified liabilities of
Growth & Income. The identified liabilities consist only of those liabilities
reflected on the Fund's statement of assets and liabilities determined
immediately preceding the Reorganization. The Plan also calls for the
distribution of shares of Keystone Growth and Income to Growth & Income
shareholders in liquidation of Growth & Income as part of the Reorganization. As
a result of the Reorganization, the shareholders of Growth & Income will become
the owners of that number of full and fractional Class A shares of Keystone
Growth and Income having an aggregate net asset value equal to the aggregate net
asset value of the shareholder's shares of Growth & Income as of the close of
business immediately prior to the date that Growth & Income's assets are
exchanged for shares of Keystone Growth and Income. See "Reasons for the
Reorganization - The Restructuring and 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 Restructuring and the Reorganization would
be in the best interests of shareholders of Growth & Income, and that the
interests of the shareholders of Growth & Income will not be diluted as a result
of the transactions contemplated by the Reorganization. Accordingly, the
Trustees have submitted the Restructuring and the Plan for the approval of
Growth & Income's shareholders.
THE BOARD OF TRUSTEES OF BLANCHARD FUNDS
<PAGE>
RECOMMENDS APPROVAL BY SHAREHOLDERS OF GROWTH & INCOME
OF THE RESTRUCTURING AND OF THE PLAN EFFECTING
THE REORGANIZATION.
The Trustees of Evergreen Equity Trust have also approved
the Plan and, accordingly, Keystone Growth and Income's
participation in the Reorganization.
Approval of the Restructuring and of the Reorganization on the part of
Growth & Income will require the affirmative vote of a majority of Growth &
Income'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 Growth & Income. Prior to
consummation of the Merger, Growth & Income 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 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 is approved by the
Fund's shareholders (but in no event later than April 30, 1998). The Interim
Advisory Agreement has the same terms and fees as the previous investment
advisory agreement between Growth & Income and Virtus. The Reorganization is
scheduled to take place on or about February 27, 1998.
Approval of the Interim Advisory Agreement requires the affirmative
vote of (i) 67% or more of the shares of Growth & Income present in person or by
proxy at the Meeting, if holders of more than 50% of the shares of Growth &
Income outstanding on the record date are present, in person or by proxy, or
(ii) more than 50% of the outstanding shares of Growth & Income, whichever is
less. See "Voting Information Concerning the Meeting."
If the shareholders of Growth & Income do not vote to approve the
Restructuring and the Reorganization, the Trustees will consider other possible
courses of action in the best interests of shareholders.
<PAGE>
Tax Consequences
As a condition to the Restructuring, Blanchard Funds will receive an
opinion of counsel that the Restructuring will not cause Growth & Income or its
shareholders to recognize any gain or loss under the Internal Revenue Code of
1986, as amended (the "Code") (other than possible gain or loss under the
mark-to-market provisions of the Code). At the date of this Proxy
Statement/Prospectus, there are no circumstances which would result in gain or
loss to Growth & Income shareholders under the mark-to-market provisions of the
Code. Moreover, should the Restructuring in fact result in the recognition of
any mark-to-market gain or loss by Growth & Income shareholders, the effect of
the Restructuring would be merely to cause the acceleration of the date of
recognition of gain or loss which would otherwise have been recognized by
shareholders at the end of Growth & Income's fiscal year.
Prior to or at the completion of the Reorganization, Growth & Income
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 Keystone Growth and Income in the Reorganization. The holding period
and aggregate tax basis of shares of Keystone Growth and Income that are
received by Growth & Income's shareholders will be the same as the holding
period and aggregate tax basis of shares of the Fund previously held by such
shareholders, provided that shares of the Fund are held as capital assets. In
addition, the holding period and tax basis of the assets of Growth & Income in
the hands of Keystone Growth and Income 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 Keystone Growth and Income upon the
receipt of the assets of the Fund in exchange for shares of Keystone Growth and
Income and the assumption by Keystone Growth and Income of certain identified
liabilities.
Investment Objectives and Policies of the Funds
The investment objectives and policies of Keystone Growth and Income
and Growth & Income are substantially similar.
The investment objective of Keystone Growth and Income is to seek the
best possible growth of capital and long-term growth of income. Under normal
circumstances, the Fund will invest principally in common stocks of generally
accepted investment quality selected primarily from or similar to those found in
the Standard & Poor's 500 Index ("S&P 500"), usually with established records of
dividend payments. However, the
<PAGE>
Fund may purchase securities that are not currently paying dividends, but show
potential capital growth or future income. In addition, the Fund will invest in
quality companies with medium market capitalizations that are smaller than those
of companies typically found in the S&P 500.
The Fund may invest up to 25% of its assets in foreign securities of
issuers located in developed countries as well as emerging market countries.
The investment objective of Growth & Income is to provide long-term
capital appreciation and dividend income. In seeking its investment objective,
Growth & Income invests all of its investable assets in the Portfolio. The
Portfolio invests in common stocks of issuers with a broad range of market
capitalizations. Under normal market conditions, the Portfolio will invest at
least 80% of its total assets in common stocks. The Portfolio may invest up to
20% of its total assets in convertible securities and up to 20% of its total
assets in foreign securities. 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. The total return of Keystone Growth and Income and Growth & Income for
the one, and if applicable, five and ten year periods ended September 30, 1997,
and for both Funds for the periods 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 Year From
Ended 5 Years 10 Years Inception
September Ended Ended To
30, September September September Inception
1997 30, 1997 30, 1997 30, 1997 Date
------- ------- --------- --------- ---------
<S> <C> <C> <C> <C>
Keystone 32.52% 16.45% 10.32% 8.91% 9/11/35
Growth and
Income
<PAGE>
Growth &
Income (1) 33.79% N/A N/A 22.72% 11/1/94
</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 Keystone Growth and Income is also
contained in management's discussion of Keystone Growth and Income's
performance, attached hereto as Exhibit C. This information also appears in
Keystone Growth and Income's most recent Annual Report.
Management of the Funds
The overall management of Keystone Growth and Income and of Growth &
Income is the responsibility of, and is supervised by, the Board of Trustees of
Evergreen Equity Trust and Blanchard Funds, respectively.
Investment Advisers
Keystone Investment Management Company ("Keystone") serves as
investment adviser to Keystone Growth and Income. 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 "Fund
Management and Expenses - Investment Adviser" in the Prospectus of Keystone
Growth and Income.
Keystone manages investments, provides various administrative services
and supervises the daily business affairs of Keystone Growth and Income subject
to the authority of the Evergreen Equity 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
Management Fee Shares of the Fund
- ------------------------------------------ ----------------------------------
<PAGE>
Average Aggregate Net
Asset Value of the
Management Fee Shares of the Fund
- ------------------------------------------ ----------------------------------
0.70% of the first $100,000,000 plus
0.65% of the next $100,000,000 plus
0.60% of the next $100,000,000 plus
0.55% of the next $100,000,000 plus
0.50% of the next $100,000,000 plus
0.45% of the next $500,000,000 plus
0.40% of the next $500,000,000 plus
0.35% of amounts over $1,500,000,000.
Virtus serves as the investment adviser for Growth & Income. As
investment adviser, Virtus is responsible for managing the Fund and overseeing
the investment of its assets. Virtus selects, monitors and evaluates Chase
Manhattan Bank, the Portfolio's investment adviser. For its services as
investment adviser, Virtus receives a fee at an annual rate of 0.70% of the
Fund's average daily net assets and the Portfolio's investment adviser receives
0.40% per annum of the Fund's average daily net assets directly from the
Portfolio.
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 Growth & Income 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 Keystone Growth and Income is Judith A. Warners.
Ms. Warners is currently a Vice President at Keystone and has been an equity
investment professional with Keystone since 1988. Ms. Warners has managed
Keystone Growth and Income since January 1995.
<PAGE>
Distribution of Shares
Evergreen Distributor, Inc. ("EDI"), an affiliate of BISYS Fund
Services, acts as underwriter of Keystone Growth and Income's shares. EDI
distributes the Fund's shares directly or through broker-dealers, banks
(including FUNB), or other financial intermediaries. Effective on or about
January 9, 1998, Keystone Growth and Income will offer three classes of shares:
Class A, Class B and Class C. Each class has separate distribution arrangements.
(See "Distribution- Related and Shareholder Servicing-Related Expenses" below.)
No class bears the distribution expenses relating to the shares of any other
class.
In the proposed Reorganization, shareholders of Growth & Income will
receive Class A shares of Keystone Growth and Income. Class A shares of Keystone
Growth and Income have substantially similar arrangements with respect to the
imposition of Rule 12b-1 distribution and service fees as the shares of Growth &
Income. Because the Reorganization will be effected at net asset value without
the imposition of a sales charge, Keystone Growth and Income shares acquired by
shareholders of Growth & Income 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 Keystone Growth and Income which will be received by Growth &
Income shareholders in the Reorganization. More detailed descriptions of the
distribution arrangements applicable to the classes of shares are contained in
the respective Keystone Growth and Income Prospectus and the Growth & Income
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. After January 9, 1998, the Prospectus for Keystone
Growth and Income will contain a description of the initial shares charges
applicable to purchases of Class A shares. Holders of shares of Growth & Income
who receive Class A shares of Keystone Growth and Income in the Reorganization
will be able to purchase additional Class A shares of Keystone Growth and Income
and of any other Evergreen fund at net asset value. No initial sales charge will
be imposed.
<PAGE>
Additional information regarding the classes of shares of each Fund is
included in its respective Prospectus and Statement of Additional Information.
Distribution-Related Expenses. Keystone Growth and Income 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.
Growth & Income 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 initial purchase requirement for Keystone Growth and Income
is $1,000 and the minimum investment for Growth & Income is $3,000 ($2,000 for
qualified pension plans). Growth & Income has a minimum investment requirement
of $200 for subsequent investments. There is no minimum for subsequent purchases
of shares of Keystone Growth and Income. 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
Growth & Income currently permits shareholders to exchange such shares
for shares of another fund in the
<PAGE>
Blanchard Group of Funds or for Investment shares of other funds managed by
Virtus. Holders of shares of a class of Keystone Growth and Income generally may
exchange their shares for shares of the same class of any other Evergreen fund.
Growth & Income shareholders will be receiving Class A shares of Keystone Growth
and Income in the Reorganization and, accordingly, with respect to shares of
Keystone Growth and Income received by Growth & Income 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
Growth & Income declares dividends at least semi-annually from its net
investment income. Keystone Growth and Income distributes dividends from its net
investment income quarterly. Distributions of any net realized gains of a Fund
will be made at least annually. Dividends and distributions are reinvested in
additional shares of the same class of the respective Fund, or paid in cash, as
a shareholder has elected. See the respective Prospectus of each Fund for
further information concerning dividends and distributions.
After the Reorganization, shareholders of Growth & Income who have
elected to have their dividends and/or distributions reinvested will have
dividends and/or distributions received from Keystone Growth and Income
reinvested in shares of Keystone Growth and Income. Shareholders of Growth &
Income who have elected to receive dividends and/or distributions in cash will
receive dividends and/or distributions from Keystone Growth and Income in cash
after the Reorganization, although they may, after the Reorganization, elect to
have such dividends and/or distributions reinvested in additional shares of
Keystone Growth and Income.
Each of Keystone Growth and Income and Growth & Income has qualified
and intends to continue to qualify to be treated as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code"). While
so qualified, so long as each Fund distributes all of its 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
<PAGE>
distributed if a Fund does not meet certain distribution requirements by the end
of each calendar year. Each Fund anticipates meeting such distribution
requirements.
Risks
Since the investment objectives and policies of each Fund are
substantially comparable, the risks involved in investing in each Fund's shares
are similar. For a discussion of each Fund's investment objectives and policies,
see "Comparison of Investment Objectives and Policies." There is no assurance
that investment performances will be positive and that the Funds will meet their
investment objectives. In addition, Keystone Growth and Income and the Portfolio
may employ for hedging purposes and to enhance returns the strategy of engaging
in options and futures transactions. The risks involved in these strategies are
described in the "Investment Practices and Restrictions - Risk Characteristics
of Options and Futures" section in Keystone Growth and Income's Prospectus.
Investing in companies with large market capitalizations carries less
risk than investing in small capitalization stocks because they may have broader
product lines, markets or financial resources. However, investing in medium
capitalization stocks may involve greater risk than investing in large
capitalization stocks, since they can be subject to more abrupt or erratic
movements. Such stocks tend to involve less risk than stocks of small
capitalization companies.
Both Keystone Growth and Income and the Portfolio may invest in foreign
securities. The Portfolio may invest up to 20% of its assets in securities of
issuers located in emerging or developing markets countries. Keystone Growth and
Income may invest up to 25% of its assets in securities of issuers located in
emerging or developing market countries. The Portfolio may invest in debt
securities issued or guaranteed by certain supranational entities. 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
<PAGE>
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.
The Portfolio is a non-diversified investment company. As such, there
is no limit on the percentage of assets which can be invested in the securities
of a single issuer. An investment in the Portfolio, therefore, will entail
greater risk than would exist in a diversified investment company because the
higher percentage of investments among fewer issuers may result in greater
fluctuations in the total market value of Growth & Income's shares. Any adverse
developments affecting the value of the securities held by the Portfolio will
have a greater impact on the total value of the Portfolio than would be the case
if the Portfolio's investments were diversified among more issuers.
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 Growth & Income by various
units of Signet and various unaffiliated parties. It is also expected that
Signet 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
interests of shareholders of Growth & Income and determined that the interests
of existing shareholders of Growth & Income will not be diluted as a result of
the transactions contemplated by the Reorganization. In addition, the Trustees
approved the Interim Advisory Agreement with respect to Growth & Income.
<PAGE>
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. Blanchard Funds have received an
order from the SEC which permits Virtus to continue to act as Growth & Income's
investment adviser 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.
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 Keystone Growth and Income and Growth & Income. Specifically, Keystone
Growth and Income and Growth & Income have substantially identical 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 Growth & Income with an Evergreen fund with a greater level
of assets. As of September 30, 1997, Keystone Growth and Income's net assets
were approximately $330 million and Growth & Income's net assets were
approximately $18 million.
In addition, assuming that an alternative to the Reorganization would
be to propose that Growth & Income continue its existence and be separately
managed by Keystone or one of its affiliates, Growth & Income would be offered
through common distribution channels with the substantially similar Keystone
Growth and Income. Growth & Income 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.
<PAGE>
The Board of Trustees of Blanchard Funds met and considered the
recommendation of Signet and Keystone and, in addition, considered among other
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 Keystone Growth and Income and Growth &
Income; (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 Growth & Income in
connection with the Reorganization; (x) the fact that Keystone Growth and Income
will assume certain identified liabilities of Growth & Income; and (xi) the
expected federal income tax consequences of the Reorganization.
The Trustees also considered the benefits to be derived by shareholders
of Growth & Income from the sale of its assets to Keystone Growth and Income. 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 Growth & Income.
In addition, the Trustees considered that there are alternatives
available to shareholders of Growth & Income, 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 Equity Trust also concluded at a meeting on
September 17, 1997 that the proposed Reorganization would be in the best
interests of shareholders of Keystone Growth and Income and that the interests
of the shareholders of Keystone Growth and Income would not be diluted as a
result of the transactions contemplated by the Reorganization.
THE TRUSTEES OF BLANCHARD FUNDS RECOMMEND
THAT THE SHAREHOLDERS OF GROWTH & INCOME APPROVE
THE PROPOSED RESTRUCTURING AND THE REORGANIZATION.
The Restructuring
<PAGE>
Unlike other mutual funds such as Keystone Growth and Income, which
directly acquire and manage their own portfolios of securities, Growth & Income
currently seeks to achieve its investment objective by investing all its assets
in the Portfolio which is a separate registered investment company with
identical investment objectives as Growth & Income. Since the Trustees of
Blanchard Funds have proposed that Growth & Income enter into the
Reorganization, it will be necessary for Growth & Income to require the
Portfolio to distribute to Growth & Income a portion of the Portfolio's assets
for transfer to Keystone Growth and Income in satisfaction of Growth & Income's
obligations under the Plan.
To accomplish the Restructuring, Growth and Income and the Portfolio
have entered into a Withdrawal Agreement, dated December , 1997, pursuant to
which the Portfolio will distribute to Growth and Income on the Closing Date of
the Reorganization, portfolio securities mutually acceptable to Growth & Income
and the Portfolio, having an aggregate value equal to the net asset value of
Growth & Income's share interest in the Portfolio as of the Closing Date. The
securities so distributed to Growth and Income will conform to those permitted
to be held by Keystone Growth and Income.
The Restructuring is subject to the receipt by Blanchard Funds of an
opinion of Sullivan & Worcester LLP, that the withdrawal by Growth & Income of
its investment in the Portfolio will not cause Growth & Income or its
shareholders to recognize any gain or loss under the Code (other than possible
gain or loss under the mark-to-market provisions of the Code). At the date of
this Proxy Statement/Prospectus, there are no circumstances which would result
in gain or loss to Growth & Income shareholders under the mark-to-market
provisions of the Code. Moreover, should the Restructuring in fact result in the
recognition of any mark-to-market gain or loss by Growth & Income shareholders,
the effect of the Restructuring would be merely to cause the acceleration of the
date of the recognition of gain or loss which would otherwise have been
recognized by shareholders at the end of Growth & Income's fiscal year.
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 Keystone Growth and Income will acquire all of
the assets of Growth & Income in exchange for shares of Keystone Growth and
Income and the assumption by Keystone Growth and Income of certain identified
liabilities
<PAGE>
of Growth & Income 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,
Growth & Income will endeavor to discharge all of its known liabilities and
obligations. Keystone Growth and Income will not assume any liabilities or
obligations of Growth & Income other than those reflected in an unaudited
statement of assets and liabilities of Growth & Income 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 Keystone Growth and Income to be received by
the shareholders of Growth & Income will be determined by multiplying the
respective outstanding class of shares of Growth & Income by a factor which
shall be computed by dividing the net asset value per share of the respective
class of shares of Growth & Income by the net asset value per share of the
respective class of shares of Keystone Growth and Income. 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 Keystone Growth
and Income, 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 Keystone Growth and Income, 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, Growth & Income 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, Growth & Income
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 Keystone
Growth and Income received by Growth & Income. Such
<PAGE>
liquidation and distribution will be accomplished by the establishment of
accounts in the names of the Fund's shareholders on the share records of
Keystone Growth and Income's transfer agent. Each account will represent the
respective pro rata number of full and fractional shares of Keystone Growth and
Income due to the Fund's shareholders. All issued and outstanding shares of
Growth & Income, including those represented by certificates, will be canceled.
The shares of Keystone Growth and Income to be issued will have no preemptive or
conversion rights. After such distributions and the winding up of its affairs,
Growth & Income 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 Growth & Income'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 Growth &
Income's shareholders, the Plan may be terminated (a) by the mutual agreement of
Growth & Income and Keystone Growth and Income; or (b) at or prior to the
Closing Date by either party (i) because of a breach by the other party of any
representation, warranty, or agreement contained therein to be performed at or
prior to the Closing Date if not cured within 30 days, or (ii) because a
condition to the obligation of the terminating party has not been met and it
reasonably appears that it cannot be met.
The expenses of Growth & Income 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 Growth & Income or its shareholders. There are
not any liabilities or any expected reimbursements in connection with the 12b-1
Plan of Growth & Income. As a result, no 12b-1 liabilities will be assumed by
Keystone Growth and Income following the Reorganization.
If the Reorganization is not approved by shareholders of Growth &
Income, the Board of Trustees of Blanchard Funds will consider other possible
courses of action in the best interests of shareholders.
Federal Income Tax Consequences
<PAGE>
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, Growth & Income 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 Growth & Income solely in
exchange for shares of Keystone Growth and Income and the assumption by Keystone
Growth and Income of certain identified liabilities, followed by the
distribution of Keystone Growth and Income's shares by Growth & Income in
dissolution and liquidation of Growth & Income, will constitute a
"reorganization" within the meaning of section 368(a)(1)(C) of the Code, and
Keystone Growth and Income and Growth & Income 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 Growth & Income on the
transfer of all of its assets to Keystone Growth and Income solely in exchange
for Keystone Growth and Income's shares and the assumption by Keystone Growth
and Income of certain identified liabilities of Growth & Income or upon the
distribution of Keystone Growth and Income's shares to Growth & Income's
shareholders in exchange for their shares of Growth & Income;
(3) The tax basis of the assets transferred will be the same to
Keystone Growth and Income as the tax basis of such assets to Growth & Income
immediately prior to the Reorganization, and the holding period of such assets
in the hands of Keystone Growth and Income will include the period during which
the assets were held by Growth & Income;
(4) No gain or loss will be recognized by Keystone Growth and Income
upon the receipt of the assets from Growth & Income solely in exchange for the
shares of Keystone Growth and Income and the assumption by Keystone Growth and
Income of certain identified liabilities of Growth & Income;
(5) No gain or loss will be recognized by Growth & Income's
shareholders upon the issuance of the shares of Keystone Growth and Income to
them, provided they receive solely such shares (including fractional shares) in
exchange for their shares of Growth & Income; and
<PAGE>
(6) The aggregate tax basis of the shares of Keystone Growth and
Income, including any fractional shares, received by each of the shareholders of
Growth & Income pursuant to the Reorganization will be the same as the aggregate
tax basis of the shares of Growth & Income held by such shareholder immediately
prior to the Reorganization, and the holding period of the shares of Keystone
Growth and Income, including fractional shares, received by each such
shareholder will include the period during which the shares of Growth & Income
exchanged therefor were held by such shareholder (provided that the shares of
Growth & Income 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 Growth & Income 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 Keystone Growth and
Income shares he or she received. Shareholders of Growth & Income 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 Keystone Growth
and Income. Since the foregoing discussion relates only to the federal income
tax consequences of the Reorganization, shareholders of Growth & Income 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 Keystone Growth
and Income and Growth & Income as of September 30, 1997 and the capitalization
of Keystone Growth and Income on a pro forma basis as of that date, giving
effect to the proposed acquisition of assets at net asset value and the
conversion of certain Keystone Growth and Income Class B shares to Class A
shares. See "Comparison of Fees and Expenses." The pro forma data reflects an
exchange ratio of approximately 0.38 Class A shares of Keystone Growth and
Income issued for each share of Growth & Income.
<TABLE>
<CAPTION>
Capitalization of Growth & Income,
Keystone Growth and Income and Keystone
Growth and Income (Pro Forma)
<PAGE>
Keystone
Growth and
Keystone Income (After
Growth & Growth and Reorgani-
Income Income zation)
--------- -------- ------------
<S> <C> <C> <C>
Net Assets
Class A........................ $18,116,445 N/A $258,536,290
Class B........................ N/A $330,156,338 $89,736,493
------------ ------------ -------------
Total Net
Assets....................... $18,116,445 $330,156,338 $348,272,783
Net Asset Value Per
Share
Class A........................ $12.03 N/A $31.51
Class B........................ N/A $31.51 $31.51
Shares Outstanding
Class A........................ 1,506,167 N/A 8,205,599
Class B........................ N/A 10,478,672 2,848,103
------------ ------------ -------------
All Classes.................... 1,506,167 10,478,672 11,053,702
</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 Growth & Income
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 Growth &
Income. To Growth & Income's knowledge, the following person owned beneficially
or of record more than 5% of Growth & Income's total outstanding shares as of
October 31, 1997:
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Percentage of Shares of
No. of Shares Before Class After
Name and Address Shares Reorganization Reorganization
- ---------------- ------ -------------- --------------
<S> <C> <C> <C>
Stephens, Inc. % Class A
111 Center Street
Little Rock, AR
72201-3507
</TABLE>
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion is based upon and qualified in its entirety by
the descriptions of the respective investment objectives, policies and
restrictions set forth in the respective Prospectus and Statement of Additional
Information of the Funds. The investment objective, policies and restrictions of
Keystone Growth and Income can be found in the Prospectus of Keystone Growth and
Income under the caption "Investment Objective and Policies." The investment
objective, policies and restrictions of Growth & Income can be found in the
Prospectus of the Fund under the captions "Fund Objective" and "Investment
Policies." Unlike the investment objective of Growth & Income, which is
fundamental, the investment objective of Keystone Growth and Income is non-
fundamental and can be changed by the Board of Trustees without shareholder
approval.
The investment objective of Keystone Growth and Income is to provide
shareholders with the best possible growth of capital and long-term growth of
income. Under normal circumstances, the Fund will invest principally in common
stocks of generally accepted investment quality selected primarily from or
similar to those found in S&P 500, usually with established records of dividend
payments. However, the Fund may purchase securities that are not currently
paying dividends, but show potential capital growth or future income.
In addition, the Fund will invest in quality companies with medium
market capitalizations that are smaller than those of companies typically found
in the S&P 500. For this purpose, companies with medium capitalizations are
generally those whose market capitalization falls within the capitalization
range of the Standard & Poor's MidCap 400 Index ("S&P MidCap 400") at the time
of the Fund's investment.
<PAGE>
In pursuing its objective, the Fund may invest up to 25% of its assets
in foreign securities issued by issuers located in developed countries as well
as emerging market countries. For this purpose, countries with emerging markets
are generally those where the per capita income is in the low to middle ranges,
as determined, from time to time, by the International Bank for Reconstruction
and Development.
The Fund may also invest in other types of securities, including other
common stocks, debt securities convertible into common stocks or having common
stock characteristics, and rights and warrants to purchase common stocks. In
addition to its other investment options, the Fund may invest in limited
partnerships, including master limited partnerships.
When market conditions warrant, the Fund may invest up to 100% of its
assets for temporary or defensive purposes in short-term obligations. Such
obligations may include master demand notes, commercial paper and notes, bank
deposits and other financial institution obligations.
Growth & Income seeks to provide long-term capital appreciation and
dividend income. The Fund seeks to achieve its objective by investing all of its
investable assets in the Portfolio. The Portfolio has an objective identical to
that of the Fund. The Portfolio invests in common stocks of issuers with a broad
range of market capitalizations. Under normal market conditions, the Portfolio
will invest at least 80% of its total assets in common stocks.
The Portfolio may invest any portion of its assets not invested as
described above in high quality money market instruments and repurchase
agreements. For temporary defensive purposes, the Portfolio may invest without
limitation in these instruments as well as investment grade debt securities.
The Portfolio may also invest up to 20% of its total assets in foreign
securities and 20% of its assets in convertible securities.
Each Fund may invest in certain types of derivative instruments
including options and futures.
Keystone Growth and Income 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, the
same restrictions apply to 75% of the assets of Keystone Growth and Income.
However, since the Portfolio is non-diversified for purposes of the 1940 Act,
these 5% restrictions apply to 50% of the assets of the Portfolio. The remaining
50% of the assets of the Portfolio may be invested up to 25% in the securities
of a single issuer. Nondiversification may increase investment risks.
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 Equity 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 Equity 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. Keystone Growth and Income is a series of
Evergreen Equity Trust and Growth & Income is a series of Blanchard Funds.
As set forth in Keystone Growth and Income's Prospectus, effective
December 22, 1997, Keystone Growth and Income Fund (S-1), a Pennsylvania common
law trust, was reorganized (the "Delaware Reorganization") into a corresponding
series (Keystone Growth and Income) of Evergreen Equity Trust. In connection
with the Delaware Reorganization, the Fund's investment objectives were
reclassified from "fundamental" to "non-fundamental" and therefore may be
changed without shareholder approval; the Fund adopted certain standardized
investment restrictions; and eliminated or reclassified from fundamental to
non-fundamental certain of the Fund's other fundamental investment restrictions.
On January 9, 1998, Keystone Growth and Income will change its name to Evergreen
Blue Chip Fund.
Capitalization
The beneficial interests in Keystone Growth and Income are represented
by an unlimited number of transferable shares of beneficial interest, $.001 par
value per share. The beneficial interests in Growth & Income are represented by
an
<PAGE>
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 Growth & Income
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.
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 Equity 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 Equity 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
<PAGE>
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 Equity Trust. Accordingly, the risk of a
shareholder of Evergreen Equity 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 Equity Trust is remote.
Shareholder Meetings and Voting Rights
Neither Evergreen Equity Trust on behalf of Keystone Growth and Income
nor Blanchard Funds on behalf of Growth & Income 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
Equity 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 Keystone Growth
and Income and Growth & Income, 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 Equity Trust, each share of
Keystone Growth and Income is entitled to one vote for each dollar of net asset
value applicable to each share. Under the voting provisions governing Growth &
Income, 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 the current voting provisions of Blanchard
Funds, have more votes,
<PAGE>
than the same investment in a Blanchard Funds' series with a higher net asset
value. Under the Declaration of Trust of Evergreen Equity 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 Keystone Growth and Income and
Growth & Income, 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 Equity 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
<PAGE>
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.
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 Growth
& Income 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 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
Growth & Income, 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
<PAGE>
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 Growth & Income 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 Growth
& Income.
The Trustees have authorized Blanchard Funds, on behalf of Growth &
Income, to enter into the Interim Advisory Agreement with Virtus. Such Agreement
became effective on November 28, 1997. If the Interim Advisory Agreement for
Growth & Income is not approved by shareholders, the Trustees will consider
appropriate actions to be taken with respect to Growth & Income'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 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 Growth & Income. FAS will
continue during the term of the Interim Advisory Agreement as Growth & Income's
administrator for the same compensation as currently received; except that on
February 9, 1998, FAS' obligations to provide transfer agency services for
Growth & Income's shareholders will terminate and such
<PAGE>
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
Growth & Income 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 Growth & Income (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
<PAGE>
contained identical provisions as to termination and
assignment.
Information about Growth & Income's Investment Adviser
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 October 31, 1997 and 1996 and the period from
July 12, 1995 to October 31, 1995, Virtus received from Growth & Income
management fees of $115,747, $85,166 and $6,416, respectively, of which all were
voluntarily waived.
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 GROWTH & INCOME APPROVE
THE INTERIM ADVISORY AGREEMENT
ADDITIONAL INFORMATION
Keystone Growth and Income. Information concerning the operation and
management of Keystone Growth and Income is incorporated herein by reference
from the Prospectus dated December __, 1997, as supplemented, a copy of which is
enclosed, and Statement of Additional Information dated December __, 1997. A
copy of such Statement of Additional Information is available upon request and
without charge by writing to Keystone Growth and Income at the address listed on
the cover page of this Prospectus/Proxy Statement or by calling toll-free
1-800-343-2898.
Growth & Income. Information about the Fund is included in its current
Prospectus dated February 28, 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 Growth & Income at the address
<PAGE>
listed on the cover page of this Prospectus/Proxy Statement or
by calling toll-free 1-800-829-3863.
Keystone Growth and Income and Growth & Income are each subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, and in accordance therewith file reports and other information, including
proxy material and charter documents, with the SEC. These items can be inspected
and copies obtained at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional
Offices located at Northwest Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661-2511 and Seven World Trade Center, Suite 1300, New York, New York
10048.
VOTING INFORMATION CONCERNING THE MEETING
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the 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 Growth & Income 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
Restructuring, FOR the proposed Reorganization, FOR the Interim Advisory
Agreement and FOR any other matters deemed appropriate. Proxies that reflect
abstentions and "broker non-votes" (i.e., shares held by brokers or nominees as
to which (i) instructions have not been received from the beneficial owners or
the persons entitled to vote or (ii) the broker or nominee does not have
discretionary voting power on a particular matter) will be counted as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum, but will not be counted as shares voted and will have no effect on
the vote regarding the Restructuring and the Plan. However, such "broker non-
votes" will have the effect of being counted as votes against the Interim
Advisory Agreement which must be approved by a
<PAGE>
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 Restructuring, FOR approval of the Plan and
the Reorganization contemplated thereby and FOR approval of the Interim Advisory
Agreement.
Approval of the Restructuring and 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 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 solicitations
conducted by officers and employees of Keystone or Signet, their affiliates or
other representatives of Growth & Income (who will not be paid for their
soliciting activities). Shareholders Communications Corporation has been engaged
by Growth & Income 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
<PAGE>
adjournment after consideration of all circumstances which may bear upon a
decision to adjourn the Meeting.
A shareholder who objects to the proposed Restructuring and the
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
Restructuring and 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 Keystone Growth and Income which they receive in the transaction
at their then-current net asset value. Shares of Growth & Income may be redeemed
at any time prior to the consummation of the Reorganization. Shareholders of
Growth & Income 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.
Growth & Income does not hold annual shareholder meetings. If the
Restructuring and the Reorganization are 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 Keystone Growth and Income 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 Growth & Income whether other persons are beneficial owners of
shares for which proxies are being solicited and, if so, the number of copies of
this Prospectus/Proxy Statement needed to supply copies to the beneficial owners
of the respective shares.
FINANCIAL STATEMENTS AND EXPERTS
The financial statements of Keystone Growth and Income as of August 31,
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
<PAGE>
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 Growth & Income
incorporated in this Prospectus/Proxy Statement by reference from the Annual
Report of Growth & Income for the year ended October 31, 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 Keystone
Growth and Income 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
RESTRUCTURING, THE PLAN AND THE INTERIM ADVISORY AGREEMENT AND ANY UNMARKED
PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN FAVOR OF APPROVAL
OF THE RESTRUCTURING, THE PLAN AND THE INTERIM 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>
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 Equity Trust, a
Delaware business trust, with its principal place of business at 200 Berkeley
Street, Boston, Massachusetts 02116 (the "Trust"), with respect to the Keystone
Growth and Income Fund (S-1) 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 Growth & 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)(C) 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;
<PAGE>
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
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
<PAGE>
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.
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
<PAGE>
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
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.
<PAGE>
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
<PAGE>
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.
3.2 CUSTODIAN'S CERTIFICATE. Invesetors Bank and Trust Co., as
custodian for the Growth and Income Portfolio (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.
<PAGE>
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.
(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
<PAGE>
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 October
31, 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 October 31, 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 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
<PAGE>
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
<PAGE>
make the statements therein, in light of the circumstances under which such
statements were made, not misleading.
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
<PAGE>
materially and adversely affects its business or its ability to consummate the
transactions contemplated herein.
(f) The financial statements of the Acquiring Fund at August
31, 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 August 31, 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 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
<PAGE>
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 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
Growth and Income Fund (S-1) (the "Predecessor Fund"), a Pennsylvania common law
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.
<PAGE>
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 to
in paragraph 4.1(o) (the "Prospectus and Proxy Statement"), all to be included
in a Registration Statement on Form N-14 of
<PAGE>
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
<PAGE>
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 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
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
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
<PAGE>
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
"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
<PAGE>
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 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
<PAGE>
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.
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.
<PAGE>
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)(C) of the Code and the Acquiring Fund and the Selling Fund
will each be a "party to a reorganization" within the meaning of Section 368(b)
of the Code.
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Selling Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of certain 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
<PAGE>
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).
(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), 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;
(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 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.
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
<PAGE>
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
<PAGE>
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) 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
<PAGE>
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
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
<PAGE>
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 EQUITY TRUST
ON BEHALF OF KEYSTONE GROWTH AND
INCOME FUND (S-1) By:
Name:
Title:
BLANCHARD FUNDS
ON BEHALF OF BLANCHARD GROWTH &
INCOME FUND
By:
Name:
Title:
<PAGE>
EXHIBIT B
BLANCHARD FUNDS
INTERIM MANAGEMENT CONTRACT
This Contract is made this 28th 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
<PAGE>
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, 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
<PAGE>
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 26, 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 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.
<PAGE>
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
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
<PAGE>
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 .75%
Bond Fund
<PAGE>
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 28th day of November, 1997.
Attest: Virtus Capital Management, Inc.
________________________ By: ___________________________
Secretary Executive Vice President
Attest: Blanchard Funds
________________________ By: ____________________________
Assistant Secretary Vice President
<PAGE>
EXHIBIT B
to the
Management Contract
BLANCHARD GROWTH & INCOME FUND
The Trust shall pay to Manager, on behalf of the Fund, monthly
compensation at the annual rate of 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 Growth & Income Portfolio, under a separate
investment advisory agreement between Chase and the Growth & Income Portfolio.
The portion of the fee based upon the average daily net assets of the
Funds shall be accrued daily at the rate of 1/365th of the applicable percentage
applied to the daily net assets of each Fund.
Witness the due execution hereof this 28th day of November, 1997.
Attest: Virtus Capital Management, Inc.
By:
Assistant Secretary Senior Vice President
Attest: Blanchard Funds
By:
Assistant Secretary Vice President
<PAGE>
EXHIBIT C
to the
Management Contract
Blanchard Asset Allocation Fund
For all services rendered by manager hereunder, the above-named Fund 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 1% of the
average daily net assets of the Fund.
The portion of the fee based upon the average net assets of the Fund
shall be accrued daily at the rate of 1/365th of 1% applied to the daily net
assets of the Fund.
The management fee so accrued shall be paid to Manager monthly.
Witness the due execution hereof this November 28, 1997.
Attest: Virtus Capital Management, Inc.
________________________ By: ____________________________
Secretary Senior Vice President
Attest: Blanchard Fund
________________________ By: ____________________________
Assistant Secretary Vice President
PAGE 3
A Discussion With
Your Fund Manager
[Photo of Judith A. Warners appears here]
JUDITH A. WARNERS IS PORTFOLIO MANAGER OF KEYSTONE GROWTH AND INCOME FUND
(S-1). A MEMBER OF THE SECURITY ANALYSTS SOCIETY, MS. WARNERS HAS MORE
THAN 17 YEARS OF INVESTMENT MANAGEMENT EXPERIENCE. SHE HOLDS A BA FROM
CURRY COLLEGE AND AN MBA FROM BABSON COLLEGE. SHE IS A MEMBER OF THE
KEYSTONE GROWTH AND INCOME TEAM.
Q WHAT WAS THE ENVIRONMENT LIKE DURING THE YEAR THAT ENDED ON AUGUST 31?
A Basically, it was an environment that favored large cap stocks. In fact, while
the overall market indices recorded very substantial increases over the 12
months, much of that was due to the performance of the largest 50 stocks. We
started the fiscal year with a very supportive environment of strong economic
growth and rising corporate profits. Early in 1997, however, investors became
concerned that the growth might become too strong, and that inflation could
return. The fear was that this could cause an increase in interest rates, which
eventually would cut into corporate profits. The Federal Reserve Board did raise
short-term rates once in late March. The anticipation and reaction to this
one-time tightening of the money supply caused a sharp correction in March and
early April. However, as evidence grew at the end of the first quarter that
growth was slowing down and inflation did not appear to be a problem, the stock
market took off again, with a very strong rally from mid-April through July. In
fact, the Standard & Poors 500 Index rose 7% in July 1997 alone. Things started
cooling a little bit in August, as some blue chip companies, most notably
Gillette Co. and Coca-Cola Co., warned of earnings that will be disappointing to
Wall Street. However, if you look at the period from August 31, 1996 through
August 31, 1997, you would have to say generally that large capitalization,
industry-leading companies with national and international franchises were the
big winners in stock performance.
Q HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
A We concentrated, and even increased our holdings, in the high quality, growth
companies that have consistently been the core of our portfolio. If you look at
our major investments, you will see names like General Electric Co., Microsoft
Corp., IBM Corp., and Bristol-Myers Squibb Co. These are quality companies, with
histories of demonstrable earnings growth, strong managements, and visible name
brands. These blue chip companies consistently have made up 65% or more of the
portfolio, and they have been an excellent investment over the past two years.
This summer, we have increased somewhat our holdings in mid-cap companies that
also have histories of earnings growth, strong managements,
<PAGE>
PAGE 4
KEYSTONE GROWTH AND INCOME FUND (S-1)
TOP 10 STOCK HOLDINGS
AUGUST 31, 1997
<TABLE>
<CAPTION>
% OF
COMPANY NET ASSETS
<S> <C>
General Electric Co. 3.3%
Microsoft Corp. 2.1%
International Business Machines Corp. 2.1%
Bristol-Myers Squibb Co. 2.0%
Merck & Co., Inc. 1.8%
SLM Holding Corp. 1.7%
American Home Products Corp. 1.7%
Exxon Corp. 1.7%
Procter & Gamble Co. 1.6%
Intel Corp. 1.5%
</TABLE>
and leadership positions in their industries. We have added to our positions in
companies such as HBO & Co.; Kohl's Corp., a mid-western retailer; and Falcon
Drilling, a company involved in offshore energy exploration. We believe that as
the market broadens out and investors start looking for more growth niche
stocks, these companies have the potential to do very well. In fact, we have
started to see some evidence of a possible broadening out of market leadership
in late summer. These mid-cap stocks, however, are not expected to account for
more than 20-to-25% of the portfolio. The fund has been and will remain a blue
chip-oriented fund.
Q IN THE LAST REPORT, YOU DISCUSSED AN EMPHASIS ON INTEREST-RATE SENSITIVE
STOCKS, SUCH AS BANKS AND REAL ESTATE INVESTMENT TRUSTS. DO YOU STILL EMPHASIZE
THIS AREA?
A We remain heavily weighted in interest-rate sensitive stocks. While we
continue to have a heavy emphasis in real estate investment trusts, or REITs, we
have cut back there a little bit primarily because that area was such a strong
performer in 1996 and early 1997 that we decided to take some profits. We
probably have increased our overall emphasis in the finance sector, including
banks, insurance and security industries. However, we have taken some profits
from the very big bank stocks, and redeployed into some mid-cap banking stocks.
This is an area in the market that is benefiting from industry consolidation.
Among the names we have added are First Commerce Corp., First American Corp.,
and Mellon Bank Corp. As long as the economy is moving along well and interest
rates and inflation are stable, the finance sector is a good place to be.
Q IN WHAT OTHER AREAS DO YOU HAVE AN EMPHASIS?
A We have remained committed to the general pharmaceutical area, consistent with
that industry's weighting in the S&P 500. In the drug area, we tend to own
top-line growth companies with a consistent flow of new products to keep
revenues growing. We hold positions in companies such as Bristol-Myers Squibb
Co., Merck & Co., Inc., and American Home Products Corp. We are overweighted in
telecommunications, which we believe has tremendous market opportunities. We own
more integrated companies, such as Worldcom Inc., a leading Internet access
provider company; equipment companies such as Northern Telecom Ltd.; and Cisco
Systems, Inc., a systems router for telecommunications carriers. Other
telecommunications-related holdings include Motorola Inc., GTE Corp, Loral Space
and Communications, Ltd., and Iridium World Communications. The last two
companies are involved in satellite communications.
<PAGE>
PAGE 5
TOP 5 INDUSTRIES
AUGUST 31, 1997
<TABLE>
<CAPTION>
% OF
INDUSTRY NET ASSETS
<S> <C>
Healthcare Products & Services 10.8%
Finance & Insurance 10.8%
Banks 8.3%
Oil 6.6%
Telecommunications Services & Equipment 6.4%
</TABLE>
Q WHAT IS YOUR OUTLOOK?
A We continue to feel we are in a growth environment, with interest rates
trending downward and inflation still under control. We are watching closely for
signs of any pickup in inflation, but up until now productivity enhancements
have offset any potential inflationary pressures. In this environment, we remain
flexible, with a major commitment to the large cap stocks that have been market
leaders, but with an eye to see if market movement toward mid-cap stocks becomes
a sustained trend.
[Graphic appears here]
THIS COLUMN IS INTENDED TO ANSWER QUESTIONS ABOUT YOUR FUND.
IF YOU HAVE A QUESTION YOU WOULD LIKE ANSWERED, PLEASE WRITE TO:
EVERGREEN KEYSTONE INVESTMENT SERVICES, INC.
ATTN: SHAREHOLDER COMMUNICATIONS
201 SOUTH COLLEGE STREET, SUITE 400
CHARLOTTE, N.C. 28288-1195
<PAGE>
PAGE 6
KEYSTONE GROWTH AND INCOME FUND (S-1)
Growth of an Investment
[Graph appears below with the following information:]
Growth of an investment in
Keystone Growth and Income Fund (S-1)
(In Thousands) August 31, 1987 through August 31, 1997
Initial Investment Dividend Reinvestment
8/87 $10,000.00 $10,000.00
8/88 $ 6,952.00 $ 7,545.00
8/89 $ 9,119.00 $10,185.00
8/90 $ 8,432.00 $ 9,721.00
8/91 $ 9,225.00 $12,133.00
8/92 $ 8,509.00 $12,179.00
8/93 $ 9,335.00 $13,922.00
8/94 $ 8,524.00 $13,822.00
8/95 $ 8,439.00 $14,739.00
8/96 $ 9,199.00 $18,463.00
8/97 $10,940.00 $24,879.00
[Line Graph appears below with the following information:]
Fund CPI S&P 500
8/87 $10,000.00 $10,000.00 $10,000.00
8/88 $ 7,545.00 $10,402.00 $ 8,218.00
8/89 $10,185.00 $10,891.00 $11,262.00
8/90 $ 9,721.00 $11,502.00 $10,237.00
8/91 $12,133.00 $11,939.00 $12,985.00
8/92 $12,179.00 $12,315.00 $14,013.00
8/93 $13,922.00 $12,655.00 $16,140.00
8/94 $13,822.00 $13,021.00 $17,019.00
8/95 $15,739.00 $13,363.00 $20,663.00
8/96 $18,463.00 $13,747.00 $24,531.00
8/97 $24,879.00 $14,052.00 $34,496.00
The cumulative and average annual total returns with sales charge calculations
reflect the deduction of the 3% contingent deferred sales charge (CDSC) for
those investors who sold Fund shares after one calendar year. Investors who
retained their investment earned the returns in the lines marked "w/o sales
charge."
The investment return and principal value will fluctuate so that your shares,
when redeemed, may be worth more or less than the original cost. Past
performance is no guarantee of future results.
You may exchange your shares for another Keystone Classic fund by phone or in
writing. The Fund reserves the right to change or terminate the exchange offer.
<TABLE>
<CAPTION>
HISTORICAL RECORD
CUMULATIVE TOTAL RETURN
<S> <C>
1 year w/o sales charge 34.76%
1 year w/ sales charge 31.76%
5 years 104.28%
10 years 148.79%
AVERAGE ANNUAL TOTAL RETURN
1 year w/o sales charge 34.76%
1 year w/ sales charge 31.76%
5 years 15.36%
10 years 9.54%
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the Assets of
BLANCHARD GROWTH & INCOME FUND
a Series of
BLANCHARD FUNDS
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(800) 829-3863
By and In Exchange For Shares of
KESYTONE GROWTH AND INCOME FUND (S-1)
a Series of
EVERGREEN EQUITY 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 Growth & Income
Fund ("Growth & Income"), a series of Blanchard Funds, to Keystone Growth and
Income Fund (S-1) ("Keystone Growth and Income"), in exchange for Class A shares
of beneficial interest, $.001 par value per share, of Keystone Growth and
Income, 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 Keystone Growth and
Income dated December __, 1997; (To be filed by amendment)
(2) The Statement of Additional Information of Growth & Income
dated February 28, 1997; (To be filed by amendment)
(3) Annual Report of Growth & Income for the year ended October
31, 1997; (To be filed by amendment) and
(4) Annual Report of Keystone Growth and Income for the period
ended August 31, 1997; (To be filed by amendment)
This Statement of Additional Information, which is not a prospectus,
supplements, and should be read in conjunction with, the Prospectus/Proxy
Statement of Keystone Growth and
<PAGE>
Income and Growth & Income dated January 5, 1998. A copy of the Prospectus/Proxy
Statement may be obtained without charge by calling or writing to Keystone
Growth and Income or Growth & Income at the telephone numbers or addresses set
forth above.
The date of this Statement of Additional Information is January 5,
1998.
<PAGE>
KEYSTONE GROWTH AND INCOME FUND (S-1)
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 Evergreen Equity Trust's
Registration Statement on Form N-1A filed on October 8, 1997 - Registration No.
333-37453 ("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 of Evergreen Equity 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 Evergreen Equity Trust. 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.
7(a). Principal Underwriting Agreement between Evergreen Distributor, Inc. and
Evergreen Equity Trust. 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.
<PAGE>
8. Deferred Compensation Plan. Incorporated by reference to the Form N-1A
Registration Statement.
9. Custody Agreement between State Street Bank and Trust Company and Evergreen
Equity Trust. 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 Registrant's Form N-1A Registration Statement -
Registration No. 2-10661.
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
<PAGE>
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
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 2nd day of December, 1997.
KEYSTONE GROWTH AND INCOME
FUND (S-1)
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 2nd 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
<PAGE>
/s/Thomas L. McVerry* Trustee
- --------------------
Thomas L. McVerry
/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
Keystone Growth and Income Fund (S-1)
We consent to the use of our report dated September 26, 1997 for Keystone Growth
and Income Fund (S-1) incorporated by reference herein and to the reference 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 GROWTH & 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
Growth & Income Fund ("Growth & Income") that the undersigned is entitled to
vote at the special meeting of shareholders of Growth & Income 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
-1-
<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 the proposal whereby Growth & Income would withdraw its
investment in Growth and Income Portfolio.
- ---- FOR ---- AGAINST ---- ABSTAIN
2. To approve an Agreement and Plan of Reorganization whereby Keystone
Growth and Income Fund (S-1), a series of Evergreen Equity Trust, will (i)
acquire all of the assets of Growth & Income in exchange for shares of Keystone
Growth and Income Fund (S-1); and (ii) assume certain identified liabilities of
Growth & Income, as substantially described in the accompanying Prospectus/Proxy
Statement.
- ---- FOR ---- AGAINST ---- ABSTAIN
3. To approve the proposed Interim Management Contract with Virtus
Capital Management, Inc.
- ---- FOR ---- AGAINST ---- ABSTAIN
4. To consider and vote upon such other matters as may properly come
before said meeting or any adjournments thereof.
<PAGE>
