LOGO
------------ VERY IMPORTANT -------------
Enclosed is a proxy card which
requires your signature.
It has to do with the pending transaction
involving the Blanchard Group of Funds
and Signet Banking Corporation.
It's important.
Please review and cast your vote today!
---------------------------------------
Dear Valued Shareholder,
Not long ago, I wrote you with exciting news. Subject to your approval,
Sheffield Investments, Inc., and Sheffield Management Corporation, distributors
and managers of the Blanchard Group of Funds, will become part of the Richmond,
Virginia based Signet Banking Corporation, one of the nation's leading banking
institutions.
In my last letter, I noted that the considerable resources of Signet -- the
42nd largest bank in America -- will allow us to offer a far broader range of
competitive services to you and our other shareholders.
I also quoted a recent study by the investment firm of Donaldson, Lufkin &
Jenrette which analyzed 65 of the nation's leading banks and ranked Signet as #1
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in capital strength, a measure involving capital, debt and shareholder equity.
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We think that this is important.
Finally, Signet brings a long tradition of investment expertise to the
partnership: the asset management division of Signet Banking Corporation has
managed client investments since the 1950's.
We need your help to proceed
On the following pages you will find details of the proposed transaction and
be asked for your vote. In the course of representing and looking after your
interests, your fund's independent board members have carefully evaluated this
intended transaction and recommend that you vote FOR each proposal.
In order for us to proceed, it is essential that you take a few minutes now
------------------------------------------
and read through the materials, and then vote, sign and return your proxy.
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(over, please)
Your vote really counts!
Because shareholder approval is required for any change in management, your
individual vote is of critical importance. This gives you an important say in
--------
the management of your Funds.
(check mark) A different voting card is enclosed for each Blanchard mutual
fund in which you are currently a shareholder. It is essential that
you mark your card(s) in the appropriate spaces and return each of
these cards.
Please vote and return your proxy right away. Only by voting will we be able
to move ahead with the Signet transaction. If the proxy is approved, the
transaction is scheduled to be completed in late June, 1995.
If a majority of shareholders do not return their votes, additional proxy
statements must be sent out, costing money, as well as valuable time. So please,
take a few moments to fill out and return the enclosed proxy voting card(s) now,
while this material is at hand.
If you wish to return your vote by fax, you may do so to fax number 1-800-
733-1885. If you wish to vote your proxy in person, you may attend the
shareholder meeting on , 1995 at the offices of Kramer Levin, Room __
__ th Fl, 919 Third Ave, New York, NY.
You may also vote your proxy over the phone. To assure that our Investors'
Services representatives are available for regular account service, we have
retained the firm of Shareholder Communications Corporation which specializes in
processing proxy votes over the phone. To vote by phone, call this firm at
1-800-733-8485 ext. 450 between the hours 9:00 a.m.-11:00 p.m. EST. If we have
not received your vote as the meeting date approaches, you may receive a
telephone call from this firm to ask for your vote. We hope that their telephone
call does not inconvenience you.
Please take a few moments now and complete your proxy card(s) and return
it/them in the postage-paid envelope provided. Thank you for your help and
cooperation, and for your prompt response.
Here's to a great 1995!
Michael Freedman
President
P.S. Enclosed you'll find additional background information on Signet. I think
you'll find it of interest.
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Because this is so important, please don't put off
returning your proxy. Send it in today!
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BLANCHARD GROUP OF FUNDS
41 MADISON AVENUE, 24TH FLOOR, NEW YORK, NY 10010
<PAGE>
Dear Blanchard Fund Shareholder,
As you review the enclosed proxy materials related to the proposed transaction
between the management company and distributor of the Blanchard Group of Funds
and Signet Banking Corporation, we thought you would enjoy some additional
background information on Signet and the exciting prospects they offer to
Blanchard and our shareholders.
Thank you for your continued support.
Sincerely,
Michael Freedman, President, Blanchard Group of Funds
Introducing Signet Banking Corporation
Pending shareholder approval, the Blanchard Group of Funds will soon become
part of the Richmond, Virginia-based Signet Banking Corporation. Here's a brief
sketch of Signet...
Signet is a $10 billion multi-bank holding company listed on the New York
Stock Exchange under the symbol "SBK." Signet's asset size at the end of 1994
made it the 42nd largest bank in the nation.
Headquartered in Richmond, Virginia, they provide a wide variety of financial
services through their Capital Markets, Commercial and Consumer Banking
businesses. Through various affiliates of Signet, Blanchard shareholders will
have access to a wide variety of valuable financial services including
insurance, discount brokerage, annuities, banking services and more.
Signet's primary market area covers Virginia, Maryland and the District of
Columbia, although several of their business units offer their services
nationally. If you live in the primary market area, you are probably already
well aware of Signet and their reputation for excellence.
In 1994, a study by the investment firm of Donaldson, Lufkin & Jenrette ranked
65 of the nation's banks according to a set of performance measures. In that
study, Signet ranked #1 in capital strength, a measure involving capital, debt
and shareholder equity.
A separate research report by Dean Witter updated on March 6, 1995, rates
Signet stock as one of only 28 companies in the nation on their Buy-Recommended
List.
Plans are currently in the works to use Signet's considerable resources to
forge an even stronger Blanchard Group of Funds:
(over, please)
<PAGE>
in terms of performance, expense levels and the scope of services we are able to
offer you. We are very excited about this pending transaction, and about the
potential advantages it offers for shareholders.
A Long Tradition of Investment Management
Another benefit that Signet offers is their long tradition of investment
management: their Asset Management Division has managed client investments since
the 1950s. Current investment services include equities, municipal bond,
government, federal agency and money market management and trading, as well as
foreign exchange trading and discount brokerage.
Signet offers specialized services for trust, leasing, asset-based lending,
cash management, real estate, insurance and consumer financing, as well as trade
financing through an international operation.
Garry M. Allen, President and Chief Investment Officer for Virtus Capital
Management, Inc., a Signet subsidiary, will be lending his expertise on
portfolio management to the management here at Blanchard.
Prior to joining Signet in 1994, Mr. Allen was the Managing Director of U.S.
Equities for the $16 billion Virginia Retirement System, a top performer among
its peers, and one of the nation's largest pools of assets. His job
responsibilities included overseeing the management of over $8 billion in
equities investments. An important part of his expertise is in the area of
"managing managers" - working to optimize the performance of independent
portfolio managers such as those retained by the Blanchard Group of Funds.
Mr. Allen and his team of analysts should greatly complement the managers at
Blanchard. They will also make an important contribution in the development of
an expanded level of products and services designed to better meet your
investing needs.
These are exciting times for the shareholders, staff and management of the
Blanchard Group of Funds. Signet's financial strength, their investment
expertise, and their shared commitment to exemplary customer service should help
us excel in meeting your needs in 1995 and beyond.
If you have any questions whatsoever about this proposed transaction, or you
need help with the proxy which follows, please call 1-800-829-3863 today.
Please cast your proxy vote today! Your vote is essential!
<PAGE>
PRELIMINARY PROXY MATERIAL
FOR THE INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
BLANCHARD GROUP OF FUNDS
41 Madison Avenue, 24th Floor
New York, New York 10010
May ____, 1995
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NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
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To be Held on __________, 1995
To the Shareholders:
Special Meetings of the shareholders of Blanchard Global Growth Fund,
Blanchard Precious Metals Fund, Inc., Blanchard 100% Treasury Money Market Fund,
Blanchard Short-Term Global Income Fund, Blanchard American Equity Fund,
Blanchard Flexible Income Fund, Blanchard Short-Term Bond Fund, Blanchard
Flexible Tax-Free Bond Fund, Blanchard Worldwide Emerging Markets Fund,
Blanchard Capital Growth Fund and Blanchard Growth & Income Fund (each, a "Fund"
and, collectively, the "Funds") will be held on the date, and at the time and
place, set forth in the Fund Exhibit accompanying, and forming a part of, these
materials. The Meetings will be held for the following purposes:
The following Proposals apply to shareholders of each Fund:
1. To approve a new investment advisory contract upon closing of the
proposed transaction. No fee increase is proposed.
2. To elect new Board Members to hold office until their successors are duly
elected and qualified.
3. To ratify the selection of Price Waterhouse LLP as independent
accountants of the Fund.
The following Proposal applies to shareholders of each Fund except Blanchard
100% Treasury Money Market Fund.
4. To approve a new distribution plan. No fee increase is proposed.
The following Proposal applies to shareholders of Blanchard Global Growth Fund,
Blanchard Precious Metals Fund, Inc., Blanchard Short-Term Global Income Fund,
Blanchard American Equity Fund, Blanchard Flexible Income Fund, Blanchard
Short-Term Bond Fund, Blanchard Flexible Tax-Free Bond Fund and Blanchard
Worldwide Emerging Markets Fund:
5. To approve the Fund's new sub-advisory agreement(s). No fee increase is
proposed.
The following Proposal applies to shareholders of each Fund except Blanchard
Precious Metals Fund, Inc.:
6. To amend the Agreement and Declaration of Trust of The Blanchard Funds to
permit the creation of additional classes of shares.
7. Finally, to transact such other business as may properly come before a
Fund's Special Meeting, or any adjournment or adjournments thereof.
Important: When we have solicited proxies in the past, you have received a proxy
statement directed solely to your Fund. Because this transaction affects all of
the Funds and because much of the information required to be included in the
proxy materials for each Fund is substantially identical, we believe it is more
efficient and cost-effective to prepare
1
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a single, "combined" proxy statement for use by the shareholders of all Funds.
Further information pertaining to your Fund is contained in a separate Exhibit
(the "Fund Exhibit") which accompanies, and forms a part of, these materials.
(If you own shares in more than one Fund, the term "your Fund" means each of
your Funds.) A separate proxy voting card for each Fund you own is enclosed with
these proxy materials.
As you may be aware, each of the Funds, with the exception of Blanchard
Precious Metals Fund, Inc. (which is a Maryland corporation) (the
"Corporation"), are series of Blanchard Funds (the "Trust") which is a
Massachusetts business trust. While the nomenclature of each state varies, for
ease of presentation, we will refer to you throughout the combined proxy
statement as a "shareholder," your Fund shares as "shares" and your directors or
trustees as "Board Members."
Shareholders of record as of the close of business on ____________, 1995 are
entitled to receive notice of, and to vote at, the Special Meeting of their Fund
and any and all adjournments thereof. Your attention is called to the
accompanying combined proxy statement.
By Order of the Boards
Lawrence Liebman
Secretary
New York, New York
May ____, 1995
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IMPORTANT
YOU ARE INVITED TO ATTEND YOUR SPECIAL MEETING. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING IN PERSON, YOU ARE REQUESTED TO COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED,
WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD MAY AVOID
THE NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ASSURE A QUORUM AT
THE MEETING. A PROXY WILL NOT BE REQUIRED FOR ADMISSION TO THE MEETING.
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2
<PAGE>
BLANCHARD GROUP OF FUNDS
COMBINED PROXY STATEMENT
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Special Meetings of Shareholders To be Held on __________, 1995
This combined proxy statement is furnished in connection with a solicitation
of proxies by the Board of each of the Blanchard Global Growth Fund ("BGGF"),
Blanchard Precious Metals Fund, Inc. ("BPMF"), Blanchard 100% Treasury Money
Market Fund ("BTMMF"), Blanchard Short-Term Global Income Fund ("BSTGIF"),
Blanchard American Equity Fund ("BAEF"), Blanchard Flexible Income Fund
("BFIF"), Blanchard Short-Term Bond Fund ("BSTBF"), Blanchard Flexible Tax-Free
Bond Fund ("BFTFBF"), Blanchard Worldwide Emerging Markets Fund ("BWEMF"),
Blanchard Capital Growth Fund ("BCGF") and Blanchard Growth & Income Fund
("BGIF") (each, a "Fund" and, collectively, the "Funds") to be used at the
Special Meeting of Shareholders of each Fund to be held for the purposes set
forth in the accompanying Notice of Special Meetings of Shareholders.
Shareholders of record at the close of business on ________, 1995 (the "Record
Date") are entitled to be present and to vote at the Meeting of their Fund, and
at any and all adjournments thereof.
The Funds will request broker-dealer firms, custodians, nominees and
fiduciaries to forward proxy materials to the beneficial owners of the shares
held as of the Record Date. Sheffield Management Company ("SMC") may reimburse
such broker-dealer firms, custodians, nominees and fiduciaries for their
reasonable expenses incurred in connection with such proxy solicitation. In
addition to the solicitation of proxies by mail, officers of the Funds and
employees of SMC, without additional compensation, may solicit proxies in person
or by telephone, and/or the Funds may engage a proxy service firm to assist in
the solicitation of proxies. The costs associated with such solicitation and the
Meetings will be borne by SMC.
Each Fund share is entitled to one vote. Shareholders can vote only on
matters affecting the Fund(s) of which they are shareholders. If the
accompanying form of proxy is properly executed, returned in time to be voted at
a Special Meeting and unrevoked, the shares covered thereby will be voted in
accordance with the instructions marked thereon by the shareholder(s). Executed
proxies that are unmarked will be voted in favor of all proposals. The proxy
holder will vote in his or her discretion upon any other business as may
properly come before a Fund's Special Meeting, or any adjournment or
adjournments thereof. If the enclosed form of proxy is executed and returned, it
nevertheless may be revoked by another proxy or by letter or telegram directed
to the relevant Fund, which must indicate the shareholder's name and account
number. To be effective, such revocation must be received prior to the relevant
Fund's meeting. In addition, any shareholder who attends a meeting in person may
vote by ballot at the relevant Fund meeting, thereby canceling any proxy
previously given. Your Fund has outstanding the number of shares indicated on
the separate Exhibit accompanying, and forming a part of, these materials (the
"Fund Exhibit"). Proxy materials will be first sent to shareholders of record on
or about , 1995.
The most recent annual and semi-annual reports of each Fund, including
financial statements, have been mailed to shareholders. If you have not received
these reports or would like to receive additional copies free of charge, please
call the Fund at 800-829-3863, and they will be sent by first-class mail within
48 hours.
Proposals are to be voted upon by shareholders of the Funds as follows:
Proposal 1--This Proposal applies to shareholders of each Fund.
Shareholders will be asked to vote to approve their Fund's new investment
advisory contract.
Proposal 2--This Proposal applies to shareholders of each Fund.
Shareholders will be asked to elect their Fund's new Board Members.
VOTE YOUR PROXY TODAY! BY MAIL, use enclosed return envelope. BY PHONE:
1-800-733-8485, ext. 450 (Mon. - Fr., 9:00 a.m. - 11:00 p.m. EST) BY FAX:
1-800-733-1885 (24 hours, 7 days a week). QUESTIONS? Call 1-800-829-3863.
3
<PAGE>
Proposal 3--This Proposal applies to shareholders of each Fund.
Shareholders will be asked to vote to ratify the selection of Price
Waterhouse LLP as independent accountants of their Fund.
Proposal 4--This Proposal applies to shareholders of each Fund except BTMMF.
Shareholders will be asked to vote to approve their Fund's new distribution
plan.
Proposal 5--This Proposal applies only to shareholders of BGGF, BPMF, BSTGIF,
BAEF, BFIF, BSTBF, BFTFBF and BWEMF.
Shareholders will be asked to vote to approve their Fund's new sub-advisory
agreement(s).
Proposal 6--This Proposal applies to shareholders of all funds except BPMF.
Shareholders of the Trust will be asked to approve an amendment to the
Agreement and Declaration of Trust to permit the creation of additional classes
of shares.
The table below illustrates which Proposals are to be voted upon by
shareholders of a Fund:
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Fund Proposal Number
- ---- ---------------
1 2 3 4 5 6
BGGF .............. X X X X X X
BPMF .............. X X X X X
BTMMF ............. X X X X
BSTGIF ............ X X X X X X
BAEF .............. X X X X X X
BFIF .............. X X X X X X
BSTBF ............. X X X X X X
BFTFBF ............ X X X X X X
BWEMF ............. X X X X X X
BCGF .............. X X X X X
BGIF .............. X X X X X
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In the event the shareholders of each Fund do not adopt Proposals 1, 2, 4
and 5 (as applicable), and the shareholders of BTMMF do not adopt Proposals 1
and 2, the closing of the purchase described in Proposal 1 of this proxy
statement will not proceed. If the purchase described in Proposal 1 of this
proxy statement is not consummated, Proposals 1, 2, 4 and 5 will not be
implemented, even if the shareholder vote necessary to adopt them is received.
Regardless of the other proposals, the shareholders of BAEF must approve, via
Proposal 5, a sub-advisory agreement with either Sheffield Management Company or
Virtus Capital Management, Inc. and Provident Investment Counsel, Inc.
A majority of the outstanding shares of a Fund on the Record Date,
represented in person or by proxy, must be present to constitute a quorum for
the transaction of such Fund's business at the Meeting.
The affirmative vote of a "majority of the outstanding voting securities" of
a Fund is required for the approval of Proposals 1, 4 and 5. For purposes of
this requirement, a "majority of the outstanding voting securities" of a Fund
has the meaning assigned to that term in the Investment Company Act of 1940, as
amended (the "1940 Act"), i.e. (i) 67% or more of the shares of such Fund
present at the Meeting if more than 50% of the outstanding shares of such Fund
are represented at the Meeting in person or by proxy, or (ii) more than 50% of
the outstanding shares of such Fund, whichever is less. A plurality (with
respect to the Trust) or a majority (with respect to the Corporation) of the
votes cast at the Meeting is required for the election of Board Members
(Proposal 2) and a majority of the votes cast at the Meeting is required for the
ratification of independent accountants (Proposal 3). A majority of the shares
of each Fund entitled to vote is required for the approval of the amendment to
the Agreement and Declaration of Trust (Proposal 6).
If a quorum is not present at a Meeting, or if a quorum is present but
sufficient votes to approve any of the Proposals are not received, 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 nature of the Proposals that are
the subject of the Meeting, 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
4
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shareholders with respect to the reasons for the solicitation. Any adjournment
will require the affirmative vote of a majority of those shares represented at
the Meeting in person or by proxy. A shareholder vote may be taken for one or
more of the Funds on one or more of the Proposals in this combined proxy
statement prior to any adjournment if sufficient votes have been received for
approval. If a shareholder abstains from voting as to any matter, then the
shares held by such shareholder shall be deemed present at the Special Meeting
of the Fund for purposes of determining a quorum and for purposes of calculating
the vote with respect to such matter, but shall not be deemed to have been voted
in favor of such matter. If a broker returns a "non-vote" proxy, indicating a
lack of authority to vote on a matter, then the shares covered by such non-vote
shall be deemed present at the Special Meeting for purposes of determining a
quorum but shall not be deemed represented at the Special Meeting for purposes
of calculating the vote with respect to such matter.
To the best of each Fund's knowledge, as of , 1995, no person beneficially
owned, directly or indirectly, 5% or more of the outstanding shares of a Fund.
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VOTE YOUR PROXY TODAY!
By Mail: use the enclosed return envelope.
By Phone: 1-800-733-8485, ext. 450 (Mon.-Fri., 9:00 a.m. - 11:00 p.m. EST)
By Fax: 1-800-733-1885 (24 hours, 7 days a week)
QUESTIONS? CALL 1-800-733-8485, ext. 450
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5
<PAGE>
TABLE OF CONTENTS
Page
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Description of the Parties Involved ........................................ 7
PROPOSAL 1--APPROVAL OF THE NEW INVESTMENT ADVISORY CONTRACTS BETWEEN THE
FUNDS AND VIRTUS CAPITAL MANAGEMENT, INC., A SUBSIDIARY OF
SIGNET BANKING CORPORATION ..................................... 7
Information Concerning the Purchase .................................... 7
Information Concerning Signet Banking Corporation ...................... 8
Information Pertaining to SMC and SII .................................. 9
Existing Management Agreements and New Investment Advisory Contracts ... 10
Custodian .............................................................. 11
Portfolio Transactions and Brokerage ................................... 11
Deliberations by the Funds' Board Members .............................. 12
New Investment Advisory Contracts .................................... 12
Administrative Services Agreement .................................... 13
VCM and its Principal Executive Officer and Directors .................. 14
Required Vote .......................................................... 14
PROPOSAL 2--ELECTION OF NEW BOARD MEMBERS TO SERVE UPON CONSUMMATION OF
THE PURCHASE ................................................... 15
Nominees for Election to the Boards .................................... 15
Committees of the Board ................................................ 16
Remuneration of Board Members and Officers ............................. 17
Trustee Compensation Nominees .......................................... 17
Remuneration--Current Board Members .................................... 18
Current Officers of the Fund ........................................... 18
Required Vote .......................................................... 18
PROPOSAL 3--RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS ....... 18
Required Vote .......................................................... 19
PROPOSAL 4--APPROVAL OF DISTRIBUTION PLANS ................................. 19
Introduction ........................................................... 19
Existing Distribution and Marketing Plans .............................. 19
New Distribution Plans ................................................. 20
Related Action by the Boards ........................................... 20
Required Vote .......................................................... 20
PROPOSAL 5--APPROVAL OF NEW SUB-ADVISORY AGREEMENTS ........................ 21
The Existing and New Sub-Advisory Agreements-All above-referenced
Funds, except BAEF ................................................... 21
New Sub-Advisory Agreement-BAEF Only ................................... 21
Required Vote .......................................................... 22
PROPOSAL 6--PROPOSAL TO AMEND THE AGREEMENT AND DECLARATION OF TRUST TO
PERMIT THE CREATION OF ADDITIONAL CLASSES OF SHARES ............ 22
Required Vote .......................................................... 22
ADDITIONAL INFORMATION ..................................................... 23
Shareholder Proposals .................................................. 23
6
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Description of the Parties Involved
Sheffield Management Corporation and Sheffield Investments, Inc. are the
manager and distributor, respectively, of the Blanchard Group of Funds.
Signet Banking Corporation is a registered bank holding company.
Headquartered in Richmond, Virginia, it has consolidated assets of $12.9 billion
as of December 31, 1994, including assets of approximately $3 billion held by
Capital One Financial Corporation, Signet Banking Corporation's former credit
card subsidiary, which was distributed to Signet Banking Corporation's
shareholders in the first quarter of 1995. Signet Banking Corporation provides a
number of financial services through subsidiary organizations.
Signet Trust Company, Signet Financial Services and Virtus Capital
Management, Inc. are the Signet Banking Corporation subsidiaries concerned in
this transaction. Signet Trust Company is a subsidiary which administers trust
operations for Signet Banking Corporation. It is anticipated that Signet Trust
Company will serve as custodian for the securities and cash of the Funds.
Signet Financial Services, a wholly owned subsidiary of Signet Banking
Corporation, acts as a broker-dealer in domestic securities.
Virtus Capital Management, Inc., a subsidiary of Signet Trust Corporation,
is the proposed new investment advisor to the Blanchard Group of Funds.
The Virtus Funds are mutual funds managed by Virtus Capital Management, Inc.
and sold by Signet Financial Services.
Federated Securities Corp. and Federated Administrative Services are the
companies proposed by the Fund Boards to assume management of the distribution
functions and administrative responsibilities, respectively, of the Funds.
PROPOSAL 1
APPROVAL OF THE NEW INVESTMENT
ADVISORY CONTRACTS BETWEEN THE
FUNDS AND VIRTUS CAPITAL MANAGEMENT, INC.,
A SUBSIDIARY OF SIGNET BANKING CORPORATION
Information Concerning the Purchase
SMC and Sheffield Investments, Inc. ("SII") (collectively the "Companies")
have entered into an asset purchase agreement with Signet Banking Corporation
("SBC") and its subsidiaries, Signet Trust Company ("STC") and Signet Financial
Services ("SFS"), dated February 15, 1995 (the "Asset Purchase Agreement"),
pursuant to which the Companies will sell to SBC or to such wholly owned
subsidiaries of SBC as it shall designate (the "Buyer") certain of SMC's and
SII's assets relating to each of the Funds, all other assets, and the right to
succeed to certain contracts of the Companies with the Funds (the "Purchase").
The Funds had combined assets of approximately $962 million as of May 1, 1995.
The Purchase price is $15,000,000 in the case of SMC and $10,000,000 in the
case of SII, subject in each case to certain adjustments, including an
adjustment based upon any difference between the net assets of the Funds on the
day prior to closing as compared to the net assets of the Funds on February 14,
1995, payable in cash and promissory notes.
As indicated below, no material change is contemplated in the management of
the Funds and the management fee payable by each of the Funds will not change
under each new investment advisory contract. If the Purchase is consummated, STC
plans to retain the present sub-advisors of the following Funds: BGGF, BPMF,
BSTGIF, BAEF, BFIF, BSTBF, BFTFBF and BWEMF and certain other personnel of the
Companies in the management and administration activities of the Funds.
At meetings of the respective Boards of the Funds held on March 7, March 24,
and May 2, 1995, each Board considered and approved a new investment advisory
contract, new sub-advisory agreements (as applicable) and, a new underwriting
agreement and an administration agreement (the "New Agreements"), to be entered
into with Federated Securities Corp. ("FSC") and Federated Administrative
Services, ("FAS"), respectively. The Boards also approved
7
<PAGE>
the nominees for election as Board Members and with respect to each Fund, except
for BTMMF, new distribution plans, and determined to recommend to shareholders
that they vote FOR approval of the new investment advisory contracts, the
nominees for election as Board Members and the new distribution plans.
The assets that are required to be transferred by the Companies under the
Asset Purchase Agreement consist of the following: (i) the "SMC Assets,"
including (A) all of the assets, properties and rights of SMC in existence as of
immediately prior to the closing, except certain SMC excluded assets described
below and (B) the assets of SciAd, a Vermont corporation which served as the
Funds' marketing company prior to being acquired by SMC in February, 1995; and
(ii) the "SII Assets," including all of the assets, properties and rights of SII
in existence as of immediately prior to the closing, except certain SII excluded
assets described below (collectively with the SMC Assets, the "Assets").
Excluded from the Assets are the management agreements between the Funds and
SMC, the sub-advisory agreements between SMC and the current portfolio managers
of the Funds, and the distribution agreements between SII and the Funds and
SII's Shareholder Servicing Agreement with respect to an investment company that
is not one of the Funds. Also excluded from the Assets are certain insurance
policies, car leases, agreements with and receivables from stockholders of the
Companies, receivables from employees of SciAd, potential claims against current
and former stockholders, directors and officers of the Companies, tax refunds
and tax receivables.
The consummation of the Purchase is subject to the fulfillment of certain
conditions, including: (i) approval by both the Boards of the Funds and the
shareholders of the Funds of the new investment advisory contracts between the
Funds and Virtus Capital Management, Inc. ("VCM"), new sub-advisory agreements
(where applicable) between VCM and the current sub-advisors and new distribution
plans; (ii) approval by the Boards of the Funds of the new distribution
contracts between the Funds and FSC, new Rule 12b-1 agreements between Federated
Services Company and selected broker-dealers, new administrative services
agreements between the Funds and FAS, new custodian contracts between the Funds
and STC and a new agreement for fund accounting, shareholder recordkeeping and
custody services procurement between the Funds and FSC; (iii) that the new Board
Members are satisfactory to SBC; and (iv) that no material adverse change shall
have occurred in the financial condition, results of operations, assets or
liabilities of the business of SMC or SII, the Assets or SMC or SII itself.
The Buyer and the Companies have informed each Fund that they propose to
comply with Section 15(f) of the 1940 Act and such compliance is also a
condition to the consummation of the Purchase. Section 15(f) provides a
non-exclusive safe harbor for an investment adviser or any of its affiliated
persons to receive any amount or benefit in connection with a change in control
of the investment adviser as long as two conditions are met. First, for a period
of three years after the transaction, at least 75% of the board members for the
fund must not be "interested persons" of the successor or predecessor investment
adviser. Second, an "unfair burden" must not be imposed on the fund as a result
of such transaction or any express or implied terms, conditions or
understandings applicable thereto. The term "unfair burden" is defined in
Section 15(f) to include any arrangement during the two-year period after the
transaction whereby the investment adviser (or predecessor or successor
investment adviser), or any interested person of any such adviser, receives or
is entitled to receive any compensation, directly or indirectly, from the fund
or its security holders (other than fees for bona fide investment advisory or
other services) or from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the fund (other than bona
fide ordinary compensation as principal underwriter for such investment
company). The Companies, after due inquiry, are not aware of any express or
implied term, condition, arrangement or understanding which would impose an
"unfair burden" on any of the Funds as a result of the Purchase. STC has agreed
that it and the Companies will take no action that would have the effect of
imposing an "unfair burden" on any Fund as a result of the Purchase.
Information Concerning Signet Banking Corporation
The following information is based upon information provided by SBC.
SBC is a registered bank holding company, incorporated in Virginia in 1962,
and had consolidated assets of $12.9 billion as of December 31, 1994 including
assets of approximately $3 billion held by Capital One Financial Corporation,
SBC's credit card subsidiary, which was distributed to SBC shareholders in the
first quarter of 1995. SBC provides interstate financial services through three
principal subsidiaries: Signet Bank/Virginia, headquartered in Richmond,
Virginia; Signet Bank/Maryland, headquartered in Baltimore, Maryland; and Signet
Bank N.A., headquartered in Washington, D.C.
SBC is engaged in the general commercial and consumer banking business
through its three principal bank subsidiaries, which are members of the Federal
Reserve System. The bank subsidiaries provide financial services
8
<PAGE>
through banking offices located throughout Virginia, Maryland and Washington,
D.C. and a 24-hour full-service Telephone Banking Center. Signet Bank/Virginia
owns a commercial bank operating in the Bahamas. International banking
operations are conducted through foreign branches of Signet Bank/Virginia and
Signet Bank/Maryland. Service subsidiaries are engaged in writing insurance in
connection with the lending activities of the banks and bank-related
subsidiaries and owning real estate for banking premises. Other subsidiaries are
engaged in trust operations, various kinds of lending and leasing activities,
insurance agency activities, mortgage lending, certain investment banking
activities and broker and dealer activities relating to certain phases of the
domestic securities business.
As of December 31, 1994, SBC and its subsidiaries employed 6,028 full-time
and 1,311 part-time employees, including 2,305 full-time employees of Capital
One Financial Corporation. SBC's bank subsidiaries provide all customary banking
services to businesses and individuals in Virginia, Maryland and Washington,
D.C. International banking operations are conducted through Signet
Bank/Maryland's and Signet Bank/Virginia's international divisions and through
Signet Bank (Bahamas), Ltd., a subsidiary of Signet Bank/Virginia. Signet
Bank/Virginia and Signet Bank/Maryland also conduct international banking
operations through foreign branches located in the Bahamas and Cayman Islands,
respectively. International banking is subject to special risks such as exchange
controls and other regulatory or political policies of governments, both foreign
and domestic. Currency devaluation is an additional risk of international
banking; however, substantially all of SBC's international assets are repayable
in U.S. dollars. Signet Commercial Credit Corporation, a wholly owned subsidiary
of SBC, is engaged in banking-related activities in the United States. It makes
loans that are often secured by inventory, accounts receivable or like security
and are generally structured on a revolving basis. Signet Insurance Services,
Inc. and Signet Insurance Services, Inc./Maryland, wholly owned subsidiaries of
SBC, provide, as agents, a full line of life and property/casualty insurance
coverage for both individuals and business enterprises. Signet Mortgage
Corporation, a wholly owned subsidiary of Signet Bank/Virginia, engages in the
business of originating, servicing, and selling mortgage loans. Signet Leasing
and Financial Corporation, a wholly owned subsidiary of Signet Bank/Maryland,
engages in diversified equipment lease financing activities (excluding passenger
automobiles) for commercial customers primarily in Maryland and the Mid-Atlantic
region. Signet Financial Services, Inc., formerly Signet Investment Corporation,
a wholly-owned subsidiary of SBC, acts as a broker and dealer in certain phases
of the domestic securities business. Signet Investment Banking Company, a
wholly owned subsidiary of SBC, is engaged in certain investment banking
activities.
Based on the most recent Securities and Exchange Commission filings, SBC has
informed the Funds that there are no SBC stockholders who either individually or
as a "group" (as defined in Section 13(d) of the Securities Exchange Act of
1934, as amended), owned more than 10% of the outstanding shares of SBC's voting
securities as of May 1, 1995.
As of March 10, 1995, the directors and officers of SBC as a group owned
beneficially approximately 6.2% of the outstanding shares of SBC's voting
securities.
Information Pertaining to SMC and SII
SMC was incorporated in Delaware on October 11, 1985. SMC is an investment
adviser registered with the Securities and Exchange Commission and specializes
in managing and advising mutual funds. SII was incorporated in Delaware on
October 15, 1985 and is an affiliated company of SMC. SII acts as principal
distributor of the Funds' shares. As of May 1, 1995, SMC had approximately $962
million of assets under management. The address of SMC and SII is 41 Madison
Avenue, 24th Floor, New York, New York 10010.
The names and principal occupations for the past five years of the officers
and directors of SMC are set forth below. The address of all the individuals
listed is that of SMC.
<TABLE>
<CAPTION>
Name Principal Occupations For the Last 5 Years
---- ------------------------------------------
<S> <C>
Michael I. Freedman Trustee and President, Blanchard Funds; Director and President,
President, Chief Executive Officer and Blanchard Precious Metals Fund, Inc.; President, Chief Executive
Director Officer and Director, SMC and SII.
Robert Anderson Vice President and Assistant Secretary, Blanchard Funds and Blanchard
Executive Vice President Precious Metals Fund, Inc., Executive Vice President, SMC and SII.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Name Principal Occupations For the Last 5 Years
---- ------------------------------------------
<S> <C>
Lawrence Liebman Trustee and Secretary, Blanchard Funds; Director and Secretary,
Secretary, Director Blanchard Precious Metals Funds, Inc.; Director and Secretary, SMC
and SII; Attorney-at-Law, New Haven, Connecticut; Chairman of the
Board, U.S. Reduction Company, a major secondary aluminum
smelter, Munster, Indiana; Past President of the Connecticut Bar
Association; Director and Corporate Counsel of The Bank of New
Haven.
William Craven Chief Financial Officer and Treasurer, Blanchard Funds and Blanchard
Chief Financial Officer Precious Metals Fund, Inc.; Chief Financial Officer, SMC and SII;
and Treasurer Senior Vice President, Reich & Tang L.P. and Treasurer of the Reich &
Tang Funds from 1990 to 1991.
Bertram Frankenberger, Jr. Director of SMC and SII since 1986; private investor, consultant and
Director director of Lafayette American Bank & Trust Co.
James U. Blanchard III Director of SMC and SII since 1986; Chief Executive Officer Jefferson
Director Coin & Bullion, Inc., coin and bullion dealer, since 1993; Chief
Executive Officer Jefferson Financial, Inc., newsletter publisher and
financial conference sponsor, since 1990.
David Galland Director of SMC and SII since 1990; President, SciAD marketing
Director organization from 1987 to February 1995.
</TABLE>
It is anticipated that, upon consummation of the Purchase, Mr. Freedman
will be employed by SFS and SBC as a managing director, and that Mr. Galland
will be employed by SFS and SBC as a vice president. Pursuant to the terms of
the Asset Purchase Agreement, SMC and SII will both liquidate after the purchase
is consummated.
Existing Management Agreements and New Investment Advisory Contracts
Certain investment management services are currently provided to each Fund
by SMC pursuant to a management agreement (the "Management Agreement"). Pursuant
to each Management Agreement, SMC is responsible for providing management and
administrative services to each Fund subject at all times to the supervision of
the Fund's Board. SMC furnishes or obtains on behalf of each Fund all services
necessary for the proper conduct of the Fund's business and administration. In
addition to the foregoing, SMC evaluates the performance of each sub-advisor.
For the services it provides under the terms of each Management Agreement,
which includes selecting and evaluating the performance of each Fund's
sub-advisor; supervising and managing all aspects of each Fund's operations;
providing each Fund with such executive, administrative and clerical services as
are deemed advisable by the Funds' Board Members; arranging, but not paying for,
the periodic updating of prospectuses and supplements thereto, proxy material,
tax returns, reports to each Fund's shareholders and reports to and filings with
the Securities and Exchange Commission and state Blue Sky authorities; providing
the Fund with, or obtaining for it, adequate office space and all necessary
office equipment and services, including telephone service, heat, utilities,
stationery supplies and similar items for the Fund's principal office; and
providing the Board Members on a regular basis with financial reports and
analyses on each Fund's operations and the operations of comparable investment
companies, SMC is paid monthly a fee as set forth on each Fund Exhibit. SMC will
reduce its aggregate fees for any fiscal year, or reimburse a Fund, to the
extent required so that a Fund's expenses do not exceed the expense limitations
applicable to such Fund under the securities laws or regulations of those states
or jurisdictions in which such Fund's shares are registered or qualified for
sale, but will not be required to reimburse a Fund for any ordinary expenses
which exceed the amount of its management fee for such fiscal year. For each
Fund, the management fee paid by such Fund for its most recent fiscal year
under its existing Management Agreement is set forth on its Fund Exhibit.
The new investment advisory contract ("New Investment Advisory Contract")
between each Fund and VCM is similar to the existing Management Agreement
between each Fund and SMC. Under the New Investment Advisory Contract, subject
to the direction of the Board Members, VCM shall provide or procure on behalf of
each of the Funds all management and certain administrative services. In
carrying out its obligations, VCM shall: (i) provide or arrange
10
<PAGE>
for investment research and supervision of the investments of the Funds; (ii)
select and evaluate the performance of each Fund's portfolio sub-advisor; (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 a Fund's assets. VCM has undertaken, for a period of two years,
to voluntarily waive a portion of its fees or reimburse each Fund, if necessary,
so that the expense ratio for the Fund for the next two years does not exceed
the expense ratio for the Fund's most recent fiscal year. In addition, VCM has
agreed to cap the Funds' total operating expenses so that for a period of two
years after the consummation of the Purchase the expense ratio for each Fund
will not exceed the Fund expense ratio of the fiscal year preceding the
Purchase. A form of the New Investment Advisory Contract is included in this
proxy statement in the Fund Exhibit.
For each Fund, the New Investment Advisory Contract will remain in effect
for an initial period of two years and may continue thereafter from year to
year: if (a) specifically approved at least annually by the vote of a majority
of the Board Members of each Fund who are not parties to the New Investment
Advisory Contract or "interested persons" of any such party, cast in person at a
meeting called for that purpose or by the outstanding voting securities of each
Fund; and (b) VCM shall not have notified a Fund in writing at least sixty (60)
days prior to the anniversary date of the New Investment Advisory Contract in
any year thereafter that it does not desire such continuation with respect to
that Fund. The New Investment Advisory Contract may be terminated by a Fund or
by the Board Members of each Fund at any time without penalty upon 60 days'
notice, and will automatically terminate in the event of its assignment.
Termination will not affect the right of VCM to receive payments on any unpaid
balance of the compensation earned prior to termination. VCM may from time to
time voluntarily waive a portion of its advisory fee.
Custodian
It is anticipated that STC, which is a subsidiary of SBC, will serve as
custodian for the securities and cash of the Funds if the Purchase is
consummated. Under the custodian agreement, STC will hold the Funds' portfolio
securities in safekeeping and keep all necessary records and documents relating
to its duties.
Portfolio Transactions and Brokerage
Currently, all orders for the purchase or sale of portfolio securities are
placed on behalf of each Fund by each of the sub-advisors, subject to the
supervision of SMC and the Boards and pursuant to authority contained in the
Management and Sub-Advisory Agreements between the Fund and SMC, and SMC and the
sub-advisors, respectively. In selecting such brokers or dealers, the
sub-advisors consider various relevant factors, including, but not limited to
the best net price available, the size and type of the transaction, the nature
and character of the markets for the security to be purchased or sold, the
execution efficiency, settlement capability, financial condition of the
broker-dealer firm, the broker-dealer's execution services rendered on a
continuing basis and the reasonableness of any commission.
In addition to meeting the primary requirements of execution and price,
brokers or dealers may be selected who provide research services, or statistical
material or other services to a Fund or to the sub-advisors for a Fund's use.
Those services may include economic studies, industry studies, security analysis
or reports, sales literature and statistical services furnished either directly
to a Fund or to the sub-advisors. Such allocation is in such amounts as SMC
determines and the sub-advisors report regularly to SMC who in turn reports to
the Board Members on the allocation of brokerage for such services. The Board
Members must determine that such services are reasonable and necessary to a
Fund's normal operations.
The receipt of research from broker-dealers may be useful to the
sub-advisors in rendering investment management services to their other clients,
and, conversely, such information provided by brokers or dealers who have
executed orders on behalf of the sub-advisors' other clients may be useful to
the sub-advisors in carrying out their obligations to a Fund. The receipt of
such research may not reduce the sub-advisors' normal independent research
activities.
The sub-advisors are authorized, subject to best price and execution, to
place portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of a Fund and are authorized to use SII, an
affiliate of SMC, and the sub-advisors or their affiliated broker-dealers on an
agency basis, to effect a substantial
VOTE YOUR PROXY TODAY! BY MAIL, use enclosed return envelope. BY PHONE:
1-800-733-8485 ext. 450 (Mon. - Fr., 9:00 a.m. - 11:00 p.m. EST) BY FAX:
1-800-733-1885 (24 hours, 7 days a week) QUESTIONS? Call 1-800-829-3863.
11
<PAGE>
amount of the portfolio transactions which are executed on the New York or
American Stock Exchanges, Regional Exchanges and Foreign Exchanges where
relevant, or which are traded in the Over-the-Counter market. Any profits
resulting from brokerage commissions earned by the Distributor as a result of
Fund transactions will accrue to the benefit of the shareholders of SII who are
also shareholders of SMC. The Management Agreement does not provide for any
reduction in the management fee as a result of profits resulting from brokerage
commissions effected through SII. In addition, the Sub-Advisory Agreements
between SMC and the sub-advisors do not provide for any reduction in the
advisory fees as a result of profits resulting from brokerage commissions
effected through the sub-advisors or their affiliated brokerage firms. For the
year ended April 30, 1994, BGGF incurred brokerage expenses of $583,706 from the
purchase and sale of portfolio securities, of which $121,292, or approximately
21%, was paid to Shufro, Rose & Ehrman, a sub-advisor of BGGF.
The Boards have adopted certain procedures incorporating the standards of
Rule 17e-1 issued under the 1940 Act which requires that the commissions paid
SII or to the sub-advisors or their affiliated broker-dealers must be
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time."
The Rule and the procedures also contain review requirements and require SMC to
furnish reports to the Boards and to maintain records in connection with such
reviews.
Brokers or dealers who execute portfolio transactions on behalf of a Fund
may receive commissions which are in excess of the amount of commissions which
other brokers or dealers would have charged for effecting such transactions;
provided, SMC determines in good faith that such commissions are reasonable in
relation to the value of the brokerage and/or research services provided by such
executing brokers or dealers viewed in terms of a particular transaction or
SMC's overall responsibilities to the Fund.
It may happen that the same security will be held by other clients of SMC or
of the sub-advisors. When the other clients are simultaneously engaged in the
purchase or sale of the same security, the prices and amounts will be allocated
in accordance with a formula considered by SMC to be equitable to each, taking
into consideration such factors as size of account, concentration of holdings,
investment objectives, tax status, cash availability, purchase cost, holding
period and other pertinent factors relative to each account. In some cases, this
system could have a detrimental effect on the price or volume of the security as
far as the Fund is concerned. In other cases, however, the ability of the Fund
to participate in volume transactions will produce better executions for the
Fund.
It is anticipated that the policies described above will continue in effect
if the Purchase is consummated.
Deliberations by the Funds' Board Members
(i) New Investment Advisory Contracts
On March 24, 1995, the Boards of the Funds approved the New Investment
Advisory Contracts, subject to shareholder approval. In determining whether to
recommend approval of the New Investment Advisory Contracts to the shareholders,
the independent Board Members met separately with their counsel a number of
times, inquired into a number of matters and considered the following factors,
among others:
(1) The intention of VCM to employ certain of the present key management
personnel of SMC, and its expectation that those persons will continue to
render substantially the same services with regard to the Funds that they
are currently rendering.
(2) The fact that the management fees and management services to be
performed under the New Investment Advisory Contracts combined with the
administrative services to be provided under an administrative services
agreement are the same as those currently provided under the existing
Management Agreements, that the other terms of the agreements are similar,
except for (i) the identity of the adviser, which will be VCM and (ii) the
dates of their execution, effectiveness and termination; and the provision
that VCM has agreed to voluntarily waive a portion of its fees or reimburse
each Fund, if necessary, so that the expense ratio of the Funds for the next
two years does not exceed the expense ratio for each Fund's most recent
fiscal year (with the exception of certain expenses beyond the control of
VCM.
(3) The possibility that having VCM act as the advisor and FSC act as
the distributor of the Funds will increase the assets and economies of scale
of the Funds.
As a result of their considerations, the Boards determined that the New
Investment Advisory Contracts would be in the best interests of the Funds and
their shareholders. The Boards also determined that the New Investment
12
<PAGE>
Advisory Contracts would not "result in any unfair burden" to the Funds within
the meaning of the 1940 Act. Accordingly, the Boards unanimously approved the
New Investment Advisory Contracts and voted to recommend them to shareholders
for approval.
(ii) Administrative Services Agreements
In anticipation of the transfer of assets and management personnel to VCM,
each Fund Board approved an administrative services agreement ("Administrative
Services Agreement") with Federated Administrative Services ("FAS") (the
"Administrator"), to take effect if Proposal 1 is approved by shareholders of
the Funds and upon consummation of the Purchase. As Administrator, and subject
to the supervision and control of the Funds' Boards, FAS will provide
facilities, equipment, and personnel to carry out the following administrative
services for operation of the business and affairs of each Fund: (a) prepare,
file, and maintain the Fund's governing documents and any amendments thereto,
including the Declaration of Trust and Articles of Incorporation, the By-laws
and minutes of meetings of Board Members and shareholders; (b) prepare and file
with the Securities and Exchange Commission and the appropriate state securities
authorities the registration statements for the Fund and the Fund's shares and
all amendments thereto, reports to regulatory authorities and shareholders,
prospectuses, proxy statements, and such other documents all as may be necessary
to enable the Fund to make a continuous offering of its shares; (c) prepare,
negotiate, and administer contracts on behalf of the Fund with, among others,
the Fund's investment advisor, distributor, custodian, and transfer agent; (d)
supervise the Fund's custodian in the maintenance of the Fund's general ledger
and in the preparation of the Fund's financial statements, including oversight
of expense accruals and payments, of the determination of the net asset value of
the Fund and of the declaration and payment of dividends and other distributions
to shareholders; (e) calculate performance data of the Fund for dissemination to
information services covering the investment company industry; (f) prepare and
file the Fund's tax returns; (g) examine and review the operations of the Fund's
custodian and transfer agent; (h) coordinate the layout and printing of publicly
disseminated prospectuses and reports; (i) perform internal audit examinations
in accordance with a charter to be adopted by FAS and the Fund; (j) assist with
the design, development, and operation of the Fund; (k) provide individuals
reasonably acceptable to the Fund's Board Members for nomination, appointment,
or election as officers of the Fund, who will be responsible for the management
of certain of the Fund's affairs as determined by the Fund's Board Members; and
(l) consult with the Fund and its Board Members on matters concerning the Fund
and its affairs. Each Administrative Services Agreement provides that, unless
sooner terminated, it shall remain in effect for an initial period of two years
and may continue thereafter from year to year if specifically approved at least
annually by the Boards of the Funds. Although the Funds do not currently have an
Administrative Services Agreement, SMC is reimbursed, pursuant to a shareholder
servicing arrangement with the Funds, by the Funds for providing certain of the
services listed above. For the Administrative Services to be provided, the Funds
will pay FAS an administrative fee at an annual rate per each Fund's shares,
payable daily, as specified below:
Maximum Administrative Average Daily Net Assets
Fee of the Fund
--- -----------
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
However, in no event will the administrative fee received during any year of
the Administrative Services Agreement be less than, or be paid at a rate less
than would aggregate (i) for Funds existing on the date of the Administrative
Services Agreement, $75,000 per Fund plus $30,000 per each additional class of
shares related to such Fund added after the date of the Administrative Services
Agreement; and (ii) for Funds created after the date of the Administrative
Services Agreement, $150,000 per Fund having a single class of shares, plus
$30,000 per each additional class of shares related to such Fund.
In addition, VCM has agreed to cap the Funds' expenses so that for a period
of two years after the consummation of the Purchase the expense ratio for each
Fund will not exceed the Fund's expense ratio of the fiscal year preceding the
Purchase. No shareholder approval of the Administrative Services Agreement is
being sought in this proxy statement.
13
<PAGE>
VCM and its Principal Executive Officer and Directors
VCM, a Maryland corporation formed in 1995, is a wholly owned subsidiary of
SBC. VCM, on March 1, 1995, succeeded to the business of The Virtus Funds'
former investment advisor, Signet Asset Management (a division of STC), by
virtue of a corporate reorganization within the SBC holding company system.
Signet Asset Management had managed The Virtus Funds since their inception in
1990. As successor to the business of Signet Asset Management, VCM, which is a
registered investment advisor, will manage, in addition to the Funds and The
Virtus Funds, three equity common trust funds with $39 million in assets and
three fixed income common trust funds with $221 million in assets at February
28, 1995. As part of its regular banking operations, SBC may make loans to
public companies. Thus, it may be possible, from time to time, for the Funds to
hold or acquire the securities of issuers which are also lending clients of SBC.
The lending relationship will not be a factor in the selection of securities.
The following schedule lists the advisory fees for each of The Virtus Funds
and their approximate net assets, as of March 31, 1995:
Net Assets as of
Name of Fund March 31, 1995 Advisory Fee
------------ ---------------- ------------
The U.S. Government Securities Fund .... $206,918,643 .75%
The Stock Fund ......................... 97,466,760 .75%
The Virginia Municipal Bond Fund ....... 104,056,964 .75%
The Maryland Municipal Bond Fund ....... 42,036,129 .50%
The Treasury Money Market Fund ......... 466,221,073 .50%
The Money Market Fund .................. 172,213,295 .50%
The Tax-Free Money Market Fund ......... 46,220,950 .50%
The Strategic Stock Fund ............... 55,368,297 1.00%
The names and principal occupations of the principal executive officer and
each director of VCM are set forth below. The address of all individuals listed
is that of The Virtus Funds: Federated Investors Tower, Pittsburgh, Pennsylvania
15220-3779.
<TABLE>
<CAPTION>
Name Position with VCM Principal Occupations for the Last 5 Years
- ---- ----------------- ------------------------------------------
<S> <C> <C>
Garry M. Allen President and Director ...... Chief Investment Officer, VCM, since March 1995;
Senior Vice President, STC (March 1994 to March 1995);
Managing Director of U.S. Equities (November 1990 to
March 1994) and Director, Internal Asset Management
(June 1985 to November 1990) of the Virginia
Retirement System.
E. Christian Goetz Senior Vice President and
Director ...................... Director of Fixed Income, VCM, since March 1995;
Portfolio Management STC (November 1990 to March
1995).
Tanya Orr Bird Vice President and Director ... Director of Client Services, VCM, since March 1995;
Vice President of Client Sevices, STC (October 1994 to
March 1995); Consultant, William M. Mercer Asset
Planning Inc., 1989 to October 1994.
Kevin M. Lewis Vice President and Director ... Senior Equity Manager, VCM, Since March 1995; Equity
Manager, STC, from 1987 to March 1995.
</TABLE>
Required Vote
In order to approve Proposal 1, the affirmative vote of a "majority of the
outstanding voting securities", as defined by the 1940 Act, of a Fund is
required. The Boards unanimously recommend that shareholders vote FOR the
approval of the New Investment Advisory Contracts between the Funds and VCM. If
the Purchase described above is not consummated, Proposal 1 will not be
implemented, even if the shareholder vote necessary to adopt it is received.
14
<PAGE>
PROPOSAL 2
ELECTION OF NEW BOARD MEMBERS TO SERVE UPON CONSUMMATION OF THE PURCHASE
Nominees for Election to the Boards
The Board of each Fund will consist of thirteen Members. It is proposed that
shareholders of each Fund elect as Board Members the individuals (the
"Nominees") listed below, each to serve until his or her successor is duly
elected and qualified. In the event the Purchase is not consummated, the current
Board Members, Michael I. Freedman, Lawrence Liebman, Eric J. Lomas, Gerald E.
Morris and Arthur Kiriacon, will continue to serve. Biographical information
about the Nominees and other relevant information is set forth below. Each
Nominee has consented to being named in this proxy statement and has agreed to
serve as a Board Member if elected. The current disinterested Board Members
reserve the right to substitute another person or persons of their choice as
nominee or nominees if a Nominee is unable to serve as a Board Member at the
time of the Meeting for any reason. Nothing, however, indicates that such a
situation will arise.
<TABLE>
<CAPTION>
Nominee Age Principal Occupations for the Last Five Years
- ------- --- ---------------------------------------------
<S> <C> <C>
John F. Donahue(D) 70 Chairman and Trustee, The Virtus Funds; Chairman and Trustee, Federated
Investors, Federated Advisers, Federated Management, and Federated
Research; Chairman and Director, Federated Research Corp.; Chairman,
Passport Research, Ltd.; Director, Aetna Life and Casualty Company; Chief
Executive Officer and Director, Trustee, or Managing General Partner of
certain registered investment companies.*
Thomas G. Bigley 61 Trustee, The Virtus Funds; Director, Oberg Manufacturing Co.; Chairman of
the Board, Children's Hospital of Pittsburgh; Director, Trustee, or Managing
General Partner of certain registered investment companies;* formerly,
Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr. 57 Trustee, The Virtus Funds; President, Investment Properties Corporation;
Senior Vice President, John R. Wood and Associates, Inc., Realtors; Presi-
dent, Northgate Village Development Corporation; Partner or Trustee in
private real estate ventures in Southwest Florida; Director, Trustee, or
Managing General Partner of certain registered investment companies;*
formerly, President, Naples Property Management, Inc.
William J. Copeland 76 Trustee, The Virtus Funds; Director and Member of the Executive Commit-
tee, Michael Baker, Inc.; Director, Trustee, or Managing General Partner of
certain registered investment companies;* formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes,
Inc.
James E. Dowd 72 Trustee, The Virtus Funds; Attorney-at-law; Director, The Emerging Ger-
many Fund, Inc.; Director, Trustee, or Managing General Partner of certain
registered investment companies;* formerly, Director, Blue Cross of Massa-
chusetts, Inc.
Lawrence D. Ellis, M.D.(D) 62 Trustee, The Virtus Funds; Professor of Medicine and Member, Board of
Trustees, University of Pittsburgh; Director of University of Pittsburgh
Medical Center-Downtown; formerly, Hematologist, Oncologist, and Inter-
nist, Presbyterian and Montefiore Hospitals; Director, Trustee, or Managing
Partner of certain registered investment companies.*
Edward L. Flaherty, Jr. 70 Trustee, The Virtus Funds; Attorney-at-law; Partner, Henny, Kochuba,
Meyer & Flaherty; Director, Eat'N Park Restaurants, Inc. and Statewide
Settlement Agency, Inc.; Director, Trustee, or Managing General Partner of
certain registered investment companies;* formerly, Counsel, Horizon
Financial, F.A., Western Region.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Nominee Age Principal Occupations for the Last Five Years
- ------- --- ---------------------------------------------
<S> <C> <C>
Edward C. Gonzales(D) 64 President, Treasurer and Trustee, The Virtus Funds; Vice President, Treas-
urer, and Trustee, Federated Investors; Vice President and Treasurer, Feder-
ated Advisers, Federated Management, Federated Research, Federated
Research Corp., and Passport Research, Ltd.; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.; Trustee, Federated Serv-
ices Company and Federated Shareholder Services; Chairman, Treasurer, and
Trustee, Federated Administrative Services; Trustee or Director of certain
registered investment companies;* Vice President and Treasurer of the
Federated complex of Funds.
Peter E. Madden 53 Trustee, The Virtus Funds; Consultant; Director, Trustee, or Managing
General Partner of certain registered investment companies;* formerly,
President, State Street Bank and Trust Company and State Street Boston
Corporation, Trustee, Lahey Clinic Foundation, Inc. and State Representative,
Commonwealth of Massachusetts.
Gregor F. Meyer 68 Trustee, The Virtus Funds; Attorney-at-law; Partner, Henny, Kochuba,
Meyer & Flaherty; Chairman, Meritcare, Inc.; Director, Eat'N Park Restau-
rants, Inc.; Director, Trustee, or Managing General Partner of certain regis-
tered investment companies;* formerly, Vice Chairman, Horizon Financial,
F.A.
John E. Murray, Jr., J.D., 62 Trustee, The Virtus Funds; President, Law Professor, Duquesne University; Consulting
S.J.D. Partner, Mollica, mUrray and Hogue; Director, Trustee or Managing Partner of certain
registered investment companies.*
Wesley W. Posvar 69 Trustee, The Virtus Funds; Professor, Foreign Policy and Management
Consultant; Trustee, Carnegie Endowment for International Peace, RAND
Corporation, Online Computer Library Center, Inc., and U.S. Space Founda-
tion; Chairman, Czecho Slovak Management Center; Director, Trustee, or
Managing General Partner of certain registered investment companies;*
President Emeritus, University of Pittsburgh; formerly, Chairman, National
Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts 59 Trustee, The Virtus Funds; Public relations/marketing consultant; Director,
Trustee, or Managing General Partner of certain registered investment
companies.*
<FN>
- ----------
(D) If the nominees are elected, Messrs. Donahue, Ellis and Gonzales would be deemed to be "interested persons" of
the Funds as defined in the 1940 Act.
* The registered investment companies, for which the Nominees act as trustees or directors and are compensated,
includes approximately 77 funds for which Federated Investors acts as investment advisory and/or administrator/
distributor.
</FN>
</TABLE>
Committees of the Board
If the Nominees are elected, it is expected that Messrs. Donahue and
Flaherty, Jr. would serve as members of the Boards' Executive Committee.
Each Board has an Audit Committee which is responsible principally for
reviewing compliance with all internal controls and all regulations related to
the financial reporting process. The Audit Committee meets at least twice a year
to receive a report from, and discuss with, a Fund's independent accountants the
financial statements covering the Fund's semi-annual and annual periods and to
discuss, among other things, any matters relating to the Fund's financial
reporting process. The Boards do not have nominating or compensation committees.
It is anticipated that upon consummation of the Purchase, Messrs. Flaherty,
Copeland, Conroy and Dowd will serve as members of each Board's Audit Committee
and that the Audit Committee will meet at least four times a year at regularly
scheduled meetings.
16
<PAGE>
Remuneration of Board Members and Officers
Assuming that the Nominees are elected, they will receive compensation from
the Funds in an amount to be determined in part by the aggregate net assets of
the Funds relative to the aggregate assets of certain registered investment
companies for which such Nominees act as trustees or directors and for which
Federated Investors or its affiliates act as investment advisor and/or
administrator. Had the Funds been included in such formula during the year ened
December 31, 1994, such Nominees, as a group, would have received an aggregate
of approximately $24,500 from the Funds. During the year ended December 31,
1994, the highest paid Nominee would have received $1,984 from the Funds. It is
not anticipated that the amount to be received from the Funds by the Nominees in
1995 will differ materially from that which would have been received in 1994.
Trustee Compensation--Nominees
COMPENSATION TABLE*
(FOR EACH BOARD MEMBER OR NOMINEE RECEIVING COMPENSATION FROM
THE VIRTUS FUNDS FOR THE YEAR ENDED DECEMBER 31, 1994)
The proposed new Board Members listed below have broad experience as mutual
fund board members. They serve as trustees to many other fund groups, including
The Virtus Funds which are managed by VCM, a subsidiary of SBC. The second
column below indicates the total compensation these trustees receive from The
Virtus Funds. The last column indicates the total compensation received from all
the funds in the fund complex, including The Virtus Funds.
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation Paid To
Name and Position with from all Trustees from all The Virtus
The Virtus Funds The Virtus Funds** Funds and Other Mutual Funds
---------------- ------------------ ----------------------------
<S> <C> <C>
John F. Donahue, Chairman and $-0- $-0- for the Virtus Funds and 69 other mutual funds
Trustee
Thomas G. Bigley, Trustee $489.00 $24,991 for the Virtus Funds and 50 other mutual
funds
John T. Conroy, Jr., Trustee $2,001.50 $136,100 for the Virtus Funds and 65 other mutual
funds
William J. Copeland, Trustee $2,001.50 $136,100 for the Virtus Funds and 65 other mutual
funds
James E. Dowd, Trustee $2,001.50 $136,100 for the Virtus Funds and 65 other mutual
funds
Lawrence D. Ellis, M.D., Trustee $1,816.00 $123,600 for the Virtus Funds and 65 other mutual
funds
Edward L. Flaherty, Jr., Trustee $2,001.50 $136,100 for the Virtus Funds and 65 other mutual
funds
Edward C. Gonzales, President
and Trustee $-0- $-0-for the Virtus Funds and 18 other mutual funds
Peter E. Madeen, Trustee $1,517.50 $104,880 for the Virtus Funds and 65 other mutual
funds
Gregor F. Meyer, Trustee $1,816.00 $123,600 for the Virtus Funds and 65 other mutual
funds
John E. Murray, Jr., J.D., S.J.D., $-0- $-0-
Trustee
Wesley W. Posvar, Trustee $1,816.00 $123,600 for the Virtus Funds and 65 other mutual
funds
Marjorie P. Smuts, Trustee $1,816.00 $123,600 for the Virtus Funds and 65 other mutual
funds
<FN>
- ---------------
*This table covers the year ended December 31, 1994.
**The aggregate compensation is provided for all The Virtus Funds, which is comprised of eight portfolios.
</FN>
</TABLE>
17
<PAGE>
Remuneration--Current Board Members
A retirement plan presently in place for the benefit of the current
disinterested Board Members will be terminated prior to the closing of the
Purchase. One Board Member who has reached retirement age will receive a lump
sum payment under the Plan in settlement of benefits that he would have received
and two other Board Members will each receive annuities which will, commencing
at retirement age, provide benefits to such disinterested Board Members which
are similar to those they would have received upon retirement had the existing
Plan not been terminated.
For each Fund's most recent fiscal year, with respect to current Board
members, the number of Board meetings that were held, the schedule of fees
payable by the Fund to Board Members and the amount of fees and expenses
received by Board Members as a group are set forth on its Fund Exhibit.
Current Officers of the Funds
The following persons currently are principal executive officers of the
Funds:
<TABLE>
<CAPTION>
Name Principal Occupations For the Last 5 Years
---- ------------------------------------------
<S> <C>
Michael I. Freedman, President Trustee and President, Blanchard Funds; Director and President,
Blanchard Precious Metals Fund, Inc.; President and Director, SMC
and SII.
Robert Anderson, Vice President Vice President and Assistant Secretary, Blanchard Funds and
and Assistant Secretary Blanchard Precious Metals Fund, Inc.; Executive Vice President,
SMC and SII.
Lawrence Liebman, Secretary Trustee and Secretary, Blanchard Funds; Director and Secretary,
Blanchard Precious Metals Fund, Inc.; Director and Secretary, SMC and SII.
Attorney-at-Law, New Haven, Connecticut; Chairman of the Board, U.S.
Reduction Company, a major secondary aluminum smelter, Munster, Indiana;
Past President of the Connecticut Bar Association; Director and Corporate
Counsel of The Bank of New Haven.
William Craven, Chief Financial Officer Chief Financial Officer and Treasurer, Blanchard Funds and Blanchard
and Treasurer Precious Metals Fund, Inc.; Senior Vice President, Reich & Tang L.P.
and Treasurer of the Reich & Tang Funds from 1990 to 1991.
</TABLE>
Required Vote
The affirmative vote of a plurality (majority) of the votes cast at each
Fund's Meeting, assuming a quorum is present, is required for the election of
the Board Members. The Boards unanimously recommend that shareholders vote FOR
the above slate of Nominees. It is intended that the shares represented by the
accompanying proxy will be voted FOR the election of the Nominees, unless
otherwise instructed on the proxy card. If the Purchase described in Proposal 1
of this proxy statement is not consummated by each Fund, Proposal 2 will not be
implemented, even if the shareholder vote necessary to adopt it is received.
PROPOSAL 3
RATIFICATION OF THE SELECTION
OF INDEPENDENT ACCOUNTANTS
The Boards of the Funds, including a majority of the Board Members who are
not "interested persons" of the Funds as defined by the 1940 Act, have selected
the firm of Price Waterhouse LLP to serve as independent accountants of each
Fund for the fiscal years ending October 31, 1995 for BCGF and BGIF and April
30, 1996 for each of the other Funds, subject to the right of each Fund to
terminate such employment immediately without penalty by vote of a majority of
the outstanding voting securities of a Fund at any meeting called for such
purpose. The Boards' selection is being submitted to the shareholders for
ratification.
18
<PAGE>
Services performed by Price Waterhouse LLP during the most recent year
included an audit of the financial statements of the Funds, services related to
filings with the Securities and Exchange Commission and tax return preparation.
Price Waterhouse LLP has informed the Funds that neither Price Waterhouse LLP
nor any of its partners has any direct or indirect financial interest in the
Funds. Representatives of Price Waterhouse LLP are not expected to be present at
the Meetings but have been given the opportunity to make a statement if they so
desire, and will be available should any matter arise that requires their
participation.
Required Vote
In order to approve Proposal 3 and thereby ratify the selection of
independent accountants, a vote of a majority of the shares of each Fund
represented in person or by proxy at the meeting, assuming a quorum is present,
is required. The Boards unanimously recommend that shareholders vote FOR the
ratification of the selection of Price Waterhouse LLP as independent accountants
for the Funds for the fiscal years ending October 31, 1995 and April 30, 1996.
Adoption of this proposal is not conditioned upon the consummation of the
Purchase.
PROPOSAL 4
APPROVAL OF DISTRIBUTION PLANS
All Funds except BTMMF
Introduction
Each Fund (except BTMMF) has a Distribution and Marketing Plan pursuant to
Rule 12b-1 (the "Rule"). The Rule was adopted by the Securities and Exchange
Commission under the 1940 Act and authorizes mutual funds to pay for sales costs
of distributing their shares only pursuant to a plan adopted in accordance with
the Rule. Basically, the plan allows for the distributor and the advisor of the
Funds to be reimbursed for a certain percentage of sales-related costs, which
are incurred as the distributor and the advisor seek to increase the size of the
Funds.
Based on the data and information presented to the Boards of the Funds by
Federated Investors, Inc., the Boards determined that there is a reasonable
likelihood that the benefits of growth in size of the Funds can be achieved
under the new Distribution Plans; that the Funds expect to share in the benefits
of growth in assets by achieving certain economies of scale; that the Funds
would be better able to withstand downturns in the market more easily than
smaller funds would; and that the Funds would be in a better position to attract
and retain high quality service providers to meet the needs of the Funds.
It is proposed that, effective upon the consummation of the Purchase, new
Distribution Plans for each Fund except BTMMF be approved as described below.
The existing Distribution and Marketing Plan and the new Distribution Plan for
each Fund are substantially similar, except that Federated Services Corp.
("FSC") replaces SII as each Fund's underwriter and receives payments under each
new Distribution Plan. In no case is the rate a Fund pays under its Rule 12b-1
Plan proposed to be increased. A form of new Distribution Plan applicable to
each Fund is included as part of the Fund Exhibit.
Shareholders should review the Fund Exhibit and the section below that
describes the Distribution Plan.
Existing Distribution and Marketing Plans
Each Fund, except BTMMF, has adopted a Distribution and Marketing Plan under
which (i) BSTGIF, BFIF, BSTBF and BFTFBF will pay up to a maximum of 25/100 of
1% per year of their respective average daily net assets; (ii) BGIF, BCGF, BWEMF
and BAEF will pay up to a maximum of 50/100 of 1% per year of their respective
average daily net assets and (iii) BGGF and BPMF will pay up to a maximum of
75/100 of 1% per year of their respective average daily net assets for expenses
incurred in the distribution of the Fund's shares. The Distribution and
Marketing Plan provides that the Funds may finance activities which are
primarily intended to result in the sale of the Funds' shares. The Distribution
and Marketing Plan only permits payments for expenses actually incurred by SII
or SMC. The Distribution and Marketing Plan allows for the carry-over of
expenses from year to year, however, if the Distribution and Marketing Plan is
terminated or not continued in accordance with its terms, the Funds' obligation
to make payments to SII or SMC pursuant to the Plan will cease and the Fund will
not be required to make any payments past the date that the Distribution and
Marketing Plan terminates.
19
<PAGE>
The amounts paid by the Funds pursuant to the Distribution and Marketing
Plans is included on each Fund Exhibit.
New Distribution Plans
The current Board Members of each Fund, except for BTMMF, have adopted a new
Distribution Plan, subject to shareholder approval and consummation of the
Purchase. In approving the new Distribution Plans, the Board Members (including
those Board Members who are not "interested" persons of the Funds, as defined in
the 1940 Act, and who have no direct or indirect financial interest in the new
Distribution Plans or any related agreement) considered various factors and
determined that there is a reasonable likelihood that the new Distribution Plans
will benefit the Funds and their shareholders. Among the matters considered by
the Board Members were the present and future requirements of the Funds for
distribution services, the ability of FSC to perform adequately the services
required under the new Distribution Plans and the related agreements and the
fairness of the new Distribution Plans and the related agreements. According to
the provisions of the new Distribution Plan, FSC may select brokers and dealers
to provide distribution and administrative services as to shares of the Funds.
FSC may also select administrators (including financial institutions,
fiduciaries, custodians for public funds and investment advisors) to provide
administrative services. Administrative services may include, but are not
limited to, the following functions: providing office space, equipment,
telephone facilities, and various personnel including clerical, supervisory and
computer, as necessary or beneficial to establish and maintain shareholder
accounts and records; processing purchase and redemption transactions and
automatic investments of client account cash balances; answering routine client
inquiries regarding shares; assisting clients in changing dividend options,
account designations, and addresses; and providing such other services as each
Fund reasonably requests for its shares. Brokers, dealers, and administrators
will receive fees based upon shares owned by their clients or customers. Any
fees paid by FSC with respect to shares of a Fund pursuant to the distribution
plan will be reimbursed by a Fund from the assets of the shares of that Fund.
FSC will, periodically, uniformly offer to pay cash or promotional incentives in
the form of trips to sales seminars at luxury resorts, tickets or other items to
all dealers selling shares of the Funds. Such payments will be predicated upon
the amount of shares of the Funds that are sold by the dealer. Such payments, if
made, will be in addition to amounts paid under the distribution plan and will
not be an expense of a Fund. The new Distribution Plan would replace the
existing Distribution and Marketing Plan. See Fund Exhibit. Amounts carried over
under the existing Distribution and Marketing Plans will be terminated upon the
termination of such Plans.
Related Action by the Boards
At their March 24, 1995 meeting, in anticipation of the transfer of the
Companies' assets and management personnel to VCM, the Boards of the Funds
approved new underwriting agreements with FSC, to take effect if Proposal 1 is
approved by shareholders of such Funds and upon consummation of the Purchase.
The new underwriting agreements would replace the existing underwriting
agreements and would be identical in all material respects to those agreements,
except for the change of identity of the Distributor and the dates of their
execution, effectiveness and termination.
Pursuant to the terms of the proposed underwriting agreements, FSC will have
the exclusive right to enter into dealer agreements with securities dealers who
sell shares of the Funds and with financial institutions which may furnish
services to shareholders of the Funds. It is anticipated that FSC will enter
into dealer agreements with the current dealers offering shares of the Funds.
No shareholder approval of the new underwriting agreements is required or is
being sought in this proxy statement.
Required Vote
In order to approve Proposal 4, the affirmative vote of a "majority of the
outstanding voting securities", as defined by the 1940 Act, of a Fund is
required. The Boards unanimously recommend that shareholders vote FOR the
approval of the new Distribution Plans. If the Purchase described in Proposal 1
of this proxy statement is not consummated, Proposal 4 will not be implemented,
even if the shareholder vote necessary to adopt it is received.
20
<PAGE>
PROPOSAL 5
APPROVAL OF NEW SUB-
ADVISORY AGREEMENTS
Only the shareholders of BGGF, BPMF, BSTGIF, BAEF, BFIF, BSTBF, BFTFBF and
BWEMF will be requested to vote on this Proposal.
The Existing and New Sub-Advisory Agreements-All above-referenced Funds,
except BAEF
To provide sub-advisory services for the Funds, SMC has entered into
sub-advisory agreements with certain sub-advisors. The sub-advisors have
extensive experience in investing and managing large private and institutional
accounts. Under the terms of each sub-advisory agreement, the sub-advisor has
discretion to purchase and sell securities for each Fund, except as limited by a
Fund's investment objective, policies and restrictions. Although each
sub-advisor's activities are subject to general oversight by SMC and the Board
Members, selection of specific securities in which a Fund may invest are made by
the sub-advisor.
The existing sub-advisory agreements between SMC and the sub-advisors will
terminate in accordance with their terms and pursuant to the 1940 Act as of the
date SMC ceases to be the investment manager to the Funds. Therefore, new
sub-advisory agreements between VCM and the current sub-advisors of the Funds,
mentioned above, must be approved by Fund shareholders being asked to vote on
this proposal.
For the services provided under the terms of each sub-advisory agreement,
each sub-advisor is paid monthly a fee as set forth on each Fund Exhibit. The
new sub-advisory agreements ("New Sub-Advisory Agreements") between the Adviser
and a sub-advisor are identical in all material respects to the existing
sub-advisory agreements, except for the identity of the Fund's advisor and the
dates of their execution, effectiveness and termination. A brief description of
each Fund's sub-advisor, the fees it received for the most recent fiscal year
and a form of the New Sub-Advisory Agreement are also set forth on each Fund
Exhibit.
Each New Sub-Advisory Agreement provides that it may be terminated without
penalty by vote of the Boards or by vote of a majority of a Fund's outstanding
voting securities (as defined in the 1940 Act), or by either VCM or the
sub-advisor, at any time by the giving of 60 days' written notice to the other,
and terminates automatically in the event of its "assignment," as defined in the
Investment Company Act or in the event of termination of the Investment Advisory
Contract. Each New Sub-Advisory Agreement provides that, unless sooner
terminated, it shall continue in effect from year to year after expiration of
its initial two year term only so long as such continuance is specifically
approved at least annually by either the Fund Board or by a vote of the majority
of the outstanding voting securities of a Fund, provided, that in either event,
such continuance is also approved by vote of the majority of the Board Members
who are not parties to the New Sub-Advisory Agreement or "interested persons" of
such parties cast in person at a meeting called for the purpose of voting on
such approval.
New Sub-Advisory Agreement - BAEF Only
Provident Investment Counsel, Inc. ("PIC") has acted as portfolio advisor to
BAEF under a sub-advisory agreement which terminated on February 15, 1995. Under
the terms of the sub-advisory agreement and in accordance with the 1940 Act, the
PIC sub-advisory agreement terminated automatically upon the acquisition of PIC
by United Asset Management Corp. ("UAM"), whereby PIC became a wholly owned
subsidiary of UAM, and the assignment of the sub-advisory agreement to UAM by
PIC.
A description of PIC, the fees it received for the most recent fiscal year
and a form of the Sub-Advisory Agreement are included in BAEF's Fund Exhibit.
Due to the termination of the existing sub-advisory agreement with SMC and
PIC, BAEF shareholders must approve a new sub-advisory agreement (i) between SMC
and PIC if the Purchase is not consummated or (ii) between STC and PIC if the
Purchase is consummated. PIC is currently serving as sub-advisor to BAEF without
a fee, pending shareholder approval of a new sub-advisory agreement. The Board
Members, including a majority of the Board Members who are not parties to the
Sub-Advisory Agreement or "interested persons" of such parties, approved the
continuance of the current Sub-Advisory Agreement on March 7, 1995 and,
alternatively, the adoption of the New Sub-Advisory Agreement.
21
<PAGE>
Required Vote
In order to approve Proposal 5, the affirmative vote of a "majority of the
outstanding voting securities", as defined by the 1940 Act, of a Fund is
required. The Boards unanimously recommend that shareholders vote FOR the
approval of the New Sub-Advisory Agreements. If the Purchase described above is
not consummated, Proposal 5 will not be implemented (except with respect to BAEF
as explained above), even if the shareholder vote necessary to adopt it is
received.
PROPOSAL 6
PROPOSAL TO AMEND THE AGREEMENT
AND DECLARATION OF TRUST TO PERMIT THE
CREATION OF ADDITIONAL CLASSES OF SHARES
All Funds except BPMF will be requested to vote on this proposal.
The Trust proposes to amend its Agreement and Declaration of Trust (the
"Amendment") to permit the Trustees to authorize the division of shares of any
Fund into shares of one or more classes of each Fund. A copy of the proposed
Amendment is attached to the Fund Exhibit. The following summary is qualified in
its entirety by the provisions of Exhibit Q.
Under the Trust's Agreement and Declaration of Trust, dated as of January
24, 1986 as amended April 11, 1986 and December 4, 1990 (the "Declaration of
Trust"), as currently in effect, the Trust is permitted to establish one or more
series of its shares of beneficial interest. The Trust currently has ten series.
Each share of a series represents an equal beneficial interest with each other
share of that series in the assets of the Trust pertaining to that series.
Under the Amendment, the Board of Trustees may, in their discretion,
authorize the division of shares of any series into shares of one or more
classes of shares of such series. All shares of a class shall be identical with
each other and with the shares of each other class of the same series except for
such variations between classes as may be approved by the Board of Trustees and
be permitted under the 1940 Act or the rules and regulations thereunder or
pursuant to exemptive orders issued by the Securities and Exchange Commission.
These variations would enable the Trust to provide a broader choice as to the
method of purchasing shares of a Fund which would benefit existing shareholders
as well as prospective investors. The implementation of a new class of shares
would not alter the rights and privileges of the existing shareholders of the
ten series, nor would it affect the net asset value of an existing shareholder's
investment.
Under the Amendment, the Board of Trustees could also offer other variations
among classes of shares to the extent permitted by the 1940 Act or the rules and
regulations thereunder or pursuant to exemptive orders issued by the Securities
and Exchange Commission. If the Trust offers shares of a new class, among other
conditions it will amend its Prospectus and Statement of Additional Information
or issue a new Prospectus and Statement of Additional Information setting forth
such information regarding such new class of shares.
Required Vote
In order to approve Proposal 6 and thereby approve the Amendment to the
Declaration of Trust, the affirmative vote of a majority of the Shares of each
Fund entitled to vote, is required. The Board of Trustees of the Trust
unanimously recommend that shareholders vote FOR the Amendment to the Agreement
and Declaration of Trust.
22
<PAGE>
ADDITIONAL INFORMATION
Shareholder Proposals
The Funds need not hold annual shareholder meetings, except as required by
the 1940 Act or under applicable state law. Therefore, it is probable that no
annual meeting of shareholders will be held in 1995 or in subsequent years until
so required. For those years in which annual meetings are held, proposals which
shareholders of the Funds intend to present for inclusion in the proxy materials
with respect to the annual meeting of shareholders must be received at the
Fund's principal executive offices within a reasonable period of time before the
proxy solicitation for that meeting is made, and must comply with all other
legal requirements in order to be included in the Fund's proxy statement and
form of proxy for that meeting.
By Order of the Boards
Lawrence Liebman
Secretary
New York, New York
____________, 1995
23
<PAGE>
EXHIBIT INDEX
Fund Exhibit Page
- ---- ------------
Blanchard Global Growth Fund ............................................ A-1
Blanchard 100% Treasury Money Market Fund ............................... B-1
Blanchard Short-Term Global Income Fund ................................. C-1
Blanchard American Equity Fund .......................................... D-1
Blanchard Flexible Income Fund .......................................... E-1
Blanchard Short-Term Bond Fund .......................................... F-1
Blanchard Flexible Tax-Free Bond Fund ................................... G-1
Blanchard Worldwide Emerging Markets Fund ............................... H-1
Blanchard Growth & Income Fund .......................................... I-1
Blanchard Capital Growth Fund ........................................... J-1
Blanchard Precious Metals Fund, Inc.
Fund Exhibit ........................................................ K-1
Form of Investment Advisory Contract ................................ K-9
Form of Distribution Plan ........................................... K-13
Form of Distributor's Contract ...................................... K-16
Form of Rule 12b-1 Agreement ........................................ K-23
Form of Sales Agreement with Federated Securities Corp. ............. K-27
Blanchard Funds-Form of Investment Advisory Contract .................... L-1
Blanchard Funds-Form of Distribution Plan ............................... M-1
Blanchard Funds-Form of Distributor's Contract .......................... N-1
Blanchard Funds-Form of Rule 12b-1 Agreement ............................ O-1
Blanchard Funds-Form of Sales Agreement with Federated Securities Corp. . P-1
Blanchard Funds-Amendment to Agreement and Declaration of Trust ......... Q-1
--------------------------------------------------------------------------
VOTE YOUR PROXY TODAY!
By Mail: use the enclosed return envelope.
By Phone: 1-800-733-8485, ext. 450 (Mon.-Fri., 9:00 a.m. - 11:00 p.m. EST)
By Fax: 1-800-733-1885 (24 hours, 7 days a week)
QUESTIONS? CALL 1-800-733-8485, ext. 450
--------------------------------------------------------------------------
24
<PAGE>
BLANCHARD GLOBAL GROWTH FUND
FUND EXHIBIT
1. Pertaining to the Meeting
* Meeting Date: May _____, 1995
* Meeting Time: _____ [a.m./p.m.]
* Meeting Place: Offices of Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, 919 Third Avenue, New York, NY 10022.
* Shares outstanding as of _____, 1995: _____
2. Pertaining to Investment Advisory Contracts with Virtus Capital Management,
Inc.
* Date Board approved Proposed Contract: March 4, 1995
* Date shareholders last approved Existing Agreement: March 5, 1986
* Date Board last approved Existing Agreement: December 8, 1994
* Date of Existing Agreement: May 29, 1986
* Investment management fee as a percentage of average daily net assets
under Existing and Proposed Agreements: 1.00% 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.
* Investment management agreement fee payable to Sheffield Management
Company for most recent fiscal year: $943,678
* Fee reduction for the Fund's most recent fiscal year resulting from any
state expense limitation: None
3. Pertaining to Sub-Advisory Agreements
A. Shufro Rose & Ehrman
* Date Board approved Proposed Agreement: March 24, 1995
* Date shareholders last approved Existing Agreement: March 5, 1986
* Date Board last approved Existing Agreement: December 8, 1994
* Date of Existing Agreement: February 18, 1992
* Investment advisory fee as a percentage of average daily net assets under
Existing and Proposed Agreements: .30% of the first $150 million of the
U.S. Equities sector's average daily net assets, .2625% of the sector's
next $150 million of average daily net assets, and .225% of the sector's
average daily net assets in excess of $300 million.
* Investment advisory fee payable to Shufro Rose & Ehrman for most recent
fiscal year: $104,023
B. Fiduciary International, Inc.
* Date Board approved Proposed Agreement: March 24, 1995
* Date shareholders last approved Existing Agreement: January 15, 1992 (for
Foreign Fixed Income sector) and October 22, 1993 (for Foreign Equities
sector)
* Date Board last approved Existing Agreement: December 8, 1994 (for Foreign
Fixed Income sector) and September 16, 1994 (for Foreign Equities sector)
* Date of Existing Agreement: October 22, 1993 (for Foreign Equities sector)
and Feb 18, 1992 (for Foreign Fixed Income sector)
A-1
<PAGE>
* Investment advisory fee as a percentage of average daily net assets under
Existing and Proposed Agreements: .375% of the first $150 million of the
Foreign Fixed Income sector's average daily net assets, .32825% of the
next $150 million of the sector's average daily net assets, and .28125% of
the sector's average daily net assets in excess of $300 million; and .45%
of the first $150 million of the Foreign Equities sector's average daily
net assets, .39375% of the next $150 million of the sector's average daily
net assets, and .3375% of the sector's average daily net assets in excess
of $300 million
* Investment advisory fee payable to Fiduciary International, Inc. for most
recent fiscal year: $91,814 (Foreign Fixed Income)/$37,233(Foreign Equity)
C. Fiduciary International, Inc. (Global Allocation Strategist)
* Date Board approved Proposed Agreement: March 24, 1995
* Date shareholders last approved Existing Agreement: January 15, 1992
* Date Board last approved Existing Agreement: December 8, 1994
* Date of Existing Agreement: February 18, 1992
* Investment advisory fee as a percentage of average daily net assets under
Existing and Proposed Agreements: .08% of the first $150 million of
average daily net assets, .07% of the next $150 million of average daily
net assets and .06% of average daily net assets in excess of $300 million.
* Investment advisory fee payable to Fiduciary International, Inc. for most
recent fiscal year: $75,352
D. Investment Advisers, Inc.
* Date Board approved Proposed Agreement: March 24, 1995
* Date shareholders last approved Existing Agreement: January 15, 1992
* Date Board last approved Existing Agreement: December 8, 1994
* Date of Existing Agreement: February 18, 1992
* Investment advisory fee as a percentage of average daily net assets under
Existing and Proposed Agreements: .20% of the first $150 million of the
U.S. Fixed Income sector's average daily net assets, .175% of the next
$150 million of the sector's average daily net assets, and .15% of the
sector's average daily net asset in excess of $300 million
* Investment advisory fee payable to Investment Advisers, Inc. for most
recent fiscal year: $5,641
E. Cavelti Capital Management, Ltd.
* Date Board approved Proposed Agreement: March 24, 1995
* Date shareholders last approved Existing Agreement: January 15, 1992
* Date Board last approved Existing Agreement: December 8, 1994
* Date of Existing Agreement: February 18, 1992
* Investment advisory fee as a percentage of average daily net assets under
Existing and Proposed Agreements: .30% of the first $150 million of the
Precious Metals sector's average daily net assets, .2625% of the next $150
million of the sector's average daily net assets, and .225% of the
sector's average daily net assets in excess of $300 million.
* Investment advisory fee payable to Cavelti Capital Management, Ltd. for
most recent fiscal year: $10,558
F. Martin Currie Inc.
* Date Board approved Proposed Agreement: March 24, 1995
* Date shareholders last approved Existing Agreement: October 22, 1993
* Date Board last approved Existing Agreement: September 16, 1994
A-2
<PAGE>
* Date of Existing Agreement: October 22, 1993
* Investment advisory fee as a percentage of average daily net assets under
Existing and Proposed Agreements: .50% of the first $150 million of the
Emerging Markets sector's average daily net assets, .4375% of the next
$150 million of the sector's average daily net assets, and .375% of the
sector's average daily net assets in excess of $300 million.
* Investment advisory fee payable to Martin Currie Inc. for most recent
fiscal year: $36,308
4. Pertaining to Accountants
* Date Board last approved Accountants: June 13, 1994
5. Pertaining to the Board
* Number of Board, and where applicable committee, meetings held during the
last fiscal year: 5 Board meetings/ 1 Audit Committee meeting
* Board Members, if any, attending fewer than 75% of all Board and committee
meetings held in the last fiscal year during the period the Board Member
was in office: None
Compensation Table*
Total
Estimate Annual Compensation
Name of Person Aggregate Compensation Benefits Upon from BPMF and
Position from Blanchard Funds Retirement Blanchard Funds
- -------- -------------------- ---------- ---------------
Arthur Kiriacon, Trustee $47,770 $ ** $51,000
Gerald Morris, Trustee 47,770 54,000 51,000
Eric Lomas, Trustee 47,770 57,000 51,000
6. Pertaining to Distribution and Marketing Plans
* The Fund is subject to a Distribution and Marketing Plan.
* Date that the Distribution and Marketing Plan was adopted: May 29, 1986
* Amounts paid pursuant to the Distribution and Marketing Plan, both in the
aggregate and as a percentage of the Fund's average net assets during its
most recent fiscal year: $706,440 (.75%).
The following table presents certain information regarding the beneficial
ownership of shares as of___________, 1995 by each officer and Nominee of the
Fund owning shares on such date.
Name Number of Shares
---- ----------------
*Messrs. Freedman and Liebman are compensated by SMC, not the Funds.
**Mr. Kiriacom will receive a payment of a lump sum cash benefit of $505,006
upon closing of the Purchase in lieu of the estimated annual benefit of
$57,000.
--------------------------------------------------------------------------
VOTE YOUR PROXY TODAY!
By Mail: use the enclosed return envelope.
By Phone: 1-800-733-8485, ext. 450 (Mon.-Fri., 9:00 a.m. - 11:00 p.m. EST)
By Fax: 1-800-733-1885 (24 hours, 7 days a week)
QUESTIONS? CALL 1-800-733-8485, ext. 450
--------------------------------------------------------------------------
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<PAGE>
Description of Portfolio Advisors
Blanchard Global Growth Fund
Shufro Rose & Ehrman ("Shufro") manages the U.S. Equities Sector of the
Fund. Shufro is a registered investment adviser. Founded in 1938, Shufro is a
member of the New York and American Stock Exchanges. It is among the oldest of
those firms specializing in the management of investment portfolios. As of
December 31, 1993, Shufro managed assets of more than $1.3 billion from private
and institutional accounts.
Shufro's investment philosophy is one of "fundamentals". This involves
selecting securities backed by assets, finances and current earning power.
Shufro's principals conduct research as well as portfolio management, including
examination of source materials such as annual and other corporate reports,
published speeches by the company officers, and other pertinent data. In
addition, Shufro's principals conduct visits to companies to attain depth of
understanding not achieved solely through inspection of written materials.
Robert Weiss, a General Partner of Shufro, with more than 30 years of experience
as a portfolio manager, is responsible for the day-to-day management of this
sector's portfolio.
The Foreign Equities Sector and the Foreign Fixed Income Sector are managed
by Fiduciary International, Inc., a New York corporation that was organized in
1982 as Fir Tree Advisers, Inc. Fiduciary International has also been chosen by
the Fund to perform the duties of Global Allocation Strategist. Fiduciary
International, Inc. is a wholly-owned subsidiary of Fiduciary Investment
Corporation, which, in turn, is a wholly-owned subsidiary of Fiduciary Trust
Company International. Fiduciary Trust Company International was chartered in
1931 as a New York State bank and is headquartered in New York City. This sector
is managed by a committee headed by Mr. Jeremy H. Biggs, Vice Chairman and Chief
Investment Officer.
The U.S. Fixed Income Sector is managed by Investment Advisers, Inc. of
Minneapolis, Minnesota, a registered investment adviser established in 1947. As
of December 31, 1993, it managed over $13 billion in assets. Investment
Advisers, Inc. furnishes investment advice to pension and profit sharing trusts,
religious, educational, and charitable trusts, investment companies,
municipalities and individuals. Larry R. Hill, an Executive Vice President of
Investment Advisers, Inc., with more than 10 years of experience as a Fixed
Income Portfolio Manager, is responsible for the day-to-day management of this
sector's portfolio.
The Precious Metals Securities and Bullion Sector Manager is managed by
Cavelti Capital Management, Ltd., of Toronto, Canada. Cavelti Capital
Management, Ltd. is a Canadian money management firm specializing in bullion and
precious metals mining shares and is a registered investment adviser with the
SEC. Peter C. Cavelti, the company's President, has extensive investment
experience in the field of precious metals and the firm's clients include
government agencies, financial institutions, mining companies and Canadian
mutual funds. Cavelti Capital Management, Ltd. also acts as Portfolio Adviser to
BPMF.
Martin Currie Inc., a member of the Martin Currie Group, manages the
Emerging Markets sector. Based in Edinburgh, the Martin Currie Group is one of
Scotland's leading international equity houses and has experience and expertise
in emerging markets. The Martin Currie Group currently manages over $4 billion
in global assets and has been involved in managing investment portfolios for
over 100 years. Martin Currie Inc., incorporated in 1978, is an investment
adviser registered with the SEC and currently manages over $900 million in
global assets.
Currently, the Martin Currie Group operates its investment business through
four companies. In North America, Martin Currie Inc. (the Sector Manager), and
in the U.K., Martin Currie Investment Management, Martin Currie Unit Trusts and
Martin Currie Private Clients, all wholly-owned subsidiaries of Martin Currie
Limited.
An asset allocation committee headed by Mr. James Fairweather, a director
and senior portfolio manager with Martin Currie, with more than 10 years of
experience as a portfolio manager, coordinates the company's investments in
emerging markets. The committee determines asset allocation and country weighing
for emerging markets and Mr. Fairweather, together with Mr. Tristan Clube (also
a director and senior portfolio manager), selects stocks in conjunction with
members of regional investment teams. Martin Currie Inc.
also acts as portfolio advisor to BWEMF.
VCM has chosen Fiduciary International, Inc. to act as the Global Allocation
Strategist for the Fund. As such, Fiduciary International has a global
allocation committee headed by Mr. Jeremy H. Biggs, Vice Chairman and Chief
Investment Officer, whose role is to review, evaluate and allocate the
percentages in which the total assets of the Fund will be divided among its six
investment sectors, subject to review by the Fund's Manager and its Board
Members. The
A-4
<PAGE>
allocations for each sector may be changed at any time. Allocations will vary
depending on a variety of factors, such as economic and market conditions,
interest rates, currency fluctuations, inflationary or deflationary
expectations, geopolitical circumstances and other factors. The ability of the
Fund to achieve its investment objective will be dependent in part on the
success of the Global Allocation Strategist in anticipating the onset, duration
and termination of broad economic cycles. Failure to anticipate the onset or
termination of such cycles could result in the assets of the Fund being
disproportionately weighted toward one sector at the expense of another.
VCM feels that Fiduciary International, Inc. is uniquely qualified for the
job of Global Allocation Strategist. Fiduciary International, Inc. is a
registered investment adviser with the SEC and has been engaged in the business
of providing investment advisory services since 1982. In addition to its role as
Global Allocation Strategist, Fiduciary International, Inc. has been chosen to
manage the Foreign Fixed Income and Foreign Equities sectors of the Fund.
Fiduciary International, Inc. was founded in 1931 and currently manages over
$24 billion in global assets for large institutional and corporate accounts as
well as those of wealthy individuals. Clients include the United Nations pension
fund, Princeton University and Duke University. Mr. Jeremy H. Biggs, Vice
Chairman and Chief Investment Officer of Fiduciary International, Inc., oversees
the portfolio allocation process for the Fund. Mr. Biggs is a graduate of Yale
University and has done postgraduate work at the London School of Economics. Mr.
Biggs has extensive experience in global investing and in finance. Mr. Biggs is
supported by a team of researchers and analysts.
Fiduciary International, Inc.'s method of security analysis includes credit
analysis to gauge the creditworthiness of issuers and securities, analysis of
economic background, industry analysis, balance sheet and income statement
analysis and assessment of the macro-economic environment and the outlook for
the currencies in the countries where the companies operate. In addition,
Fiduciary International, Inc. may use outside sources of information, including
economic consultants, technical industry specialists and market technicians.
The Sub-Advisory Agreements. The sub-advisory agreements between VCM and the
Sector Managers provide for payment by VCM of annual fees, payable to the Sector
Managers on a monthly basis. The aggregate of fees payable to the Sector
Managers for the services they provide, as a group, equals approximately 35% of
the management fees paid to VCM by the Fund.
A-5
<PAGE>
FORM OF SUB-ADVISORY AGREEMENT
------------------------------
THIS AGREEMENT is made this ____________ day of _____________, 1995 by and
between VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the "Manager"),
and SHUFRO, ROSE & EHRMAN, a registered investment adviser (the "Portfolio
Manager" or "Shufro") with respect to the following recital of fact:
R E C I T A L
WHEREAS, Blanchard Funds (the "Trust") is registered as an open-end,
non-diversified, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the Portfolio Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment adviser; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in one series called the Blanchard Global
Growth Fund (such series, being referred to as the "Fund"); and
WHEREAS, the Trust and the Manager have entered into an agreement of even
date herewith to provide for management services for the Fund on the terms and
conditions set forth therein (the "Management Agreement"); and
WHEREAS, the Portfolio Manager proposes to render investment advisory
services to the Manager in connection with the Manager's responsibilities to the
Fund with respect to the U.S. Common and Preferred Stocks sector of the Fund's
portfolio on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Investment Management. Shufro shall act as a Portfolio Manager for the
Fund and shall, in such capacity, supervise the investment and reinvestment of a
portion of the cash, securities or other properties comprising the U.S. Common
and Preferred Stocks sector of the Fund's portfolio, subject at all times to the
direction of the Global Asset Allocation Strategist, the Manager and the
policies and control of the Trust's Board of Trustees. Shufro shall give the
Fund the benefit of its best judgment, efforts and facilities in rendering its
services as Portfolio Manager.
2. Investment Analysis and Implementation. In carrying out its obligation
under paragraph 1 hereof, the Portfolio Manager shall:
(a) use the same skill and care in providing such service as it uses in
providing services to fiduciary accounts for which it has investment
responsibilities;
(b) obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund's
portfolio and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which the issuers
engage, or with respect to securities which the Portfolio Manager considers
desirable for inclusion in the Fund's portfolio;
(c) determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Trust's Board of
Trustees;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Trust's Board of Trustees; and
(e) take, on behalf of the Fund, all actions which appear to the Trust
and the Manager necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including the placing of
orders for the purchase and sale of securities for the Fund and the prompt
reporting to the Manager of such purchases and sales.
3. Broker-Dealer Relationships. The Portfolio Manager is responsible for
decisions to buy and sell securities for the Fund's portfolio, broker-dealer
selection, and negotiation of brokerage commission rates. The Portfolio
Manager's
A-6
<PAGE>
primary consideration in effecting a security transaction will be execution at
the most favorable price. In selecting a broker-dealer to execute each
particular transaction, the Portfolio Manager will take the following into
consideration: the best net price available, the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
Accordingly, the price to the Fund in any transaction may be less favorable than
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered. Subject
to such policies as the Board of Trustees may determine, the Portfolio Manager
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of its having caused the
Fund to pay a broker for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Portfolio Manager determines in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Portfolio Manager's overall
responsibilities with respect to the Fund and to its other clients as to which
it exercises investment discretion. The Portfolio Manager is further authorized
to allocate the orders placed by it on behalf of the Fund to any affiliated
broker-dealer or to such brokers and dealers who also provide research or
statistical material, or other services to the Fund or the Portfolio Manager.
Such allocation shall be in such amounts and proportions as the Portfolio
Manager shall determine and the Portfolio Manager will report on said
allocations regularly to the Board of Trustees of the Trust indicating the
brokers to whom such allocations have been made and the basis therefor.
4. Control by Board of Trustees. Any investment program undertaken by the
Portfolio Manager pursuant to this Agreement, as well as any other activities
undertaken by the Portfolio Manager on behalf of the Fund pursuant thereto,
shall at all times be subject to any directives of the Board of Trustees of the
Trust. The Manager shall provide the Portfolio Manager with written notice of
all such directives, so long as this Agreement remains in effect.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Portfolio Manager shall at all times conform to:
(a) all applicable provisions of the 1940 Act;
and
(b) the provisions of the Registration Statement of the Trust under the
Securities Act of 1933 and the 1940 Act; and (c) any other applicable
provisions of state and federal law.
6. Expenses. The Portfolio Manager shall maintain, at its expense and
without cost to the Manager or the Fund, a trading function in order to carry
out its obligations under subparagraph (e) of paragraph 2 hereof to place orders
for the purchase and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with the
approval of the Trust's Board of Trustees, the Portfolio Manager may perform
services on behalf of the Fund which are not required by this Agreement. Such
services will be performed on behalf of the Fund and the Portfolio Manager's
cost in rendering such services may be billed monthly to the Manager, subject to
examination by the Manager's independent accountants. Payment or assumption by
the Portfolio Manager of any Fund expense that the Portfolio Manager is not
required to pay or assume under this Agreement shall not relieve the Manager or
the Portfolio Manager of any of their obligations to the Fund or obligate the
Portfolio Manager to pay or assume any similar Fund expense on any subsequent
occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Manager shall pay the Portfolio Manager the greater of
(i) $25,000 per annum, or (ii) a monthly fee at the annual rate of .30% of the
sector's first $150 million of average daily net assets; plus .2625% of the
sector's average daily net assets in excess of $150 million but less than $300
million; plus .225% of the sector's average daily net assets in excess of $300
million. Compensation under this Agreement shall be calculated and accrued daily
and the amounts of the daily accruals shall be paid monthly. Notwithstanding
anything herein to the contrary, the Portfolio Manager, in its capacity as
broker-dealer, shall be paid commissions pursuant to Section 17(e)(2) of the
1940 Act. if this Agreement becomes effective subsequent to the first day of a
month or shall terminate before the last day of a month, compensation for that
part of the month this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fees as set forth above. Payment of the
Portfolio Manager's compensation for the preceding month shall be made as
promptly as possible after the end of each month.
A-7
<PAGE>
9. Non-Exclusivity. The services of the Portfolio Manager to the Manager are
not to be deemed to be exclusive, and the Portfolio Manager shall be free to
render investment advisory or other services to others (including other
investment companies) and to engage in other activities, so long as its services
under this agreement are not impaired thereby. The Portfolio Manager shall give
60 days' notice to the Manager if it intends to perform investment advisory
services for any investment company similar to that of the Trust.
10. Term. This Agreement shall become effective at the close of business on
the date hereof and shall remain in force and effect for an initial term of two
years, and shall remain in effect thereafter if approved in the manner set forth
in Section 11 hereof.
11. Renewal. Following the expiration of its initial two year term, this
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Trust's Board of Trustees or by the vote of a majority of
the Fund's outstanding voting securities (as defined in Section 2(a)(42) of
the 1940 Act), and
(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a trustee of the Trust), by votes cast in person at a meeting
specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Trust's Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), or by the Manager or the Portfolio Manager, on sixty
(60) days' written notice to the other party. This Agreement shall automatically
terminate: (a) in the event of its assignment, the term "assignment" having the
meaning defined in Section 2(a)(4) of the 1940 Act, or (b) in the event that the
Management Agreement between the Fund and the Manager shall terminate.
13. Liability of the Portfolio Manager. In the absence of willful
misfeasance, bad faith or gross negligence on the part of the Portfolio Manager
or its officers, directors or employees, or reckless disregard by the Portfolio
Manager of its duties under this Agreement, the Portfolio Manager shall not be
liable to the Manager, the Trust or to any shareholder of the Trust for any act
or omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
14. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Manager and that of the
Trust for this purpose shall be 41 Madison Avenue, New York, New York 10010, and
the address of the Portfolio Manager for this purpose shall be 745 5th Avenue,
New York, New York 10151.
15. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to said Act. In addition, where the effect of a requirement of
the 1940 Act reflected in the provision of this Agreement is revised by rule,
regulation or order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: SHUFRO, ROSE & ERHMAN
____________________________________ By______________________________
Title: General Partner
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
____________________________________ By______________________________
Title: President
A-8
<PAGE>
FORM OF SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made this ___________ day of __________, 1995 by and
between VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the "Manager"),
and FIDUCIARY INTERNATIONAL INC., a registered investment adviser (the
"Portfolio Manager" or "Fiduciary") with respect to the following recital of
fact:
R E C I T A L
WHEREAS, Blanchard Funds (the "Trust") is registered as an open-end,
non-diversified, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the Portfolio Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment adviser; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in one series called the Blanchard Global
Growth Fund (such series, being referred to as the "Fund"); and
WHEREAS, the Trust and the Manager have entered into an agreement dated
___________________, 1995 to provide for management services for the Fund on the
terms and conditions set forth therein (the "Management Agreement"); and
WHEREAS, the Portfolio Manager proposes to render investment advisory
services to the Manager in connection with the Manager's responsibilities to the
Fund with respect to the Foreign Equities sector of the Fund's portfolio on the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Investment Management. Fiduciary shall act as a Portfolio Manager for
the Fund and shall, in such capacity, supervise the investment and
reinvestment of a portion of the cash, securities or other properties
comprising the Foreign Equities sector of the Fund's portfolio, subject at
all times to the direction of the Global Asset Allocation Strategist, the
Manager and the policies and control of the Trust's Board of Trustees.
Fiduciary shall give the Fund the benefit of its best judgment, efforts and
facilities in rendering its services as Portfolio Manager.
2. Investment Analysis and Implementation. In carrying out its
obligation under paragraph 1 hereof, the Portfolio Manager shall:
(a) use the same skill and care in providing such service as it uses in
providing services to fiduciary accounts for which it has investment
responsibilities;
(b) obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund's
portfolio and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which the issuers
engage, or with respect to securities which the Portfolio Manager considers
desirable for inclusion in the Fund's portfolio;
(c) determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Trust's Board of
Trustees;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Trust's Board of Trustees; and
(e) take, on behalf of the Fund, all actions which (i) appear to the
Trust and the Manager necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including the placing of
orders for the purchase and sale of securities for the Fund and the prompt
reporting to the Manager of such purchases and sales, or (ii) are indicated
in accordance with the provisions of Section 4 hereof.
3. Broker-Dealer Relationships. The Portfolio Manager is responsible for
decisions to buy and sell securities for the Fund's portfolio, broker-dealer
selection, and negotiation of brokerage commission rates. The Portfolio
Manager's
A-9
<PAGE>
primary consideration in effecting a security transaction will be execution at
the most favorable price. In selecting a broker-dealer to execute each
particular transaction, the Portfolio Manager will take the following into
consideration: the best net price available, the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order, and the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
Accordingly, the price to the Fund in any transaction may be less favorable than
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered. Subject
to such policies as the Board of Trustees may determine, the Portfolio Manager
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of its having caused the
Fund to pay a broker for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Portfolio Manager determines in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Portfolio Manager's overall
responsibilities with respect to the Fund and to its other clients as to which
it exercises investment discretion. The Portfolio Manager is further authorized
to allocate the orders placed by it on behalf of the Fund to any affiliated
broker-dealer or to such brokers and dealers which also provide research or
statistical material, or other services to the Fund or the Portfolio Manager.
Such allocation shall be in such amounts and proportions as the Portfolio
Manager shall determine and the Portfolio Manager will report on said
allocations regularly to the Board of Trustees of the Trust indicating the
brokers to whom such allocations have been made and the basis therefor.
4. Control by Board of Trustees. Any investment program undertaken by the
Portfolio Manager pursuant to this Agreement, as well as any other activities
undertaken by the Portfolio Manager on behalf of the Fund pursuant thereto,
shall at all times be subject to any directives of the Board of Trustees of the
Trust. The Manager shall provide the Portfolio Manager with written notice of
all such directives, so long as this Agreement remains in effect.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Portfolio Manager shall at all times conform to:
(a) all applicable provisions of the 1940 Act; and
(b) the provisions of the Registration Statement of the Trust under the
Securities Act of 1933 and the 1940 Act; and
(c) any other applicable provisions of state and federal law.
6. Expenses. The Portfolio Manager shall maintain, at its expense and
without cost to the Manager or the Fund, a trading function in order to carry
out its obligations under subparagraph (e) of paragraph 2 hereof to place orders
for the purchase and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with the
approval of the Trust's Board of Trustees, the Portfolio Manager may perform
services on behalf of the Fund which are not required by this Agreement. Such
services will be performed on behalf of the Fund and the Portfolio Manager's
cost in rendering such services may be billed monthly to the Manager, subject to
examination by the Manager's independent accountants. Payment or assumption by
the Portfolio Manager of any Fund expense that the Portfolio Manager is not
required to pay or assume under this Agreement shall not relieve the Manager or
the Portfolio Manager of any of their obligations to the Fund or obligate the
Portfolio Manager to pay or assume any similar Fund expense on any subsequent
occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Manager shall pay the Portfolio Manager the greater of
(i) $25,000 per annum, or (ii) a monthly fee at the annual rate .45% of the
sector's first $150 million of average net assets; plus .39375% of the sector's
average daily net assets in excess of $150 million but less than $300 million;
plus .3375% of the sector's average daily net assets in excess of $300 million.
Compensation under this Agreement shall be calculated and accrued daily and the
amounts of the daily accruals shall be paid monthly. If this Agreement becomes
effective subsequent to the first day of a month or shall terminate before the
last day of a month, compensation for that part of the month this Agreement is
in effect shall be prorated in a manner consistent with the calculation of the
fees as set forth above. Payment of the Portfolio Manager's compensation for the
preceding month shall be made as promptly as possible after the end of each
month.
9. Non-Exclusivity. The services of the Portfolio Manager to the Manager are
not to be deemed to be exclusive, and the Portfolio Manager shall be free to
render investment advisory or other services to others (including other
investment companies) and to engage in other activities, so long as its services
under this agreement are not impaired thereby. The Portfolio Manager shall give
60 days' notice to the Manager if it intends to perform investment advisory
A-10
<PAGE>
services for any investment company similar to that of the Trust. The investment
advisory services rendered by the Portfolio Manager to registered investment
companies as of the date of this Agreement shall be deemed not to impair its
services under this Agreement and the Portfolio Manager shall not be required to
notify the Manager of such services.
10. Term. This Agreement shall become effective at the close of business on
the date hereof and shall remain in force and effect for an initial term of two
years, and shall remain in effect thereafter if approved in the manner set forth
in Section 11 hereof.
11. Renewal. Following the expiration of its initial two year term, this
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Trust's Board of Trustees or (ii) by the vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a trustee of the Trust), by votes cast in person at a meeting
specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Trust's Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), or by the Manager or the Portfolio Manager, on sixty
(60) days' written notice to the other party. This Agreement shall automatically
terminate: (a) in the event of its assignment, the term "assignment" having the
meaning defined in Section 21(a)(4) of the 1940 Act, or (b) in the event that
the Management Agreement between the Fund and the Manager shall terminate.
13. Liability of the Portfolio Manager. In the absence of willful
misfeasance, bad faith or gross negligence on the part of the Portfolio Manager
or its officers, directors or employees, or reckless disregard by the Portfolio
Manager of its duties under the Agreement, the Portfolio Manager shall not be
liable to the Manager, the Trust or to any shareholder of the Trust for any act
or omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security. Any actions taken by the Portfolio Manager for the sole purpose of
correctly complying with a directive pursuant to Section 4 hereof shall be
deemed to be taken without willful misfeasance, bad faith or gross negligence.
14. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Manager and that of the
Trust for this purpose shall be 41 Madison Avenue, New York, New York 10010, and
the address of the Portfolio Manager for this purpose shall be Two World Trade
Center, 94th Floor, New York, New York 10048.
15. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to said Act. In addition, where the effect of a requirement of
the 1940 Act reflected in the provision of this Agreement is revised by rule,
regulation or order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: FIDUCIARY INTERNATIONAL, INC.
____________________________________ By______________________________
Title: President
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
____________________________________ By______________________________
Title: President
A-11
<PAGE>
FORM OF SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made this __________ day of __________, 1995 by and
between VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the "Manager"),
and FIDUCIARY INTERNATIONAL, INC., a registered investment adviser (the
"Portfolio Manager" or "Fiduciary Trust") with respect to the following recital
of fact:
R E C I T A L
WHEREAS, Blanchard Funds (the "Trust") is registered as an open-end,
non-diversified, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the Portfolio Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment adviser; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in one series called the Blanchard Global
Growth Fund (such series, being referred to as the "Fund"); and
WHEREAS, the Trust and the Manager have entered into an agreement of even
date herewith to provide for management services for the Fund on the terms and
conditions set forth therein (the "Management Agreement"); and
WHEREAS, the Portfolio Manager proposes to render investment advisory
services to the Manager in connection with the Manager's responsibilities to the
Fund with respect to the Foreign Fixed Income Securities sector of the Fund's
portfolio on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Investment Management. Fiduciary Trust shall act as a Portfolio Manager
for the Fund and shall, in such capacity, supervise the investment and
reinvestment of a portion of the cash, securities or other properties comprising
the Foreign Fixed Income Securities sector of the Fund's portfolio, subject at
all times to the direction of the Global Asset Allocation Strategist, the
Manager and the policies and control of the Trust's Board of Trustees. Shufro
shall give the Fund the benefit of its best judgment, efforts and facilities in
rendering its services as Portfolio Manager.
2. Investment Analysis and Implementation. In carrying out its obligation
under paragraph 1 hereof, the Portfolio Manager shall:
(a) use the same skill and care in providing such service as it uses in
providing services to accounts for which it has discretionary investment
responsibilities;
(b) obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund's
portfolio and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which the issuers
engage, or with respect to securities which the Portfolio Manager considers
desirable for inclusion in the Fund's portfolio;
(c) determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Trust's Board of
Trustees;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Trust's Board of Trustees; and
(e) take, on behalf of the Fund, all actions which (i) appear to the
Trust and the Manager necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including the placing of
orders for the purchase and sale of securities for the Fund and the prompt
reporting to the Manager of such purchasers and sales, or (ii) are indicated
in accordance with the provisions of Section 4 hereof.
3. Broker-Dealer Relationships. The Portfolio Manager is responsible for
decisions to buy and sell securities for the Fund's portfolio, broker-dealer
selection, and negotiation of brokerage commission rates. The Portfolio
Manager's primary consideration in effecting a security transaction will be
execution at the most favorable price. In selecting a broker-dealer to execute
each particular transaction, the Portfolio Manager will take the following into
considera-
A-12
<PAGE>
tions: the best net price available, the reliability, integrity and financial
condition of the broker-dealer; the size of and difficulty in executing the
order; and the value of the expected contribution of the broker-dealer to the
investment performance of the Fund on a continuing basis. Accordingly, the price
to the Fund in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified by other aspects
of the portfolio execution services offered. Subject to such policies as the
Board of Trustees may determine, the Portfolio Manager shall not be deemed to
have acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Fund to pay a broker for
effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Portfolio Manager determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the Portfolio Manager's overall responsibilities
with respect to the Fund and to its other clients as to which it exercises
investment discretion. The Portfolio Manager is further authorized to allocate
the orders placed by it on behalf of the Fund to any affiliated broker-dealer or
to such brokers and dealers who also provide research or statistical material,
or other services to the Fund or the Portfolio Manager. Such allocation shall be
in such amounts and proportions as the Portfolio Manager shall determine and the
Portfolio Manager will report on said allocations regularly to the Board of
Trustees of the Trust indicating the brokers to whom such allocations have been
made and the basis therefor.
4. Control by Board of Trustees. Any investment program undertaken by the
Portfolio Manager pursuant to this Agreement, as well as any other activities
undertaken by the Portfolio Manager on behalf of the Fund pursuant thereto,
shall at all times be subject to any directives of the Board of Trustees of the
trust. The Manager shall provide the Portfolio Manager with written notice of
all such directives, so long as this Agreement remains in effect.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Portfolio Manager shall at all times conform to:
(a) all applicable provisions of the 1940 Act; and
(b) the provisions of the Registration Statement of the Trust under the
Securities Act of 1933 and the 1940 Act; and
(c) any other applicable provisions of state and federal law.
6. Expenses. The Portfolio Manager shall maintain, at its expense and
without cost to the Manager or the Fund, a trading function in order to carry
out its obligations under subparagraph (e) of paragraph 2 hereof to place orders
for the purchase and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with the
approval of the Trust's Board of Trustees, the Portfolio Manager may perform
services on behalf of the Fund which are not required by this Agreement. Such
services will be performed on behalf of the Fund and the Portfolio Manager's
cost in rendering such services may be billed monthly to the Manager, subject to
examination by the Manager's independent accountants. Payment or assumption by
the Portfolio Manager of any Fund expense that the Portfolio Manager is not
required to pay or assume under this Agreement shall not relieve the Manager or
the Portfolio Manager of any of their obligations to the Fund or obligate the
Portfolio Manager to pay or assume any similar Fund expense on any subsequent
occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Manager shall pay the Portfolio Manager the greater of
(i) $25,000 per annum, or (ii) a monthly fee at the annual rate of .375% of the
sector's first $150 million of average daily net assets; plus .32825% of the
sector's average daily net assets in excess of $150 million but less than $300
million; plus .28125% of the sector's average daily net assets in excess of $300
million. Compensation under this Agreement shall be calculated and accrued daily
and the amounts of the daily accruals shall be paid monthly. If this Agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for that part of the month in which
this Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fees as set forth above. Payment of the Portfolio Manager's
compensation for each month shall be made as promptly as possible after the end
of such month.
9. Non-Exclusivity. The services of the Portfolio Manager to the Manager are
not to be deemed to be exclusive, and the Portfolio Manager shall be free to
render investment advisory or other services to others (including other
investment companies) and to engage in other activities, so long as its services
under this agreement are not impaired thereby. The Portfolio Manager shall give
60 days' notice to the Manager if it intends to perform investment advisory
services for any investment company similar to that of the Trust. The investment
advisory services rendered by the
A-13
<PAGE>
Portfolio Manager to registered investment companies as of the date of this
agreement shall be deemed not to impair its services under this Agreement and
the Portfolio Manager shall not be required to notify the Manager of such
services.
10. Term. This Agreement shall become effective at the close of business on
the date hereof and shall remain in force and effect for an initial term of two
years, and shall remain in effect thereafter if approved in the manner set forth
in Section 11 hereof.
11. Renewal. Following the expiration of its initial two year term, this
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Trust's Board of Trustees or by the vote of a majority of
the Fund's outstanding voting securities (as defined in Section 2(a)(42) of
the 1940 Act), and
(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a trustee of the Trust), by votes cast in person at a meeting
specifically called for such purpose.
(c) Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by vote of the Trust's Board of Trustees or by
vote of a majority of the Fund's outstanding voting securities (as defined
in Section 2(a)(42) of the 1940 Act), or by the Manager or the Portfolio
Manager, on sixty (60) days' written notice to the other party. This
Agreement shall automatically terminate: (a) in the event of its assignment,
the term "assignment" having the meaning defined in Section 2(a)(4) of the
1940 Act, or (b) in the event that the Management Agreement between the Fund
and the Manager shall terminate.
12. Liability of the Portfolio Manager. In the absence of willful
misfeasance, bad faith or gross negligence on the part of the Portfolio Manager
or its officers, directors or employees, or reckless disregard by the Portfolio
Manager of its duties under this Agreement, the Portfolio Manager shall not be
liable to the Manager, the Trust or to any shareholder of the Trust for any act
or omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security. Any actions taken by the Portfolio Manager for the sole purpose of
correctly complying with a directive pursuant to Section 4 hereof shall be
deemed to be taken without willful misfeasance, bad faith or gross negligence.
13. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Manager and that of the
Trust for this purpose shall be 41 Madison Avenue, New York, New York 10010, and
the address of the Portfolio Manager for this purpose shall be 2 World Trade
Center, 94th Floor, New York, New York 10048.
14. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to said Act. In addition, where the effect of a requirement of
the 1940 Act reflected in the provision of this Agreement is revised by rule,
regulation or order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: FIDUCIARY INTERNATIONAL, INC.
____________________________________ By______________________________
Title: Chairman
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
____________________________________ By______________________________
Title: President
A-14
<PAGE>
FORM OF SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made this ______________day of ____________, 1995 by and
between VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the "Manager"),
and FIDUCIARY INTERNATIONAL INC., a registered investment adviser (the "Global
Allocation Strategist") with respect to the following recital of fact:
R E C I T A L
WHEREAS, BLANCHARD FUNDS (the "Trust") is registered as an open-end,
non-diversified, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the Global Allocation Strategist engages in the business of acting
as an investment adviser and may, under applicable securities and banking laws,
provide the services hereinafter set forth; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, one series of the Trust is called the Blanchard Global Growth Fund
(such series, being referred to as the "Fund"); and
WHEREAS, the Trust and the Manager have entered into an agreement dated
__________, 1995 (the "Management Agreement") to provide for management services
for the Fund on the terms and conditions set forth therein; and
WHEREAS, the Global Allocation Strategist proposes to render investment
advisory services to the Manager, in connection with the Manager's
responsibilities to the Fund, with respect to reviewing, evaluating and
allocating the assets of the Fund among its investment sectors.
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Investment Management. The Global Allocation Strategist shall review,
evaluate and allocate the percentages in which the total assets of the Fund will
be invested, subject at all times to the direction of the Manager and the
policies and control of the Trust's Board of Trustees. The Global Allocation
Strategist shall give the Fund the benefit of its best judgment, efforts and
facilities in rendering its services to the Fund.
2. Investment Analysis and Implementation. In carrying out its obligations
under paragraph 1 hereof, the Global Allocation Strategist shall:
(a) use the same skill and care in providing such service as it uses in
providing services to accounts for which it has discretionary investment
responsibilities;
(b) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, whether affecting
the economy generally or the Fund's portfolio and whether concerning the
individual foreign issuers whose securities are included in the Fund's
portfolio or the activities in which the issuers engage, or with respect to
securities which the Global Allocation Strategist considers desirable for
inclusion in the Fund's portfolio;
(c) determine what percentage of the total assets of the Fund will be
allocated to each of the Fund's investment sectors and regularly report
thereon to the Trust's Board of Trustees;
(d) formulate and implement continuing programs for the review,
evaluation and allocation of the Fund's investments and regularly report
thereon to the Trust's Board of Trustees; and
(e) take, on behalf of the Fund, all actions which (i) appear to the
Trust and the Manager necessary to carry into effect such programs and
supervisory functions, or (ii) are indicated in accordance with Section 3
hereof.
3. Control by Board of Trustees. Any investment program undertaken by the
Global Allocation Strategist pursuant to this Agreement, as well as any other
activities undertaken by the Global Allocation Strategist on behalf of the Fund,
shall at all times be subject to any directives of the Board of Trustees of the
Trust. The Manager shall provide the Global Allocation Strategist with written
notice of all such directives, so long as this Agreement remains in effect.
A-15
<PAGE>
4. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Global Allocation Strategist shall at all times
conform to:
(a) all applicable provisions of the 1940 Act; and
(b) the provisions of the Registration Statement of the Trust under the
Securities Act of 1933 and the 1940 Act; and
(c) any other applicable provisions of state and federal law, including
specifically the banking laws.
5. Delegation of Responsibilities. Upon the request of the Manager and with
the approval of the Trust's Board of Trustees, the Global Allocation Strategist
may at its option perform services on behalf of the Fund which are not required
by this Agreement. Such services will be performed on behalf of the Fund and the
Global Allocation Strategist's cost in rendering such services may be billed
monthly to the Manager, subject to examination by the Manager's independent
accountants. Payment or assumption by the Global Allocation Strategist of any
Fund expense that the Global Allocation Strategist is not required to pay or
assume under this Agreement shall not relieve the Manager or the Global
Allocation Strategist of any of their obligations to the Fund or obligate the
Global Allocation Strategist to pay or assume any similar Fund expense on any
subsequent occasions.
6. Expenses. The Global Allocation Strategist shall bear all expenses
necessary to carry out its obligations under this Agreement. No other expenses
connected with the Fund shall be borne by the Global Allocation Strategist.
7. Compensation. For the services to be rendered hereunder, the Manager
shall pay the Global Allocation Strategist monthly compensation at the following
annual rate: .08% of the Fund's average net assets up to $150 million; plus .07%
of the Fund's average daily net assets in excess of $150 million but less than
$300 million; plus .06% of the Fund's average daily net assets in excess of $300
million. Compensation under this Agreement shall be calculated and accrued daily
and the amounts of the daily accruals shall be paid monthly. If this Agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fees as set forth above. Payment of the Global Allocation
Strategist's compensation for each month shall be made as promptly as possible
after the end of such month.
8. Non-Exclusivity. The services of the Global Allocation Strategist to the
Manager are not to be deemed to be exclusive, and the Global Allocation
Strategist shall be free to render investment advisory or other services to
others (including the services it presently provides to the International Income
Fund and International Equity Fund portfolios of FT Series, Inc., and other
investment companies) and to engage in other activities, so long as its services
under this agreement are not impaired thereby: provided, however, that the
Global Allocation Strategist shall not perform investment advisory services as
an asset allocator for any registered investment company with objectives and
strategies similar to that of the Fund except where the Manager is acting as
investment adviser to such registered investment company.
9. Term. This Agreement shall become effective at the close of business on
the date hereof and shall remain in force and effect for an initial term of two
years, and shall remain in effect thereafter if approved in the manner set forth
in Section 10 hereof.
10. Renewal. Following the expiration of its initial two year term, this
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Trust's Board of Trustees or by the vote of a majority of
the Fund's outstanding voting securities (as defined in Section 2(a)(42) of
the 1940 Act), and
(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a trustee of the Trust), by votes cast in person at a meeting
specifically called for such purpose.
11. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Trust's Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), or by the Manager or the Global Allocation
Strategist, on sixty (60) days' written notice to the other party. This
Agreement shall automatically terminate: (a) in the event of its assignment, the
term "assignment" having the meaning defined in Section 2(a)(4) of the 1940 Act,
or (b) in the event that the Management Agreement between the Fund and the
Manager shall terminate.
A-16
<PAGE>
12. Liability of the Global Allocation Strategist. In the absence of willful
misfeasance, bad faith or gross negligence on the part of the Global Allocation
Strategist, its officers, directors or employees, or reckless disregard by the
Global Allocation Strategist of its duties under this Agreement, the Global
Allocation Strategist shall not be liable to the Manager, the Trust or to any
shareholder of the Trust for any act or omission in the course of, or connected
with, rendering services hereunder or for any losses that may be sustained in
the purchase, holding or sale of any security. Any actions taken by the Global
Allocation Strategist for the sole purpose of correctly complying with an
instruction of the Trust or the Manager or a directive pursuant to Section 3
hereof shall be deemed to be taken without willful misfeasance, bad faith or
gross negligence.
13. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Manager and that of the
Trust for this purpose shall be 41 Madison Avenue, New York, New York 10010, and
the address of the Global Allocation Strategist for this purpose shall be 2
World Trade Center, 94th floor, New York, New York 10048.
14. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to said Act. In addition, where the effect of a requirement of
the 1940 Act reflected in the provision of this Agreement is revised by rule,
regulation or order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: FIDUCIARY INTERNATIONAL, INC.
____________________________________ By______________________________
Title: Chairman
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
____________________________________ By______________________________
Title: President
A-17
<PAGE>
FORM OF SUB-ADVISORY AGREEMENT
------------------------------
THIS AGREEMENT is made this ____________ day of ____________, 1995 by and
between VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the "Manager"),
and INVESTMENT ADVISERS, INC., a registered investment adviser (the "Portfolio
Manager" or "IAI") with respect to the following recital of fact:
R E C I T A L
WHEREAS, Blanchard Funds (the "Trust") is registered as an open-end,
non-diversified, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the Portfolio Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment adviser; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in one series called the Blanchard Global
Growth Fund (such series, being referred to as the "Fund"); and
WHEREAS, the Trust and the Manager have entered into an agreement of even
date herewith to provide for management services for the Fund on the terms and
conditions set forth therein (the "Management Agreement"); and
WHEREAS, the Portfolio Manager proposes to render investment advisory
services to the Manager in connection with the Manager's responsibilities to the
Fund with respect to the U.S. Fixed Income Securities sector of the Fund's
portfolio on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Investment Management. IAI shall act as a Portfolio Manager for the Fund
and shall, in such capacity, supervise the investment and reinvestment of a
portion of the cash, securities or other properties comprising the U.S. Fixed
Income Securities sector of the Fund's portfolio, subject at all times to the
direction of the Global Asset Allocation Strategist, the Manager and the
policies and control of the Trust's Board of Trustees. IAI shall give the Fund
the benefit of its best judgment, efforts and facilities in rendering its
services as Portfolio Manager.
2. Investment Analysis and Implementation. In carrying out its obligation
under paragraph 1 hereof, the Portfolio Manager shall:
(a) use the same skill and care in providing such service as it uses in
providing services to fiduciary accounts for which it has investment
responsibilities;
(b) obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund's
portfolio and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which the issuers
engage, or with respect to securities which the Portfolio Manager considers
desirable for inclusion in the Fund's portfolio;
(c) determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Trust's Board of
Trustees;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Trust's Board of Trustees; and
(e) take, on behalf of the Fund, all actions which appear to the Trust
and the Manager necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including the placing of
orders for the purchase and sale of securities for the Fund and the prompt
reporting to the Manager of such purchasers and sales.
3. Broker-Dealer Relationships. The Portfolio Manager is responsible for
decisions to buy and sell securities for the Fund's portfolio, broker-dealer
selection, and negotiation of brokerage commission rates. The Portfolio
Manager's
A-18
<PAGE>
primary consideration in effecting a security transaction will be execution at
the most favorable price. In selecting a broker-dealer to execute each
particular transaction, the Portfolio Manager will take the following into
consideration: the best net price available, the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
Accordingly, the price to the Fund in any transaction may be less favorable than
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered. Subject
to such policies as the Board of Trustees may determine, the Portfolio Manager
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of its having caused the
Fund to pay a broker for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Portfolio Manager determines in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Portfolio Manager's overall
responsibilities with respect to the Fund and to its other clients as to which
it exercises investment discretion. The Portfolio Manager is further authorized
to allocate the orders placed by it on behalf of the Fund to any affiliated
broker-dealer or to such brokers and dealers who also provide research or
statistical material, or other services to the Fund or the Portfolio Manager.
Such allocation shall be in such amounts and proportions as the Portfolio
Manager shall determine and the Portfolio Manager will report on said
allocations regularly to the Board of Trustees of the Trust indicating the
brokers to whom such allocations have been made and the basis therefor.
4. Control by Board of Trustees. Any investment program undertaken by the
Portfolio Manager pursuant to this Agreement, as well as any other activities
undertaken by the Portfolio Manager on behalf of the Fund pursuant thereto,
shall at all times be subject to any directives of the Board of Trustees of the
Trust. The Manager shall provide the Portfolio Manager with written notice of
all such directives, so long as this Agreement remains in effect.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Portfolio Manager shall at all times conform to:
(a) all applicable provisions of the 1940 Act; and
(b) the provisions of the Registration Statement of the Trust under the
Securities Act of 1933 and the 1940 Act; and
(c) any other applicable provisions of state and federal law.
6. Expenses. The Portfolio Manager shall maintain, at its expense and
without cost to the Manager or the Fund, a trading function in order to carry
out its obligations under subparagraph (e) of paragraph 2 hereof to place orders
for the purchase and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with the
approval of the Trust's Board of Trustees, the Portfolio Manager may perform
services on behalf of the Fund which are not required by this Agreement. Such
services will be performed on behalf of the Fund and the Portfolio Manager's
cost in rendering such services may be billed monthly to the Manager, subject to
examination by the Manager's independent accountants. Payment or assumption by
the Portfolio Manager of any Fund expense that the Portfolio Manager is not
required to pay or assume under this Agreement shall not relieve the Manager or
the Portfolio Manager of any of their obligations to the Fund or obligate the
Portfolio Manager to pay or assume any similar Fund expense on any subsequent
occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Manager shall pay the Portfolio Manager the greater of
(i) $25,000 per annum, or (ii) a monthly fee at the annual rate of .20% of the
sector's first $150 million of average daily net assets; plus .175% of the
sector's average daily net assets in excess of $150 million but less than $300
million; plus .15% of the sector's average daily net assets in excess of $300
million. Compensation under this Agreement shall be calculated and accrued daily
and the amounts of the daily accruals shall be paid monthly. If this Agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fees as set forth above. Payment of the Portfolio Manager's
compensation for the preceding month shall be made as promptly as possible after
the end of each month.
9. Non-Exclusivity. The services of the Portfolio Manager to the Manager are
not to be deemed to be exclusive, and the Portfolio Manager shall be free to
render investment advisory or other services to others (including other
A-19
<PAGE>
investment companies) and to engage in other activities, so long as its services
under this agreement are not impaired thereby. The Portfolio Manager shall give
60 days notice to the Manager if it intends to perform investment advisory
services for any investment company similar to that of the Trust.
10. Term. This Agreement shall become effective at the close of business on
the date hereof and shall remain in force and effect for an initial term of two
years, and shall remain in effect thereafter if approved in the manner set forth
in Section 11 hereof.
11. Renewal. Following the expiration of its initial two year term, this
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Trust's Board of Trustees or (ii) by the vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a trustee of the Trust), by votes cast in person at a meeting
specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Trust's Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), or by the Manager or the Portfolio Manager, on sixty
(60) days' written notice to the other party. This Agreement shall automatically
terminate: (a) in the event of its assignment, the term "assignment" having the
meaning defined in Section 2(a)(4) of the 1940 Act, or (b) in the event that the
Management Agreement between the Fund and the Manager shall terminate.
13. Liability of the Portfolio Manager. In the absence of willful
misfeasance, bad faith or gross negligence on the part of the Portfolio Manager
or its officers, directors or employees, or reckless disregard by the Portfolio
Manager of its duties under this Agreement, the Portfolio Manager shall not be
liable to the Manager, the Trust or to any shareholder of the Trust for any act
or omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
14. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Manager and that of the
Trust for this purpose shall be 41 Madison Avenue, New York, New York 10010, and
the address of the Portfolio Manager for this purpose shall be 100 Dain Tower,
Minneapolis, Minnesota 55402.
15. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to said Act. In addition, where the effect of a requirement of
the 1940 Act reflected in the provision of this Agreement is revised by rule,
regulation or order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: INVESTMENT ADVISERS, INC.
____________________________________ By______________________________
Title: Vice President
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
____________________________________ By______________________________
Title: President
A-20
<PAGE>
FORM OF SUB-ADVISORY AGREEMENT
------------------------------
THIS AGREEMENT is made this ____________ day of ____________, 1995 by and
between VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the "Manager"),
and CAVELTI CAPITAL MANAGEMENT, LTD., a Canadian money management firm (the
"Portfolio Manager" or "Cavelti") with respect to the following recital of fact:
R E C I T A L
WHEREAS, Blanchard Funds (the "Trust") is registered as an open-end,
non-diversified, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the Portfolio is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment adviser; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in one series called the Blanchard Global
Growth Fund (such series, being referred to as the "Fund"); and
WHEREAS, the Trust and the Manager have entered into an agreement of even
date herewith to provide for management services for the Fund on the terms and
conditions set forth therein (the "Management Agreement"); and
WHEREAS, the Portfolio Manager proposes to render investment advisory
services to the Manager in connection with the Manager's responsibilities to the
Fund with respect to the Precious Metals Securities and Bullion sector of the
Fund's portfolio on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Investment Management. Cavelti shall act as a Portfolio Manager for the
Fund and shall, in such capacity, supervise the investment and reinvestment of a
portion of the cash, securities or other properties comprising the Precious
Metals Securities and Bullion sector of the Fund's portfolio, subject at all
times to the direction of the Global Asset Allocation Strategist, the Manager
and the policies and control of the Trust's Board of Trustees. Cavelti shall
give the Fund the benefit of its best judgment, efforts and facilities in
rendering its services as Portfolio Manager.
2. Investment Analysis and Implementation. In carrying out its obligation
under paragraph 1 hereof, the Portfolio Manager shall:
(a) use the same skill and care in providing such service as it uses in
providing services to fiduciary accounts for which it has investment
responsibilities;
(b) obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund's
portfolio and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which the issuers
engage, or with respect to securities which the Portfolio Manager considers
desirable for inclusion in the Fund's portfolio;
(c) determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Trust's Board of
Trustees;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Trust's Board of Trustees; and
(e) take, on behalf of the Fund, all actions which appear to the Trust
and the Manager necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including the placing of
orders for the purchase and sale of securities for the Fund and the prompt
reporting to the Manager of such purchases and sales.
3. Broker-Dealer Relationships. The Portfolio Manager is responsible for
decisions to buy and sell securities for the Fund's portfolio, broker-dealer
selection, and negotiation of brokerage commission rates. The Portfolio
Manager's
A-21
<PAGE>
primary consideration in effecting a security transaction will be execution at
the most favorable price. In selecting a broker-dealer to execute each
particular transaction, the Portfolio Manager will take the following into
consideration: the best net price available, the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
Accordingly, the price to the Fund in any transaction may be less favorable than
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered. Subject
to such policies as the Board of Trustees may determine, the Portfolio Manager
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of its having caused the
Fund to pay a broker for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Portfolio Manager determines in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Portfolio Manager's overall
responsibilities with respect to the Fund and to its other clients as to which
it exercises investment discretion. The Portfolio Manager is further authorized
to allocate the orders placed by it on behalf of the Fund to any affiliated
broker-dealer or to such brokers and dealers who also provide research or
statistical material, or other services to the Fund or the Portfolio Manager.
Such allocation shall be in such amounts and proportions as the Portfolio
Manager shall determine and the Portfolio Manager will report on said
allocations regularly to the Board of Trustees of the Trust indicating the
brokers to whom such allocations have been made and the basis therefor.
4. Control by Board of Trustees. Any investment program undertaken by the
Portfolio Manager pursuant to this Agreement, as well as any other activities
undertaken by the Portfolio Manager on behalf of the Fund pursuant thereto,
shall at all times be subject to any directives of the Board of Trustees of the
Trust. The Manager shall provide the Portfolio Manager with written notice of
all such directives, so long as this Agreement remains in effect.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Portfolio Manager shall at all times conform to:
(a) all applicable provisions of the 1940 Act;
and
(b) the provisions of the Registration Statement of the Trust under the
Securities Act of 1933 and the 1940 Act; and
(c) any other applicable provisions of state and federal law.
6. Expenses. The Portfolio Manager shall maintain, at its expense and
without cost to the Manager or the Fund, a trading function in order to carry
out its obligations under subparagraph (e) of paragraph 2 hereof to place orders
for the purchase and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with the
approval of the Trust's Board of Trustees, the Portfolio Manager may perform
services on behalf of the Fund which are not required by this Agreement. Such
services will be performed on behalf of the Fund and the Portfolio Manager's
cost in rendering such services may be billed monthly to the Manager, subject to
examination by the Manager's independent accountants. Payment or assumption by
the Portfolio Manager of any Fund expense that the Portfolio Manager is not
required to pay or assume under this Agreement shall not relieve the Manager or
the Portfolio Manager of any of their obligations to the Fund or obligate the
Portfolio Manager to pay or assume any similar Fund expense on any subsequent
occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Manager shall pay the Portfolio Manager the greater of
(i) $25,000 per annum, or (ii) a monthly fee at the annual rate of .30% of the
sector's first $150 million of average daily net assets; plus .2625% of the
sector's average daily net assets in excess of $150 million but less than $300
million; plus .225% of the sector's average daily net assets in excess of $300
million. Compensation under this Agreement shall be calculated and accrued daily
and the amounts of the daily accruals shall be paid monthly. If this Agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fees as set forth above. Payment of the Portfolio Manager's
compensation for the preceding month shall be made as promptly as possible after
the end of each month.
9. Non-Exclusivity. The services of the Portfolio Manager to the Manager are
not to be deemed to be exclusive, and the Portfolio Manager shall be free to
render investment advisory or other services to others (including other
A-22
<PAGE>
investment companies) and to engage in other activities, so long as its services
under this agreement are not impaired thereby. The Portfolio Manager shall give
60 days' notice to the Manager if it intends to perform investment advisory
services for any investment company similar to that of the Trust.
10. Term. This Agreement shall become effective at the close of business on
the date hereof and shall remain in force and effect for an initial term of two
years, and shall remain in effect thereafter if approved in the manner set forth
in Section 11 hereof.
11. Renewal. Following the expiration of its initial two year term, this
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Trust's Board of Trustees or (ii) by the vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a trustee of the Trust), by votes cast in person at a meeting
specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Trust's Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), or by the Manager or the Portfolio Manager, on sixty
(60) days' written notice to the other party. This Agreement shall automatically
terminate: (a) in the event of its assignment, the term "assignment" having the
meaning defined in Section 2(a)(4) of the 1940 Act, or (b) in the event that the
Management Agreement between the Fund and the Manager shall terminate.
13. Liability of the Portfolio Manager. In the absence of willful
misfeasance, bad faith or gross negligence on the part of the Portfolio Manager
or its officers, directors or employees, or reckless disregard by the Portfolio
Manager of its duties under this Agreement, the Portfolio Manager shall not be
liable to the Manager, the Trust or to any shareholder of the Trust for any act
or omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
14. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Manager and that of the
Trust for this purpose shall be 41 Madison Avenue, New York, New York 10010, and
the address of the Portfolio Manager for this purpose shall be 74 Victoria
Street, Toronto, Canada M5C2A5.
15. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to said Act. In addition, where the effect of a requirement of
the 1940 Act reflected in the provision of this Agreement is revised by rule,
regulation or order of the Securities and Exchange commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: CAVELTI CAPITAL MANAGEMENT, LTD.
____________________________________ By______________________________
Title: President
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
____________________________________ By______________________________
Title: President
A-23
<PAGE>
FORM OF SUB-ADVISORY AGREEMENT
------------------------------
THIS AGREEMENT is made this _____________ day of ____________, 1995 by and
between VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the "Manager"),
and MARTIN CURRIE INCORPORATED, a registered investment adviser (the "Portfolio
Manager" or "Martin Currie") with respect to the following recital of fact:
R E C I T A L
WHEREAS, Blanchard Funds (the "Trust") is registered as an open-end,
non-diversified, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the Portfolio is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment adviser; and
WHEREAS, the Portfolio Manager is a member of the Investment Management
Regulatory Organization Limited ("IMRO") of the United Kingdom and is thereby
regulated by IMRO in the conduct of its investment business for United Kingdom
investors and engages in the business of acting as an investment adviser; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in one series called the Blanchard Global
Growth Fund (such series, being referred to as the "Fund"); and
WHEREAS, the Trust and the Manager have entered into an agreement dated ,
1995 to provide for management services for the Fund on the terms and conditions
set forth therein (the "Management Agreement"); and
WHEREAS, the Portfolio Manager proposes to render investment advisory
services to the Manager in connection with the Manager's responsibilities to the
Fund with respect to the Emerging Markets sector of the Fund's portfolio on the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Investment Management. Martin Currie shall act as a Portfolio Manager for
the Fund and shall, in such capacity, supervise the investment and reinvestment
of a portion of the cash, securities or other properties comprising the Emerging
Markets sector of the Fund's portfolio, subject at all times to the direction of
the Global Asset Allocation Strategist, the Manager and the policies and control
of the Trust's Board of Trustees. Martin Currie shall give the Fund the benefit
of its best judgment, efforts and facilities in rendering its services as
Portfolio Manager.
2. Investment Analysis and Implementation. In carrying out its obligation
under paragraph 1 hereof, the Portfolio Manager shall:
(a) use the same skill and care in providing such service as it uses in
providing services to fiduciary accounts for which it has investment
responsibilities;
(b) obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund's
portfolio and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which the issuers
engage, or with respect to securities which the Portfolio Manager considers
desirable for inclusion in the Fund's portfolio;
(c) determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Trust's Board of
Trustees;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Trust's Board of Trustees; and
(e) take, on behalf of the Fund, all actions which appear to the Trust
and the Manager necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including the placing of
orders for the purchase and sale of securities for the Fund and the prompt
reporting to the Manager of such purchases and sales.
A-24
<PAGE>
3. Broker-Dealer Relationships. The Portfolio Manager is responsible for
decisions to buy and sell securities for the Fund's portfolio, broker-dealer
selection, and negotiation of brokerage commission rates. The Portfolio
Manager's primary consideration in effecting a security transaction will be
execution at the most favorable price. In selecting a broker-dealer to execute
each particular transaction, the Portfolio Manager will take the following into
consideration: the best net price available, the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order, and the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
Accordingly, the price to the Fund in any transaction may be less favorable than
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered. Subject
to such policies as the Board of Trustees may determine, the Portfolio Manager
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of its having caused the
Fund to pay a broker for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Portfolio Manager determines in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Portfolio Manager's overall
responsibilities with respect to the Fund and to its other clients as to which
it exercises investment discretion. The Portfolio Manager is further authorized
to allocate the orders placed by it on behalf of the Fund to any affiliated
broker-dealer or to such brokers and dealers which also provide research or
statistical material, or other services to the Fund or the Portfolio Manager.
Such allocation shall be in such amounts and proportions as the Portfolio
Manager shall determine and the Portfolio Manager will report on said
allocations regularly to the Board of Trustees of the Trust indicating the
brokers to whom such allocations have been made and the basis therefor.
4. Control by Board of Trustees. Any investment program undertaken by the
Portfolio Manager pursuant to this Agreement, as well as any other activities
undertaken by the Portfolio Manager on behalf of the Fund pursuant thereto,
shall at all times be subject to any directives of the Board of Trustees of the
Trust. The Manager shall provide the Portfolio Manager with written notice of
all such directives, so long as this Agreement remains in effect.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Portfolio Manager shall at all times conform to:
(a) all applicable provisions of the 1940 Act; and
(b) the provisions of the Registration Statement of the Trust under the
Securities Act of 1933 and the 1940 Act; and
(c) any other applicable provisions of state and federal law.
6. Expenses. The Portfolio Manager shall maintain, at its expense and
without cost to the Manager or the Fund, a trading function in order to carry
out its obligations under subparagraph (e) of paragraph 2 hereof to place orders
for the purchase and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with the
approval of the Trust's Board of Trustees, the Portfolio Manager may perform
services on behalf of the Fund which are not required by this Agreement. Such
services will be performed on behalf of the Fund and the Portfolio Manager's
cost in rendering such services may be billed monthly to the Manager, subject to
examination by the Manager's independent accountants. Payment or assumption by
the Portfolio Manager of any Fund expense that the Portfolio Manager is not
required to pay or assume under this Agreement shall not relieve the Manager or
the Portfolio Manager of any of their obligations to the Fund or obligate the
Portfolio Manager to pay or assume any similar Fund expense on any subsequent
occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Manager shall pay the Portfolio Manager the greater of
(i) $25,000 per annum, or (ii) a monthly fee at the annual rate of .50% of the
sector's first $150 million but less than $300 million; plus .4375% of the
sector's average daily net assets in excess of $150 million but less than $300
million; plus.375% of the sector's average daily net assets in excess of $300
million. Compensation under this Agreement shall be calculated and accrued daily
and the amounts of the daily accruals shall be paid monthly. The compensation
paid to the Portfolio Manager will not be reduced by the amount of brokerage
commissions received by the Portfolio Manager or its affiliated broker-dealer
pursuant to Section 17(e)(2) of the 1940 Act. If this Agreement becomes
effective subsequent to the first day of a month or shall terminate before the
last day of a month, compensation for that part of the month this Agreement is
in effect shall be prorated in a manner consistent with the calculation of the
fees as set forth above. Payment of the Portfolio Manager's compensation for the
preceding month shall be made as promptly as possible after the end of each
month.
A-25
<PAGE>
9. Non-Exclusivity. The services of the Portfolio Manager to the Manager are
not to be deemed to be exclusive, and the Portfolio Manager shall be free to
render investment advisory or other services to others (including other
investment companies) and to engage in other activities, so long as its services
under this agreement are not impaired thereby. The Portfolio Manager shall give
60 days' notice to the Manager if it intends to perform investment advisory
services for any investment company similar to that of the Trust.
10. Term. This Agreement shall become effective at the close of business on
the date hereof and shall remain in force and effect for an initial term of two
years, and shall remain in effect thereafter if approved in the manner set forth
in Section 11 hereof.
11. Renewal. Following the expiration of its initial two year term, this
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
(a)
(i) by the Trust's Board of Trustees or (ii) by the vote of a majority of the
Fund's outstanding voting securities (as defined in Section 2(a)(42) of the 1940
Act), and
(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a trustee of the Trust), by votes cast in person at a meeting
specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Trust's Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), or by the Manager or the Portfolio Manager, on sixty
(60) days' written notice to the other party. This Agreement shall automatically
terminate: (a) in the event of its assignment, the term "assignment" having the
meaning defined in Section 21(a)(4) of the 1940 Act, or (b) in the event that
the Management Agreement between the Fund and the Manager shall terminate.
Extraordinary expenses necessarily incurred by the Portfolio Manager in
connection with the termination of this Agreement shall be paid by the Manager
to the extent that such extraordinary expenses are not paid by the Fund.
13. Liability of the Portfolio Manager. In the absence of willful
misfeasance, bad faith or gross negligence on the part of the Portfolio Manager
or its officers, directors or employees, or reckless disregard by the Portfolio
Manager of its duties under the Agreement, the Portfolio Manager shall not be
liable to the Manager, the Trust or to any shareholder of the Trust for any act
or omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
14. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Manager and that of the
Trust for this purpose shall be 41 Madison Avenue, New York, New York 10010, and
the address of the Portfolio Manager for this purpose shall be Saltaire Court,
20 Castle Terrace, Edinburgh EHI 2ES.
15. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such a
term or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to said Act. In addition, where the effect of a requirement of
the 1940 Act reflected in the provision of this Agreement is revised by rule,
regulation or order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: MARTIN CURRIE INCORPORATED
____________________________________ By______________________________
Title: President
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
____________________________________ By______________________________
Title: President
A-26
<PAGE>
BLANCHARD 100% TREASURY MONEY MARKET FUND
FUND EXHIBIT
1. Pertaining to the Meeting
* Meeting Date: May ____________, 1995
* Meeting Time: ____________ [a.m./p.m.]
* Meeting Place: Offices of Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, 919 Third Avenue, New York, NY 10022.
* Shares outstanding as of ____________, 1995: ____________
2. Pertaining to Investment Advisory Contracts with Virtus Capital Management,
Inc.
* Date Board approved Proposed Contract: March 24, 1995
* Date shareholders last approved Existing Agreement: January 22, 1989
* Date Board last approved Existing Agreement: December 8, 1994
* Date of Existing Agreement: December 5, 1988
* Investment management fee as a percentage of average daily net assets
under Existing and Proposed Agreements: .5% of the first $500 million of
the Fund's average daily net assets, .475% of the Fund's average daily net
assets in excess of $500 million but not exceeding $1 billion, plus .45%
of the Fund's average daily net assets in excess of $1 billion.
* Investment management agreement fee payable to Sheffield Management
Company for most recent fiscal year: $851,522
* Fee reduction for the Fund's most recent fiscal year resulting from any
state expense limitation: None
3. Pertaining to Accountants
* Date Board last approved Accountants: June 13, 1994
4. Pertaining to the Board
* Number of Board, and where applicable committee, meetings held during the
last fiscal year: 5 Board meetings/ 1 Audit Committee meeting
* Board Members, if any, attending fewer than 75% of all Board and committee
meetings held in the last fiscal year during the period the Board Member
was in office: None
Compensation Table*
Total
Estimate Annual Compensation
Name of Person Aggregate Compensation Benefits Upon from BPMF and
Position from Blanchard Funds Retirement Blanchard Funds
- -------- -------------------- ---------- ---------------
Arthur Kiriacon, Trustee $47,770 $ ** $51,000
Gerald Morris, Trustee 47,770 54,000 51,000
Eric Lomas, Trustee 47,770 57,000 51,000
- --------------
*Messrs. Freedman and Liebman are compensated by SMC, not the Funds.
**Mr. Kiriacom will receive a payment of a lump sum cash benefit of $505,006
upon closing of the Purchase in lieu of the estimated annual benefit of
$57,000.
B-1
<PAGE>
The following table presents certain information regarding the beneficial
ownership of shares as of ____________, 1995 by each officer and Nominee of the
Fund owning shares on such date.
Name Number of Shares
---- ----------------
--------------------------------------------------------------------------
VOTE YOUR PROXY TODAY!
By Mail: use the enclosed return envelope.
By Phone: 1-800-733-8485, ext. 450 (Mon.-Fri., 9:00 a.m. - 11:00 p.m. EST)
By Fax: 1-800-733-1885 (24 hours, 7 days a week)
QUESTIONS? CALL 1-800-733-8485, ext. 450
--------------------------------------------------------------------------
B-2
<PAGE>
BLANCHARD SHORT-TERM GLOBAL INCOME FUND
FUND EXHIBIT
1. Pertaining to the Meeting
* Meeting Date: May ___________, 1995
* Meeting Time: _________ [a.m./p.m.]
* Meeting Place: Offices of Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, 919 Third Avenue, New York, NY 10022.
* Shares outstanding as of __________, 1995: ___________
2. Pertaining to Investment Advisory Contracts with Virtus Capital Management,
Inc.
* Date Board approved Proposed Contract: March 24, 1995
* Date shareholders last approved Existing Agreement: January 2, 1991
* Date Board last approved Existing Agreement: September 16, 1994
* Date of Existing Agreement: December 4, 1990
* Investment management fee as a percentage of average daily net assets
under Existing and Proposed Agreements: .75%
* Investment management agreement fee payable to Sheffield Management
Company for most recent fiscal year: $4,845,290
* Fee reduction for the Fund's most recent fiscal year resulting from any
state expense limitation: None
3. Pertaining to Sub-Advisory Agreement
* Date Board approved Proposed Agreement: March 24, 1995
* Date shareholders last approved Existing Agreement: January 2, 1991
* Date Board last approved Existing Agreement: September 16, 1994
* Date of Existing Agreement: December 17, 1993
* Investment advisory fee as a percentage of average daily net assets under
Existing and Proposed Agreements: .35% of the first $10 million of average
daily net assets, .30% of the next $10 million of average daily net
assets, .25% of the next $10 million of average daily net assets, .20% of
the next $10 million of average daily net assets, and .15% of average
daily net assets in excess of $40 million
* Investment advisory fee payable to Lombard Odier International Portfolio
Management Limited for most recent fiscal year: $ 1,039,688
4. Pertaining to Accountants
* Date Board last approved Accountants: June 13, 1994
5. Pertaining to the Board
* Number of Board, and where applicable committee, meetings held during the
last fiscal year: 6 Board meetings/ 1 Audit Committee meeting
* Board Members, if any, attending fewer than 75% of all Board and committee
meetings held in the last fiscal year during the period the Board Member
was in office: None
C-1
<PAGE>
Compensation Table*
Total
Estimate Annual Compensation
Name of Person Aggregate Compensation Benefits Upon from BPMF and
Position from Blanchard Funds Retirement Blanchard Funds
- -------- -------------------- ---------- ---------------
Arthur Kiriacon, Trustee $47,770 $ ** $51,000
Gerald Morris, Trustee 47,770 54,000 51,000
Eric Lomas, Trustee 47,770 57,000 51,000
6. Pertaining to Distribution and Marketing Plans
* The Fund is subject to a Distribution and Marketing Plan.
* Date that the Distribution and Marketing Plan was adopted: January 2, 1991
* Amounts paid pursuant to the Distribution and Marketing Plan, both in the
aggregate and as a percentage of the Fund's average net assets during its
most recent fiscal year: $1,615,097 (.25%).
The following table presents certain information regarding the beneficial
ownership of shares as of ____________, 1995 by each officer and Nominee of the
Fund owning shares on such date.
Name Number of Shares
---- ----------------
- --------------
*Messrs. Freedman and Liebman are compensated by SMC, not the Funds.
**Mr. Kiriacom will receive a payment of a lump sum cash benefit of $505,006
upon closing of the Purchase in lieu of the estimated annual benefit of
$57,000.
--------------------------------------------------------------------------
VOTE YOUR PROXY TODAY!
By Mail: use the enclosed return envelope.
By Phone: 1-800-733-8485, ext. 450 (Mon.-Fri., 9:00 a.m. - 11:00 p.m. EST)
By Fax: 1-800-733-1885 (24 hours, 7 days a week)
QUESTIONS? CALL 1-800-733-8485, ext. 450
--------------------------------------------------------------------------
C-2
<PAGE>
Description of Portfolio Advisor and Sub-Advisor
Blanchard Short-Term Global Income Fund
VCM has retained Lombard Odier International Portfolio Management Limited,
Norfolk House, 13 Southampton Place, London WC1A 2AJ, England ("Lombard Odier")
to provide portfolio advisory services to the Fund. Lombard Odier is the
institutional investment management arm of Geneva-based Lombard Odier & Cie, one
of the oldest and largest private Swiss banks, founded in 1798. The Lombard
Odier Group currently manages well in excess of $15 billion and has nearly 200
years experience in global fixed income investment management. Lombard Odier is
registered as an investment adviser with the SEC. Paul Abberley, a Director of
Lombard Odier, has more than 8 years of experience as a portfolio manager and is
responsible for the day-to-day management of the Fund's portfolio.
The Portfolio Adviser has retained WLO Global Management, as a sub-adviser,
to assist in the investment management of the Fund pursuant to a Sub-Advisory
Agreement, and subject to the direction of the Manager, the Portfolio Adviser
and the Board of Trustees of the Fund. Under the Sub-Advisory Agreement, the
Sub-Adviser has primary responsibility for providing investment advice to the
Fund and managing the domestic (U.S.) investment of the Fund's assets, while the
Portfolio Adviser retains responsibility for international investments.
WLO Global Management, a partnership between Lombard Odier and Western Asset
Management, was established in 1992 to offer international and global fixed
income portfolio management services to U.S. plan sponsors and foreign
institutions. WLO Global Management is registered with the Securities and
Exchange Commission as an investment adviser. WLO Global Management is
structured to combine the proven expertise of two independent yet mutually
compatible firms: Western Asset Management (for U.S. domestic fixed-income
management) and Lombard Odier (for non-dollar fixed income management).
The California-based partner, Western Asset Management International, is
registered with the Securities and Exchange Commission as an investment adviser.
As of December 31, 1993, the Group managed $11 billion of U.S. fixed-income
assets.
The Sub-Advisory Agreement. The sub-advisory agreement between VCM and
Lombard Odier, provides for payment by VCM to Lombard Odier of a monthly fee at
the annual rate of .35% of the first $10 million of the Fund's average daily net
assets; .30% of the next $10 million of average daily net assets; .25% of the
next $10 million of average daily net assets; .20% of the next $10 million of
average daily net assets; and .15% of average daily net assets in excess of $40
million.
C-3
<PAGE>
FORM OF INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this ____________ day of _____________ 1995, by and
between VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the "Manager"),
and LOMBARD ODIER INTERNATIONAL PORTFOLIO MANAGEMENT LIMITED (the "Portfolio
Manager" or "Lombard") with respect to the following recital of fact:
R E C I T A L
WHEREAS, Blanchard Funds (the "Trust") is registered as an open-end
non-diversified management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act") and the rules and regulations promulgated
thereunder; and
WHEREAS, the Trust and the Manager have entered into a Management Agreement
to provide for management services for Blanchard Short-Term Global Income Fund,
a series of the Trust (the "Fund"), on the terms and conditions set forth in the
Management Agreement dated __________, 1995; and
WHEREAS, the Portfolio Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and is a member of the
Investment Management Regulatory Organization Limited ("IMRO"), a
self-regulating organization recognized under the Financial Services Act 1986 of
the United Kingdom, and engages in the business of acting as an investment
adviser; and
WHEREAS, the Portfolio Manager proposes to render investment advisory
services to the Manager in connection with the Manager's responsibilities to the
Fund on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable considerations, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Investment Management. Lombard shall act as the Portfolio Manager for the
Fund and shall, in such capacity, supervise the investment and reinvestment of
the cash, securities or other properties comprising the Fund's portfolio,
subject at all times to the direction of the Manager and the policies and
control of the Trust's Trustees. Lombard shall give the Fund the benefit of its
best judgment, efforts and facilities in rendering its services as Portfolio
Manager. The Portfolio Manager may engage, on behalf of the Fund and with the
required consent of the shareholders thereof, the services of a sub-adviser,
subject to any limitations imposed by the 1940 Act.
2. Investment Analysis and Implementation. In carrying out its obligation
under paragraph 1 hereof, the Portfolio Manager shall:
(a) at all times adhere to the Fund's investment objectives,
restrictions and limitations as contained in its Prospectus and Statement of
Additional Information;
(b) use the same skill and care in providing such service as it uses in
providing services to fiduciary accounts for which it has investment
responsibilities;
(c) obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund's
portfolio and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which the issues
engage, or with respect to securities which the Portfolio Manager considers
desirable for inclusion in the Fund's portfolio;
(d) determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Manager;
(e) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Manager;
(f) take, on behalf of the Fund, all actions which appear to the Fund
and the Manager necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including the placing of
orders for the purchase and sale of securities for the Fund and the prompt
reporting to the Manager of such purchases and sales; and
C-4
<PAGE>
(g) be authorized to give instructions to the Custodian and
Sub-Custodian of the Fund as to deliveries of securities, transfers of
currencies and payments of cash for the account of the Fund, in relation to
the matters contemplated by this Agreement. All securities or other assets
to the Fund shall be held in, the Custodian or Sub-Custodian appointed by
the Fund's Trustees.
3. Broker-Dealer-Relationship. The Portfolio Manager (and/or any
Sub-Adviser) is responsible for decisions to buy and sell securities for the
Fund's portfolio, broker-dealer selection, and negotiation of brokerage
commission rates. The Portfolio Manager's (Sub-Adviser's) primary consideration
in effecting a security transaction will be execution at the most favorable
price. In selecting a broker-dealer to execute each particular transaction, the
Portfolio Manager (Sub-Adviser) will take the following into consideration: the
best net price available, the reliability, integrity and financial condition of
the broker-dealer; the size of and difficulty in executing the order; and the
value of the expected contribution of the broker-dealer to the investment
performance of the Fund on a continuing basis. Accordingly, the price to the
Fund in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered. Subject to such policies as the Trustees
may determine, the Portfolio Manager (Sub-Adviser) shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement
(Sub-Advisory Agreement) or otherwise solely by reason of its having caused the
Fund to pay a broker for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Portfolio Manager (Sub-Adviser) determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Portfolio Manager's
(Sub-Adviser's) overall responsibilities with respect to the Fund and to its
other clients as to which it executes investment discretion. The Portfolio
Manager (Sub-Adviser) is further authorized to allocate the orders placed by it
on behalf of the Fund to itself, to its affiliated broker-dealer, if any, or
affiliated broker-dealers of the Manager, or to such brokers and dealers who
also provide research or statistical material, or other services to the Fund or
the Portfolio Manager (Sub-Adviser). Such allocation shall be in such amounts
and proportions as the Portfolio Manager (Sub-Adviser) shall determine and the
Portfolio Manager (Sub-Adviser) will report on said allocations regularly to the
Manager indicating the brokers to whom such allocations have been made and the
basis therefor.
4. Control by Trustees. Any investment program undertaken by the Portfolio
Manager pursuant to this Agreement, as well as any other activities undertaken
by the Portfolio Manager on behalf of the Fund pursuant thereto, shall at all
times be subject to any directives of the Board of Trustees of the Trust. The
Manager shall provide the Portfolio Manager with written notice of all such
directives, so long as this Agreement remains in effect.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Portfolio Manager shall at all times conform to:
(a) all applicable provisions of the 1940 Act;
(b) the provisions of the Registration Statement of the Trust under the
Securities Act of 1933 and the 1940 Act;
(c) any other applicable provisions of state and federal law; and
(d) as a member of IMRO and in light of the IMRO Rules, the Portfolio
Manager places on record that it regards this Agreement as not necessitating
any ancillary agreement with the Fund or the Manager on the grounds that,
within the meanings of the IMRO Rules, and for purposes thereof, (a) the
Fund is an open-ended investment company and a business investor, (b) the
Manager is a Professional Investor and (c) the subject matter of this
Agreement is a scheme management activity.
6. Expenses. The expenses connected with the Fund shall be borne by the
Portfolio Manager as follows:
The Portfolio Manager shall maintain, at its expense and without cost to the
Manager or the Fund, a trading function in order to carry out its obligations
under subparagraph (f) of paragraph 2 hereof to place orders for the purchase
and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with the
approval of the Trust's Trustees, the Portfolio Manager may perform services on
behalf of the Fund which are not required by this Agreement. Such services will
be performed on behalf of the Fund and the Portfolio Manager's costs in
rendering such services may be
C-5
<PAGE>
billed monthly to the Manager, subject to examination by the Manager's
independent accountants. Payment or assumption by the Portfolio Manager of any
Fund expense that the Portfolio Manager is not required to pay or assume under
this Agreement shall not relieve the Manager or the Portfolio Manager of any of
their obligations to the Fund or obligate the Portfolio Manager to pay or assume
any similar Fund expense on any subsequent occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder the Manager shall pay the Portfolio Manager monthly
compensation at the annual rate of .35% of the first $10 million of the Fund's
average daily net assets, .30% of the next $10 million of average daily net
assets, .25% of the next $10 million of average daily net assets, .20% of the
next $10 million of average daily net assets, and .15% of average daily net
assets in excess of $40 million. Compensation under this Agreement shall be
calculated and accrued daily and the amounts of the daily accruals shall be paid
on a monthly basis. If this Agreement becomes effective subsequent to the first
day of a month or shall terminate before the last day of a month, compensation
for that part of the month this Agreement is in effect shall be prorated in a
manner consistent with the calculation of the fees as set forth above. Payment
of the Portfolio Manager's compensation for the preceding month shall be made as
promptly as possible after the end of each month.
9. Expense Limitation. If for any fiscal year the total of all ordinary
business expenses of the Fund, including all investment advisory fees but
excluding brokerage commissions, 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, the
management fee, which the Manager would otherwise receive from the Fund, shall
be reduced in order to reduce such excess expenses; however, the Manager 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 fee which the
Portfolio Manager would otherwise receive from the Manager pursuant to paragraph
8 of this Agreement should also be reduced proportionately, but only to the
extent of such fee. For example, the Manager's fee is reduced by 1/4, the
Portfolio Manager's fee from the Manager will also be reduced by 1/4. Such
reduction shall be deducted from the monthly fee otherwise payable to the
Portfolio Manager by the Manager. For the purposes of this paragraph, the term
"fiscal year" shall exclude the portion of the current fiscal year which shall
have elapsed prior to the date hereof and shall include the portion of the then
current fiscal year which shall have elapsed at the date of termination of this
Agreement,
10. Non-Exclusivity. The services of the Portfolio Manager to the Manager
are not deemed to be exclusive, and the Portfolio Manager shall be free to
render investment advisory or other services to others (including investment
companies or investment trusts) and to engage in other activities (i) so long as
its services under the Agreement are not impaired thereby; and (ii) provided
that it does not render investment advisory services to other U.S. investment
companies which specialize in marketing publicly offered, "no-load/low-load"
mutual funds (i.e., those that are sold either with no sales charge or with a
front-end or back-end sales charge of up to 2.0%), without first terminating
this Agreement in accordance with the provisions set forth below or receiving
written permission to do so from the Manager.
If either the Portfolio Manager or the Manager terminates this Agreement, by
giving sixty (60) days' written notice, in accordance with Section 14 hereof,
the Portfolio Manager agrees that for a period of six months following the
effective date of termination, it will not render investment advisory services
to other U.S. investment companies which specialize in publicly marketing
"no-load/low-load" mutual funds (as previously defined) unless the Portfolio
Manager has obtained prior written approval from the Manager to enter such
potential advisory agreements. It is recognized that the Portfolio Manager has
an existing agreement with another U.S. investment company to manage "full load"
mutual funds (i.e., those that are sold with a front-end or back-end sales
charge of 2.0% or more) and that the Portfolio Manager is free to render these
services and to enter into additional such agreements to manage "full load"
mutual funds at any time.
11. Indemnity for Taxes. Notwithstanding any other provision of this
Agreement, the Manager shall indemnify and save the Portfolio Manager and each
of its affiliates, officers, directors and employees (each individually referred
to as an "Indemnified Party") harmless from, against, for and in respect of all
taxes imposed by the United Kingdom on the Manager or the Fund, in relation to
the matters contemplated by this Agreement in the event that any such tax is
amended or charged on an Indemnified Party as a branch or agent of the Manager
or the Fund.
12. Term. This Agreement shall become effective at the cost of business on
the date hereof and shall remain in force and effect, subject to Sections 13 and
14 hereof, for two years from , 1995.
13. Renewal. Following the expiration of its initial two-year term, the
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
C-6
<PAGE>
(a) (i) by the Trust's Trustees or (ii) by the vote of a majority of the
Fund's outstanding voting securities (as defined in Section 2(a)(42) of the
1940 Act), and
(b) by the affirmative vote of a majority of the Trustees who arc not
parties to this Agreement (other than as a Trustee of the Trust), by votes
cast in person at a meeting specifically called for such purpose.
14. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Trust's Trustees or by vote of a majority
of the Fund's outstanding voting securities (as defined in Section 2(a)(42) of
the 1940 Act) or by the Manager or the Portfolio Manager, on sixty (60) days'
written notice to the other party. This Agreement shall automatically terminate:
(a) in the event of its assignment, the term "assignment" having the meaning
defined in Section 2(a)(4) of the 1940 Act, or (b) in the event that the
Management Agreement between the Trust and the Manager shall terminate.
15. Liability of the Portfolio Manager. In the absence of willful
misfeasance, bad faith or gross negligence on the part of the Portfolio Manager
or its officers, directors or employees, or reckless disregard by the Portfolio
Manager of its duties under this Agreement, the Portfolio Manager shall not be
liable to the Manager, the Trust or to any shareholder of the Trust for any act
or omission in the course of or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
16. Liability of Trustees and Shareholders. 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 the obligations
of this instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Fund.
17. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other company, it is agreed that the address of the Manager and that of
the Trust for this purpose shall be 41 Madison Avenue, 24th Floor, New York, New
York 10010, and the address of the Portfolio Manager for this purpose shall be
Norfolk House, 13 Southampton Place, London WC1A 2AJ, England.
18. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of a controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to said Act. In addition, where the effect of a requirement of
the 1940 Act reflected in the provision of this Agreement is revised by rule,
regulation or order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on __________, 1995.
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
____________________________________ By______________________________
Title: President
Attest: LOMBARD ODIER INTERNATIONAL
PORTFOLIO MANAGEMENT LIMITED
____________________________________ By______________________________
Title: Director
C-7
<PAGE>
FORM OF SUB-ADVISORY AGREEMENT
------------------------------
THIS AGREEMENT is made this _____________ day of ____________, 1995, by
and between LOMBARD ODIER INTERNATIONAL PORTFOLIO MANAGEMENT LIMITED (the
"Portfolio Manager") and WLO Global Management (the "Sub-Adviser" or "WLO") with
respect to the following recital of fact:
R E C I T A L
WHEREAS, Blanchard Funds (the "Trust") is registered as an open-end,
non-diversified, management investment company under the Investment Advisers Act
of 1940, as amended (the "1940 Act"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the Trust and Virtus Capital Management, Inc. (the "Manager") have
entered into a Management Agreement to provide for management services for
Blanchard Short-Term Global Income Fund, a series of the Trust (the "Fund"), on
the terms and conditions set forth in the Management Agreement dated __________,
1995; and
WHEREAS, the Portfolio Manager and the Manager have entered into an
Investment Advisory Agreement to provide for investment advisory services for
the Fund, on the terms and conditions set forth in the Investment Advisory
Agreement dated the date hereof; and
WHEREAS, the Portfolio Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and is a member of the
Investment Management Regulatory Organization Limited ("IMRO"), a
self-regulating organization recognized under the Financial Services Act 1986 of
the United Kingdom, and engages in the business of acting as an investment
adviser; and
WHEREAS, the Sub-Adviser is investment adviser under the Investment Advisers
Act of 1940, as amended, and engages in the business of acting as an investment
adviser; and
WHEREAS, the Sub-Adviser proposes to render investment advisory services to
the Manager and the Portfolio Manager in connection with the Manager and the
Portfolio Manager's responsibilities to the Fund on the terms and conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable considerations, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Investment Management. WLO shall act as the Sub-Adviser for the Fund and
shall, in such capacity, supervise the investment and reinvestment of the cash,
securities or other properties comprising the Fund's U.S. portfolio, subject at
all times to the direction of the Manager and the Portfolio Manager and the
policies and control of the Trust's Trustees. WLO shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its services
as Sub-Adviser.
2. Investment Analysis and Implementation. In carrying out its obligation
under paragraph 1 hereof, the Sub-Adviser shall:
(a) at all times adhere to the Fund's investment objectives,
restrictions and limitations as contained in its Prospectus and Statement of
Additional Information;
(b) use the same skill and care in providing such service as it uses in
providing services to fiduciary accounts for which it has investment
responsibilities;
(c) obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund's
U.S. portfolio and whether concerning the individual issuers whose
securities are included in the Fund's U.S. portfolio or the activities in
which the issuers engage, or with respect to securities which the
Sub-Adviser considers desirable for inclusion in the Fund's U.S. portfolio;
(d) determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Manager and the
Portfolio Manager;
(e) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Manager and the Portfolio Manager;
C-8
<PAGE>
(f) take, on behalf of the Fund, all actions which appear to the Fund,
the Manager and the Portfolio Manager necessary to carry into effect such
purchase and sale programs and supervisory functions as aforesaid, including
the placing of orders for the purchase and sale of securities for the Fund
and the prompt reporting to the Manager and the Portfolio Manager of such
purchases and sales; and
(g) be authorized to give instructions to the Custodian and
Sub-Custodian of the Fund as to deliveries of securities, transfers of
currencies and payments of cash for the account of the Fund, in relation to
the matters contemplated by this Agreement. All securities or other assets
of the Fund shall be held by the Custodian or Sub-Custodian appointed by the
Fund's Trustees.
3. Broker-Dealer Relationships. The Sub-Adviser is responsible for decisions
to buy and sell securities for the Fund's U.S. portfolio, broker-dealer
selection, and negotiation of brokerage commission rates. The Sub-Adviser's
primary consideration in effecting a security transaction will be execution at
the most favorable price. In selecting a broker-dealer to execute each
particular transaction, the Sub-Adviser will take the following into
consideration: the best net price available, the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order and the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
Accordingly, the price to the Fund in any transaction may be less favorable than
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered. Subject
to such policies as the Trustees may determine, the Sub-Adviser shall not be
deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of its having caused the Fund to pay a
broker for effecting a portfolio investment transaction in excess of the amount
of commission another broker or dealer would have charged for effecting that
transaction, if the Sub-Adviser determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Fund and to its other clients as to which it exercises investment
discretion. The Sub-Adviser is further authorized to allocate the orders placed
by it on behalf of the Fund to itself, to its affiliated broker-dealer, if any,
or affiliated broker-dealers of the Manager or the Portfolio Manager, or to such
brokers, and dealers who also provide research or statistical material, or other
services to the Fund or the Sub-Adviser. Such allocation shall be in such
amounts and proportions as the Sub-Adviser shall determine and the Sub-Adviser
will report on said allocations regularly to the Manager and the Portfolio
Manager indicating the brokers to whom such allocations have been made and the
basis therefor.
4. Control by Trustees. Any investment program undertaken by the
Sub-Adviser, pursuant to this Agreement, as well as any other activities
undertaken by the Sub-Adviser on behalf of the Fund pursuant thereto, shall at
all times be subject to any directives of the Board of Trustees of the Trust.
The Manager shall provide the Sub-Adviser with written notice of all such
directives, so long as this Agreement remains in effect.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Sub-Adviser shall at all times conform to:
(a) all applicable provisions of the 1940 Act;
(b) the provisions of the Registration Statement of the Trust under the
Securities Act of 1933 and the 1940 Act; and
(c) any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with the Fund shall be borne by the
Sub-Adviser as follows:
The Sub-Adviser shall maintain, at its expense and without cost to the
Manager or the Fund, a trading function in order to carry out its obligations
under subparagraph (f) of paragraph 2 hereof to place orders for the purchase
and sale of U.S. portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager or the
Portfolio Manager and with the approval of the Trust's Trustees, the Sub-Adviser
may perform services on behalf of the Fund which are not required by this
Agreement. Such services will be performed on behalf of the Fund and the
Sub-Adviser's costs in rendering such services may be billed monthly to the
Manager or the Portfolio Manager, as the case may be, subject to examination by
the Manager or the Portfolio Manager's independent accountants. Payment or
assumption by the Sub-Adviser of any Fund expense that the Sub-Adviser is not
required to pay or assume under this Agreement shall not relieve the
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<PAGE>
Portfolio Manager or the Sub-Adviser of any of their obligations to the Fund or
to the Manager or obligate the Sub-Adviser pay or assume any similar Fund
expense on any subsequent occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Portfolio Manager shall pay the Sub-Adviser one-half of
the fees the Portfolio Manager receives from the Manager. Compensation under
this Agreement shall be paid on a monthly basis. If this Agreement becomes
effective subsequent to the first day of a month or shall terminate before the
last day of a month, compensation for that part of the month this Agreement is
in effect shall be prorated. Payment of the Sub-Adviser's compensation for the
preceding month shall be made as promptly as possible after the end of each
month.
9. Non-Exclusivity. The services of the Sub-Adviser to the Portfolio Manager
and the Manager are not deemed to be exclusive, and the Sub-Adviser shall be
free to render investment advisory or other services to others (including
investment companies or investment trusts) and to engage in other activities (i)
so long as its services under this Agreement are not impaired thereby; and (ii)
provided that it does not render investment advisory services to other U.S.
investment companies which specialize in marketing publicly offered,
"no-load/low-load" mutual funds (i.e., those that are sold either with no sales
charge or with a front-end or back-end sales charge of up to 2.0%), without
first terminating this Agreement in accordance with the provisions set forth
below or receiving written permission to do so from the Portfolio Manager and
the Manager.
If either the Portfolio Manager or the Sub-Adviser terminates this
Agreement, by giving sixty (60) days' written notice, in accordance with Section
12 hereof, the Sub-Adviser agrees that for a period of six months following the
effective date of termination, it will not render investment advisory services
to other U.S. investment companies which specialize in publicly marketing
"no-load/low-load" mutual funds (as previously defined) unless the Sub-Adviser
has obtained prior written approval from the Manager and the Portfolio Manager
to enter such potential advisory agreements.
10. Term. This Agreement shall become effective at the close of business on
the date hereof and shall remain in force and effect, subject to Sections 11 and
12 hereof, for two years from ___________, 1995.
11. Renewal. Following the expiration of its initial two-year term, the
Agreement shall continue in force and effect from year to year provided that
such continuance is specifically approved at least annually:
(a) (i) by the Trust's Trustees or (ii) by the vote of a majority of the
Fund's outstanding voting securities (as defined in Section 2(a)(42) of the
1940 Act), and
(b) by the affirmative vote of a majority of the Trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a Trustee of the Trust), by votes cast in person at a meeting
specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Trust's Trustees or by vote of a majority
of the Fund's outstanding voting securities (as defined in Section 2(a)(42) of
the 1940 Act), or by the Portfolio Manager or the Sub-Adviser, on sixty (60)
days' written notice to the other party. This Agreement shall automatically
terminate: (a) in the event of its assignment, the term "assignment" having the
meaning defined in Section 2(a)(4) of the 1940 Act, or (b) in the event that the
Investment Advisory Agreement between the Manager and the Portfolio Manager
shall terminate.
13. Liability of the Sub-Adviser. In the absence of willful misfeasance, bad
faith, gross negligence on the part of the Sub-Adviser or its officers, partners
or employees, or reckless disregard by the Sub-Adviser of its duties under this
Agreement, the Sub-Adviser shall not be liable to the Portfolio Manager, the
Manager, the Trust or to any shareholder of the Trust for any act or omission in
the course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
14. Liability of Trustees and Shareholders. 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 the obligations of
this instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Fund.
15. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Portfolio Manager for
this purpose shall be Norfolk House,
C-10
<PAGE>
12 Southampton Place, London WC1A 2AJ, England and the address of the
Sub-Adviser for this purpose shall be 117 E. Colorado Boulevard, Pasadena,
California 91105. It is agreed that copies of any notices under this Agreement
shall be delivered or mailed postage paid to the Manager and that of the Trust
for this purpose shall be 41 Madison Avenue, 24th Floor, New York, New York
10010.
16. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of a controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to said Act. In addition, where the effect of a requirement of
the 1940 Act reflected in the provision of this Agreement is revoked by rule,
regulation or order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: LOMBARD ODIER INTERNATIONAL
____________________________________ By______________________________
Title:
Attest: WLO GLOBAL MANAGEMENT
____________________________________ By______________________________
Title:
C-11
<PAGE>
BLANCHARD AMERICAN EQUITY FUND
FUND EXHIBIT
1. Pertaining to the Meeting
* Meeting Date: May ____________, 1995
* Meeting Time: ____________ [a.m./p.m.]
* Meeting Place: Offices of Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, 919 Third Avenue, New York, NY 10022.
* Shares outstanding as of ____________, 1995: ____________
2. Pertaining to Investment Advisory Contracts with Virtus Capital Management,
Inc.
* Date Board approved Proposed Contract: March 24, 1995
* Date shareholders last approved Existing Agreement: August 6, 1992
* Date Board last approved Existing Agreement: June 13, 1994
* Date of Existing Agreement: June 25, 1992
* Investment management fee as a percentage of average daily net assets
under Existing and Proposed Agreements: 1.1%
* Investment management agreement fee payable to Sheffield Management
Company for most recent fiscal year: $252,773
* Fee reduction for the Fund's most recent fiscal year resulting from any
state expense limitation: $2,469
3. Pertaining to Sub-Advisory Agreement
* Date Board approved Proposed Agreement: March 24, 1995
* Date shareholders last approved Existing Agreement: August 6, 1992
* Date Board last approved Existing Agreement: June 13, 1994
* Date of Existing Agreement: June 25, 1992
* Investment advisory fee as a percentage of average daily net assets under
Existing and Proposed Agreements: .50% of the first $150 million of
average daily net assets, .45% of the next $100 million of average daily
net assets, .40% of the next $150 million of average daily net assets, and
.35% of average daily net assets in excess of $400 million
* Investment advisory fee payable to Provident Investment Counsel, Inc. for
most recent fiscal year: $ 122,075
4. Pertaining to Accountants
* Date Board last approved Accountants: June 13, 1994
5. Pertaining to the Board
* Number of Board, and where applicable committee, meetings held during the
last fiscal year: 5 Board meetings/1 Audit Committee meeting
* Board Members, if any, attending fewer than 75% of all Board and committee
meetings held in the last fiscal year during the period the Board Member
was in office: None
D-1
<PAGE>
Compensation Table*
Total
Estimate Annual Compensation
Name of Person Aggregate Compensation Benefits Upon from BPMF and
Position from Blanchard Funds Retirement Blanchard Funds
- -------- -------------------- ---------- ---------------
Arthur Kiriacon, Trustee $47,770 $ ** $51,000
Gerald Morris, Trustee 47,770 54,000 51,000
Eric Lomas, Trustee 47,770 57,000 51,000
6. Pertaining to Distribution and Marketing Plans
* The Fund is subject to a Distribution and Marketing Plan.
* Date that the Distribution and Marketing Plan was adopted: June 25, 1992
* Amounts paid pursuant to the Distribution and Marketing Plan, both in the
aggregate and as a percentage of the Fund's average net assets during its
most recent fiscal year: $114,917 (.50%).
The following table presents certain information regarding the beneficial
ownership of shares as of ____________, 1995 by each officer and Nominee of the
Fund owning shares on such date.
Name Number of Shares
---- ----------------
- --------------
*Messrs. Freedman and Liebman are compensated by SMC, not the Fund.
**Mr. Kiriacom will receive a payment of a lump sum cash benefit of $505,006
upon closing of the Purchase in lieu of the estimated annual benefit of
$57,000.
--------------------------------------------------------------------------
VOTE YOUR PROXY TODAY!
By Mail: use the enclosed return envelope.
By Phone: 1-800-733-8485, ext. 450 (Mon.-Fri., 9:00 a.m. - 11:00 p.m. EST)
By Fax: 1-800-733-1885 (24 hours, 7 days a week)
QUESTIONS? CALL 1-800-733-8485, ext. 450
--------------------------------------------------------------------------
D-2
<PAGE>
Description of Portfolio Advisor
Blanchard American Equity Fund
VCM has retained Provident Investment Counsel ("Provident"), 300 North Lake
Avenue, Pasadena, California 91101-4922, as the Portfolio Advisor to provide
portfolio advisory services. The Portfolio Advisor is a corporation that traces
its origins to an investment partnership formed in 1951. On February 15, 1995,
Provident was acquired by, and became a wholly-owned subsidiary of, United Asset
Management Corp. The Portfolio Advisor currently manages over $10 billion and
has nearly 40 years experience in equity management. The Portfolio Advisor is
registered as an investment adviser with the SEC. Jeffrey Miller, a Managing
Director of Provident, has more than 20 years of experience as a portfolio
manager and is responsible for the day-to-day management of the Fund's
portfolio.
The Sub-Advisory Agreement. The sub-advisory agreement between VCM and
Provident provides for the payment by VCM to Provident of a monthly fee at the
annual rate of .50% of the first $150 million of the Fund's average daily net
assets; .45% of the next $100 million of average daily net assets; .40% of the
next $150 million of average daily net assets; and .35% of average daily net
assets in excess of $400 million.
D-3
<PAGE>
FORM OF SUB-ADVISORY AGREEMENT
------------------------------
THIS AGREEMENT is made this ____________day of ____________, 1995, by and
between VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the "Manager"),
and PROVIDENT INVESTMENT COUNSEL, INC. (the "Sub-Adviser") with respect to the
following recital of fact:
R E C I T A L
WHEREAS, Blanchard Funds (the "Trust") is registered as an open-end
non-diversified management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act") and the rules and regulations promulgated
thereunder; and
WHEREAS, the Trust and the Manager have entered into a Management Agreement
to provide for management services for Blanchard American Equity Fund, a series
of the Trust (the "Fund"), on the terms and conditions set forth in the
Management Agreement dated ____________, 1995 (the "Management Agreement"); and
WHEREAS, the Sub-Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment adviser; and
WHEREAS, the Sub-Adviser proposes to render investment advisory services to
the Fund in connection with the Manager's responsibilities to the Fund on the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable considerations, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Investment Management. The Sub-Adviser shall act as the portfolio adviser
for the Fund and shall, in such capacity, supervise the investment and
reinvestment of the cash, securities or other properties comprising the Fund's
portfolio, subject at all times to the direction of the Manager and the policies
and control of the Trust's Board of Trustees. The Sub-Adviser shall give the
Fund the benefit of its best judgment, efforts and facilities in rendering its
services as portfolio adviser.
2. Investment Analysis and Implementation. In carrying out its obligation
under paragraph 1 hereof, the Sub-Adviser shall:
(a) at all times adhere to the Fund's investment objectives,
restrictions and limitations as contained in its then current Prospectus and
Statement of Additional Information;
(b) use the same skill and care in providing such service as it uses in
providing services to fiduciary accounts for which it has investment
responsibilities;
(c) obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund's
portfolio and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which the issuers
engage, or with respect to securities which the Sub-Adviser considers
desirable for inclusion in the Fund's portfolio;
(d) determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Manager;
(e) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
manager;
(f) take, on behalf of the Fund, all actions which appear to the Fund
and the Manager necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including the placing of
orders for the purchase and sale of securities for the Fund and the prompt
reporting to the Manager of such purchases and sales; and
(g) be authorized to give instructions to the Custodian of the Fund as
to deliveries of securities, transfers of currencies and payments of cash
for the account of the Fund, in relation to the matters contemplated by this
Agreement.
D-4
<PAGE>
3. Broker-Dealer Relationships. The Sub-Adviser is responsible for decisions
to buy and sell securities for the Fund's portfolio, broker-dealer selection,
and negotiation of brokerage commission rates. The Sub-Adviser's primary
consideration in effecting a security transaction will be execution at the most
favorable price. In selecting a broker-dealer to execute each particular
transaction, the Sub-Adviser will take the following into consideration: the
best net price available, the reliability, integrity and financial condition of
the broker-dealer; the size of and difficulty in executing the order; research
services provided by such broker-dealer; and the value of the expected
contribution of the broker-dealer to the investment performance of the Fund on a
continuing basis. Accordingly, the price to the Fund in any transaction may be
less favorable than that available from another broker-dealer if the difference
is reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Trustees may determine, the Sub-Adviser
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of its having caused the
Fund to pay a broker for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Sub-Adviser determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Fund and to its other clients as to which
it exercises investment discretion. Subject to the foregoing, the Sub-Adviser is
authorized to allocate the orders placed by it on behalf of the Fund to itself,
to its affiliated broker-dealer, if any, or affiliated broker-dealers of the
Manager, or to such brokers and dealers who also provide research or statistical
material, or other services to the Fund or the Sub-Adviser. Such allocation
shall be in such amounts and proportions as the Sub-Adviser shall determine and
the Sub-Adviser will report on said allocations regularly to the Manager
indicating the brokers to whom such allocations have been made and the basis
therefor.
4. Control by Trustees. Any investment program undertaken by the Sub-Adviser
pursuant to this Agreement, as well as any other activities undertaken by the
Sub-Adviser on behalf of the Fund pursuant thereto, shall at all times be
subject to any directives of the Board of Trustees of the Trust. The Manager
shall provide the Sub-Adviser with written notice of all such directives, so
long as this Agreement remains in effect.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Sub-Adviser shall at all times conform to:
(a) all applicable provisions of the 1940 Act;
(b) the provisions of the Registration Statement of the Trust, as
amended from time to time, under the Securities Act of 1933 and the 1940
Act; and
(c) any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with rendering services to the Fund
pursuant to this Agreement shall be borne by the Sub-Adviser as follows:
The Sub-Adviser shall maintain, at its expense and without cost to the
Manager or the Fund, a trading function in order to carry out its obligations
under subparagraph (f) of paragraph 2 hereof to place orders for the purchase
and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with the
approval of the Trust's Board of Trustees, the Sub-Adviser may perform services
on behalf of the Fund which are not required by this Agreement. Such services
will be performed on behalf of the Fund and the Sub-Adviser's costs in rendering
such services may be billed monthly to the Manager, subject to examination by
the Manager's independent accountants. Payment or assumption by the Sub-Adviser
of any Fund expense that the Sub-Adviser is not required to pay or assume under
this Agreement shall not relieve the Manager or the Sub-Adviser of any of their
obligations to the Fund or obligate the Sub-Adviser to pay or assume any similar
Fund expense on any subsequent occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Manager shall pay the Sub-Adviser monthly compensation
at the annual rate of .50% of the first $150 million of the Fund's average daily
net assets, plus .45% of the Fund's average daily net assets in excess of $150
million but less than $250 million, plus .40% of the Fund's average daily net
assets in excess of $250 million but less than $400 million, plus .35% of the
Fund's average daily net assets in excess of $400 million. Compensation under
this Agreement shall be calculated and
D-5
<PAGE>
accrued daily and the amounts of the daily accruals shall be paid on a monthly
basis. If this Agreement becomes effective subsequent to the first day of a
month or shall terminate before the last day of a month, compensation for that
part of the month this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fees as set forth above. Payment of the
Sub-Adviser's compensation for the preceding month shall be made as promptly as
possible after the end of each month.
9. Expense Limitation. If, for any fiscal year, the total of all ordinary
business expenses of the Fund, including all investment advisory fees but
excluding brokerage commissions, 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, the
management fee, which the Manager would otherwise receive from the Fund, shall
be reduced in order to reduce such excess expenses; however, the Manager 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 fee which the
Sub-Adviser is entitled to receive from the Manager pursuant to paragraph 8 of
this Agreement shall not be reduced as a result of any such expense limitation,
notwithstanding any reduction in management fees payable to the Manager. For the
purposes of this paragraph, the term "fiscal year" shall exclude the portion of
the current fiscal year which shall have elapsed prior to the date hereof and
shall include the portion of the then current fiscal year which shall have
elapsed at the date of termination of this Agreement.
10. Non-Exclusivity. The services of the Sub-Adviser to the Manager are not
deemed to be exclusive, and the Sub-Adviser shall be free to render investment
advisory or other services to others (including investment companies or
investment trusts) and to engage in other activities so long as its services
under this Agreement are not impaired thereby.
11. Term. This Agreement shall become effective at the close of business on
the date hereof and shall remain in force and effect, subject to Section 12
hereof and approval at the first or special meeting of the Fund's shareholders
in accordance with subsection (a)(ii) of Section 12 hereof, for two years from
the date hereof.
12. Renewal. Following the expiration of its initial two-year term, the
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Trust's Trustees or (ii) by the vote of a majority of the
Fund's outstanding voting securities (as defined in Section 2(a)(42) of the
1940 Act), and
(b) by the affirmative vote of a majority of the Trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a Trustee of the Trust), by votes cast in person at a meeting
specifically called for such purpose.
13. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Trust's Trustees or by vote of a majority
of the Fund's outstanding voting securities (as defined in Section 2(a)(42) of
the 1940 Act), or by the Manager or the Sub-Adviser, on sixty (60) days' written
notice to the other party. This Agreement shall automatically terminate: (a) in
the event of its assignment, the term "assignment" having the meaning defined in
Section 2(a)(4) of the 1940 Act, or (b) in the event that the Management
Agreement shall terminate.
14. Liability of the Sub-Adviser. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser or its officers,
trustees or employees, or reckless disregard by the Sub-Adviser of its duties
under this Agreement, the Sub-Adviser shall not be liable to the Manager, the
Trust or to any shareholder of the Trust for any act or omission in the course
of, or connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of any security.
15. Liability of Trustees and Shareholders. 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 shareholders individually but are binding only upon the
assets and property of the Fund.
16. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further
D-6
<PAGE>
notice to the other party, it is agreed that the address of the Manager and that
of the Trust for this purpose shall be 41 Madison Avenue, 24th Floor, New York,
New York 10010, and the address of the Sub-Adviser for this purpose shall be 300
North Lake Avenue, Pasadena, California 91101-4922.
17. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of a controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to said Act. In addition, where the effect of a requirement of
the 1940 Act reflected in the provision of this Agreement is revised by rule,
regulation or order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
____________________________________ By______________________________
Title: President
Attest: PROVIDENT INVESTMENT COUNSEL, INC.
PORTFOLIO MANAGEMENT LIMITED
____________________________________ By______________________________
Title: Managing Director
D-7
<PAGE>
BLANCHARD FLEXIBLE INCOME FUND
FUND EXHIBIT
1. Pertaining to the Meeting
* Meeting Date: May ___________, 1995
* Meeting Time: _________ [a.m./p.m.]
* Meeting Place: Offices of Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, 919 Third Avenue, New York, NY 10022.
* Shares outstanding as of ___________, 1995: ____________
2. Pertaining to Investment Advisory Contracts with Virtus Capital Management,
Inc.
* Date Board approved Proposed Contract: March 24, 1995
* Date shareholders last approved Existing Agreement: January 2, 1992
* Date Board last approved Existing Agreement: September 16, 1994
* Date of Existing Agreement: September 10, 1992
* Investment management fee as a percentage of average daily net assets
under Existing and Proposed Agreements: .75%
* Investment management agreement fee payable to Sheffield Management
Company for most recent fiscal year: $4,285,213
* Fee reduction for the Fund's most recent fiscal year resulting from any
state expense limitation: None
3. Pertaining to Sub-Advisory Agreement
* Date Board approved Proposed Agreement: March 24, 1995
* Date shareholders last approved Existing Agreement: January 2, 1992
* Date Board last approved Existing Agreement: September 16, 1994
* Date of Existing Agreement: September 10, 1992
* Investment advisory fee as a percentage of average daily net assets under
Existing and Proposed Agreements: .30% of the first $25 million of average
daily net assets, .25% of the next $25 million of average daily net
assets, and .20% of average daily net assets in excess of $50 million
* Investment advisory fee payable to OFFITBANK for most recent fiscal year:
$1,100,253
4. Pertaining to Accountants
* Date Board last approved Accountants: June 13, 1994
5. Pertaining to the Board
* Number of Board, and where applicable committee, meetings held during the
last fiscal year: 6 Board meetings/ 1 Audit Committee meeting
* Board Members, if any, attending fewer than 75% of all Board and committee
meetings held in the last fiscal year during the period the Board Member
was in office: None
E-1
<PAGE>
Compensation Table*
Total
Estimate Annual Compensation
Name of Person Aggregate Compensation Benefits Upon from BPMF and
Position from Blanchard Funds Retirement Blanchard Funds
- -------- -------------------- ---------- ---------------
Arthur Kiriacon, Trustee $47,770 $ ** $51,000
Gerald Morris, Trustee 47,770 54,000 51,000
Eric Lomas, Trustee 47,770 57,000 51,000
6. Pertaining to Distribution and Marketing Plans
* The Fund is subject to a Distribution and Marketing Plan.
* Date that the Distribution and Marketing Plan was adopted: September 10,
1992
* Amounts paid pursuant to the Distribution and Marketing Plan, both in the
aggregate and as a percentage of the Fund's average net assets during its
most recent fiscal year: $1,428,474 (.25%).
The following table presents certain information regarding the beneficial
ownership of shares as of ____________, 1995 by each officer and Nominee of the
Fund owning shares on such date.
Name Number of Shares
---- ----------------
- --------------
*Messrs. Freedman and Liebman are compensated by SMC, not the Funds.
**Mr. Kiriacom will receive a payment of a lump sum cash benefit of $505,006
upon closing of the Purchase in lieu of the estimated annual benefit of
$57,000.
--------------------------------------------------------------------------
VOTE YOUR PROXY TODAY!
By Mail: use the enclosed return envelope.
By Phone: 1-800-733-8485, ext. 450 (Mon.-Fri., 9:00 a.m. - 11:00 p.m. EST)
By Fax: 1-800-733-1885 (24 hours, 7 days a week)
QUESTIONS? CALL 1-800-733-8485, ext. 450
--------------------------------------------------------------------------
E-2
<PAGE>
Description of Portfolio Advisor
Blanchard Flexible Income Fund
VCM has retained OFFITBANK, 520 Madison Avenue, New York, New York 10022
(the "Sub-Adviser") to provide portfolio advisory services to the Fund.
OFFITBANK, a New York State chartered trust bank, is the continuation of the
business of Offit Associates, Inc., a registered investment adviser founded in
December, 1982. The firm converted to a trust bank in July, 1990. The core
business of OFFITBANK is portfolio management for institutions, non-profit
organizations and wealthy family groups. OFFITBANK specializes in fixed income
management and offers its clients a complete range of fixed income investments
in capital markets throughout the world. OFFITBANK currently manages in excess
of $4.0 billion in assets. Jack D. Burks, Managing Director of OFFITBANK, has
over 10 years of experience in Fixed Income Portfolio Management and is
responsible for the day-to-day management of the Fund's portfolio. OFFITBANK
also acts as portfolio advisor to BWMF.
The Sub-Advisory Agreements. The sub-advisory agreement between VCM and
OFFITBANK provides for the payment by VCM to OFFITBANK of a monthly fee at the
annual rate of .30% of the first $25 million of each Fund's average daily net
assets; .25% of the next $25 million of average daily net assets; and .20% of
average daily net assets in excess of $50 million.
E-3
<PAGE>
FORM OF SUB-ADVISORY AGREEMENT
------------------------------
THIS AGREEMENT is made this ____________ day of _____________, 1995 by and
between VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the "Manager"),
and OFFITBANK, a New York banking corporation (the "Sub-Adviser" or "OFFITBANK")
with respect to the following recital of fact:
R E C I T A L
WHEREAS, Blanchard Funds (the "Trust") is registered as an open-end,
non-diversified, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the Sub-Adviser is a New York banking corporation and engages in
the business of acting as an investment adviser; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in one series called the Blanchard Flexible
Income Fund (such series, being referred to as the "Fund"); and
WHEREAS, the Trust and the Manager have entered into an agreement of even
date herewith to provide for management services for the Fund on the terms and
conditions set forth therein (the "Management Agreement"); and
WHEREAS, OFFITBANK proposes to render investment advisory services to the
Manager in connection with the Manager's responsibilities to the Fund's
portfolio on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Investment Management. OFFITBANK shall act as a Sub-Adviser for the Fund
and shall, in such capacity, supervise the investment and reinvestment of the
cash, securities or other properties comprising the Fund's portfolio, subject at
all times to the direction of the Manager and the policies and control of the
Trust's Board of Trustees. OFFITBANK shall give the Fund the benefit of its best
judgment, efforts and facilities in rendering its services as Sub-Adviser.
2. Investment Analysis and Implementation. In carrying out its obligation
under paragraph 1 hereof, the Sub-Adviser shall:
(a) use the same skill and care in providing such service as it uses in
providing services to fiduciary accounts for which it has investment
responsibilities;
(b) obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund's
portfolio and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which the issuers
engage, or with respect to securities which the Sub-Adviser considers
desirable for inclusion in the Fund's portfolio;
(c) determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Trust's Board of
Trustees;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Trust's Board of Trustees;
(e) be authorized to give instructions to the custodian and/or
sub-custodian of the Fund appointed by the Trust's Board of Trustees, as to
deliveries of securities, transfers of currencies and payments of cash for
the account of the Fund, in relation to the matters contemplated by this
Agreement; and
(f) take, on behalf of the Fund, all actions which appear to the Trust
and the Manager necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including the placing of
orders for the purchase and sale of securities for the Fund and the prompt
reporting to the Manager of such purchases and sales.
3. Broker-Dealer Relationships. The Sub-Adviser is responsible for decisions
to buy and sell securities for the Fund's portfolio, broker-dealer selection,
and negotiation of brokerage commission rates. The Sub-Adviser's primary
consideration in effecting a security transaction will be execution at the most
favorable price. In selecting a broker-
E-4
<PAGE>
dealer to execute each particular transaction, the Sub-Adviser will take the
following into consideration: the best net price available, the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Fund on a continuing
basis. Accordingly, the price to the Fund in any transaction may be less
favorable than that available from another broker-dealer if the difference is
reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Trustees may determine, the
Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Sub-Adviser determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Sub-Adviser's
overall responsibilities with respect to the Fund and to its other clients as to
which it exercises investment discretion. Subject to such policies as the Board
of Trustees may determine, the Sub-Adviser will purchase and sell foreign
currency contracts and other securities for the Fund. The Sub-Adviser is further
authorized to allocate the orders placed by it on behalf of the Fund to any
affiliated broker-dealer of the Fund or to such brokers and dealers who also
provide research or statistical material, or other services to the Fund, the
Manager or the Sub-Adviser. Such allocation shall be in such amounts and
proportions as the Sub-Adviser shall determine and the Sub-Adviser will report
on said allocations regularly to the Board of Trustees of the Trust indicating
the brokers to whom such allocations have been made and the basis therefor.
4. Control by Board of Trustees. Any investment program undertaken by the
Sub-Adviser pursuant to this Agreement, as well as any other activities
undertaken by the Sub-Adviser on behalf of the Fund pursuant thereto, shall at
all times be subject to any directives of the Board of Trustees of the Trust.
The Manager shall provide the Sub-Adviser with written notice of all such
directives, so long as this Agreement remains in effect.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Sub-Adviser shall at all times conform to:
(a) all applicable provisions of the 1940 Act;
(b) the provisions of the Registration Statement of the Trust under the
Securities Act of 1933 and the 1940 Act; and
(c) any other applicable provisions of state and federal law.
6. Expenses. The Sub-Adviser shall maintain, at its expense and without cost
to the Manager or the Fund, a trading function in order to carry out its
obligations under subparagraph (f) of paragraph 2 hereof to place orders for the
purchase and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with the
approval of the Trust's Board of Trustees, the Sub-Adviser may perform services
on behalf of the Fund which are not required by this Agreement. Such services
will be performed on behalf of the Fund and the Sub-Adviser's cost in rendering
such services may be billed monthly to the Manager, subject to examination by
the Manager's independent accountants. Payment or assumption by the Sub-Adviser
of any Fund expense that the Sub-Adviser is not required to pay or assume under
this Agreement shall not relieve the Manager or the Sub-Adviser of any of their
obligations to the Fund or obligate the Sub-Adviser to pay or assume any similar
Fund expense on any subsequent occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Manager shall pay the Sub-Adviser a monthly fee at the
annual rate of .30% of the Fund's first $25 million of average daily net assets;
plus .25% of the Fund's average daily net assets in excess of $25 million but
less than $50 million; plus .20% of the Fund's average daily net assets in
excess of $50 million. Compensation under this Agreement shall be calculated and
accrued daily and the amounts of the daily accruals shall be paid monthly. The
compensation paid to the Sub-Adviser will not be reduced by the amount of
brokerage commissions received by the Sub-Adviser or its affiliated
broker-dealer pursuant to Section 17(e)(2) of the 1940 Act. If this Agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fees as set forth above. Payment of the Sub-Adviser's
compensation for the preceding month shall be made as promptly as possible after
the end of each month.
9. Exclusivity. OFFITBANK agrees that it will not render advisory or
sub-advisory services to any other similar publicly offered no-load or low-load
open-end investment company registered with the Securities and Exchange
Commission while this Agreement is in effect. In the event of the termination of
this Agreement by the Sub-Adviser
E-5
<PAGE>
such exclusivity shall continue for a period of [ ] months from the effective
date of such termination. For the purposes of this Agreement, low-load shall be
defined as a sales charge of 3% or less. The Sub-Adviser, however, shall be free
to render investment advisory or other services to others (including unit trusts
and registered investment companies other than no load or low load investment
companies) and to engage in other activities, so long as its services under this
Agreement are not impaired thereby.
10. Term. This Agreement shall become effective at the close of business on
the date hereof and shall remain in force and effect for an initial term of two
years, and shall remain in effect thereafter if approved in the manner set forth
in Section 10 hereof.
11. Renewal. Following the expiration of its initial two year term, this
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Trust's Board of Trustees or (ii) by the vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a trustee of the Trust), by votes cast in person at a meeting
specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Trust's Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), or by the Manager or the Sub-Adviser, on sixty (60)
days' written notice to the other party. This Agreement shall automatically
terminate: (a) in the event of its assignment, the term "assignment" having the
meaning defined in Section 2(a)(4) of the 1940 Act, or (b) in the event that the
Management Agreement between the Fund and the Manager shall terminate.
13. Liability of the Sub-Adviser. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser or its officers,
directors or employees, or reckless disregard by the Sub-Adviser of its duties
under this Agreement, the Sub-Adviser shall not be liable to the Manager, the
Trust or to any shareholder of the Trust for any act or omission in the course
of, or connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of any security.
14. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Manager and that of the
Trust for this purpose shall be 41 Madison Avenue, New York, New York 10010, and
the address of the Sub-Adviser for this purpose shall be 101 East 52nd Street,
New York, New York 10022.
15. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
courts, by rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said Act. In addition, where the effect of a
requirement of the 1940 Act reflected in a provision of this Agreement is
revised by rule, regulation or order of the Securities and Exchange Commission,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: OFFITBANK
____________________________________ By______________________________
Title: Title:
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
____________________________________ By______________________________
Title: Title: President
E-6
<PAGE>
BLANCHARD SHORT-TERM BOND FUND
FUND EXHIBIT
1. Pertaining to the Meeting
* Meeting Date: May __________, 1995
* Meeting Time: ________ [a.m./p.m.]
* Meeting Place: Offices of Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, 919 Third Avenue, New York, NY 10022.
* Shares outstanding as of ___________, 1995: ____________
2. Pertaining to Investment Advisory Contracts with Virtus Capital Management,
Inc.
* Date Board approved Proposed Contract: March 24, 1995
* Date shareholders last approved Existing Agreement: April 16, 1993
* Date Board last approved Existing Agreement: December 8, 1994
* Date of Existing Agreement: April 5, 1993
* Investment management fee as a percentage of average daily net assets
under Existing and Proposed Agreements: .75%
* Investment management agreement fee payable to Sheffield Management
Company for most recent fiscal year: $192,323
* Fee reduction for the Fund's most recent fiscal year resulting from any
state expense limitation: None
3. Pertaining to Sub-Advisory Agreement
* Date Board approved Proposed Agreement: March 24, 1995
* Date shareholders last approved Existing Agreement: April 16, 1993
* Date Board last approved Existing Agreement: December 8, 1994
* Date of Existing Agreement: April 16, 1993
* Investment advisory fee as a percentage of average daily net assets under
Existing and Proposed Agreements: .30% of the first $25 million of average
daily net assets, .25% of the next $25 million of average daily net
assets, and .20% of average daily net assets in excess of $50 million
* Investment advisory fee payable to OFFITBANK for most recent fiscal year:
$45,697
4. Pertaining to Accountants
* Date Board last approved Accountants: June 13, 1994
5. Pertaining to the Board
* Number of Board, and where applicable committee, meetings held during the
last fiscal year: 5 Board meetings/ 1 Audit Committee meeting
* Board Members, if any, attending fewer than 75% of all Board and committee
meetings held in the last fiscal year during the period the Board Member
was in office: None
F-1
<PAGE>
Compensation Table*
Total
Estimate Annual Compensation
Name of Person Aggregate Compensation Benefits Upon from BPMF and
Position from Blanchard Funds Retirement Blanchard Funds
- -------- -------------------- ---------- ---------------
Arthur Kiriacon, Trustee $47,770 $ ** $51,000
Gerald Morris, Trustee 47,770 54,000 51,000
Eric Lomas, Trustee 47,770 57,000 51,000
6. Pertaining to Distribution and Marketing Plans
* The Fund is subject to a Distribution and Marketing Plan.
* Date that the Distribution and Marketing Plan was adopted: January 26,
1993
* Amounts paid pursuant to the Distribution and Marketing Plan, both in the
aggregate and as a percentage of the Fund's average net assets during its
most recent fiscal year: $64,105 (.25%).
The following table presents certain information regarding the beneficial
ownership of shares as of ____________, 1995 by each officer and Nominee of the
Fund owning shares on such date.
Name Number of Shares
---- ----------------
- --------------
*Messrs. Freedman and Liebman are compensated by SMC, not the Funds.
**Mr. Kiriacom will receive a payment of a lump sum cash benefit of $505,006
upon closing of the Purchase in lieu of the estimated annual benefit of
$57,000.
--------------------------------------------------------------------------
VOTE YOUR PROXY TODAY!
By Mail: use the enclosed return envelope.
By Phone: 1-800-733-8485, ext. 450 (Mon.-Fri., 9:00 a.m. - 11:00 p.m. EST)
By Fax: 1-800-733-1885 (24 hours, 7 days a week)
QUESTIONS? CALL 1-800-733-8485, ext. 450
--------------------------------------------------------------------------
F-2
<PAGE>
Description of Portfolio Advisor
Blanchard Short Term Bond Fund
VCM has retained OFFITBANK, 520 Madison Avenue, New York, New York 10022
(the "Sub-Adviser") to provide portfolio advisory services to the Fund.
OFFITBANK, a New York State chartered trust bank, is the continuation of the
business of Offit Associates, Inc., a registered investment adviser founded in
December, 1982. The firm converted to a trust bank in July, 1990. The core
business of OFFITBANK is portfolio management for institutions, non-profit
organizations and wealthy family groups. OFFITBANK specializes in fixed income
management and offers its clients a complete range of fixed income investments
in capital markets throughout the world. OFFITBANK currently manages in excess
of $4.0 billion in assets. Jack D. Burks, Managing Director of OFFITBANK, has
over 10 years of experience in Fixed Income Portfolio Management and is
responsible for the day-to-day management of the Fund's portfolio. OFFITBANK
also acts as portfolio advisor to BWMF.
The Sub-Advisory Agreements. The sub-advisory agreement between VCM and
OFFITBANK provides for the payment by VCM to OFFITBANK of a monthly fee at the
annual rate of .30% of the first $25 million of each Fund's average daily net
assets; .25% of the next $25 million of average daily net assets; and .20% of
average daily net assets in excess of $50 million.
F-3
<PAGE>
FORM OF SUB-ADVISORY AGREEMENT
------------------------------
THIS AGREEMENT is made this _____________ day of ____________, 1995 by and
between VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the "Manager"),
and OFFITBANK, a registered investment adviser (the "Sub-Adviser" or
"OFFITBANK") with respect to the following recital of fact:
R E C I T A L
WHEREAS, Blanchard Funds (the "Trust") is registered as an open-end,
non-diversified, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the Sub-Adviser is a New York banking corporation and engages in
the business of acting as an investment adviser; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in one series called the Blanchard
Short-Term Bond Fund (such series, being referred to as the "Fund"); and
WHEREAS, the Trust and the Manager have entered into an agreement of even
date herewith to provide for management services for the Fund on the terms and
conditions set forth therein (the "Management Agreement"); and
WHEREAS, OFFITBANK proposes to render investment advisory services to the
Manager in connection with the Manager's responsibilities to the Fund's
portfolio on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Investment Management. OFFITBANK shall act as a Sub-Adviser for the Fund
and shall, in such capacity, supervise the investment and reinvestment of the
cash, securities or other properties comprising the Fund's portfolio, subject at
all times to the direction of the Manager and the policies and control of the
Trust's Board of Trustees. OFFITBANK shall give the Fund the benefit of its best
judgment, efforts and facilities in rendering its services as Sub-Adviser.
2. Investment Analysis and Implementation. In carrying out its obligation
under paragraph 1 hereof, the Sub-Adviser shall:
(a) use the same skill and care in providing such service as it uses in
providing services to fiduciary accounts for which it has investment
responsibilities;
(b) obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund's
portfolio and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which the issuers
engage, or with respect to securities which the Sub-Adviser considers
desirable for inclusion in the Fund's portfolio;
(c) determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Trust's Board of
Trustees;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Trust's Board of Trustees;
(e) be authorized to give instructions to the custodian and/or
sub-custodian of the Fund appointed by the Trust's Board of Trustees, as to
deliveries of securities, transfers of currencies and payments of cash for
the account of the Fund, in relation to the matters contemplated by this
Agreement; and
(f) take, on behalf of the Fund, all actions which appear to the Trust
and the Manager necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including the placing of
orders for the purchase and sale of securities for the Fund and the prompt
reporting to the Manager of such purchases and sales.
F-4
<PAGE>
3. Broker-Dealer Relationships. The Sub-Adviser is responsible for decisions
to buy and sell securities for the Fund's portfolio, broker-dealer selection,
and negotiation of brokerage commission rates. The Sub-Adviser's primary
consideration in effecting a security transaction will be execution at the most
favorable price. In selecting a broker-dealer to execute each particular
transaction, the Sub-Adviser will take the following into consideration: the
best net price available, the reliability, integrity and financial condition of
the broker-dealer; the size of and difficulty in executing the order; and the
value of the expected contribution of the broker-dealer to the investment
performance of the Fund on a continuing basis. Accordingly, the price to the
Fund in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered. Subject to such policies as the Board of
Trustees may determine, the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer for
effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Sub-Adviser determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Fund and to its other clients as to which it exercises investment
discretion. Subject to such policies as the Board of Trustees may determine, the
Sub-Adviser will purchase and sell foreign currency contracts and other
securities for the Fund. The Sub-Adviser is further authorized to allocate the
Orders placed by it on behalf of the Fund to any affiliated broker-dealer of the
Fund or to such brokers and dealers who also provide research or statistical
material, or other services to the Fund, the Manager or the Sub-Adviser. Such
allocation shall be in such amounts and proportions as the Sub-Adviser shall
determine and the Sub-Adviser will report on said allocations regularly to the
Board of Trustees of the Trust indicating the brokers to whom such allocations
have been made and the basis therefor.
4. Control by Board of Trustees. Any investment program undertaken by the
Sub-Adviser pursuant to this Agreement, as well as any other activities
undertaken by the Sub-Adviser on behalf of the Fund pursuant thereto, shall at
all times be subject to any directives of the Board of Trustees of the Trust.
The Manager shall provide the Sub-Adviser with written notice of all such
directives, so long as this Agreement remains in effect.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Sub-Adviser shall at all times conform to:
(a) all applicable provisions of the 1940 Act;
(b) the provisions of the Registration Statement of the Trust under the
Securities Act of 1933 and the 1940 Act; and
(c) any other applicable provisions of state and federal law.
6. Expenses. The Sub-Adviser shall maintain, at its expense and without cost
to the Manager or the Fund, a trading function in order to carry out its
obligations under subparagraph (f) of paragraph 2 hereof to place orders for the
purchase and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with the
approval of the Trust's Board of Trustees, the Sub-Adviser may perform services
on behalf of the Fund which are not required by this Agreement. Such services
will be performed on behalf of the Fund and the Sub-Adviser's cost in rendering
such services may be billed monthly to the Manager, subject to examination by
the Manager's independent accountants. Payment or assumption by the Sub-Adviser
of any Fund expense that the Sub-Adviser is not required to pay or assume under
this Agreement shall not relieve the Manager or the Sub-Adviser of any of their
obligations to the Fund or obligate the Sub-Adviser to pay or assume any similar
Fund expense on any subsequent occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Manager shall pay the Sub-Adviser a monthly fee at the
annual rate of .30% of the Fund's first $25 million of average daily net assets;
plus .25% of the Fund's average daily net assets in excess of $25 million but
less than $50 million; plus .20% of the Fund's average daily net assets in
excess of $50 million. Compensation under this Agreement shall be calculated and
accrued daily and the amounts of the daily accruals shall be paid monthly. The
compensation paid to the Sub-Adviser will not be reduced by the amount of
brokerage commissions received by the Sub-Adviser or its affiliated
broker-dealer pursuant to Section 17(e)(2) of the 1940 Act. If this Agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for that part of the month this
Agreement is in
F-5
<PAGE>
effect shall be prorated in a manner consistent with the calculation of the fees
as set forth above. Payment of the Sub-Adviser's compensation for the preceding
month shall be made as promptly as possible after the end of each month.
9. Exclusivity. OFFITBANK agrees that it will not render advisory or
sub-advisory services to any other similar registered no-load or low-load
open-end investment company while this Agreement is in effect. In the event of
the termination of this Agreement by the Sub-Adviser such exclusivity shall
continue for a period of 6 months from the effective date of such termination.
For the purposes of this Agreement, low load shall be defined as a sales charge
of 3% or less. The Sub-Adviser, however, shall be free to render investment
advisory or other services to others (including unit trusts and registered
investment companies other than no-load or low-load investment companies) and to
engage in other activities, so long as its services under this Agreement are not
impaired thereby.
10. Term. This Agreement shall become effective at the close of business on
the date hereof and shall remain in force and effect for an initial term of two
years, and shall remain in effect thereafter if approved in the manner set forth
in Section 11 hereof.
11. Renewal. Following the expiration of its initial two year term, this
Agreement shall continue in force and effect from year to year provided that
such continuance is specifically approved at least annually:
(a) (i) by the Trust's Board of Trustees or (ii) by the vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a trustee of the Trust), by votes cast in person at a meeting
specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Trust's Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), or by the Manager or the Portfolio Manager, on sixty
(60) days' written notice to the other party. This Agreement shall automatically
terminate: (a) in the event of its assignment, the term "assignment" having the
meaning defined in Section 2(a)(4) of the 1940 Act, or (b) in the event that the
Management Agreement between the Fund and the Manager shall terminate.
13. Liability of the Sub-Adviser. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser or its officers,
directors or employees, or reckless disregard by the Sub-Adviser of its duties
under this Agreement, the Sub-Adviser shall not be liable to the Manager, the
Trust or to any shareholder of the Trust for any act or omission in the course
of, or connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of any security.
14. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Manager and that of the
Trust for this purpose shall be 41 Madison Avenue, New York, New York 10010, and
the address of the Sub-Adviser for this purpose shall be 101 East 52nd Street,
New York, New York 10022.
15. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
courts, by rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said Act. In addition, where the effect of a
requirement of the 1940 Act reflected in a provision of this Agreement is
revised by rule, regulation or order of the Securities and Exchange Commission,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
F-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: OFFITBANK
____________________________________ By______________________________
Title: Title:
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
____________________________________ By______________________________
Title: Title: President
F-7
<PAGE>
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
FUND EXHIBIT
1. Pertaining to the Meeting
* Meeting Date: May ___________, 1995
* Meeting Time: _________ [a.m./p.m.]
* Meeting Place: Offices of Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, 919 Third Avenue, New York, NY 10022.
* Shares outstanding as of ____________, 1995: ____________
2. Pertaining to Investment Advisory Contracts with Virtus Capital Management,
Inc.
* Date Board approved Proposed Contract: March 24, 1995
* Date shareholders last approved Existing Agreement: July 23, 1993
* Date Board last approved Existing Agreement: March 7, 1995
* Date of Existing Agreement: April 22, 1993
* Investment management fee as a percentage of average daily net assets
under Existing and Proposed Agreements: .75%
* Investment management agreement fee payable to Sheffield Management
Company for most recent fiscal year: $89,180
* Fee reduction for the Fund's most recent fiscal year resulting from any
state expense limitation: None
3. Pertaining to Sub-Advisory Agreement
* Date Board approved Proposed Agreement: March 24, 1995
* Date shareholders last approved Existing Agreement: July 23, 1993
* Date Board last approved Existing Agreement: March 7, 1995
* Date of Existing Agreement: April 22, 1993
* Investment advisory fee as a percentage of average daily net assets under
Existing and Proposed Agreements: .20%
* Investment advisory fee payable to The United States Trust Company of New
York for most recent fiscal period: $ 9,758
4. Pertaining to Accountants
* Date Board last approved Accountants: June 13, 1994
5. Pertaining to the Board
* Number of Board, and where applicable committee, meetings held during the
last fiscal year: 5 Board meetings/ 1 Audit Committee meeting
* Board Members, if any, attending fewer than 75% of all Board and committee
meetings held in the last fiscal year during the period the Board Member
was in office: None
G-1
<PAGE>
Compensation Table*
Total
Estimate Annual Compensation
Name of Person Aggregate Compensation Benefits Upon from BPMF and
Position from Blanchard Funds Retirement Blanchard Funds
- -------- -------------------- ---------- ---------------
Arthur Kiriacon, Trustee $47,770 $ ** $51,000
Gerald Morris, Trustee 47,770 54,000 51,000
Eric Lomas, Trustee 47,770 57,000 51,000
6. Pertaining to Distribution and Marketing Plans
* The Fund is subject to a Distribution and Marketing Plan.
* Date that the Distribution and Marketing Plan was adopted: April 22, 1993
* Amounts paid pursuant to the Distribution and Marketing Plan, both in the
aggregate and as a percentage of the Fund's average net assets during its most
recent fiscal year: $29,727 (.25%).
The following table presents certain information regarding the beneficial
ownership of shares as of ____________, 1995 by each officer and Nominee of the
Fund owning shares on such date.
Name Number of Shares
---- ----------------
- --------------
*Messrs. Freedman and Liebman are compensated by SMC, not the Funds.
**Mr. Kiriacom will receive a payment of a lump sum cash benefit of $505,006
upon closing of the Purchase in lieu of the estimated annual benefit of
$57,000.
--------------------------------------------------------------------------
VOTE YOUR PROXY TODAY!
By Mail: use the enclosed return envelope.
By Phone: 1-800-733-8485, ext. 450 (Mon.-Fri., 9:00 a.m. - 11:00 p.m. EST)
By Fax: 1-800-733-1885 (24 hours, 7 days a week)
QUESTIONS? CALL 1-800-733-8485, ext. 450
--------------------------------------------------------------------------
G-2
<PAGE>
Description of Portfolio Advisor
Blanchard Flexible Tax-Free Bond Fund
VCM has retained The United States Trust Company of New York ("U.S. Trust")
to provide portfolio advisory services to the Fund. U.S. Trust, a New York State
chartered bank and trust company established in 1853, currently manages in
excess of $26 billion in assets. U.S. Trust is a financial services company that
specializes in asset management, private banking, fiduciary and securities
services. Kenneth J. McAlley, an executive vice president of U.S. Trust, has
over ten years of expertise in Municipal Obligation portfolio management and is
responsible for the day-to-day management of the Fund's Portfolio. Mr. McAlley
is a nationally recognized expert in municipal bond investment strategy and has
been favorably profiled in publications such as Barrons, Forbes and Financial
World.
The Sub-Advisory Agreement. The sub-advisory agreement between VCM and U.S.
Trust provides for the payment by VCM to U.S. Trust of a monthly fee at the
annual rate of .20% of the Fund's average daily net assets.
G-3
<PAGE>
FORM OF SUB-ADVISORY AGREEMENT
------------------------------
THIS AGREEMENT is made this ______________ day of _______________, 1995 by
and between VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the
"Manager"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York State
chartered bank and trust company (the "Sub-Adviser" or "U.S. Trust") with
respect to the following recital of fact:
R E C I T A L
WHEREAS, Blanchard Funds (the "Trust") is registered as an open-end,
non-diversified, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the Sub-Adviser is a New York State chartered bank and trust
company and engages in the business of acting as an investment adviser; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in one series called the Blanchard Flexible
Tax-Free Bond Fund (such series, being referred to as the "Fund"); and
WHEREAS, the Trust and the Manager have entered into an agreement of even
date herewith to provide for management services for the Fund on the terms and
conditions set forth therein (the "Management Agreement"); and
WHEREAS, U.S. Trust proposes to render investment advisory services to the
Manager in connection with the Manager's responsibilities to the Fund's
portfolio on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Investment Management. U.S. Trust shall act as a Sub-Adviser for the Fund
and shall, in such capacity, supervise the investment and reinvestment of the
cash, securities or other properties comprising the Fund's portfolio, subject at
all times to the direction of the Manager and the policies and control of the
Trust's Board of Trustees. U.S. Trust shall give the Fund the benefit of its
best judgment, efforts and facilities in rendering its services as Sub-Adviser.
2. Investment Analysis and Implementation. In carrying out its obligation
under paragraph 1 hereof, the Sub-Adviser shall:
(a) use the same skill and care in providing such service as it uses in
providing services to fiduciary accounts for which it has investment
responsibilities;
(b) obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund's
portfolio and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which the issuers
engage, or with respect to securities which the Sub-Adviser considers
desirable for inclusion in the Fund's portfolio;
(c) determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Trust's Board of
Trustees;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Trust's Board of Trustees;
(e) be authorized to give instructions to the custodian and/or
sub-custodian of the Fund appointed by the Trust's Board of Trustees, as to
deliveries of securities, transfers of currencies and payments of cash for
the account of the Fund, in relation to the matters contemplated by this
Agreement; and
(f) take, on behalf of the Fund, all actions which appear to the Trust
and the Manager necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including the placing of
orders for the purchase and sale of securities for the Fund and the prompt
reporting to the Manager of such purchases and sales.
3. Broker-Dealer Relationships. The Sub-Adviser is responsible for decisions
to buy and sell securities for the Fund's portfolio, broker-dealer selection,
and negotiation of brokerage commission rates. The Sub-Adviser's primary
consideration in effecting a security transaction will be execution at the most
favorable price. In selecting a broker-
G-4
<PAGE>
dealer to execute each particular transaction, the Sub-Adviser will take the
following into consideration: the best net price available, the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Fund on a continuing
basis. Accordingly, the price to the Fund in any transaction may be less
favorable than that available from another broker-dealer if the difference is
reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Trustees may determine, the
Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Sub-Adviser determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Sub-Adviser's
overall responsibilities with respect to the Fund and to its other clients as to
which it exercises investment discretion. Subject to such policies as the Board
of Trustees may determine, the Sub-Adviser will purchase and sell foreign
currency contracts and other securities for the Fund. The Sub-Adviser is further
authorized to allocate the orders placed by it on behalf of the Fund to any
affiliated broker-dealer of the Fund or to such brokers and dealers who also
provide research or statistical material, or other services to the Fund, the
Manager or the Sub-Adviser. Such allocation shall be in such amounts and
proportions as the Sub-Adviser shall determine and the Sub-Adviser will report
on said allocations regularly to the Board of Trustees of the Trust indicating
the brokers to whom such allocations have been made and the basis therefor.
4. Control by Board of Trustees. Any investment program undertaken by the
Sub-Adviser pursuant to this Agreement, as well as any other activities
undertaken by the Sub-Adviser on behalf of the Fund pursuant thereto, shall at
all times be subject to any directives of the Board of Trustees of the Trust.
The Manager shall provide the Sub-Adviser with written notice of all such
directives, so long as this Agreement remains in effect.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Sub-Adviser shall at all times conform to:
(a) all applicable provisions of the 1940 Act;
(b) the provisions of the Registration Statement of the Trust under the
Securities Act of 1933 and the 1940 Act; and
(c) any other applicable provisions of state and federal law.
6. Expenses. The Sub-Adviser shall maintain, at its expense and without cost
to the Manager or the Fund, a trading function in order to carry out its
obligations under subparagraph (f) of paragraph 2 hereof to place orders for the
purchase and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with the
approval of the Trust's Board of Trustees, the Sub-Adviser may perform services
on behalf of the Fund which are not required by this Agreement. Such services
will be performed on behalf of the Fund and the Sub-Adviser's cost in rendering
such services may be billed monthly to the Manager, subject to examination by
the Manager's independent accountants. Payment or assumption by the Sub-Adviser
of any Fund expense that the Sub-Adviser is not required to pay or assume under
this Agreement shall not relieve the Manager or the Sub-Adviser of any of their
obligations to the Fund or obligate the Sub-Adviser to pay or assume any similar
Fund expense on any subsequent occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Manager shall pay the Sub-Adviser a monthly fee at the
annual rate of .20% of the Fund's average daily net assets. Compensation under
this Agreement shall be calculated and accrued daily and the amounts of the
daily accruals shall be paid monthly. The compensation paid to the Sub-Adviser
will not be reduced by the amount of brokerage commissions received by the
Sub-Adviser or its affiliated broker-dealer pursuant to Section 17(e)(2) of the
1940 Act. If this Agreement becomes effective subsequent to the first day of a
month or shall terminate before the last day of a month, compensation for that
part of the month this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fees as set forth above. Payment of the
Sub-Adviser's compensation for the preceding month shall be made as promptly as
possible after the end of each month.
9. Term. This Agreement shall become effective at the close of business on
the date hereof and shall remain in force and effect for an initial term of two
years, and shall remain in effect thereafter if approved in the manner set forth
in Section 10 hereof.
G-5
<PAGE>
10. Renewal. Following the expiration of its initial two year term, this
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Trust's Board of Trustees or (ii) by the vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a trustee of the Trust), by votes cast in person at a meeting
specifically called for such purpose.
11. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Trust's Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), or by the Manager or the Portfolio Manager, on sixty
(60) days' written notice to the other party. This Agreement shall automatically
terminate: (a) in the event of its assignment, the term "assignment" having the
meaning defined in Section 2(a)(4) of the 1940 Act, or (b) in the event that the
Management Agreement between the Fund and the Manager shall terminate.
12. Liability of the Sub-Adviser. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser or its officers,
directors or employees, or reckless disregard by the Sub-Adviser of its duties
under this Agreement, the Sub-Adviser shall not be liable to the Manager, the
Trust or to any shareholder of the Trust for any act or omission in the course
of, or connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of any security.
13. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Manager and that of the
Trust for this purpose shall be 41 Madison Avenue, New York, New York 10010, and
the address of the Sub-Adviser for this purpose shall be 45 Wall Street, New
York, New York 10005.
14. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
courts, by rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said Act. In addition, where the effect of a
requirement of the 1940 Act reflected in a provision of this Agreement is
revised by rule, regulation or order of the Securities and Exchange Commission,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: UNITED STATES TRUST COMPANY
OF NEW YORK
____________________________________ By______________________________
Title: Title: Executive Vice President
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
____________________________________ By______________________________
Title: Title: President
G-6
<PAGE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
FUND EXHIBIT
1. Pertaining to the Meeting
* Meeting Date: May ___________, 1995
* Meeting Time: _________ [a.m./p.m.]
* Meeting Place: Offices of Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, 919 Third Avenue, New York, NY 10022.
* Shares outstanding as of ___________, 1995: ____________
2. Pertaining to Investment Advisory Contracts with Virtus Capital
Management, Inc.
* Date Board approved Proposed Contract: March 24, 1995
* Date shareholders last approved Existing Agreement: October 1, 1993
* Date Board last approved Existing Agreement: June 22, 1993
* Date of Existing Agreement: February 7, 1994
* Investment management fee as a percentage of average daily net assets
under Existing and Proposed Agreements: 1.25%
* Investment management agreement fee payable to Sheffield Management
Company for most recent fiscal year: $9,452
* Fee reduction for the Fund's most recent fiscal year resulting from any
state expense limitation: None
3. Pertaining to Sub-Advisory Agreement
A. Martin Currie Inc.
* Date Board approved Proposed Agreement: March 24, 1995
* Date shareholders last approved Existing Agreement: October 1, 1993
* Date Board last approved Existing Agreement: June 22, 1993
* Date of Existing Agreement: February 7, 1994
* Investment advisory fee as a percentage of average daily net assets under
Existing and Proposed Agreements: .50% of the first $150 million of the
Equity sector's average daily net assets, and .40% of the sector's average
daily net assets in excess of $150 million
* Investment advisory fee payable to Martin Currie, Inc. for most recent
fiscal period: $326
B. OFFITBANK
* Date Board approved Proposed Agreement: March 24, 1995
* Date shareholders last approved Existing Agreement: October 1, 1993
* Date Board last approved Existing Agreement: June 14, 1993
* Date of Existing Agreement: February 7, 1994
* Investment advisory fee as a percentage of average daily net assets under
Existing and Proposed Agreements: .45% of the first $150 million of the
Fixed Income sector's average daily net assets, and .35% of the sector's
average daily net assets in excess of $150 million
* Investment advisory fee payable to OFFITBANK for most recent fiscal year:
$0
H-1
<PAGE>
4. Pertaining to Accountants
* Date Board last approved Accountants: June 13, 1994
5. Pertaining to the Board
* Number of Board, and where applicable committee, meetings held during the
last fiscal year: 6 Board meetings/ 1 Audit Committee meeting
* Board Members, if any, attending fewer than 75% of all Board and committee
meetings held in the last fiscal year during the period the Board Member
was in office: None
Compensation Table*
Total
Estimate Annual Compensation
Name of Person Aggregate Compensation Benefits Upon from BPMF and
Position from Blanchard Funds Retirement Blanchard Funds
- -------- -------------------- ---------- ---------------
Arthur Kiriacon, Trustee $47,770 $ ** $51,000
Gerald Morris, Trustee 47,770 54,000 51,000
Eric Lomas, Trustee 47,770 57,000 51,000
6. Pertaining to Distribution and Marketing Plans
* The Fund is subject to a Distribution and Marketing Plan.
* Date that the Distribution and Marketing Plan was adopted: June 22, 1993
* Amounts paid pursuant to the Distribution and Marketing Plan, both in the
aggregate and as a percentage of the Fund's average net assets during its
most recent fiscal year: $3,781 (.50%).
The following table presents certain information regarding the beneficial
ownership of shares as of ____________, 1995 by each officer and Nominee of the
Fund owning shares on such date.
Name Number of Shares
---- ----------------
- --------------
*Messrs. Freedman and Liebman are compensated by SMC, not the Funds.
**Mr. Kiriacom will receive a payment of a lump sum cash benefit of $505,006
upon closing of the Purchase in lieu of the estimated annual benefit of
$57,000.
--------------------------------------------------------------------------
VOTE YOUR PROXY TODAY!
By Mail: use the enclosed return envelope.
By Phone: 1-800-733-8485, ext. 450 (Mon.-Fri., 9:00 a.m. - 11:00 p.m. EST)
By Fax: 1-800-733-1885 (24 hours, 7 days a week)
QUESTIONS? CALL 1-800-733-8485, ext. 450
--------------------------------------------------------------------------
H-2
<PAGE>
Description of Portfolio Advisors
Blanchard Worldwide Emerging Markets Fund
Martin Currie Inc. provides portfolio advisory services for the Equity
Securities sector of the Fund. Based in Edinburgh, the Martin Currie Group is
one of Scotland's leading international equity houses and has experience and
expertise in emerging markets. The Martin Currie Group currently manages over $4
billion in global assets and has been involved in managing investment portfolios
for over 100 years. Martin Currie Inc., incorporated in 1978, is an investment
adviser registered with the SEC and currently manages over $900 million in
global assets.
Currently, the Martin Currie Group operates its investment business through
four companies. In North America, Martin Currie Inc. (the Sector Manager), and
in the U.K., Martin Currie Investment Management, Martin Currie Unit Trusts and
Martin Currie Private Clients, all wholly-owned subsidiaries of Martin Currie
Limited.
An asset allocation committee headed by Mr. James Fairweather, a director
and senior portfolio manager with Martin Currie, with more than 10 years of
experience as a portfolio manager, coordinates the company's investments in
emerging markets. The committee determines asset allocation and country weighing
for emerging markets and Mr. Fairweather, together with Mr. Tristan Clube (also
a director and senior portfolio manager), selects stocks in conjunction with
members of regional investment teams. Martin Currie Inc. also acts as portfolio
advisor to BGGF.
OFFITBANK, 520 Madison Avenue, New York, New York 10022, provides portfolio
advisory services for the Fixed Income Securities sector of the Fund. OFFITBANK,
a New York State chartered trust bank, is the continuation of the business of
Offit Associates, Inc., a registered investment adviser founded in December,
1982. The firm converted to a trust bank in July, 1990. The core business of
OFFITBANK is portfolio management for institutions, non-profit organizations and
wealthy family groups. OFFITBANK specializes in fixed income management and
offers its clients a complete range of fixed income investments in capital
markets throughout the world. OFFITBANK currently manages in excess of $4.0
billion in assets. Jack D. Burks, Managing Director of OFFITBANK, has over 10
years of experience in Fixed Income Portfolio Management and is responsible for
the day-to-day management of the Fund's portfolio. OFFITBANK also acts as
portfolio advisor to BFIF and BSTBF.
The Sub-Advisory Agreements. The sub-advisory agreement between VCM and
Martin Currie provides for the payment by VCM to Martin Currie of a monthly fee
at the annual rate of .50% of the first $150 million of the equity sector's
average daily net assets and .40% of the sector's average daily net assets in
excess of $150 million. The sub-advisory agreement between VCM and OFFITBANK
provides for the payment by VCM to OFFITBANK of a monthly fee at the annual rate
of .45% of the first $150 million of the fixed income sector's average daily net
assets and .35% of the sector's average daily net assets in excess of $150
million.
H-3
<PAGE>
FORM OF SUB-ADVISORY AGREEMENT
------------------------------
THIS AGREEMENT is made as of this ___________ day of __________, 1995 by
and between VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the
"Manager"), and Martin Currie Incorporated, a registered investment adviser (the
"Portfolio Manager" or "Martin Currie") with respect to the following recital of
fact:
R E C I T A L
WHEREAS, Blanchard Funds (the "Trust") is registered as an open-end,
non-diversified, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the Portfolio Manager is an investment adviser registered under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment adviser; and
WHEREAS, the Portfolio Manager is a member of the Investment Regulatory
Organization Limited ("IMRO") of the United Kingdom and is thereby regulated by
IMRO in the conduct of its investment business and engages in the business of
acting as an investment adviser; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in one series called the Blanchard
Worldwide Emerging Markets Fund (such series, being referred to as the "Fund");
and
WHEREAS, the Trust and the Manager have entered into an agreement of even
date herewith to provide for management services for the Fund on the terms and
conditions set forth therein (the "Management Agreement"); and
WHEREAS, the Portfolio Manager proposes to render investment advisory
services to the Manager in connection with the Manager's responsibilities with
respect to equity securities of the Fund's portfolio on the terms and conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Investment Management. Martin Currie shall act as a Portfolio Manager for
the equity sector of the Fund's portfolio and shall, in such capacity, supervise
the investment and reinvestment of the cash, securities or other properties
comprising the equity sector of the Fund's portfolio, subject at all times to
the direction of the Manager and the policies and control of the Trust's Board
of Trustees. The Portfolio Manager shall give the Fund the benefit of its best
judgment, efforts and facilities in rendering its services as Portfolio Manager.
2. Investment Analysis and Implementation. Subject to Section 13 hereof, in
carrying out its obligation under Section 1 hereof, the Portfolio Manager shall:
(a) use the same skill and care in providing such service as it uses in
providing services to fiduciary accounts for which it has investment
responsibilities;
(b) obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund's
portfolio and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which the issuers
engage, or with respect to securities which the Portfolio Manager considers
desirable for inclusion in the Fund's portfolio;
(c) determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Trust's Board of
Trustees;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Trust's Board of Trustees; and
(e) take, on behalf of the Fund, all actions which appear to the Trust
and the Manager necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including the placing of
orders for the purchase and sale of securities for the Fund and the prompt
reporting to the Manager of such purchases and sales.
3. Broker-Dealer Relationships. The Portfolio Manager is responsible for
decisions to buy and sell securities for the Fund's portfolio, broker-dealer
selection, and negotiation of brokerage commission rates. The Portfolio
Manager's
H-4
<PAGE>
primary consideration in effecting a security transaction will be execution at
the most favorable price. In selecting a broker-dealer to execute each
particular transaction, the Portfolio Manager will take the following into
consideration: the best net price available, the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
Accordingly, the price to the Fund in any transaction may be less favorable than
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered. Subject
to such policies as the Board of Trustees may determine, the Portfolio Manager
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of its having caused the
Fund to pay a broker or dealer for effecting a portfolio investment transaction
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction, if the Portfolio Manager determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Portfolio Manager's
overall responsibilities with respect to the Fund and to its other clients as to
which it exercises investment discretion. Subject to such policies as the Board
of Trustees may determine, the Portfolio Manager may purchase and sell foreign
currency contracts and other securities for the Fund. The Portfolio Manager is
further authorized to allocate the orders placed by it on behalf of the Fund to
any affiliated broker-dealer of the Fund or to such brokers and dealers who also
provide research or statistical material, or other services to the Fund, the
Manager or the Portfolio Manager. Such allocation shall be in such amounts and
proportions as the Portfolio Manager shall determine and the Portfolio Manager
will report on said allocations regularly to the Board of Trustees of the Trust
indicating the brokers to whom such allocations have been made and the basis
therefor.
4. Control by Board of Trustees. Any investment program undertaken by the
Portfolio Manager pursuant to this Agreement, as well as any other activities
undertaken by the Portfolio Manager on behalf of the Fund pursuant hereto, shall
at all times be subject to any directives of the Board of Trustees of the Trust.
The Manager shall provide the Portfolio Manager with written notice of all such
directives, so long as this Agreement remains in effect.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Portfolio Manager shall at all times conform to:
(a) all applicable provisions of the 1940 Act;
(b) the provisions of the Registration Statement of the Trust under the
Securities Act of 1933 and the 1940 Act; and
(c) any other applicable provisions of state and federal law.
6. Expenses. The Portfolio Manager shall maintain, at its expense and
without cost to the Manager or the Fund, a trading function in order to carry
out its obligations under subsection (e) of Section 2 hereof to place orders for
the purchase and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with the
approval of the Trust's Board of Trustees, the Portfolio Manager may perform
services on behalf of the Fund which are not required by this Agreement. Such
services will be performed on behalf of the Fund and the Portfolio Manager's
cost in rendering such services may be billed monthly to the Manager, subject to
examination by the Manager's independent accountants. Payment or assumption by
the Portfolio Manager of any Fund expense that the Portfolio Manager is not
required to pay or assume under this Agreement shall not relieve the Manager or
the Portfolio Manager of any of their obligations to the Fund or obligate the
Portfolio Manager to pay or assume any similar Fund expense on any subsequent
occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Manager shall pay the Portfolio Manager a monthly fee
at the annual rate of .50% of the first $150 million of the Fund's average daily
net assets under Martin Currie management and .40% of the average daily net
assets in excess of $150 million. Compensation under this Agreement shall be
calculated and accrued daily and the amounts of the daily accruals shall be paid
monthly. The compensation paid to the Portfolio Manager will not be reduced by
the amount of brokerage commissions received by the Portfolio Manager or its
affiliated broker-dealer pursuant to Section 17(e)(2) of the 1940 Act. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fees as set forth above. Payment of the Portfolio
Manager's compensation for the preceding month shall be made as promptly as
possible after the end of each month.
9. Non-Exclusive. The services of the Portfolio Manager to the Manager are
not to be deemed to be exclusive, and the Portfolio Manager shall be free to
render investment advisory and other services to others (including other
H-5
<PAGE>
investment companies) and to engage in other activities, so long as its services
under this Agreement are not impaired thereby. The Portfolio Manager shall give
60 days' notice to the Manager if it intends to perform investment advisory
services for any investment company similar to that of the Trust.
10. Term. This Agreement shall become effective at the close of business on
the date hereof and shall remain in force and effect for an initial term of two
years, and shall remain in effect thereafter if approved in the manner set forth
in Section 11 hereof.
11. Renewal. Following the expiration of its initial two year term, this
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Trust's Board of Trustees or (ii) by the vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a trustee of the Trust), by votes cast in person at a meeting
specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by vote of the Trust's Board of Trustees or by vote
of a majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), or by the Manager or the Portfolio Manager, on sixty
(60) days' written notice to the other party. This Agreement shall automatically
terminate: (a) in the event of its assignment, the term "assignment" having the
meaning defined in Section 2(a)(4) of the 1940 Act, or (b) in the event that the
Management Agreement between the Fund and the Manager shall terminate.
Extraordinary expenses necessarily incurred by the Portfolio Manager in
connection with the termination of this Agreement shall be paid by the Manager
to the extent that such extraordinary expenses are not paid by the Fund.
13. Liability of the Portfolio Manager. In the absence of willful
malfeasance, bad faith or gross negligence on the part of the Portfolio Manager
or its officers, directors or employees, or reckless disregard by the Portfolio
Manager of its duties under this Agreement, the Portfolio Manager shall not be
liable to the Manager, the Trust or to any shareholder of the Trust for any act
or omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
14. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Manager and that of the
Trust for this purpose shall be 41 Madison Avenue, New York, New York 10010, and
the address of the Portfolio Manager for this purpose shall be Saltire Court, 20
Castle Terrace, Edinburgh EH1 2ES.
15. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
courts, by rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said Act. In addition, where the effect of a
requirement of the 1940 Act reflected in a provision of this Agreement is
revised by rule, regulation or order of the Securities and Exchange Commission,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: MARTIN CURRIE INCORPORATED
____________________________________ By______________________________
Title: Title:
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
____________________________________ By______________________________
Title: Title: President
H-6
<PAGE>
SUB-ADVISORY AGREEMENT
----------------------
THIS AGREEMENT is made as of this __________ day of ___________, 1995 by
and between VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the
"Manager"), and OFFITBANK, a New York banking corporation (the "Sub-Adviser" or
"OFFITBANK") with respect to the following recital of fact:
R E C I T A L
WHEREAS, Blanchard Funds (the "Trust") is registered as an open-end,
non-diversified, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the Sub-Adviser is a New York banking corporation and engages in
the business of acting as an investment adviser; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in one series called the Blanchard
Worldwide Emerging Markets Fund (such series, being referred to as the "Fund");
and
WHEREAS, the Trust and the Manager have entered into an agreement dated as
of ____________, 1995 to provide for management services for the Fund on the
terms and conditions set forth therein (the "Management Agreement"); and
WHEREAS, OFFITBANK proposes to render investment advisory services to the
Manager in connection with the Manager's responsibilities to the Fund's
portfolio on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Investment Management. OFFITBANK shall act as a Sub-Adviser for the fixed
income sector of the Fund's portfolio and shall, in such capacity, supervise the
investment and reinvestment of the cash, securities or other properties
comprising the Fund's portfolio, subject at all times to the direction of the
Manager and the policies and control of the Trust's Board of Trustees. OFFITBANK
shall give the Fund the benefit of its best judgment, efforts and facilities in
rendering its services as Sub-Adviser.
2. Investment Analysis and Implementation. In carrying out its obligation
under paragraph 1 hereof, the Sub-Adviser shall:
(a) use the same skill and care in providing such service as it uses in
providing services to fiduciary accounts for which it has investment
responsibilities;
(b) obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund's
portfolio and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which the issuers
engage, or with respect to securities which the Sub-Adviser considers
desirable for inclusion in the Fund's portfolio;
(c) determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Trust's Board of
Trustees;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Trust's Board of Trustees;
(e) be authorized to give instructions to the custodian and/or
sub-custodian of the Fund appointed by the Trust's Board of Trustees, as to
deliveries of securities, transfers of currencies and payments of cash for
the account of the Fund, in relation to the matters contemplated by this
Agreement; and
(f) take, on behalf of the Fund, all actions which appear to the Trust
and the Manager necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including the placing of
orders for the purchase and sale of securities for the Fund and the prompt
reporting to the Manager of such purchases and sales.
3. Broker-Dealer Relationships. The Sub-Adviser is responsible for decisions
to buy and sell securities for the Fund's portfolio, broker-dealer selection,
and negotiation of brokerage commission rates. The Sub-Adviser's primary
H-7
<PAGE>
consideration in effecting a security transaction will be execution at the most
favorable price. In selecting a broker-dealer to execute each particular
transaction, the Sub-Adviser will take the following into consideration: the
best net price available, the reliability, integrity and financial condition of
the broker-dealer; the size of and difficulty in executing the order; and the
value of the expected contribution of the broker-dealer to the investment
performance of the Fund on a continuing basis. Accordingly, the price to the
Fund in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered. Subject to such policies as the Board of
Trustees may determine, the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer for
effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Sub-Adviser determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Fund and to its other clients as to which it exercises investment
discretion. Subject to such policies as the Board of Trustees may determine, the
Sub-Adviser will purchase and sell foreign currency and futures contracts and
other securities for the Fund. The Sub-Adviser is further authorized to allocate
the orders placed by it on behalf of the Fund to any affiliated broker-dealer of
the Fund or to such brokers and dealers who also provide research or statistical
material, or other services to the Fund, the Manager or the Sub-Adviser. Such
allocation shall be in such amounts and proportions as the Sub-Adviser shall
determine and the Sub-Adviser will report on said allocations regularly to the
Board of Trustees of the Trust indicating the brokers to whom such allocations
have been made and the basis therefor.
4. Control by Board of Trustees. Any investment program undertaken by the
Sub-Adviser pursuant to this Agreement, as well as any other activities
undertaken by the Sub-Adviser on behalf of the Fund pursuant thereto, shall at
all times be subject to any directives of the Board of Trustees of the Trust.
The Manager shall provide the Sub-Adviser with written notice of all such
directives, so long as this Agreement remains in effect.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Sub-Adviser shall at all times conform to:
(a) all applicable provisions of the 1940 Act;
(b) the provisions of the Registration Statement of the Trust under the
Securities Act of 1933 and the 1940 Act; and
(c) any other applicable provisions of state and federal law.
6. Expenses. The Sub-Adviser shall maintain, at its expense and without cost
to the Manager or the Fund, a trading function in order to carry out its
obligations under subparagraph (f) of paragraph 2 hereof to place orders for the
purchase and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with the
approval of the Trust's Board of Trustees, the Sub-Adviser may perform services
on behalf of the Fund which are not required by this Agreement. Such services
will be performed on behalf of the Fund and the Sub-Adviser's cost in rendering
such services may be billed monthly to the Manager, subject to examination by
the Manager's independent accountants. Payment or assumption by the Sub-Adviser
of any Fund expense that the Sub-Adviser is not required to pay or assume under
this Agreement shall not relieve the Manager or the Sub-Adviser of any of their
obligations to the Fund or obligate the Sub-Adviser to pay or assume any similar
Fund expense on any subsequent occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Manager shall pay the Sub-Adviser a monthly fee at the
annual rate of .45% of the first $150 million of the Fund's average daily net
assets under OFFITBANK management and .35% of the average daily net assets in
excess of $150 million. Compensation under this Agreement shall be calculated
and accrued daily and the amounts of the daily accruals shall be paid monthly.
The compensation paid to the Sub-Adviser will not be reduced by the amount of
brokerage commissions received by the Sub-Adviser or its affiliated
broker-dealer pursuant to Section 17(e)(2) of the 1940 Act. If this Agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fees as set forth above. Payment of the Sub-Adviser's
compensation for the preceding month shall be made as promptly as possible after
the end of each month.
9. Exclusivity. OFFITBANK agrees that it will not render advisory or
sub-advisory services to any other similar publicly offered no-load or low-load
open-end investment company registered with the Securities and Exchange
H-8
<PAGE>
Commission while this Agreement is in effect. In the event of the termination of
this Agreement by the Sub-Adviser such exclusivity shall continue for a period
of six (6) months from the effective date of such termination. For the purposes
of this Agreement, low-load shall be defined as a sales charge of 3% or less.
The Sub-Adviser, however, shall be free to render investment advisory or other
services to others (including unit trusts and registered investment companies
other than no load or low load investment companies) and to engage in other
activities, so long as its services under this Agreement are not impaired
thereby.
10. Term. This Agreement shall become effective at the close of business on
the date hereof and shall remain in force and effect for an initial term of two
years, and shall remain in effect thereafter if approved in the manner set forth
in Section 11 hereof.
11. Renewal. Following the expiration of its initial two year term, this
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Trust's Board of Trustees or (ii) by the vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a trustee of the Trust), by votes cast in person at a meeting
specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Trust's Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities (as defined in Section 2(a)
(42) of the 1940 Act), or by the Manager or the Sub-Adviser on sixty (60) days'
written notice to the other party. This Agreement shall automatically terminate:
(a) in the event of its assignment, the term "assignment" having the meaning
defined in Section 2(a)(4) of the 1940 Act, or (b) in the event that the
Management Agreement between the Fund and the Manager shall terminate.
13. Liability of the Sub-Adviser. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser or its officers,
directors or employees, or reckless disregard by the Sub-Adviser of its duties
under this Agreement, the Sub-Adviser shall not be liable to the Manager, the
Trust or to any shareholder of the Trust for any act or omission in the course
of, or connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of any security.
14. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Manager and that of the
Trust for this purpose shall be 41 Madison Avenue, New York, New York 10010, and
the address of the Sub-Adviser for this purpose shall be 101 East 52nd Street,
New York, New York 10022.
15. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
courts, by rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said Act. In addition, where the effect of a
requirement of the 1940 Act reflected in a provision of this Agreement is
revised by rule, regulation or order of the Securities and Exchange Commission,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: OFFITBANK
____________________________________ By______________________________
Title: Title:
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
____________________________________ By______________________________
Title: Title:
H-9
<PAGE>
BLANCHARD GROWTH & INCOME FUND
FUND EXHIBIT
1. Pertaining to the Meeting
* Meeting Date: May ___________, 1995
* Meeting Time: _________ [a.m./p.m.]
* Meeting Place: Offices of Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, 919 Third Avenue, New York, NY 10022.
* Shares outstanding as of __________, 1995: ____________
2. Pertaining to Investment Advisory Contracts with Virtus Capital
Management, Inc.
* Date Board approved Proposed Contract: March 24, 1995
* Date shareholders last approved Existing Agreement: June 13, 1994
* Date Board last approved Existing Agreement: June 13, 1994
* Date of Existing Agreement: October 14, 1994
* Investment management fee as a percentage of average daily net assets
under Existing and Proposed Agreements: 1.10%*
* Investment management agreement fee payable to Sheffield Management
Company for most recent fiscal year: N/A**
* Fee reduction for the Fund's most recent fiscal year resulting from any
state expense limitation: N/A**
3. Pertaining to Accountants
* Date Board last approved Accountants: June 13, 1994
4. Pertaining to the Board
* Number of Board, and where applicable committee, meetings held during the
last fiscal year: 4 Board meetings/ 0 Audit Committee meetings
* Board Members, if any, attending fewer than 75% of all Board and committee
meetings held in the last fiscal year during the period the Board Member
was in office: None
Compensation Table***
Total
Estimate Annual Compensation
Name of Person Aggregate Compensation Benefits Upon from BPMF and
Position from Blanchard Funds Retirement Blanchard Funds
- -------- -------------------- ---------- ---------------
Arthur Kiriacon, Trustee $47,770 $ **** $51,000
Gerald Morris, Trustee 47,770 54,000 51,000
Eric Lomas, Trustee 47,770 57,000 51,000
5. Pertaining to Distribution and Marketing Plans
* The Fund is subject to a Distribution and Marketing Plan.
* Date that the Distribution and Marketing Plan was adopted: June 13, 1994
* Amounts paid pursuant to the Distribution and Marketing Plan, both in the
aggregate and as a percentage of the Fund's average net assets during its
most recent fiscal year: N/A*
-----------
*1.10% fee = .70% management fee to SMC (existing) / VCM (proposed) and .40%
advisory fee to The Chase Manhattan Bank, N.A. as Portfolio Advisor (see
"Description of Portfolio Advisor").
**Fiscal year ends October 31, 1995.
***Messrs. Freedman and Liebman are compensated by SMC, not the Funds.
****Mr. Kiriacom will receive a payment of a lump sum cash benefit of $505,006
upon closing of the Purchase in lieu of the estimated annual benefit of
$57,000.
I-1
<PAGE>
The following table presents certain information regarding the beneficial
ownership of shares as of ____________, 1995 by each officer and Nominee of the
Fund owning shares on such date.
Name Number of Shares
---- ----------------
--------------------------------------------------------------------------
VOTE YOUR PROXY TODAY!
By Mail: use the enclosed return envelope.
By Phone: 1-800-733-8485, ext. 450 (Mon.-Fri., 9:00 a.m. - 11:00 p.m. EST)
By Fax: 1-800-733-1885 (24 hours, 7 days a week)
QUESTIONS? CALL 1-800-733-8485, ext. 450
--------------------------------------------------------------------------
I-2
<PAGE>
Description of Portfolio Advisor
Blanchard Growth & Income Fund
The Fund seeks to achieve its investment objectives by investing 100% of its
assets in Growth & Income Portfolio, an open-end management investment company
advised by The Chase Manhattan Bank, N.A. (the "Portfolio Advisor"), with
investment objectives, policies and restrictions identical to those of the Fund.
The Portfolio Adviser, a wholly owned subsidiary of The Chase Manhattan
Corporation, a registered bank holding company, is a commercial bank offering a
wide range of banking and investment services to customers throughout the United
States and around the world. Its headquarters is at One Chase Manhattan Plaza,
New York, NY 10081. The Portfolio Adviser, including its predecessor
organizations, has over 100 years of money management experience and renders
investment advisory services to others.
Under the terms of the Investment Advisory Contract between the Blanchard
Funds, on behalf of the Fund and VCM, VCM receives a monthly fee of .70% per
annum of the Fund's average daily net assets and the Portfolio Adviser receives
.40% per annum of the Fund's average daily net assets directly from the
Portfolio.
I-3
<PAGE>
BLANCHARD CAPITAL GROWTH FUND
FUND EXHIBIT
1. Pertaining to the Meeting
* Meeting Date: May ___________, 1995
* Meeting Time: _________ [a.m./p.m.]
* Meeting Place: Offices of Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, 919 Third Avenue, New York, NY 10022.
* Shares outstanding as of ____________, 1995: ____________
2. Pertaining to Investment Advisory Contracts with Virtus Capital
Management, Inc.
* Date Board approved Proposed Contract: March 24, 1995
* Date shareholders last approved Existing Agreement: June 13, 1994
* Date Board last approved Existing Agreement: June 13, 1994
* Date of Existing Agreement: October 14, 1994
* Investment management fee as a percentage of average daily net assets
under Existing and Proposed Agreements: 1.10%*
* Investment management agreement fee payable to Sheffield Management
Company for most recent fiscal year: N/A**
* Fee reduction for the Fund's most recent fiscal year resulting from any
state expense limitation: N/A**
3. Pertaining to Accountants
* Date Board last approved Accountants: June 13, 1994
4. Pertaining to the Board
* Number of Board, and where applicable committee, meetings held during the
last fiscal year: 4 Board meetings/ 0 Audit Committee meeting
* Board Members, if any, attending fewer than 75% of all Board and committee
meetings held in the last fiscal year during the period the Board Member
was in office: None
Compensation Table***
Total
Estimate Annual Compensation
Name of Person Aggregate Compensation Benefits Upon from BPMF and
Position from Blanchard Funds Retirement Blanchard Funds
- -------- -------------------- ---------- ---------------
Arthur Kiriacon, Trustee $47,770 $ **** $51,000
Gerald Morris, Trustee 47,770 54,000 51,000
Eric Lomas, Trustee 47,770 57,000 51,000
- ----------------
*1.10% fee = .70% management fee to SMC (existing) / VCM (proposed) and .40%
advisory fee to The Chase Manhattan Bank, N.A. as Portfolio Advisor (see
"Description of Portfolio Advisor").
**Fiscal year ends October 31, 1995.
***Messrs. Freedman and Liebman are compensated by SMC, not the Fund.
****Mr. Kiriacom will receive a payment of a lump sum cash benefit of $505,006
upon closing of the Purchase in lieu of the estimated annual benefit of
$57,000.
J-1
<PAGE>
5. Pertaining to Distribution and Marketing Plans
* The Fund is subject to a Distribution and Marketing Plan.
* Date that the Distribution and Marketing Plan was adopted: June 13, 1994
* Amounts paid pursuant to the Distribution and Marketing Plan, both in the
aggregate and as a percentage of the Fund's average net assets during its
most recent fiscal year: N/A*
The following table presents certain information regarding the beneficial
ownership of shares as of ____________, 1995 by each officer and Nominee of the
Fund owning shares on such date.
Name Number of Shares
---- ----------------
- -------------
*Fiscal year ends October 31, 1995.
--------------------------------------------------------------------------
VOTE YOUR PROXY TODAY!
By Mail: use the enclosed return envelope.
By Phone: 1-800-733-8485, ext. 450 (Mon.-Fri., 9:00 a.m. - 11:00 p.m. EST)
By Fax: 1-800-733-1885 (24 hours, 7 days a week)
QUESTIONS? CALL 1-800-733-8485, ext. 450
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J-2
<PAGE>
Description of Portfolio Advisor
Blanchard Capital Growth Fund
The Fund seeks to achieve its investment objectives by investing 100% of its
assets in Capital Growth Portfolio, an open-end management investment company
advised by The Chase Manhattan Bank, N.A. (the "Portfolio Advisor"), with
investment objectives, policies and restrictions identical to those of the Fund.
The Portfolio Adviser, a wholly owned subsidiary of The Chase Manhattan
Corporation, a registered bank holding company, is a commercial bank offering a
wide range of banking and investment services to customers throughout the United
States and around the world. Its headquarters is at One Chase Manhattan Plaza,
New York, NY 10081. The Portfolio Adviser, including its predecessor
organizations, has over 100 years of money management experience and renders
investment advisory services to others.
Under the terms of the Investment Advisory Contract between the Blanchard
Funds, on behalf of the Fund and VCM, VCM receives a monthly fee of .70% per
annum of the Fund's average daily net assets and the Portfolio Advisor receives
.40% per annum of the Fund's average daily net assets directly from the
Portfolio.
J-3
<PAGE>
BLANCHARD PRECIOUS METALS FUND, INC.
FUND EXHIBIT
1. Pertaining to the Meeting
* Meeting Date: May __________, 1995.
* Meeting Time: ________ [a.m./p.m.]
* Meeting Place: Offices of Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, 919 Third Avenue, New York, NY 10022.
* Shares outstanding as of ___________, 1995: ____________
2. Pertaining to Investment Advisory Contracts with Virtus Capital
Management, Inc.
* Date Board approved Proposed Contract: March 24, 1995.
* Date shareholders last approved Existing Agreement: June 23, 1988.
* Date Board last approved Existing Agreement: December 8, 1994.
* Date of Existing Agreement: June 22, 1988.
* Investment management fee as a percentage of average daily net assets
under Existing and Proposed Agreements: 1% of the first $150 million of
the Fund's 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.
* Investment management agreement fee payable to Sheffield Management
Company for most recent fiscal year: $602,610
* Fee reduction for the Fund's most recent fiscal year resulting from any
state expense limitation: None
3. Pertaining to Sub-Advisory Agreement
* Date Board approved Proposed Agreement: March 24, 1995.
* Date shareholders last approved Existing Agreement: June 23, 1988.
* Date Board last approved Existing Agreement: December 8, 1994.
* Date of Existing Agreement: June 22, 1988.
* Investment advisory fee as a percentage of average daily net assets under
Existing and Proposed Agreements: .30% of the first $150 million of
average daily net assets, .2625% of the next $150 million of average daily
net assets, and .225% of average daily net assets in excess of $300
million.
* Investment advisory fee payable to Cavelti Capital Management, Ltd. for
most recent fiscal year: $170,058.
4. Pertaining to Accountants
* Date Board last approved Accountants: June 13, 1994.
5. Pertaining to the Board
* Number of Board, and where applicable committee, meetings held during the
last fiscal year: 5 Board meetings/ 1 Audit Committee meeting.
* Board Members, if any, attending fewer than 75% of all Board and committee
meetings held in the last fiscal year during the period the Board Member
was in office: None.
K-1
<PAGE>
Compensation Table*
Total
Estimate Annual Compensation
Name of Person Aggregate Compensation Benefits Upon from BPMF and
Position from BPMF Retirement Blanchard Funds
- -------- -------------------- ---------- ---------------
Arthur Kiriacon, Director $47,770 $ ** $51,000
Gerald Morris, Director 47,770 54,000 51,000
Eric Lomas, Director 47,770 57,000 51,000
6. Pertaining to Distribution and Marketing Plans
* The Fund is subject to a Distribution and Marketing Plan.
* Date that the Distribution and Marketing Plan was adopted: June 22, 1988.
* Amounts paid pursuant to the Distribution and Marketing Plan, both in the
aggregate and as a percentage of the Fund's average net assets during its
most recent fiscal year: $451,958 (.75%).
The following table presents certain information regarding the beneficial
ownership of shares as of ____________, 1995 by each officer and Nominee of the
Fund owning shares on such date.
Name Number of Shares
---- ----------------
- --------------
*Messrs. Freedman and Liebman are compensated by SMC, not the Funds.
**Mr. Kiriacom will receive a payment of a lump sum cash benefit of $505,006
upon closing of the Purchase in lieu of the estimated annual benefit of
$57,000.
--------------------------------------------------------------------------
VOTE YOUR PROXY TODAY!
By Mail: use the enclosed return envelope.
By Phone: 1-800-733-8485, ext. 450 (Mon.-Fri., 9:00 a.m. - 11:00 p.m. EST)
By Fax: 1-800-733-1885 (24 hours, 7 days a week)
QUESTIONS? CALL 1-800-733-8485, ext. 450
--------------------------------------------------------------------------
K-2
<PAGE>
Description of Portfolio Advisor
Blanchard Precious Metals Fund, Inc.
Cavelti Capital Management, Ltd. of Toronto, Canada ("Cavelti") provides
portfolio advisory services for the Fund. Cavelti Capital Management, Ltd. is a
Canadian money management firm specializing in bullion and precious metals
mining shares and is a registered investment adviser with the SEC. Peter C.
Cavelti, the company's President, has extensive investment experience in the
field of precious metals and the firm's clients include government agencies,
financial institutions, mining companies and Canadian mutual funds.
The Sub-Advisory Agreement. The sub-advisory agreement between VCM and
Cavelti provides for payment by VCM of annual fees, payable to Cavelti on a
monthly basis. For the services provided by Cavelti, VCM pays a fee of .30% of
the average daily net assets of the Fund on the first $150 million, plus .2625%
of the Fund's average net assets in excess of $150 million but less than $300
million, plus .225% of the Fund's average net assets in excess of $300 million.
K-3
<PAGE>
FORM OF ADVISORY AGREEMENT
--------------------------
THIS AGREEMENT is made this day of , 1995 by and between VIRTUS CAPITAL
MANAGEMENT, INC., a Maryland corporation (the "Manager"), and CAVELTI CAPITAL
MANAGEMENT LTD., a Canadian money management firm (the "Portfolio Manager" or
"Cavelti") with respect to the following recital of fact:
R E C I T A L
WHEREAS, Blanchard Precious Metals Fund, Inc. (the "Corporation") is
registered as an open-end non-diversified management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act") and the rules
and regulations promulgated thereunder; and
WHEREAS, the Portfolio Manager is registered as an investment advisor under
the Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment advisor; and
WHEREAS, the Corporation is authorized to issue shares of Common Stock in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Corporation intends to initially offer shares in one series
called the BLANCHARD PRECIOUS METALS FUND, INC. (such series, being referred to
as the "Fund"); and
WHEREAS, the Corporation and the Manager have entered into an agreement to
provide for management services for the Fund on the terms and conditions
hereinafter set forth therein (the "Management Agreement").
WHEREAS, the Portfolio Manager proposes to render investment advisory
services to the Manager in connection with the Manager's responsibilities to the
Fund on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable considerations, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Investment Management. Cavelti shall act as the Portfolio Manager for the
Fund and shall, in such capacity, supervise the investment and reinvestment of
the cash, securities or other properties comprising the Fund's portfolio,
subject at all times to the direction of the Manager and the policies and
control of the Corporation's Board of Directors. Cavelti shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its services
as Portfolio Manager.
2. Investment Analysis and Implementation. In carrying out its obligation
under paragraph 1 hereof, the Portfolio Manager shall:
(a) use the same skill and care in providing such service as it uses in
providing services to fiduciary accounts for which it has investment
responsibilities;
(b) obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Fund's
portfolio and whether concerning the individual issuers whose securities are
included in the Fund's portfolio or the activities in which the issuers
engage, or with respect to securities which the Portfolio Manager considers
desirable for inclusion in the Fund's portfolio;
(c) determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Manager;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Manager; and
(e) take, on behalf of the Fund, all actions which appear to the Fund
and the Manager necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including the placing of
orders for the purchase and sale of securities for the Fund and the prompt
reporting to the Manager of such purchases and sales.
3. Broker-Dealer Relationships. The Portfolio Manager is responsible for
decisions to buy and sell securities for the Fund's portfolio, broker-dealer
selection, and negotiation of brokerage commission rates. The Portfolio
Manager's
K-4
<PAGE>
primary consideration in effecting a security transaction will be execution at
the most favorable price. In selecting a broker-dealer to execute each
particular transaction, the Portfolio Manager will take the following into
consideration: the best net price available, the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
Accordingly, the price to the Fund in any transaction may be less favorable than
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered. Subject
to such policies as the Board of Directors may determine, the Portfolio Manager
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of its having caused the
Fund to pay a broker for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Portfolio Manager determines in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Portfolio Manager's overall
responsibilities with respect to the Fund and to its other clients as to which
it exercises investment discretion. The Portfolio Manager is further authorized
to allocate the orders placed by it on behalf of the Fund to its affiliated
broker-dealer or to such brokers and dealers who also provide research or
statistical material, or other services to the Fund or the Portfolio Manager.
Such allocation shall be in such amounts and proportions as the Portfolio
Manager shall determine and the Portfolio Manager will report on said
allocations regularly to the Manager indicating the brokers to whom such
allocations have been made and the basis therefor.
4. Control by Board of Directors. Any investment program undertaken by the
Portfolio Manager pursuant to this Agreement, as well as any other activities
undertaken by the Portfolio Manager on behalf of the Fund pursuant thereto,
shall at all times be subject to any directives of the Board of Directors of the
Corporation. The Manager shall provide the Portfolio Manager with written notice
of all such directives, so long as this Agreement remains in effect.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Portfolio Manager shall at all times conform to:
(a) all applicable provisions of the 1940 Act;
(b) the provisions of the Registration Statement of the Corporation
under the Securities Act of 1933 and the 1940 Act; and
(c) any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with the Fund shall be borne by the
Portfolio Manager as follows:
The Portfolio Manager shall maintain, at its expense and without cost to the
Manager or the Fund, a trading function in order to carry out its obligations
under subparagraph (e) of paragraph 2 hereof to place orders for the purchase
and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with the
approval of the Corporation's Board of Directors, the Portfolio Manager may
perform services on behalf of the Fund which are not required by this Agreement.
Such services will be performed on behalf of the Fund and the Portfolio
Manager's costs in rendering such services may be billed monthly to the Manager,
subject to examination by the Manager's independent accountants. Payment or
assumption by the Portfolio Manager of any Fund expense that the Portfolio
Manager is not required to pay or assume under this Agreement shall not relieve
the Manager or the Portfolio Manager of any of their obligations to the Fund or
obligate the Portfolio Manager to pay or assume any similar Fund expense on any
subsequent occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Manager shall pay the Portfolio Manager monthly
compensation of the sum of the amounts determined by applying the following
annual rates to the Fund's aggregate daily net assets: .30% of the Fund's net
assets up to the first $150 million; .2625% of the Fund's net assets in excess
of $150 million but less than $300 million, plus .225% of the Fund's net assets
in excess of $300 million. Compensation under this Agreement shall be calculated
and accrued daily and the amounts of the daily accruals shall be paid monthly.
If this Agreement becomes effective subsequent to the first day of a month or
shall terminate before the last day of a month, compensation for that part of
the month this Agreement is in effect shall be prorated in a manner consistent
with the calculation of the fees as set forth above. Payment of the Portfolio
Manager's compensation for the preceding month shall be made as promptly as
possible after the end of each month.
K-5
<PAGE>
9. Expense Limitation. If, for any fiscal year, the total of all ordinary
business expenses of the Fund, including all investment advisory fees but
excluding brokerage commissions and fees, payments pursuant to the Rule 12b-1
Plan then in effect, taxes, interest and extraordinary expenses such as
litigation, would exceed the most restrictive expense limits imposed by an
statute or regulatory authority of any jurisdiction in which shares of the Fund
are offered for sale, the investment advisory fee, which the Manager would
otherwise receive from the Fund, shall be reduced by the amount of such excess.
The fee which the Portfolio Manager would otherwise receive from the Manager
pursuant to paragraph 8 of this Agreement shall also be reduced proportionately.
For example, if the Manager's fee is reduced by 1/4, the Portfolio Manager's fee
from the Manager will also be reduced by 1/4. Such reduction shall be deducted
from the monthly fee otherwise payable to the Portfolio Manager by the Manager
and, if such amount should exceed such monthly fee, the Portfolio Manager agrees
to repay the Manager such amount of its fee previously received with respect to
make up the deficiency no later than the last day of the first month of the next
succeeding fiscal year. For the purposes of this paragraph, the term "fiscal
year" shall exclude the portion of the current fiscal year which shall have
elapsed prior to the date hereof and shall include the portion of the then
current fiscal year which shall have elapsed at the date of termination of this
Agreement.
10. Term. This Agreement shall become effective at the close of business on
the date hereof and shall remain in force and effect, subject to Section 12
hereof, for two years from the date hereof.
11. Renewal. Following the expiration of its initial term, the Agreement
shall continue in force and effect from year to year, provided that such
continuance is specifically approved at least annually:
(a) (i) by the Corporation's Board of Directors or by the vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the directors who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a director of the Corporation), by votes cast in person at a
meeting specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Corporation's Board of Directors or by
vote of a majority of the Fund's outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act), or by the Manager or the Portfolio Manager,
on sixty (60) days' written notice to the other party. This Agreement shall
automatically terminate: (a) in the event of its assignment, the term
"assignment" having the meaning defined in Section 2(a)(4) of the 1940 Act, or
(b) in the event that the Management Agreement between the Fund and the Manager
shall terminate.
13. Liability of the Portfolio Manager. In the absence of willful
misfeasance, bad faith or gross negligence on the part of the Portfolio Manager
or its officers, directors or employees, or reckless disregard by the Portfolio
Manager of its duties under this Agreement, the Portfolio Manager shall not be
liable to the Manager, the Corporation or to any shareholder of the Corporation
for any act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security.
14. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Manager and that of the
Corporation for this purpose shall be 41 Madison Avenue, New York, New York
10010, and the address of the Portfolio Manager for this purpose shall be 74
Victoria Street, Toronto, Canada M5C 2A5.
15. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of an controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to said Act. In addition, where the effect of a requirement of
the 1940 Act reflected in the provision of this Agreement is revised by rule,
regulation or order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
K-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
____________________________________ By______________________________
Title: President
Attest: CAVELTI CAPITAL MANAGEMENT LTD.
____________________________________ By______________________________
Title: President
K-7
<PAGE>
BLANCHARD PRECIOUS METALS FUND, INC
FORM OF INVESTMENT ADVISORY CONTRACT
This Contract is made this __________ day of __________, 1995 between Virtus
Capital Management, Inc., a Maryland corporation having its principal place of
business in Richmond, Virginia (the "Adviser"), and Blanchard Precious Metals
Fund, Inc., a Maryland corporation having its principal place of business in
Pittsburgh, Pennsylvania (the "Corporation").
WHEREAS the Corporation is an open-end management investment company as that
term is defined in the Investment Company Act of l940, as amended, and is
registered as such with the Securities and Exchange Commission; and
WHEREAS Adviser 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 Adviser as Investment Adviser for each of the
portfolios ("Funds") of the Trust which executes an exhibit to this Contract,
and Adviser accepts the appointments. Subject to the direction of the Trustees
of the Trust, Adviser 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 Adviser 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. Adviser, 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 Articles of Incorporation and
By-Laws of the Corporation 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 Corporation expenses, including, without limitation, the
expenses of organizing the Corporation and continuing its existence; fees and
expenses of Directors and officers of the Corporation; fees for investment
advisory 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 Corporation, 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 Directors 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 Corporation 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 Corporation to indemnity its
officers and Directors and agents with respect thereto.
4. Each of the Funds shall pay to Adviser, for all services rendered to each
Fund by Adviser 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 regulator authority of any jurisdiction in which shares of the Fund
are offered for sale, the Adviser shall reduce its investment advisory 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
investment advisory fee for such fiscal year. The amount of any such reduction
is to be borne by the Adviser and shall he deducted from the monthly investment
advisory fee otherwise payable to the Adviser during such fiscal year. For the
purposes of this paragraph, the term "fiscal year" shall exclude the portion of
the current fiscal year
K-8
<PAGE>
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 Adviser 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 Adviser 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) 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 Directors of the Corporation,
including a majority of the Directors 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) Adviser 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 Directors 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 this
Contract by the Directors 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
Directors of the Corporation or by a vote of the shareholders of that Fund on
sixty (60) days' written notice to Adviser.
10. This Contract may not be assigned by Adviser and shall automatically
terminate in the event of any assignment. Adviser 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 Adviser, Adviser shall not be liable to the Corporation 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 Directors of the Corporation, including a majority of the Directors who are
not parties to this Contract or interested persons of any such party to this
Contract (other than as Directors of the Corporation) 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 Adviser acknowledges that all sales literature for investment
companies (such as the Corporation) are subject to strict regulatory oversight.
The Adviser agrees to submit any proposed sales literature for the Corporation
(or any Fund) or for itself or its affiliates which mentions the Corporation (or
any Fund) to the Corporation'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 Adviser to produce sales
literature for the Corporation (or any Fund). The Corporation agrees to cause
its distributor to promptly review all such sales literature to ensure
compliance with relevant requirements, to promptly advise Adviser 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 Corporation.
14. 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 the
officers, employees, agents or shareholders of the Trust individually but are
binding only upon the assets and property of the Fund. Notice is also hereby
given that the obligations pursuant to this instrument of a particular Fund of
the Trust 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.
K-9
<PAGE>
EXHIBIT A
to the
Investment Advisory Contract
Blanchard Precious Metals Fund, Inc.
For all services rendered by Adviser hereunder, the above-named Funds of the
Corporation shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment advisory
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 Precious Metals Fund, Inc. 1.00%
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 Adviser daily.
Witness the due execution hereof this _ day of ________, 1995.
Attest: Virtus Capital Management, Inc.
___________________________________ By :_____________________________________
Secretary Executive Vice President
Attest: Blanchard Precious Metals Fund, Inc.
___________________________________ By :_____________________________________
Assistant Secretary Vice President
K-10
<PAGE>
BLANCHARD PRECIOUS METALS FUND, INC
FORM OF DISTRIBUTION PLAN
This Distribution Plan ("Plan') is adopted as of this __________, 1995, by
the Board of Directors of Blanchard Precious Metals Fund, Inc. (the
"Corporation"), a Maryland Corporation with respect to certain classes of shares
("Classes") of the portfolios of the Corporation (the "Funds") set forth in
exhibits hereto.
1. This Plan is adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940 ("Act") so as to allow the Corporation to make payments as
contemplated herein, in conjunction with the distribution of Classes of the
Funds ("Shares").
2. This Plan is designed to provide incentives to financial institutions
("Financial Institutions") to sell Shares and enable the Funds to pay for the
costs and expenses of preparing, printing and distributing prospectuses and
sales literature (including those sent to shareholders, prospective
shareholders, and Financial Institutions) and the costs of the expenses of the
implementation and operation of the Plan. Federated Securities Corp. ("FSC")
will pay Financial Institutions a fee in respect of Shares of the Funds owned
from time to time by their clients or customers. The schedules of such fees paid
or reimbursed by the Corporation and the basis upon which such fees shall be
paid or reimbursed shall be determined from time to time by the Corporation's
Board of Directors in respect of the Classes as set forth on the applicable
exhibit.
3. Any payment to Financial Institutions paid or reimbursed by the
Corporation will be made by FSC pursuant to the "Distributor s Contract" and the
"Rule 12b-1 Agreement" which are related documents to the Plan.
4. FSC has the right (i) to select, in its sole discretion, the Financial
Institutions to participate in the Plan and (ii) to terminate without cause and
in its sole discretion any Rule 12b-1 Agreement.
5. Quarterly in each year that this Plan remains in effect, the Funds'
distributor shall prepare and furnish to the Board of Directors of the
Corporation, and the Board of Directors shall review, a written report of the
amounts expended under the Plan and the purpose for which such expenditures were
made.
6. This Plan shall become effective with respect to each Class (i) after
approval by majority votes of: (a) the Corporation's Board of Directors; (b) the
Disinterested Directors of the Corporation, cast in person at a meeting called
for the purpose of voting on the Plan; and (c) the outstanding voting securities
of the particular Class, as defined in Section 2(a)(42) of the Act and (ii) upon
execution of an exhibit adopting this Plan with respect to such Class.
7. This Plan shall remain in effect with respect to each Class presently set
forth on an exhibit and any subsequent Classes added pursuant to an exhibit
during the initial year of this Plan for the period of one year from the date
set forth above and may be continued thereafter if this Plan is approved with
respect to each Class at least annually by a majority of the Corporation's Board
of Directors and a majority of the Disinterested Directors, cast in person at a
meeting called for the purpose of voting on such Plan. If this Plan is adopted
with respect to a Class after the first annual approval by the Directors as
described above, this Plan will be effective as to that Class upon execution of
the applicable exhibit pursuant to the provisions of paragraph 6(ii) above and
will continue in effect until the next annual approval of this Plan by the
Directors and thereafter for successive periods of one year subject to approval
as described above.
8. All material amendments to this Plan must be approved by a vote of the
Board of Directors of the Corporation and of the Disinterested Directors, cast
in person at a meeting called for the purpose of voting on it.
9. This Plan may not be amended in order to increase materially the costs
which the Funds may bear for distribution pursuant to the Plan without being
approved by a majority vote of the outstanding voting securities of the Funds as
defined in Section 2(a)(42) of the Act.
10. This Plan may be terminated with respect to a particular Fund at any
time by: (a) a majority vote of the Disinterested Directors; or (b) a vote of a
majority of the outstanding voting securities of the particular Fund as defined
in Section 2(a)(42) of the Act; or (c) by FSC on 60 days notice to the
particular Fund.
11. While this Plan shall be in effect, the selection and nomination of
Disinterested Directors of the Corporation shall be committed to the discretion
of the Disinterested Directors then in office.
12. All agreements with any person relating to the implementation of this
Plan shall be in writing and any agreement related to this Plan shall be subject
to termination, without penalty, pursuant to the provisions of Paragraph 10
herein.
13. This Plan shall be construed in accordance with and governed by the laws
of the Commonwealth of Pennsylvania.
K-11
<PAGE>
EXHIBIT A
to the
Distribution Plan
BLANCHARD PRECIOUS METALS FUND, INC.
This Distribution Plan is adopted by Blanchard Precious Metals Fund, Inc.
with respect to the Class of Shares of the portfolio of the Corporation set
forth above.
The fees to be paid by FSC and reimbursed by the Class shall not exceed the
annual rate of .75 of 1% of the average aggregate net asset value of the shares
held during the month.
Witness the due execution hereof this 1st day of __________, 1995.
Blanchard Precious Metals Fund, Inc.
By:_____________________________________
President
K-12
<PAGE>
BLANCHARD PRECIOUS METALS FUND, INC.
FORM OF DISTRIBUTOR'S CONTRACT
AGREEMENT made this ____________ day of ______________, 1995, by and between
Blanchard Precious Metals Fund, Inc. (the "Corporation"), a Maryland
corporation, and FEDERATED SECURITIES CORP. ("FSC"), a Pennsylvania Corporation.
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Corporation hereby appoints FSC as its agent to sell and distribute
shares of the Corporation which may be offered in one or more series (the
"Funds") consisting of one or more classes (the "Classes") of shares (the
"Shares"), as described and set forth on one or more exhibits to this Agreement,
at the current offering price thereof as described and set forth in the current
Prospectuses of the Corporation. FSC hereby accepts such appointment and agrees
to provide such other services for the Corporation, if any, and accept such
compensation from the Corporation, if any, as set forth in the applicable
exhibits to this Agreement.
2. The sale of any Shares may be suspended without prior notice whenever in
the judgment of the Corporation it is in its best interest to do so.
3. Neither FSC nor any other person is authorized by the Corporation to give
any information or to make any representation relative to any Shares other than
those contained in the Registration Statement, Prospectuses, or Statements of
Additional Information ("SAIs") filed with the Securities and Exchange
Commission, as the same may be amended from time to time, or in any supplemental
information to said Prospectuses or SAIs approved by the Corporation. FSC agrees
that any other information or representations other than those specified above
which it or any dealer or other person who purchases Shares through FSC may make
in connection with the offer or sale of Shares, shall be made entirely without
liability on the part of the Corporation. No person or dealer, other than FSC,
is authorized to act as agent for the Corporation for any purpose. FSC agrees
that in offering or selling Shares as agent of the Corporation, it will, in all
respects, duly conform to all applicable state and federal laws and the rules
and regulations of the National Association of Securities Dealers Inc.,
including its Rules of Fair Practice. FSC will submit to the Corporation copies
of all sales literature before using the same and will not use such sales
literature if disapproved by the Corporation
4. This Agreement is effective with respect to each Class as of the date of
execution of the applicable exhibit and shall continue in effect with respect to
each Class presently set forth on an exhibit and any subsequent Classes added
pursuant to an exhibit during the initial term of this Agreement for one year
from the date set forth above, and thereafter for successive periods of one year
if such continuance is approved at least annually by the Directors of the
Corporation including a majority of the members of the Board of Directors of the
Corporation who are not interested persons of the Corporation and have no direct
or indirect financial interest in the operation of any Distribution Plan
relating to the Corporation or in any related documents to such Plan
("Disinterested Directors") cast in person at a meeting called for that purpose.
If a Class is added after the first annual approval by the Directors as
described above, this Agreement will be effective as to that Class upon
execution of the applicable exhibit and will continue in effect until the next
annual approval of this Agreement by the Directors and thereafter for successive
periods of one year, subject to approval as described above.
5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of a majority
of the Disinterested Directors or by a majority of the outstanding voting
securities of the particular Fund or Class on not more than sixty (60) days'
written notice to any other party to this Agreement. This Agreement may be
terminated with regard to a particular Fund or Class by FSC on sixty (60) days'
written notice to the Corporation.
6. This Agreement may not be assigned by FSC and shall automatically
terminate in the event of an assignment by FSC as defined in the Investment
Company Act of 1940, as amended, provided, however, that FSC may employ such
other person, persons, corporation or corporations as it shall determine in
order to assist it in carrying out its duties under this Agreement
7. FSC shall not be liable to the Corporation for anything done or omitted
by it, except acts or omissions involving willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties imposed by this Agreement.
K-13
<PAGE>
8. This Agreement may be amended at any time by mutual agreement in writing
of all the parties hereto, provided that such amendment is approved by the
Directors of the Corporation including a majority of the Disinterested Directors
of the Corporation cast in person at a meeting called for that purpose.
9. This Agreement shall be construed in accordance with and governed by the
laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Corporation agrees to
indemnify and hold harmless FSC and each person, if any, who controls FSC
within the meaning of Section 15 of the Securities Act of 1933 and Section
20 of the Securities Act of 1934, as amended, against any and all loss,
liability, claim, damage and expense whatsoever (including but not limited
to any and all expenses whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or
any claim whatsoever) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectuses or SAIs (as from time to time amended and
supplemented) or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading, unless such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Corporation about FSC by or on behalf of FSC expressly for use in the
Registration Statement, any Prospectuses and SAIs or any amendment or
supplement thereof.
If any action is brought against FSC or any controlling person thereof with
respect to which indemnity may be sought against the Corporation pursuant to
the foregoing paragraph, FSC shall promptly notify the Corporation in
writing of the institution of such action and the Corporation shall assume
the defense of such action, including the employment of counsel selected by
the Corporation and payment of expenses. FSC or any such controlling person
thereof shall have the right to employ separate counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of FSC or
such controlling person unless the employment of such counsel shall have
been authorized in writing by the Corporation in connection with the defense
of such action or the Corporation shall not have employed counsel to have
charge of the defense of such action, in any of which events such fees and
expenses shall be borne by the Corporation. Anything in this paragraph to
the contrary notwithstanding, the Corporation shall not be liable for any
settlement of any such claim of action effected without its written consent.
The Corporation agrees promptly to notify FSC of the commencement of any
litigation or proceedings against the Corporation or any of its officers or
Directors or controlling persons in connection with the issue and sale of
Shares or in connection with the Registration Statement, Prospectuses, or
SAIs.
(b) FSC agrees to indemnify and hold harmless the Corporation, each of
its Directors, each of its officers who have signed the Registration
Statement and each other person, if any, who controls the Corporation within
the meaning of Section 15 of the Securities Act of 1933, but only with
respect to statements or omissions, if any, made in the Registration
Statement or any Prospectus, SAI, or any amendment or supplement thereof in
reliance upon, and in conformity with, information furnished to the
Corporation about FSC by or on behalf of FSC expressly for use in the
Registration Statement or any Prospectus, SAI, or any amendment or
supplement thereof. In case any action shall be brought against the
Corporation or any other person so indemnified based on the Registration
Statement or any Prospectus, SAI, or any amendment or supplement thereof,
and with respect to which indemnity may be sought against FSC, FSC shall
have the rights and duties given to the Corporation, and the Corporation and
each other person so indemnified shall have the rights and duties given to
FSC by the provisions of subsection (a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Corporation or its shareholders to which such
person would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of the duties of such person or
by reason of the reckless disregard by such person of the obligations and
duties of such person under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted pursuant
to Section 17 of the Investment Company Act of 1940, as amended, for
Directors, officers, FSC and controlling persons of the Corporation by the
Corporation pursuant to this Agreement, the Corporation is aware of the
position of the Securities and Exchange Commission as set forth in the
Investment Company Act Release No. IC-11330 Therefore, the Corporation
undertakes that in addition to complying with the applicable provisions of
this Agreement, in the absence of a final decision on the merits by a court
or other body before which the proceeding was brought, that an
K-14
<PAGE>
indemnification payment will not be made unless in the absence of such a
decision, a reasonable determination based upon factual review has been made
(i) by a majority vote of a quorum of non-party Disinterested Directors, or
(ii) by independent legal counsel in a written opinion that the indemnitee
was not liable for an act of willful misfeasance, bad faith, gross
negligence or reckless disregard of duties. The Corporation further
undertakes that advancement of expenses incurred in the defense of a
proceeding (upon undertaking for repayment unless it is ultimately
determined that indemnification is appropriate) against an officer,
Director, FSC or controlling person of the Corporation will not be made
absent the fulfillment of at least one of the following conditions: (i) the
indemnitee provides security for his undertaking; (ii) the Corporation is
insured against losses arising by reason of any lawful advances; or (iii) a
majority of a quorum of non-party Disinterested Directors or independent
legal counsel in a written opinion makes a factual determination that there
is reason to believe the indemnitee will be entitled to indemnification.
11. FSC is hereby expressly put on notice of the limitation of liability as
set forth in the Articles of Incorporation and agrees that the obligations
assumed by the Corporation pursuant to this Agreement shall be limited in any
case to the Corporation and its assets and FSC shall not seek satisfaction of
any such obligation from the shareholders of the Corporation, the Directors,
officers, employees or agents of the Corporation, or any of them.
12. If at any time the Shares of any Fund are offered in two or more
Classes, FSC agrees to adopt compliance standards as to when a class of shares
may be sold to particular investors.
13. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.
K-15
<PAGE>
Exhibit A
to the
Distributor's Contract
BLANCHARD PRECIOUS METALS FUND, INC.
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated _____________, 1995, between Blanchard Precious
Metals Fund, Inc. and Federated Securities Corp. with respect to the Class of
the Fund set forth above:
1. The Corporation hereby appoints FSC to select a group of financial
institutions ("Financial Institutions") to sell shares of the above-listed
series and Class ("Shares"), at the current offering price thereof as described
and set forth in the prospectuses of the Corporation.
2. FSC will enter into separate written agreements with various firms to
provide the services set forth in Paragraph 1 herein. During the term of this
Agreement, the Corporation will reimburse FSC for payments made by FSC to obtain
services pursuant to this Agreement, a monthly fee computed at the annual rate
of up to .75 of 1% of the average aggregate net asset value of the Shares held
during the month. For the month in which this Agreement becomes effective or
terminates, there shall be an appropriate proration of any fee payable on the
basis of the number of days that the Agreement is in effect during the month.
The fees paid hereunder shall be in an amount equal to the aggregate amount of
periodic fees paid by FSC to Financial Institutions pursuant to Paragraph 3
herein.
3. FSC, in its sole discretion, may pay Financial Institutions a periodic
fee in respect of Shares owned from time to time by their clients or customers.
The schedules of such fees and the basis upon which such fees will be paid shall
be determined from time to time the Corporation's Board of Directors.
4. FSC will prepare reports to the Board of Directors of the Corporation on
a quarterly basis showing amounts paid to the various firms and the purpose for
such payments.
5. In the event any amendment to this Agreement matterially increases the
fees set forth in Paragraph 2, such amendment must be approved by a vote of a
majority of the outstanding voting securities of the appropriate Fund or Class.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated ____________, 1995 between Blanchard Precious Metals Fund, Inc.
and Federated Securities Corp., Blanchard Precious Metals Fund, Inc. executes
and delivers this Exhibit on behalf of the Fund and with respect to the classes
first set forth in this Exhibit.
Witness the due execution hereof this 1st day of __________, 1995.
ATTEST: Blanchard Precious Metals Fund, Inc.
_____________________________________ By:____________________________________
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
_____________________________________ By:____________________________________
Secretary Executive Vice President
(SEAL)
K-16
<PAGE>
FORM OF
RULE 12b-1 AGREEMENT
This Agreement is made between the Financial Institution executing this
Agreement ("Institution") and Federated Securities Corp. ("FSC") for the mutual
funds (referred to individually as the "Fund" and collectively as the "Funds")
for which FSC serves as Distributor of shares of beneficial interest or capital
stock ("Shares") and which have adopted a Rule 12b-1 Plan ("Plan") and approved
this form of agreement pursuant to Rule 12b-1 under the Investment Company Act
of 1940. In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. FSC hereby appoints Institution to render or cause to be rendered
distribution and sales services to the Funds and their shareholders.
2. The services to be provided under Paragraph 1 may include, but are not
limited to, the following:
(a) reviewing the activity in Fund accounts;
(b) providing training and supervision of its personnel;
(c) maintaining and distributing current copies of prospectuses and
shareholder reports;
(d) advertising the availability of its services and products;
(e) providing assistance and review in designing materials to send to
customers and potential customers and developing methods of making such
materials accessible to customers and potential customers; and
(f) responding to customers' and potential customers' questions about
the Funds.
3. During the term of this Agreement, FSC will pay the Institution fees for
each Fund as set forth in a written schedule delivered to the Institution
pursuant to this Agreement. FSC's fee schedule for Institution may be changed by
FSC sending a new fee schedule to Institution pursuant to Paragraph 12 of this
Agreement. For the payment period in which this Agreement becomes effective or
terminates, there shall be an appropriate proration of the fee on the basis of
the number of days that the Rule 12b-1 Agreement is in effect during the
quarter.
4. The Institution will not perform or provide any duties which would cause
it to be a fiduciary with respect to plans or accounts governed by Section 4975
of the Internal Revenue Code, as amended. For purposes of that Section, the
Institution understands that any person who exercises any discretionary
authority or discretionary control with respect to any individual retirement
account or its assets, or who renders investment advice for a fee, or has any
authority or responsibility to do so, or has any discretionary authority or
discretionary responsibility in the administration of such an account, is a
fiduciary.
5. The Institution understands that the Department of Labor views ERISA as
prohibiting fiduciaries of discretionary ERISA assets from receiving fees or
other compensation from funds in which the fiduciary's discretionary ERISA
assets are invested, except to the extent permitted by PTE 77-3 and PTE 77-4. To
date, the Department of Labor has not issued any exemptive order or advisory
opinion that would exempt fiduciaries from this interpretation. Without specific
authorization from the Department of Labor, fiduciaries should carefully avoid
investing discretionary assets in any fund pursuant to an arrangement where the
fiduciary is to be compensated by the fund for such investment. Receipt of such
compensation could violate ERISA provisions against fiduciary self-dealing and
conflict of interest and could subject the fiduciary to substantial penalties.
6. The Institution agrees not to solicit or cause to be solicited directly,
or indirectly at any time in the future, any proxies from the shareholders of
any or all of the Funds in opposition to proxies solicited by management of the
Fund or Funds, unless a court of competent jurisdiction shall so direct or shall
have determined that the conduct of a majority of the Board of Directors or
Trustees of the Fund or Funds constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties. This paragraph 6 will survive
the term of this Agreement.
7. With respect to each Fund, this Agreement shall continue in effect for
one year from the date of its execution, and thereafter for successive periods
of one year if the form of this Agreement is approved at least annually by the
Directors or Trustees of the Fund, including a majority of the members of the
Board of Directors or Trustees of the Fund who are not interested persons of the
Fund and have no direct or indirect financial interest in the operation of the
Fund's Plan or in any related documents to the Plan ("Disinterested Directors or
Trustees") cast in person at a meeting called for that purpose.
K-17
<PAGE>
8. Notwithstanding paragraph 7, this Agreement may be terminated as follows:
(a) at any time, without the payment of any penalty, by the vote of a
majority of the Disinterested Directors or Trustees of the Fund or by a vote
of a majority of the outstanding voting securities of the Fund as defined in
the Investment Company Act of 1940 on not more than sixty (60) days' written
notice to the parties to this Agreement;
(b) automatically in the event of the Agreement's assignment as defined
in the Investment Company Act of 1940 or upon the termination of the
"Distributor's Contract" between the Fund and FSC; and
(c) by either party to the Agreement without cause by giving the other
party at least sixty (60) days' written notice of its intention to
terminate.
9. The termination of this Agreement with respect to any one Fund will not
cause the Agreement's termination with respect to any other Fund.
10. The Institution agrees to use its reasonable efforts to obtain any
taxpayer identification number certification from its customers required under
Section 3406 of the Internal Revenue Code, and any applicable Treasury
regulations, and to provide FSC or its designee with timely written notice of
any failure to obtain such taxpayer identification number certification in order
to enable the implementation of any required backup withholding.
11. This Agreement supersedes any prior service agreements between the
parties for the Funds.
12. This Agreement may be amended by FSC from time to time by the following
procedure. FSC will mail a copy of the amendment to the Institution's address,
as shown below. If the Institution does not object to the amendment within (30)
days after its receipt, the amendment will become part of the Agreement. The
Institution's objection must be in writing and be received by FSC within such
thirty days.
13. This Agreement shall be construed in accordance with the Laws of the
Commonwealth of Pennsylvania.
___________________________________
[Institution]
___________________________________
Address
___________________________________
City State Zip Code
By:________________________________
Authorized Signature
___________________________________
Title
Dated: __________________________, 1995
___________________________________
Print Name of Authorized Signature
FEDERATED SECURITIES CORP.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By:________________________________
James F. Getz, President
K-18
<PAGE>
BLANCHARD PRECIOUS METALS FUND, INC.
-----------------
EXHIBIT A to 12b-1 Agreement with
Federated Securities Corp. ("FSC")
Portfolios
FSC will pay Institution fees for the following portfolios (the "Funds")
effective as of the dates set forth below:
Name Date
---- ----
Blanchard Precious Metals Fund, Inc. ____________, 19
Administrative Fees
1. During the term of this Agreement, FSC will pay Institution a quarterly
fee in respect of each Fund. This fee will be computed at the annual rate of
.75% of the average net asset value of Shares of Blanchard Precious Metals Fund,
Inc., held during the quarter in accounts for which the Institution provides
services under this Agreement, so long as the average net asset value of Shares
in each Fund during the quarter equals or exceeds such minimum amount as FSC
shall from time to time determine and communicate in writing to the Institution.
2. For the quarterly period in which the Agreement becomes effective or
terminates, there shall be an appropriate proration of any fee payable on the
basis of the number of days that the Agreement is in effect during the quarter.
K-19
<PAGE>
FORM OF SALES AGREEMENT WITH
FEDERATED SECURITIES CORP.
This Agreement is entered into between the financial institution executing
this Agreement ("Financial Institution") and Federated Securities Corp. ("FSC")
for The Blanchard Funds (the "Trust), which may be offered in one or more series
(the "Funds") and classes (the "Classes") of shares ("Shares"), for which FSC
serves as Distributor of shares of beneficial interest or capital stock. The
Funds or Classes to which this Agreement applies are set forth in schedule A
herto.
1. Status of Financial Institution as "Bank" or Registered Broker-Dealer.
The Financial Institution represents and warrants to FSC that:
(a) It is either a "bank" as that term is defined in Section 3(a)(6) of
the Securities Exchange Act of 1934 ("Exchange Act") or a broker-dealer
registered with the Securities and Exchange Commission.
(b) If the Financial Institution is a "bank", it is a duly organized and
validly existing bank in good standing under the laws of the jurisdiction in
which it is organized. The Finanical Institution agrees to give written
notice to FSC promptly in the event that it shall cease to be a "bank" as
defined in Section 3(a)(6) of the Exchange Act. In that event, this
Agreement shall be automatically terminated upon such written notice.
(c) If the Financial Institution is a registered broker-dealer, it is a
member of the NASD and it agrees to abide by all of the rules and
regulations of the NASD including, without limitation, the NASD Rules of
Fair Practice. The Financial Institution agrees to notify FSC immediately in
the event of (1) its expulsion or suspension from the NASD, or (2) its being
found to have violated any applicable federal or state law, rule or
regulation arising out of its activities as a broker-dealer or in connection
with this Agreement, or which may otherwise affect in any material way its
ability to act in accordance with the terms of this Agreement. The Financial
Institution's expulsion from the NASD will automatically terminate this
Agreement immediately without notice. Suspension of the Financial
Institution from the NASD for violation of any applicable federal or state
law, rule or regulation will terminate this Agreement effective immediately
upon FSC's written notice of termination to the Financial Institution.
2. Financial Institution Act as Agent for its Customers.
The parties agree that in each transaction in the Shares of the Trust: (a)
the Financial Institution is acting as agent for the customer; (b) each
transaction is initiated solely upon the order of the customer; (c) as between
the Financial Institution and its customer, the customer will have full
beneficial ownership of all Shares of the Trust to which this Agreement applies;
(d) each transaction shall be for the account of the customer and not for the
Financial Institution's account; and (e) each transaction shall be without
recourse to the Financial Institution provided that the Financial Institution
acts in accordance with the terms of this Agreement. The Financial Institution
shall not have any authority in any transaction to act as FSC's agent or as
agent for the Trust.
3. Execution of Orders for Purchase and Redemption of Shares.
(a) All orders for the purchase of any Shares shall be executed at the
then current public offering price per share (i.e., the net asset value per
share plus the applicable sales load, if any) and all orders for the
redemption of any Shares shall be executed at the net asset value per share,
plus any applicable redemption charge, in each case as described in the
prospectus of the Fund or Class. FSC and the Trust reserve the right to
reject any purchase request at their sole discretion. If required by law,
each transaction shall be confirmed in writing on a fully desclosed basis
and, if confirmed by FSC, a copy of each confirmation shall be sent
simultaneously to the Financial Institution if the Financial Institution so
requests.
(b) The procedures relating to all orders and the handling of them will
be subject to the terms of the prospectus of each Fund or Class and FSC's
written instructions to the Financial Institution from time to time.
(c) Payments for Shares shall be made as specified in the applicable
Fund or Class prospectus. If payment for any purchase order is not received
in accordance with the terms of the applicable Fund or Class prospectus, FSC
reserves the right, without notice, to cancel the sale and to hold the
Financial Institution responsible for any loss sustained as a result
thereof.
K-20
<PAGE>
(d) The Financial Institution agrees to provide such security as is
necessary to prevent any unauthorized use of the Trust's recordkeeping
system, accessed via any computer hardware or software provided to the
Financial Institution by FSC.
4. Fees Payable to the Financial Institution from Sales Loads.
(a) On each order accepted by FSC, in exchange for the performance of
sales and/or administrative services, the Financial Institution will be
entitled to receive from the amount paid by the Financial Institution's
customer the applicable percentage of the sales load, if any, as established
by FSC. The sales loads for any Fund or Class shall be those set forth in
its prospectus. The portion of the sales load payable to the Financial
Instituion may be changed at any time at FSC's sole discretion upon thirty
(30) days' written notice to the Financial Institution.
(b) Transactions may be settled by the Financial Institution: (1) by
payment of the full purchase price to FSC less an amount equal to the
Financial Institution's applicable percentage of the sales load, or (2) by
payment of the full purchase price to FSC, in which case FSC shall pay to
the Financial Institution, not less frequently than monthly, the aggregate
fees due it on orders received and settled.
5. Payment of Rule 12b-1 Fees to the Financial Institution.
Subject to and in accordance with the terms of each Fund or Class prospectus
and the Rule 12b-1 Plan, if any, adopted by resolution of theBoard of Trustees,
and the shareholders of any Fund or Class pursuant to Rule 12b-1 under the
Investment Company Act of 1940, FSC may pay fees for sales and/or administrative
support services to certain financial institutions (such as banks and securities
dealers). The Financial Institution may serve as an Administrator, in accordance
with the terms of the form of Rule 12b-1 Agreement attached as Appendix A, for
all of its customers who purchase Shares of any Funds or Classes whose
prospectuses provide for the use of Administrators.
6. Delivery of Prospectuses to Customers.
The Financial Institution will deliver or cause to be delivered to each
customer, at or prior to the time of any purchase of Shares, a copy of the
prospectus of the Fund or Class. The Financial Institution shall not make any
representations concerning any Shares other than those contained in the
prospectus of the Fund or Class or in any promotional materials or sales
literature furnished to the Financial Institution by FSC or the Fund or Class.
7. Indemnification.
(a) The Financial Institution shall indemnify and hold harmless FSC, the
Trust, the transfer agents of the Trust, and their respective subsidiaries,
affiliates, officers, directors, agents and employees from all direct or
indirect liabilities, losses or costs (including attorneys fees) arising
from, related to or otherwise connected with: (1) any breach by the
Financial Institution of any provision of this Agreement; or (2) any actions
or omissions of FSC, the Trust, the transfer agents of the Trust, and their
subsidiaries, affiliates, officers, directors, agents and employees in
reliance upon any oral, written or computer or electronically transmitted
instructions believed to be genuine and to have been given by or on behalf
of the Financial Institution.
(b) FSC shall indemnify and hold harmless the Financial Institution and
its subsidiaries, affiliates, officers, directors, agents and employees from
and against any and all direct or indirect liabilities, losses or costs
(including attorneys fees) arising from, related to or othereise connected
with: (1) any breach by FSC of any provision of this Agreement; or (2) any
alleged untrue statement of a material fact contained in the Trust's
Registration Statement or Prospectuses, or as a result of or based upon any
alleged omission to state a material fact required to be stated, or
necessary to make the statements not misleading.
(c) The agreement of the parties in this Paragraph to indemnify each
other is conditioned upon the party entitled to indemnification (Indemnified
Party) giving notice to the party required to provide indemnification
(Indemnifying Party) promptly after the summons or other first legal process
for any claim as to which indemnity may be sought is served on the
Indemnified Party. The Indemnified Party shall permit the Indemnifying Party
to assume the defense of any such claim or any litigation resulting from it,
provided that counsel for the Indemnifying Party who shall conduct the
defense of such claim or litigation shall be approved by the
K-21
<PAGE>
Indemnified Party (which approval shall not unreasonably be withheld), and
that the Indemnified Party may participate in such defense at its expense.
The failure of the Indemnified Party to give notice as provided in this
subparagraph (c) shall not relieve the Indemnifying Party from any liability
other than its indemnity obligation under this Paragraph. No Indemnifying
Party, in the defense of any such claim or litigation, shall, without the
consent of the Indemnified Party, consent to entry of any judgment or enter
into any settlement that does not include as an unconditional term the
giving by the claimant or plaintiff to the Indemnified Party of a release
from all liability in respect to such claim or litigation.
(d) The provisions of this Paragraph 7 shall survive the termination of
this Agreement.
8. Customer Names Proprietary to the Financial Institution.
(a) The names of the Financial Institution's customers are and shall
remain the Financial Instituition's sole property and shall not be used by
FSC or its affiliates for any purpose except the performance of its duties
and responsibilities under this Agreement and except for servicing and
informational mailings relating to the Trust. Nothwithstanding the
foregoing, this Paragraph 8 shall not prohibit FSC or any of its affililates
from utilizing the names of the Financial Institution's customers for any
purpose if the names are obtained in any manner other than from the
Financial Institution pursuant to this Agreement.
(b) Neither party shall use the name of the other party in any manner
without the other party's written consent, except as required by any
applicable federal or state law, rule or regulation, and except pursuant to
any mutually agreed upon promotional programs.
(c) The provisions of this Paragraph 8 shall survive the termination of
this Agreement.
9. Solicitation of Proxies.
The Financial Institution agrees not to solicit or cause to be solicited
directly, or indirectly, at any time in the future, any proxies from the
shareholders of the Trust in opposition to proxies solicited by management of
the Trust, unless a court of competent jurisdiction shall have determined that
the conduct of a majority of the Board of Trustees of the Trust constitutes
willful misfeasance, bad faith, gross negligence or reckless disregard of their
duties. This Paragraph 9 will survive the term of this Agreement.
10. Certification of Customers' Taxpayer Indentification Numbers.
The Financial Institution agrees to obtain any taxpayer identification
number certification from its customers required under Section 3406 of the
Internal Revenue Code, and any applicable Treasury regulations, and to provide
FSC or its designee with timely written notice of any failure to obtain such
taxpayer identification number certification in order to enable the
implementation of any required backup withholding.
11. Notices.
Except as otherwise specifically provided in this Agreement, all notices
required or permitted to be given pursuant to this Agreement shall be given in
writing and delivered by personal delivery or by postage prepaid, registered or
certified United States first class mail, return receipt requested, or by telex,
telegram or similar means of same day delivery (with a confirming copy by mail
as provided herein). Unless otherwise notified in writing, all notices to FSC
shall be given or sent to FSC at its offices located at Federated Investors
Tower, Pittsburgh, PA 15222-3779, and all notices to the Financial Institution
shall be given or sent to it at its address shown below.
12. Termination and Amendment.
(a) This Agreement shall become effective in this form as of the date
set forth below and may be terminated at any time by either party upon
thirty (30) days' prior notice to the other party. This Agreement supersedes
any prior sales agreements between the parties.
(b) This Agreement may be amended by FSC from time to time by the
following procedure. FSC will mail a copy of the amendment to the Financial
Institution's address, as shown below. If the Financial Instituton does not
K-22
<PAGE>
object to the amendment within thirty (30) days after its receipt, the
amendment will become part of the Agreement. The Financial Institution's
objection must be in writing and be received by FSC within such thirty (30)
days.
13. Governing Law.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Pennsylvania.
___________________________________
[Financial Institution Name]
(Please Print or Type)
___________________________________
Address
___________________________________
City State Zip Code
By:________________________________
Authorized Signature
Dated: ___________________________________
Title
___________________________________
Print Names or Type Name
FEDERATED SECURITIES CORP.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By:________________________________
James F. Getz, President
K-23
<PAGE>
BLANCHARD FUNDS
FORM OF INVESTMENT ADVISORY CONTRACT
This Contract is made this __________ day of __________, 1995 between Virtus
Capital Management, Inc., a Maryland corporation having its principal place of
business in Richmond, Virginia (the "Adviser"), 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 of1940, as amended, and is registered
as such with the Securities and Exchange Commission; and
WHEREAS Adviser 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 Adviser as Investment Adviser for each of the
portfolios ("Funds") of the Trust which executes an exhibit to this Contract,
and Adviser accepts the appointments. Subject to the direction of the Trustees
of the Trust, Adviser 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 Adviser 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. Adviser, 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 and 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 limitatlon, the expenses
of organizing the Trust and continuing its existence; fees and expenses of
trustees and officers of the Trust; fees for investment advisory 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 Adviser, for all services rendered to each
Fund by Adviser 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, the Adviser shall reduce its investment advisory 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
investment advisory fee for such fiscal year. The amount of any such reduction
is to be borne by the Adviser and shall be deducted from the monthly investment
advisory fee otherwise payable to the Adviser during such fiscal year. For the
purposes of this paragraph, the term "fiscal year" shall exclude the portion of
the current fiscal year which shall have elapsed prior to the date hereof and
shall include the portion of the then current fiscal year which shall have
elapsed at the date of termination of this Agreement.
L-1
<PAGE>
6. The net asset value of each Fund's Shares as used herein will he
calculated to the nearest 1/10th of one cent.
7. The Adviser 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 Adviser may, by notice to the Funds, 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) 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) Adviser 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 this 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 Adviser.
10. This Contract may not be assigned by Adviser and shall automatically
terminate in the event of any assignment. Adviser 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 Adviser, Adviser 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 Adviser acknowledges that all sales literature for investment
companies (such as the Trust) are subject to strict regulatory oversight. The
Adviser 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 Adviser 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 Adviser 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 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.
L-2
<PAGE>
EXHIBIT A
to the
Investment Advisory Contract
Blanchard Global Growth Fund
Blanchard 100% Treasury Money Market Fund
Blanchard Short-Term Global Income Fund
Blanchard American Equity Fund
Blanchard Flexible Income Fund
Blanchard Short-Term Bond Fund
Blanchard Flexible Tax-Free Bond Fund
Blanchard Worldwide Emerging Markets Fund
For all services rendered by Adviser hereunder, the above-named Funds of the
Trust shall pay to Adviser and Adviser agrees to accept as full compensation for
all services rendered hereunder, an annual investment advisory fee equal to the
following percentage ("the applicable percentage") of the average daily net
assets of each Fund.
<TABLE>
<CAPTION>
NAME OF FUND PERCENTAGE OF NET ASSETS
- ------------ ------------------------
<S> <C>
Blanchard Global Growth Fund 1.00% 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 100% Treasury Money Market Fund .5% of the first $500 million of the Fund's average daily
net assets, .475% of the Fund's average daily net assets
in excess of $500 million but not exceeding $1 billion,
plus .45% of the Fund's average daily net assets in
excess of $1 billion.
Blanchard Short-Term Global Income Fund .75%
Blanchard American Equity Fund 1.10%
Blanchard Flexible Income Fund .75%
Blanchard Short-Term Bond Fund .75%
Blanchard Flexible Tax-Free Bond Fund .75%
Blanchard Worldwide Emerging Markets Fund 1.25%
</TABLE>
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 Adviser daily.
L-3
<PAGE>
EXHIBIT B
to the
Investment Advisory Contract
Blanchard Growth & Income Fund
Blanchard Capital Growth Fund
The Trust shall pay to VCM, on behalf of the Funds, monthly compensation at
the annual rate of 1.10% of each Fund's average daily net assets, .40% of which,
which would otherwise be received by VCM and paid to The Chase Manhattan Bank,
N.A. ("Chase") for portfolio advisory services, shall be paid to Chase directly
by the Capital Growth Portfolio and the Growth & Income Portfolio, respectively
under separate investment advisory agreements between Chase and the Captal
Growth Portfolio and 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 day of __________, 1995.
ATTEST: Virtus Capital Management, Inc.
_____________________________________ By:____________________________________
Secretary Executive Vice President
ATTEST: Blanchard Funds
_____________________________________ By:____________________________________
Assistant Secretary Vice President
L-4
<PAGE>
BLANCHARD FUNDS
FORM OF DISTRIBUTION PLAN
This Distribution Plan ("Plan") is adopted as of this ____________, 1995, by
the Board of Trustees of Blanchard Funds (the "Trust"), a Massachusetts business
trust with respect to certain classes of shares ("Classes") of the portfolios of
the Trust (the "Funds") set forth in exhibits hereto.
1. This Plan is adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940 ("Act") so as to allow the Trust to make payments as contemplated
herein, in conjunction with the distribution of Classes of the Funds ("Shares").
2. This Plan is designed to provide incentives to financial institutions
("Financial Institutions") to sell Shares and enable the Funds to pay for the
costs and expenses of preparing, printing and distributing prospectuses and
sales literature (including those sent to shareholders, prospective
shareholders, and Financial Institutions) and the costs of the expenses of the
implementation and operation of the Plan. Federated Securities Corp. ("FSC")
will pay Financial Institutions a fee in respect of Shares of the Funds owned
from time to time by their clients or customers. The schedules of such fees paid
or reimbursed by the Trust and the basis upon which such fees shall be paid or
reimbursed shall be determined from time to time by the Trust's Board of
Trustees in respect of the Classes as set forth on the applicable exhibit.
3. Any payment to Financial Institutions paid or reimbursed by the Trust
will be made by FSC pursuant to the "Distributor's Contract" and the "Rule 12b-1
Agreement" which are related documents to the Plan.
4. FSC has the right (i) to select, in its sole discretion, the Financial
Institutions to participate in the Plan and (ii) to terminate without cause and
in its sole discretion any Rule 12b-1 Agreement.
5. Quarterly in each year that this Plan remains in effect, the Funds'
distributor shall prepare and furnish to the Board of Trustees of the Trust, and
the Board of Trustees shall review, a written report of the amounts expended
under the Plan and the purpose for which such expenditures were made.
6. This Plan shall become effective with respect to each Class ( i) after
approval by majority votes of: (a) the Trust's Board of Trustees; (b) the
Disinterested Trustees of the Trust, cast in person at a meeting called for the
purpose of voting on the Plan; and (c) the outstanding voting securities of the
particular Class, as defined in Section 2(a)(42) of the Act and (ii) upon
execution of an exhibit adopting this Plan with respect to such Class.
7. This Plan shall remain in effect with respect to each Class presently set
forth on an exhibit and any subsequent Classes added pursuant to an exhibit
during the initial year of this Plan for the period of one year from the date
set forth above and may be continued thereafter if this Plan is approved with
respect to each Class at least annually by a majority of the Trust's Board of
Trustees and a majority of the Disinterested Trustees, cast in person at a
meeting called for the purpose of voting on such Plan. If this Plan is adopted
with respect to a Class after the first annual approval by the Trustees as
described above, this Plan will be effective as to that Class upon execution of
the applicable exhibit pursuant to the provisions of paragraph 6(ii) above and
will continue in effect until the next annual approval of this Plan by the
Trustees and thereafter for successive periods of one year subject to approval
as described above.
8. All material amendments to this Plan must be approved by a vote of the
Board of Trustees of the Trust and of the Disinterested Trustees, cast in person
at a meeting called for the purpose of voting on it.
9. This Plan may not be amended in order to increase materially the costs
which the Funds may bear for distribution pursuant to the Plan without being
approved by a majority vote of the outstanding voting securities of the Funds as
defined in Section 2(a)(42) of the Act.
10. This Plan may be terminated with respect to a particular Fund at any
time by: (a) a majority vote of the Disinterested Trustees; or (b) a vote of a
majority of the outstanding voting securities of the particular Fund as defined
in Section 2(a)(42) of the Act; or (c) by FSC on 60 days notice to the
particular Fund.
11. While this Plan shall be in effect, the selection and nomination of
Disinterested Trustees of the Trust shall be committed to the discretion of the
Disinterested Trustees then in office.
12. All agreements with any person relating to the implementation of this
Plan shall be in writing and any agreement related to this Plan shall be subject
to termination, without penalty, pursuant to the provisions of Paragraph 10
herein.
13. This Plan shall be construed in accordance with and governed by the laws
of the Commonwealth of Pennsylvania.
M-1
<PAGE>
EXHIBIT A
to the
Distribution Plan
BLANCHARD FUNDS
Blanchard Global Growth Fund
Blanchard Short-Term Global Income Fund
Blanchard American Equity Fund
Blanchard Flexible Income Fund
Blanchard Short-Term Bond Fund
Blanchard Flexible Tax-Free Bond Fund
Blanchard Worldwide Emerging Markets Fund
Blanchard Growth & Income Fund
Blanchard Capital Growth Fund
This Distribution Plan is adopted by Blanchard Funds with respect to the
Classes of Shares of the portfolios of the Trust set forth above ("Class").
The fees to be paid by FSC and reimbursed by the Class shall not exceed the
annual rate of .25 of 1% of the average aggregate net asset value of the Shares
of the of Blanchard Short-Term Global Income Fund, Blanchard Flexible Income
Fund, Blanchard Short-Term Bond Fund and Blanchard Flexible Tax-Free Bond Fund,
.50 of 1% of the average aggregate net asset value of the shares of Blanchard
American Equity Fund, Blanchard Worldwide Emerging Markets Fund, Blanchard
Growth & Income Fund and Blanchard Capital Growth Fund, and .75 of 1% of the
average aggregate net asset value of the shares of Blanchard Global Growth Fund,
held during the month.
Witness the due execution hereof this 1st day of __________, 1995.
BLANCHARD FUNDS
By:________________________________
President
M-2
<PAGE>
BLANCHARD FUNDS
FORM OF DISTRIBUTOR'S CONTRACT
AGREEMENT made this _____________ day of __________, 1995, by and between
Blanchard Funds (the "Trust"), a Massachusetts business trust, and FEDERATED
SECURITIES CORP. ("FSC"), a Pennsylvania Corporation.
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Trust hereby appoints FSC as its agent to sell and distribute shares
of the Trust which may be offered in one or more series (the "Funds") consisting
of one or more classes (the "Classes") of shares (the "Shares"), as described
and set forth on one or more exhibits to this Agreement, at the current offering
price thereof as described and set forth in the current Prospectuses of the
Trust. FSC hereby accepts such appointment and agrees to provide such other
services for the Trust, if any, and accept such compensation from the Trust, if
any, as set forth in the applicable exhibits to this Agreement.
2. The sale of any Shares may be suspended without prior notice whenever in
the judgment of the Trust it is in its best interest to do so.
3. Neither FSC nor any other person is authorized by the Trust to give any
information or to make any representation relative to any Shares other than
those contained in the Registration Statement, Prospectuses, or Statements of
Additional Information ("SAIs") filed with the Securities and Exchange
Commission, as the same may be amended from time to time, or in any supplemental
information to said Prospectuses or SAIs approved by the Trust. FSC agrees that
any other information or representations other than those specified above which
it or any dealer or other person who purchases Shares through FSC may make in
connection with the offer or sale of Shares, shall be made entirely without
liability on the part of the Trust. No person or dealer, other than FSC, is
authorized to act as agent for the Trust for any purpose. FSC agrees that in
offering or selling Shares as agent of the Trust, it will, in all respects, duly
conform to all applicable state and federal laws and the rules and regulations
of the National Association of Securities Dealers, Inc., including its Rules of
Fair Practice. FSC will submit to the Trust copies of all sales literature
before using the same and will not use such sales literature if disapproved by
the Trust.
4. This Agreement is effective with respect to each Class as of the date of
execution of the applicable exhibit and shall continue in effect with respect to
each Class presently set forth on an exhibit and any subsequent Classes added
pursuant to an exhibit during the initial term of this Agreement for one year
from the date set forth above, and thereafter for successive periods of one year
if such continuance is approved at least annually by the Trustees of the Trust
including a majority of the members of the Board of Trustees of the Trust who
are not interested persons of the Trust and have no direct or indirect financial
interest in the operation of any Distribution Plan relating to the Trust or in
any related documents to such Plan ("Disinterested Trustees") cast in person at
a meeting called for that purpose. If a Class is added after the first annual
approval by the Trustees as described above, this Agreement will be effective as
to that Class upon execution of the applicable exhibit and will continue in
effect until the next annual approval of this Agreement by the Trustees and
thereafter for successive periods of one year, subject to approval as described
above.
5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of a majority
of the Disinterested Trustees or by a majority of the outstanding voting
securities of the particular Fund or Class on not more than sixty (60) days'
written notice to any other party to this Agreement. This Agreement may be
terminated with regard to a particular Fund or Class by FSC on sixty (60) days'
written notice to the Trust.
6. This Agreement may not be assigned by FSC and shall automatically
terminate in the event of an assignment by FSC as defined in the Investment
Company Act of 1940, as amended, provided, however, that FSC may employ such
other person, persons, corporation or corporations as it shall determine in
order to assist it in carrying out its duties under this Agreement.
7. FSC shall not be liable to the Trust for anything done or omitted by it,
except acts or omissions involving willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties imposed by this Agreement.
8. This Agreement may be amended at any time by mutual agreement in writing
of all the parties hereto, provided that such amendment is approved by the
Trustees of the Trust including a majority of the Disinterested Trustees of the
Trust cast in person at a meeting called for that purpose.
N-1
<PAGE>
9. This Agreement shall be construed in accordance with and governed by the
laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Trust agrees to
indemnify and hold harmless FSC and each person, if any, who controls
FSC within the meaning of Section 15 of the Securities Act of 1933 and
Section 20 of the Securities Act of 1934, as amended, against any and
all loss, liability, claim, damage and expense whatsoever (including but
not limited to any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced
or threatened, or any claim whatsoever) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectuses or SAIs (as
from time to time amended and supplemented) or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with
written information furnished to the Trust about FSC by or on behalf of
FSC expressly for use in the Registration Statement, any Prospectuses
and SAIs or any amendment or supplement thereof.
If any action is brought against FSC or any controlling person thereof
with respect to which indemnity may be sought against the Trust pursuant
to the foregoing paragraph, FSC shall promptly notify the Trust in
writing of the institution of such action and the Trust shall assume the
defense of such action, including the employment of counsel selected by
the Trust and payment of expenses. FSC or any such controlling person
thereof shall have the right to employ separate counsel in any such
case, but the fees and expenses of such counsel shall be at the expense
of FSC or such controlling person unless the employment of such counsel
shall have been authorized in writing by the Trust in connection with
the defense of such action or the Trust shall not have employed counsel
to have charge of the defense of such action, in any of which events
such fees and expenses shall be borne by the Trust. Anything in this
paragraph to the contrary notwithstanding, the Trust shall not be liable
for any settlement of any such claim of action effected without its
written consent. The Trust agrees promptly to notify FSC of the
commencement of any litigation or proceedings against the Trust or any
of its officers or Trustees or controlling persons in connection with
the issue and sale of Shares or in connection with the Registration
Statement, Prospectuses, or SAIs.
(b) FSC agrees to indemnify and hold harmless the Trust, each of its
Trustees, each of its officers who have signed the Registration
Statement and each other person, if any, who controls the Trust within
the meaning of Section 15 of the Securities Act of 1933, but only with
respect to statements or omissions, if any, made in the Registration
Statement or any Prospectus, SAI, or any amendment or supplement thereof
in reliance upon, and in conformity with, information furnished to the
Trust about FSC by or on behalf of FSC expressly for use in the
Registration Statement or any Prospectus, SAI, or any amendment or
supplement thereof. In case any action shall be brought against the
Trust or any other person so indemnified based on the Registration
Statement or any Prospectus, SAI, or any amendment or supplement
thereof, and with respect to which indemnity may be sought against FSC,
FSC shall have the rights and duties given to the Trust, and the Trust
and each other person so indemnified shall have the rights and duties
given to FSC by the provisions of subsection (a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Trust or its shareholders to which such person
would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of the duties of such person or
by reason of the reckless disregard by such person of the obligations
and duties of such person under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted pursuant
to Section 17 of the Investment Company Act of 1940, as amended, for
Trustees, officers, FSC and controlling persons of the Trust by the
Trust pursuant to this Agreement, the Trust is aware of the position of
the Securities and Exchange Commission as set forth in the Investment
Company Act Release No. IC-11330. Therefore, the Trust undertakes that
in addition to complying with the applicable provisions of this
Agreement, in the absence of a final decision on the merits by a court
or other body before which the proceeding was brought, that an
indemnification payment will not be made unless in the absence of such a
decision, a reasonable determination based upon factual review has been
made (i) by a majority vote of a quorum of non-party Disinterested
Trustees, or (ii) by independent legal counsel in a written opinion that
the indemnitee was not liable for an act of willful misfeasance, bad
faith, gross negligence or reckless disregard of duties. The Trust
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<PAGE>
further undertakes that advancement of expenses incurred in the defense
of a proceeding (upon undertaking for repayment unless it is ultimately
determined that indemnification is appropriate) against an officer,
Trustee, FSC or controlling person of the Trust will not be made absent
the fulfillment of at least one of the following conditions: (i) the
indemnitee provides security for his undertaking; (ii) the Trust is
insured against losses arising by reason of any lawful advances; or
(iii) a majority of a quorum of non-party Disinterested Trustees or
independent legal counsel in a written opinion makes a factual
determination that there is reason to believe the indemnitee will be
entitled to indemnification.
11. FSC is hereby expressly put on notice of the limitation of liability as
set forth in the Declaration of Trust and agrees that the obligations assumed by
the Trust pursuant to this Agreement shall be limited in any case to the Trust
and its assets and FSC shall not seek satisfaction of any such obligation from
the shareholders of the Trust, the Trustees, officers, employees or agents of
the Trust, or any of them.
12. If at any time the Shares of any Fund are offered in two or more
Classes, FSC agrees to adopt compliance standards as to when a class of shares
may be sold to particular investors.
13. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.
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Exhibit B
to the
Distributor's Contract
BLANCHARD FUNDS
Blanchard Global Growth Fund
Blanchard Short-Term Global Income Fund
Blanchard American Equity Fund
Blanchard Flexible Income Fund
Blanchard Short-Term Bond Fund
Blanchard Flexible Tax-Free Bond Fund
Blanchard Worldwide Emerging Markets Fund
Blanchard Growth & Income Fund
Blanchard Capital Growth Fund
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated ___________, 1995, between Blanchard Funds and
Federated Securities Corp. with respect to the Class of the Fund set forth
above:
1. The Trust hereby appoints FSC to select a group of financial institutions
("Financial Institutions") to sell shares of the above-listed series and Class
("Shares"), at the current offering price thereof as described and set forth in
the prospectuses of the Trust.
2. FSC will enter into separate written agreements with various firms to
provide the services set forth in Paragraph 1 herein. During the term of this
Agreement, the Trust will reimburse FSC for payments made by FSC to obtain
services pursuant to this Agreement, a monthly fee computed at the annual rate
of up to .25 of 1% of the average aggregate net asset value of the Shares of the
of Blanchard Short-Term Global Income Fund, Blanchard Flexible Income Fund,
Blanchard Short-Term Bond Fund and Blanchard Flexible Tax-Free Bond Fund, .50 of
1% of the average aggregate net asset value of the shares of Blanchard American
Equity Fund, Blanchard Worldwide Emerging Markets Fund, Blanchard Growth &
Income Fund and Blanchard Capital Growth Fund, and .75 of 1% of the average
aggregate net asset value of the shares of Blanchard Global Growth Fund, held
during the month. For the month in which this Agreement becomes effective or
terminates, there shall be an appropriate proration of any fee payable on the
basis of the number of days that the Agreement is in effect during the month.
The fees paid hereunder shall be in an amount equal to the aggregate amount of
periodic fees paid by FSC to Financial Institutions pursuant to Paragraph 3
herein.
3. FSC, in its sole discretion, may pay Financial Institutions a periodic
fee in respect of Shares owned from time to time by their clients or customers.
The schedules of such fees and the basis upon which such fees will be paid shall
be determined from time to time by the Trust's Board of Trustees.
4. FSC will prepare reports to the Board of Trustees of the Trust on a
quarterly basis showing amounts paid to the various firms and the purpose for
such payments.
5. In the event any amendment to this Agreement materially increases the
fees set forth in Paragraph 2, such amendment must be approved by a vote of a
majority of the outstanding voting securities of the appropriate Fund or Class.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated 1995 between Blanchard Funds and Federated Securities Corp.,
Blanchard Funds executes and delivers this Exhibit on behalf of the Blanchard
Global Growth Fund, Blanchard Short-Term Global Income Fund, Blanchard American
Equity Fund, Blanchard Flexible Income Fund, Blanchard Short-Term Bond Fund,
Blanchard Flexible Tax-Free Bond Fund, Blanchard Worldwide Emerging Markets
Fund, Blanchard Growth & Income Fund, Blanchard Capital Growth Fund and with
respect to the classes first set forth in this Exhibit.
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<PAGE>
Witness the due execution hereof this 1st day of __________, 1995.
ATTEST: BLANCHARD FUNDS
_____________________________________ By:____________________________________
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
_____________________________________ By:____________________________________
Secretary Executive Vice President
(SEAL)
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<PAGE>
FORM OF RULE 12B-1 AGREEMENT
This Agreement is made between the Financial Institution executing this
Agreement ("Institution") and Federated Securities Corp ("FSC") For the mutual
funds (referred to individually as the Fund and collectively as the Funds") for
which FSC serves as Distributor of shares of beneficial interest or capital
stock ("Shares") and which have adopted a Rule 12b-1 Plan ('Plan") and approved
this form of Agreement pursuant to Rule 12b-1 under the Investment Company Act
of 1940. In consideration of the mutual covenants hereinafter contained, it as
hereby agreed by and between the parties hereto as follows:
1. FSC hereby appoints Institution to render or cause to be rendered
distribution and sales services to the Funds and their shareholders
2 The services to be provided under Paragraph 1 may include, but are not
limited to, the following:
(a) reviewing the activity in Fund accounts;
(b) providing training and supervision of its personnel;
(c) maintaining and distributing current copies of prospectuses and
shareholder reports;
(d) advertising the availability of its services and products;
(e) providing assistance and review in designing materials to send to
customers and potential customers and developing methods of making such
materials accessible to customers and potential customers; and
(f) responding to customers' and potential customers questions about the
Funds.
3. During the term of this Agreement, FSC will pay the Institution fees for
each Fund as set forth in a written schedule delivered to the Institution
pursuant to this Agreement. FSC's fee schedule for Institution may be changed by
FSC sending a new fee schedule to Institution pursuant to Paragraph 12 of this
Agreement For the payment period in which this Agreement becomes effective or
terminates, there shall be an appropriate probation of the fee on the basis of
the number of days that the Rule 12b-1 Agreement is in effect during the
quarter.
4. The Institution will not perform or provide any duties which would cause
it to be a fiduciary with respect to plans or accounts governed by Section 4975
of the Internal Revenue Code, as amended. For purposes of that Section, the
Institution understands that any person who exercises any discretionary
authority or discretionary control with respect to any individual retirement
account or its assets or who renders investment advice for a fee, or has any
authority or responsibility to do so, or has any discretionary authority or
discretionary responsibility in the administration of such an discount, is a
fiduciary.
5. The Institution understands that the Department of Labor views ERISA as
prohibiting fiduciaries of discretionary ERISA assets from receiving fees or
other compensation from funds in which the fiduciary s discretionary ERISA
assets are invested, except to the extent permitted by PTE 77-3 and PTE 77-4. To
date, the Department of Labor has not issued any exemptive order or Advisory
opinion that would exempt fiduciaries from this interpretation. Without specific
authorization from the Department of Labor, fiduciaries should carefully avoid
investing discretionary assets in any fund pursuant to an arrangement where the
fiduciary is to be compensated by the fond for such investment. Receipt of such
compensation could violate ERISA provisions against fiduciary self-dealing and
conflict of interest and could subject the Fiduciary to substantial penalties.
6. The Institution agrees not to solicit or cause to be solicited directly,
or indirectly at any time in the future any proxies from the shareholders of any
or all of the Funds in opposition to proxies solicited by management of the Fund
or Funds, unless a court of competent jurisdiction shall so direct or shall have
determined that the conduct of a majority of the Board of Directors or Trustees
of the Fund or Funds constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties. This paragraph 6 will survive
the term of this Agreement.
7. With respect to each Fund, this Agreement shall continue in effect for
one year from the date of its execution, and thereafter for successive periods
of one year if the form of this Agreement is approved at least annually by the
Directors or Trustees of the Fund, including a majority of the members of the
Board of Directors or Trustees of the Fund who are not interested persons of the
Fund and have no direct or indirect financial interest in the operation of the
Fund's Plan or in any related documents to the Plan ("Disinterested Directors or
Trustees") cast in person at a meeting called for that purpose.
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<PAGE>
8. Notwithstanding paragraph 7, this Agreement may be terminated as follows:
(a) at any time without the payment of any penalty, by the vote of a
majority of the Disinterested Directors or Trustees of the Fund or by a vote
of a majority of the outstanding voting securities of the Fund as defined in
the Investment Company Act of 1940 on not more than sixty (60) days' written
notice to the parties to this Agreement;
(b) automatically in the event of the Agreement's assignment as defined
in the Investment Company Act of 1940 or upon the termination of the
"Distributor's Contract" between the Fund and FSC; and
(c) by either party to the Agreement without cause by giving the other
party at least sixty (60) days' written notice of its intention to
terminate.
9. The termination of this Agreement with respect to any one Fund will not
cause the Agreement's termination with respect to any other Fund.
10. The Institution agrees to use its reasonable efforts to obtain any
taxpayer identification number certification from its customers required under
Section 3406 of the Internal Revenue Code, and any applicable Treasury
regulations, and to provide FSC or its designee with timely written notice of
any failure to obtain such taxpayer identification number certification in order
to enable the implementation of any required backup withholding.
11. This Agreement supersedes any prior service agreements between the
parties for the Funds.
12. This Agreement may be amended by FSC from time to time by the following
procedure. FSC will mail a copy of the amendment to the Institution's address,
as shown below. If the Institution does not object to the amendment within
thirty (30) days after its receipt, the amendment will become part of the
Agreement. The Institution's objection must be in writing and be received by FSC
within each thirty days.
13. This Agreement shell be construed in accordance with the Laws of the
Commonwealth of Pennsylvania.
___________________________________
[Institution]
___________________________________
Address
___________________________________
City State Zip Code
Dated: __________________________, 1995 By:________________________________
Authorized Signature
___________________________________
Title
___________________________________
Print Name of Authorized Signature
FEDERATED SECURITIES CORP.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By:________________________________
James F. Getz, President
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APPENDIX A
RULE 12B-1 AGREEMENT
This agreement is made between the Financial Institution executing this
Agreement ("Administrator") and Federated Securities Corp. ("FSC") for the
mutual funds (referred to individually as the "Fund" and collectively as the
"Funds") for which FSC serves as Distributor of shares of beneficial interest or
capital stock ("Shares") and which have adopted a Rule 12b-1 Plan ("Plan") and
approved this form of agreement pursuant to Rule 12b-1 under the Investment
Company Act of 1940. In consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. FSC hereby appoints Administrator to render or cause to be rendered sales
and administrative support services to the Funds and their shareholders.
2. The services to be provided under Paragraph 1 may include, but are not
limited to advertising, compensation of sales personnel, mailing of
prospectuses, providing assistance and review in designing materials to send to
potential customers, and such other services as are primarily intended to result
in sales of Shares by the Funds.
3. During the term of this Agreement, FSC will pay the Administrator fees
for each Fund as set forth in a written schedule delivered to the Administrator
pursuant to this Agreement. FSC's fee schedule for Administrator may be changed
by FSC sending a new fee schedule to Administrator pursuant to Paragraph 12 of
this Agreement. For the payment period in which this Agreement become effective
or terminates, there shall be an appropriate proration of the fee on the basis
of the number of days that the Rule 12b-1 Agreement is in effect during the
quarter.
4. The Administrator will not perform or provide any duties which would
cause it to be a fiduciary under Section 4975 of the Internal Revenue Code, as
amended. For purposes of that Section, the Administrator understands that any
person who exercises any discretionary authority or discretionary control with
respect to any individual retirement account or its assets, or who renders
investment advice for a fee, or has any authority or responsibility to do so, or
has any discretionary authority or discretionary responsibility in the
administration of such an account, is a fiduciary.
5. The Administrator understands that the Department of Labor views ERISA as
prohibiting fiduciaries of discretionary ERISA assets from receiving
administrative service fees or other compensation from funds in which the
fiduciary's discretionary ERISA assets are invested. To date, the Department of
Labor has not issued any exemptive order or advisory opinion that would exempt
fiduciaries from this interpretation. Without specific authorization from the
Department of Labor, fiduciaries should carefully avoid investing discretionary
assets in any fund pursuant to an arrangement where the fiduciary is to be
compensated by the fund for such investment. Receipt of such compensation could
violate ERISA provisions against fiduciary self-dealing and conflict of interest
and could subject the fiduciary to substantial penalties.
6. The Administrator agrees not to solicit or cause to be solicited
directly, or indirectly at any time in the future, any proxies from the
shareholders of any or all of the Funds in opposition to proxies solicited by
management of the Fund or Funds, unless a court of competent jurisdiction shall
have determined that the conduct of a majority of the Board of Directors or
Trustees of the Fund or Funds constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties. This paragraph 6 will survive
the term of this Agreement.
7. With respect to each Fund, this Agreement shall continue in effect for
one year from the date of its execution, and thereafter for successive periods
of one year if the form of this Agreement is approved at least annually by the
Directors or Trustees of the Fund, including a majority of the members of the
Board of Directors or Trustees of the Fund who are not interested persons of the
Fund and have no direct or indirect financial interest in the operation of the
Fund's Plan or in any related documents to the Plan ("Disinterested Directors or
Trustees") cast in person at a meeting called for that purpose.
8. Notwithstanding paragraph 7, this Agreement may be terminated as follows;
(a) at any time, without the payment of any penalty, by the wrote of a
majority of the Disinterested Directors or Trustees of the Fund or by a vole
of a majority of the outstanding voting securities of the Fund as defined in
the Investment Company Act of 1940 on not more than sixty (60) days' written
notice to the parties to this Agreement;
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<PAGE>
(b) automatically in the event of the Agreement's assignment as defined
in the Investment Company Act of 1940 or upon the termination of the
"Administrative Support and Distributor's Contract" or "Distributor's
Contract" between the Fund and FSC; and
(c) by either party to the Agreement without cause by giving the other
party at least sixty (60) days' written notice of its intention to
terminate.
9. The termination of this Agreement with respect to any one Fund will not
cause the Agreement's termination with respect to any other Fund.
10. The Administrator agrees to obtain any taxpayer identification number
certification from its customers required under Section 3406 of the Internal
Revenue Code, and any applicable Treasury regulations, and to provide FSC or its
designee with timely written notice of any failure to obtain such taxpayer
identification number certification in order to enable the implementation of any
required backup withholding.
11. This Agreement supersedes any prior service agreements between the
parties for the Fund.
12. This Agreement may be amended by FSC from time to time by the following
procedure. FSC will mail a copy of the amendment to the Administrator's address,
as shown below. If the Administrator does not object to the amendment within
thirty (30) days after its receipt, the amendment will become part of the
Agreement. The Administrator's objection must be in writing and be received by
FSC within such thirty days.
13. This Agreement shall be construed in accordance with the Laws of the
Commonwealth of Pennsylvania.
___________________________________
Administrator
___________________________________
Address
___________________________________
City State Zip Code
By:________________________________
Authorized Signature
Dated:
___________________________________
Title
___________________________________
Print Name of Authorized Signature
FEDERATED SECURITIES CORP.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By:________________________________
James F. Getz, President
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<PAGE>
FORM OF SALES AGREEMENT WITH FEDERATED SECURITIES CORP
This Agreement is entered into between the financial institution executing
this Agreement ("Financial Institution") and Federated Securities Corp. ("FSC")
for The Blanchard Funds (the "Trust"), which may be offered in one or more
series (the "Funds") and classes (the "Classes") of shares ("Shares"), for which
FSC serves as Distributor of shares of beneficial interest or capital stock. The
Funds or Classes to which this Agreement applies are set forth in Schedule A
hereto.
1. Status of Financial Institution as "Bank" or Registered Broker-Dealer
The Financial Institution represents and warrants to FSC that:
(a) It is either a "bank" as that term is defined in Section 3(a)(6) of
the Securities Exchange Act of 1934 ("Exchange Act") or a broker-dealer
registered with the Securities and Exchange Commission.
(b) If the Financial Institution is a "bank", it is a duly organized and
validly existing bank in good standing under the laws of the jurisdiction in
which it is organized. The Financial Institution agrees to give written
notice to FSC promptly in the event that it shall cease to be a "bank" as
defined in Section 3(a)(6) of the Exchange Act. In that event, this
Agreement shall be automatically terminated upon such written notice.
(c) If the Financial Institution is a registered broker-dealer, it is a
member of the NASD and it agrees to abide by all of the rules and
regulations of the NASD including, without limitation, the NASD Rules of
Fair Practice. The Financial Institution agrees to notify FSC immediately in
the event of (1) its expulsion or suspension from the NASD, or (2) its being
found to have violated any applicable federal or state law, rule or
regulation arising out of its activities as a broker-dealer or in connection
with this Agreement, or which may otherwise affect in any material way its
ability to act in accordance with the terms of this Agreement. The Financial
Institution's expulsion from the NASD will automatically terminate this
Agreement immediately without notice. Suspension of the Financial
Institution from the NASD for violation of any applicable federal or state
law, rule or regulation will terminate this Agreement effective immediately
upon FSC's written notice of termination to the Financial Institution.
2. Financial Institution Acts as Agent for its Customers
The parties agree that in each transaction in the Shares of the Trust: (a)
the Financial Institution is acting as agent for the customer; (b) each
transaction is initiated solely upon the order of the customer; (c) as between
the Financial Institution and its customer, the customer will have full
beneficial ownership of all Shares of the Trust to which this Agreement applies;
(d) each transaction shall be for the account of the customer and not for the
Financial Institution's account; and (e) each transaction shall be without
recourse to the Financial Institution provided that the Financial Institution
acts in accordance with the terms of this Agreement. The Financial Institution
shall not have any authority in any transaction to act as FSC's agent or as
agent for the Trust.
3. Execution of Orders for Purchase and Redemption of Shares
(a) All orders for the purchase of any Shares shall be executed at the
then current public offering price per share (i.e., the net asset value per
share plus the applicable sales load, if any) and all orders for the
redemption of any Shares shall be executed at the net asset value per share,
plus any applicable redemption charge, in each case as described in the
prospectus of the Fund or Class. FSC and the Trust reserve the right to
reject any purchase request at their sole discretion. If required by law,
each transaction shall be confirmed in writing on a fully disclosed basis
and, if confirmed by FSC, a copy of each confirmation shall be sent
simultaneously to the Financial Institution if the Financial Institution so
requests.
(b) The procedures relating to all orders and the handling of them will
be subject to the terms of the prospectus of each Fund or Class and PSC's
written instructions to the Financial Institution from time to time.
(c) Payments for Shares shall be made as specified in the applicable
Fund or Class prospectus. If payment for any purchase order is not received
in accordance with the terms of the applicable Fund or Class prospectus, FSC
reserves the right, without notice, to cancel the sale and to hold the
Financial Institution responsible for any loss sustained as a result
thereof.
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<PAGE>
(d) The Financial Institution agrees to provide such security as is
necessary to prevent any unauthorized use of the Trust's recordkeeping
system, accessed via any computer hardware or software provided to the
Financial Institution by FSC.
4. Fees Payable to the Financial Institution from Sales Loads
(a) On each order accepted by FSC, in exchange for the performance of
sales and/or administrative services, the Financial Institution will be
entitled to receive from the amount paid by the Financial Institution's
customer the applicable percentage of the sales load, if any, as established
by FSC. The sales loads for any Fund or Class shall be those set forth in
its prospectus. The portion of the sales load payable to the Financial
Institution may be changed at any time at FSC's sole discretion upon thirty
(30) days' written notice to the Financial Institution.
(b) Transactions may be settled by the Financial Institution: (1) by
payment of the full purchase price to FSC less an amount equal to the
Financial Institution's applicable percentage of the sales load, or (2) by
payment of the full purchase price to FSC, in which case FSC shall pay to
the Financial Institution, not less frequently than monthly, the aggregate
fees due it on orders received and settled.
5. Payment of Rule 12b-1 Fees to the Financial Institution
Subject to and in accordance with the terms of each Fund or Class prospectus
and the Rule 12b-1 Plan, if any, adopted by resolution of the Board of Trustees,
and the shareholders of any Fund or Class pursuant to Rule 12b-1 under the
Investment Company Act of 1940, FSC may pay fees for sales and/or administrative
support services to certain financial institutions (such as banks and securities
dealers). The Financial Institution may serve as an Administrator, in accordance
with the terms of the form of Rule 12b-1 Agreement attached as Appendix A, for
all of its customers who purchase Shares of any Funds or Classes whose
prospectuses provide for the use of Administrators.
6. Delivery of Prospectuses to Customers
The Financial Institution will deliver or cause to be delivered to each
customer, at or prior to the time of any purchase of Shares, a copy of the
prospectus of the Fund or Class. The Financial Institution shall not make any
representations concerning any Shares other than those contained in the
prospects of the Fund or Class or in any promotional materials or sales
literature furnished to the Financial Institution by FSC or the Fund or Class.
7. Indemnification
(a) The Financial Institution shall indemnify and hold harmless FSC, the
Trust, the transfer agents of the Trust, and their respective subsidiaries,
affiliates, officers, directors, agents and employees from all direct or
indirect liabilities, losses or costs (including attorneys fees) arising
from, related to or otherwise connected with: (1) any breach by the
Financial Institution of any provision of this Agreement; or (2) any actions
or omissions of FSC, the Trust, the transfer agents of the Trust, and their
subsidiaries, affiliates, officers, directors, agents and employees in
reliance upon any oral, written or computer or electronically transmitted
instructions believed to be genuine and to have been given by or on behalf
of the Financial Institution.
(b) FSC shall indemnify and hold harmless the Financial Institution and
its subsidiaries, affiliates, officers, directors, agents and employees from
and against any and all direct or indirect liabilities, losses or costs
(including attorneys fees) arising from, related to or otherwise connected
with: (1) any breach by FSC of any provision of this Agreement; or (2) any
alleged untrue statement of a material fact contained in the Trust's
Registration Statement or Prospectuses, or as a result of or based upon any
alleged omission to state a material fact required to be stated, or
necessary to make the statements not misleading.
(c) The agreement of the parties in this Paragraph to indemnify each
other is conditioned upon the party entitled to indemnification (Indemnified
Party) giving notice to the party required to provide indemnification
(Indemnifying Party) promptly after the summons or other first legal process
for any claim as to which indemnity may be sought is served on the
Indemnified Party. The Indemnified Party shall permit the Indemnifying Party
to assume the defense of any such claim or any litigation resulting from it,
provided that counsel for the Indemnifying Party who shall conduct the
defense of such claim or litigation shall be approved by the Indemnified
Party (which approval shall not unreasonably be withheld), and that the
Indemnified Party may
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<PAGE>
participate in such defense at its expense. The failure of the Indemnified
Party to give notice as provided in this subparagraph (c) shall not relieve
the Indemnifying Party from any liability other than its indemnity
obligation under this Paragraph. No Indemnifying Party, in the defense of
any such claim or litigation, shall, without the consent of the Indemnified
Party, consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term the giving by the claimant or
plaintiff to the Indemnified Party of a release from all liability in
respect to such claim or litigation.
(d) The provisions of this Paragraph 7 shall survive the termination of
this Agreement.
8. Customer Names Proprietary to the Financial Institution
(a) The names of the Financial Institution's customers are and shall
remain the Financial Institution's sole property and shall not be used by
FSC or its affiliates for any purpose except the performance of its duties
and responsibilities under this Agreement and except for servicing and
informational mailings relating to the Trust. Notwithstanding the foregoing,
this Paragraph 8 shall not prohibit FSC or any of its affiliates from
utilizing the names of the Financial Institution's customers for any purpose
if the names are obtained in any manner other than from the Financial
Institution pursuant to this Agreement.
(b) Neither party shall use the name of the other party in any manner
without the other party's written consent, except as required by any
applicable federal or state law, rule or regulation, and except pursuant to
any mutually agreed upon promotional programs.
(c) The provisions of this Paragraph 8 shall survive the termination of
this Agreement.
9. Solicitation of Proxies
The Financial Institution agrees not to solicit or cause to be solicited
directly, or indirectly, at any time in the future, any proxies from the
shareholders of the Trust in opposition to proxies solicited by management of
the Trust, unless a court of competent jurisdiction shall have determined that
the conduct of a majority of the Board of Trustees of the Trust constitutes
willful misfeasance, bad faith, gross negligence or reckless disregard of their
duties. This Paragraph 9 will survive the term of this Agreement.
10. Certification of Customers' Taxpayer Identification Numbers
The Financial Institution agrees to obtain any taxpayer identification
number certification from its customers required under Section 3406 of the
Internal Revenue Code, and any applicable Treasury regulations, and to provide
FSC or its designee with timely written notice of any failure to obtain such
taxpayer identification number certification in order to enable the
implementation of any required backup withholding.
11. Notices
Except as otherwise specifically provided in this Agreement, all notices
required or permitted to be given pursuant to this Agreement shall be given in
writing and delivered by personal delivery or by postage prepaid, registered or
certified United States first class mail, return receipt requested, or by telex,
telegram or similar means of same day delivery (with a confirming copy by mail
as provided herein). Unless otherwise notified in writing, all notices to FSC
shall be given or sent to FSC at its offices located at Federated Investors
Tower, Pittsburgh, PA 15222-3779, and all notices to the Financial Institution
shall be given or sent to it at its address shown below.
12. Termination and Amendment
(a) This Agreement shall become effective in this form as of the date
set forth below and may be terminated at any time by either party upon
thirty (30) days' prior notice to the other party. This Agreement supersedes
any prior sales agreements between the parties.
(b) This Agreement may be amended by FSC from time to time by the
following procedure. FSC will mail a copy of the amendment to the Financial
Institution's address, as shown below. If the Financial Institution does not
object to the amendment within thirty (30) days after its receipt, the
amendment will become part of the Agreement. The Financial Institution's
objection must be in writing and be received by FSC within such thirty (30)
days.
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13. Governing Law
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Pennsylvania.
___________________________________
[Financial Institution Name]
(Please Print or Type)
___________________________________
Address
___________________________________
City State Zip Code
By:________________________________
Authorized Signature
Dated: __________
___________________________________
Title
___________________________________
Print Names or Type Name
FEDERATED SECURITIES CORP.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By:________________________________
James F. Getz, President
P-4
<PAGE>
AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
Article III of the Trust's Agreement and Declaration of Trust is hereby
amended by adding the following Section 6 immediately following Section 5:
Section 6. Notwithstanding anything in this Declaration of Trust to the
contrary, the Trustees may, in their discretion, authorize the division
of Shares of any series into Shares of one or more classes of such
series. All Shares of a class shall be identical with each other and
with the shares of each other class or subseries of the same series
except for such variations between classes as may be approved by the
Board of Trustees and be permitted under the 1940 Act or pursuant to any
exemptive order issued by the Securities and Exchange Commission.
Q-1
<PAGE>
PLEASE VOTE, SIGN BELOW, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
BLANCHARD GLOBAL GROWTH FUND
SPECIAL MEETING OF SHAREHOLDERS-___________, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES AND WILL BE VOTED AS
SPECIFIED.
THE UNDERSIGNED REVOKE(S) ALL PREVIOUS PROXIES AND APPOINT(S)_________________
AND _________________ OR EITHER OF THEM, THE ATTORNEYS AND PROXIES OF THE
UNDERSIGNED WITH FULL POWER OF SUBSTITUTION TO VOTE ALL SHARES OF THE:
BLANCHARD GLOBAL GROWTH FUND
THAT THE UNDERSIGNED IS ENTITLED TO VOTE AT THE SPECIAL MEETING OF SUCH
SHAREHOLDERS OF SAID FUND TO BE HELD AT THE OFFICES OF KRAMER, LEVIN, NAFTALIS,
NESSEN, KAMIN & FRANKEL, 919 THIRD AVENUE, ____ FLOOR, NEW YORK, NEW YORK 10022,
ON ____________, 1995 AT ______ A.M., AND AT ANY ADJOURNMENTS THEREOF.
PLEASE INDICATE YOUR VOTES BY AN "X" IN THE APPROPRIATE BOXES BELOW.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS. IF ANY
OTHER MATTERS DO COME BEFORE THE MEETING,THE PERSONS NAMED IN THIS PROXY WILL
VOTE, ACT AND CONSENT WITH RESPECT THERETO IN ACCORDANCE WITH THE VIEW OF
MANAGEMENT.
IMPORTANT VOTING INSTRUCTIONS - URGENT ACTION REQUIRED
YOUR VOTE IS CRITICAL. PLEASE VOTE TODAY. YOUR PROMPT ATTENTION WILL BENEFIT ALL
SHAREHOLDERS AND HELP US OBTAIN A SUFFICIENT NUMBER OF SHARES TO HOLD THE
MEETING AS SCHEDULED AND AVOID THE COST OF ADDITIONAL PROXY SOLICITATION.
YOU MAY CAST YOUR VOTE BY ANY ONE OF THE CONVENIENT METHODS LISTED BELOW.
1. BY PHONE: CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL-FREE AT
1-800-733-8485, EXT. 450. OPERATORS WILL BE AVAILABLE TO TAKE YOUR
VOTE 9:00 A.M. TO 11:00 P.M. EASTERN STANDARD TIME, MONDAY THROUGH
FRIDAY.
2. BY FAX: VOTE IN THE SPACES BELOW, SIGN AND FAX THIS PROXY CARD TO
SHAREHOLDER COMMUNICATION CORPORATION TOLL-FREE AT 1-800-733-1885.
YOU MAY FAX YOUR CARD AT ANY TIME, DAY OR NIGHT.
3. BY MAIL: VOTE IN THE SPACES BELOW, SIGN AND MAIL THIS PROXY CARD IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOU HAVE ANY QUESTIONS, OR NEED ADDITIONAL ASSISTANCE WITH VOTING, PLEASE
CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL FREE AT 1-800-733-8485 ext.
450. WE THANK YOU FOR YOUR PROMPT RESPONSE.
TO VOTE MARK AN X BELOW IN BLUE OR BLACK INK AS FOLLOWS [X]
KEEP THIS PORTION FOR YOUR RECORDS
<PAGE>
(DETACH HERE AND RETURN THIS PORTION ONLY)
BLANCHARD GLOBAL GROWTH FUND
VOTE ON PROPOSAL 1 1. APPROVAL OF THE NEW INVESTMENT ADVISORY CONTRACT,
TO TAKE EFFECT UPON THE CLOSING OF THE PROPOSED
TRANSACTION WITH SIGNET BANKING CORPORATION AND ITS
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 2 2. TO ELECT NEW BOARD MEMBERS, THE NOMINEES ARE:
J. DONAHUE, T. BIGLEY, J. CONROY, JR., W. COPELAND,
J. DOWD, L. ELLIS, E. FLAHERTY, JR., E. GONZALES, P.
MADDEN, G. MEYER, J. MURRAY, JR., W. POSVAR AND M.
SMUTS.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK THE "FOR ALL EXCEPT" BOX, AND STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
FOR ALL
FOR WITHHOLD EXCEPT
[ ] [ ] [ ]
VOTE ON PROPOSAL 3 3. RATIFICATION OF SELECTION OF INDEPENDENT
ACCOUNTANTS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 4 4. APPROVAL OF THE NEW DISTRIBUTION PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 5 5. APPROVAL OF THE NEW SUB-ADVISORY AGREEMENTS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 6 6. APPROVAL OF AMENDMENT TO THE AGREEMENT AND DEC-
LARATION OF TRUST.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN A PARTNERSHIP NAME BY AUTHORIZED
PERSON.
________________________________________ ______________________________________
SIGNATURE DATE SIGNATURE (JOINT OWNER) DATE
<PAGE>
PLEASE VOTE, SIGN BELOW, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
BLANCHARD PRECIOUS METALS FUND, INC.
SPECIAL MEETING OF SHAREHOLDERS-___________, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE
VOTED AS SPECIFIED.
THE UNDERSIGNED REVOKE(S) ALL PREVIOUS PROXIES AND APPOINT(S)_________________
AND _________________ OR EITHER OF THEM, THE ATTORNEYS AND PROXIES OF THE
UNDERSIGNED WITH FULL POWER OF SUBSTITUTION TO VOTE ALL SHARES OF THE:
BLANCHARD PRECIOUS METALS FUND, INC.
THAT THE UNDERSIGNED IS ENTITLED TO VOTE AT THE SPECIAL MEETING OF SUCH
SHAREHOLDERS OF SAID FUND TO BE HELD AT THE OFFICES OF KRAMER, LEVIN, NAFTALIS,
NESSEN, KAMIN & FRANKEL, 919 THIRD AVENUE, ____ FLOOR, NEW YORK, NEW YORK 10022,
ON ____________, 1995 AT ______ A.M., AND AT ANY ADJOURNMENTS THEREOF.
PLEASE INDICATE YOUR VOTES BY AN "X" IN THE APPROPRIATE BOXES BELOW.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS. IF ANY
OTHER MATTERS DO COME BEFORE THE MEETING,THE PERSONS NAMED IN THIS PROXY WILL
VOTE, ACT AND CONSENT WITH RESPECT THERETO IN ACCORDANCE WITH THE VIEW OF
MANAGEMENT.
IMPORTANT VOTING INSTRUCTIONS - URGENT ACTION REQUIRED
YOUR VOTE IS CRITICAL. PLEASE VOTE TODAY. YOUR PROMPT ATTENTION WILL BENEFIT ALL
SHAREHOLDERS AND HELP US OBTAIN A SUFFICIENT NUMBER OF SHARES TO HOLD THE
MEETING AS SCHEDULED AND AVOID THE COST OF ADDITIONAL PROXY SOLICITATION.
YOU MAY CAST YOUR VOTE BY ANY ONE OF THE CONVENIENT METHODS LISTED BELOW.
1. BY PHONE: CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL-FREE AT
1-800-733-8485, EXT. 450. OPERATORS WILL BE AVAILABLE TO TAKE YOUR
VOTE 9:00 A.M. TO 11:00 P.M. EASTERN STANDARD TIME, MONDAY THROUGH
FRIDAY.
2. BY FAX: VOTE IN THE SPACES BELOW, SIGN AND FAX THIS PROXY CARD TO
SHAREHOLDER COMMUNICATION CORPORATION TOLL-FREE AT 1-800-733-1885.
YOU MAY FAX YOUR CARD AT ANY TIME, DAY OR NIGHT.
3. BY MAIL: VOTE IN THE SPACES BELOW, SIGN AND MAIL THIS PROXY CARD IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOU HAVE ANY QUESTIONS, OR NEED ADDITIONAL ASSISTANCE WITH VOTING, PLEASE
CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL FREE AT 1-800-733-8485 ext.
450. WE THANK YOU FOR YOUR PROMPT RESPONSE.
TO VOTE MARK AN X BELOW IN BLUE OR BLACK INK AS FOLLOWS [X]
KEEP THIS PORTION FOR YOUR RECORDS
<PAGE>
(DETACH HERE AND RETURN THIS PORTION ONLY)
BLANCHARD PRECIOUS METALS FUND, INC.
VOTE ON PROPOSAL 1 1. APPROVAL OF THE NEW INVESTMENT ADVISORY CONTRACT,
TO TAKE EFFECT UPON THE CLOSING OF THE PROPOSED
TRANSACTION WITH SIGNET BANKING CORPORATION AND ITS
SUBSIDIARY, VIRTUS CAPITAL MANAGEMENT, INC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 2 2. TO ELECT NEW BOARD MEMBERS, THE NOMINEES ARE:
J. DONAHUE, T. BIGLEY, J. CONROY, JR., W. COPELAND,
J. DOWD, L. ELLIS, E. FLAHERTY, JR., E. GONZALES, P.
MADDEN, G. MEYER, J. MURRAY, JR., W. POSVAR AND M.
SMUTS.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK THE "FOR ALL EXCEPT" BOX, AND STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
FOR ALL
FOR WITHHOLD EXCEPT
[ ] [ ] [ ]
VOTE ON PROPOSAL 3 3. RATIFICATION OF SELECTION OF INDEPENDENT
ACCOUNTANTS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 4 4. APPROVAL OF THE NEW DISTRIBUTION PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 5 5. APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN A PARTNERSHIP NAME BY AUTHORIZED
PERSON.
________________________________________ ______________________________________
SIGNATURE DATE SIGNATURE (JOINT OWNER) DATE
<PAGE>
PLEASE VOTE, SIGN BELOW, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
BLANCHARD 100% TREASURY MONEY MARKET FUND
SPECIAL MEETING OF SHAREHOLDERS-___________, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES AND WILL BE VOTED AS
SPECIFIED.
THE UNDERSIGNED REVOKE(S) ALL PREVIOUS PROXIES AND APPOINT(S)_________________
AND _________________ OR EITHER OF THEM, THE ATTORNEYS AND PROXIES OF THE
UNDERSIGNED WITH FULL POWER OF SUBSTITUTION TO VOTE ALL SHARES OF THE:
BLANCHARD 100% TREASURY MONEY MARKET FUND
THAT THE UNDERSIGNED IS ENTITLED TO VOTE AT THE SPECIAL MEETING OF SUCH
SHAREHOLDERS OF SAID FUND TO BE HELD AT THE OFFICES OF KRAMER, LEVIN, NAFTALIS,
NESSEN, KAMIN & FRANKEL, 919 THIRD AVENUE, ____ FLOOR, NEW YORK, NEW YORK 10022,
ON ____________, 1995 AT ______ A.M., AND AT ANY ADJOURNMENTS THEREOF.
PLEASE INDICATE YOUR VOTES BY AN "X" IN THE APPROPRIATE BOXES BELOW.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS. IF ANY
OTHER MATTERS DO COME BEFORE THE MEETING,THE PERSONS NAMED IN THIS PROXY WILL
VOTE, ACT AND CONSENT WITH RESPECT THERETO IN ACCORDANCE WITH THE VIEW OF
MANAGEMENT.
IMPORTANT VOTING INSTRUCTIONS - URGENT ACTION REQUIRED
YOUR VOTE IS CRITICAL. PLEASE VOTE TODAY. YOUR PROMPT ATTENTION WILL BENEFIT ALL
SHAREHOLDERS AND HELP US OBTAIN A SUFFICIENT NUMBER OF SHARES TO HOLD THE
MEETING AS SCHEDULED AND AVOID THE COST OF ADDITIONAL PROXY SOLICITATION.
YOU MAY CAST YOUR VOTE BY ANY ONE OF THE CONVENIENT METHODS LISTED BELOW.
1. BY PHONE: CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL-FREE AT
1-800-733-8485, EXT. 450. OPERATORS WILL BE AVAILABLE TO TAKE YOUR
VOTE 9:00 A.M. TO 11:00 P.M. EASTERN STANDARD TIME, MONDAY THROUGH
FRIDAY.
2. BY FAX: VOTE IN THE SPACES BELOW, SIGN AND FAX THIS PROXY CARD TO
SHAREHOLDER COMMUNICATION CORPORATION TOLL-FREE AT 1-800-733-1885.
YOU MAY FAX YOUR CARD AT ANY TIME, DAY OR NIGHT.
3. BY MAIL: VOTE IN THE SPACES BELOW, SIGN AND MAIL THIS PROXY CARD IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOU HAVE ANY QUESTIONS, OR NEED ADDITIONAL ASSISTANCE WITH VOTING, PLEASE
CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL FREE AT 1-800-733-8485 ext.
450. WE THANK YOU FOR YOUR PROMPT RESPONSE.
TO VOTE MARK AN X BELOW IN BLUE OR BLACK INK AS FOLLOWS [X]
KEEP THIS PORTION FOR YOUR RECORDS
<PAGE>
(DETACH HERE AND RETURN THIS PORTION ONLY)
BLANCHARD 100% TREASURY MONEY MARKET FUND
VOTE ON PROPOSAL 1 1. APPROVAL OF THE NEW INVESTMENT ADVISORY CONTRACT,
TO TAKE EFFECT UPON THE CLOSING OF THE PROPOSED
TRANSACTION WITH SIGNET BANKING CORPORATION AND ITS
SUBSIDIARY, VIRTUS CAPITAL MANAGEMENT, INC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 2 2. TO ELECT NEW BOARD MEMBERS, THE NOMINEES ARE:
J. DONAHUE, T. BIGLEY, J. CONROY, JR., W. COPELAND,
J. DOWD, L. ELLIS, E. FLAHERTY, JR., E. GONZALES, P.
MADDEN, G. MEYER, J. MURRAY, JR., W. POSVAR AND M.
SMUTS.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK THE "FOR ALL EXCEPT" BOX, AND STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
FOR ALL
FOR WITHHOLD EXCEPT
[ ] [ ] [ ]
VOTE ON PROPOSAL 3 3. RATIFICATION OF SELECTION OF INDEPENDENT
ACCOUNTANTS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 4 4. APPROVAL OF AMENDMENT TO THE AGREEMENT AND DEC-
LARATION OF TRUST.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN A PARTNERSHIP NAME BY AUTHORIZED
PERSON.
________________________________________ ______________________________________
SIGNATURE DATE SIGNATURE (JOINT OWNER) DATE
<PAGE>
PLEASE VOTE, SIGN BELOW, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
BLANCHARD SHORT-TERM GLOBAL INCOME FUND
SPECIAL MEETING OF SHAREHOLDERS-___________, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES AND WILL BE VOTED AS
SPECIFIED.
THE UNDERSIGNED REVOKE(S) ALL PREVIOUS PROXIES AND APPOINT(S)_________________
AND _________________ OR EITHER OF THEM, THE ATTORNEYS AND PROXIES OF THE
UNDERSIGNED WITH FULL POWER OF SUBSTITUTION TO VOTE ALL SHARES OF THE:
BLANCHARD SHORT-TERM GLOBAL INCOME FUND
THAT THE UNDERSIGNED IS ENTITLED TO VOTE AT THE SPECIAL MEETING OF SUCH
SHAREHOLDERS OF SAID FUND TO BE HELD AT THE OFFICES OF KRAMER, LEVIN, NAFTALIS,
NESSEN, KAMIN & FRANKEL, 919 THIRD AVENUE, ____ FLOOR, NEW YORK, NEW YORK 10022,
ON ____________, 1995 AT ______ A.M., AND AT ANY ADJOURNMENTS THEREOF.
PLEASE INDICATE YOUR VOTES BY AN "X" IN THE APPROPRIATE BOXES BELOW.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS. IF ANY
OTHER MATTERS DO COME BEFORE THE MEETING,THE PERSONS NAMED IN THIS PROXY WILL
VOTE, ACT AND CONSENT WITH RESPECT THERETO IN ACCORDANCE WITH THE VIEW OF
MANAGEMENT.
IMPORTANT VOTING INSTRUCTIONS - URGENT ACTION REQUIRED
YOUR VOTE IS CRITICAL. PLEASE VOTE TODAY. YOUR PROMPT ATTENTION WILL BENEFIT ALL
SHAREHOLDERS AND HELP US OBTAIN A SUFFICIENT NUMBER OF SHARES TO HOLD THE
MEETING AS SCHEDULED AND AVOID THE COST OF ADDITIONAL PROXY SOLICITATION.
YOU MAY CAST YOUR VOTE BY ANY ONE OF THE CONVENIENT METHODS LISTED BELOW.
1. BY PHONE: CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL-FREE AT
1-800-733-8485, EXT. 450. OPERATORS WILL BE AVAILABLE TO TAKE YOUR
VOTE 9:00 A.M. TO 11:00 P.M. EASTERN STANDARD TIME, MONDAY THROUGH
FRIDAY.
2. BY FAX: VOTE IN THE SPACES BELOW, SIGN AND FAX THIS PROXY CARD TO
SHAREHOLDER COMMUNICATION CORPORATION TOLL-FREE AT 1-800-733-1885.
YOU MAY FAX YOUR CARD AT ANY TIME, DAY OR NIGHT.
3. BY MAIL: VOTE IN THE SPACES BELOW, SIGN AND MAIL THIS PROXY CARD IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOU HAVE ANY QUESTIONS, OR NEED ADDITIONAL ASSISTANCE WITH VOTING, PLEASE
CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL FREE AT 1-800-733-8485 ext.
450. WE THANK YOU FOR YOUR PROMPT RESPONSE.
TO VOTE MARK AN X BELOW IN BLUE OR BLACK INK AS FOLLOWS [X]
KEEP THIS PORTION FOR YOUR RECORDS
<PAGE>
(DETACH HERE AND RETURN THIS PORTION ONLY)
BLANCHARD SHORT-TERM GLOBAL INCOME FUND
VOTE ON PROPOSAL 1 1. APPROVAL OF THE NEW INVESTMENT ADVISORY CONTRACT,
TO TAKE EFFECT UPON THE CLOSING OF THE PROPOSED
TRANSACTION WITH SIGNET BANKING CORPORATION AND ITS
SUBSIDIARY, VIRTUS CAPITAL MANAGEMENT, INC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 2 2. TO ELECT NEW BOARD MEMBERS, THE NOMINEES ARE:
J. DONAHUE, T. BIGLEY, J. CONROY, JR., W. COPELAND,
J. DOWD, L. ELLIS, E. FLAHERTY, JR., E. GONZALES, P.
MADDEN, G. MEYER, J. MURRAY, JR., W. POSVAR AND M.
SMUTS.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK THE "FOR ALL EXCEPT" BOX, AND STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
FOR ALL
FOR WITHHOLD EXCEPT
[ ] [ ] [ ]
VOTE ON PROPOSAL 3 3. RATIFICATION OF SELECTION OF INDEPENDENT
ACCOUNTANTS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 4 4. APPROVAL OF THE NEW DISTRIBUTION PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 5 5. APPROVAL OF THE NEW SUB-ADVISORY AGREEMENTS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 6 6. APPROVAL OF AMENDMENT TO THE AGREEMENT AND DEC-
LARATION OF TRUST.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN A PARTNERSHIP NAME BY AUTHORIZED
PERSON.
________________________________________ ______________________________________
SIGNATURE DATE SIGNATURE (JOINT OWNER) DATE
<PAGE>
PLEASE VOTE, SIGN BELOW, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
BLANCHARD AMERICAN EQUITY FUND
SPECIAL MEETING OF SHAREHOLDERS-___________, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES AND WILL BE VOTED AS
SPECIFIED.
THE UNDERSIGNED REVOKE(S) ALL PREVIOUS PROXIES AND APPOINT(S)_________________
AND _________________ OR EITHER OF THEM, THE ATTORNEYS AND PROXIES OF THE
UNDERSIGNED WITH FULL POWER OF SUBSTITUTION TO VOTE ALL SHARES OF THE:
BLANCHARD AMERICAN EQUITY FUND
THAT THE UNDERSIGNED IS ENTITLED TO VOTE AT THE SPECIAL MEETING OF SUCH
SHAREHOLDERS OF SAID FUND TO BE HELD AT THE OFFICES OF KRAMER, LEVIN, NAFTALIS,
NESSEN, KAMIN & FRANKEL, 919 THIRD AVENUE, ____ FLOOR, NEW YORK, NEW YORK 10022,
ON ____________, 1995 AT ______ A.M., AND AT ANY ADJOURNMENTS THEREOF.
PLEASE INDICATE YOUR VOTES BY AN "X" IN THE APPROPRIATE BOXES BELOW.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS. IF ANY
OTHER MATTERS DO COME BEFORE THE MEETING,THE PERSONS NAMED IN THIS PROXY WILL
VOTE, ACT AND CONSENT WITH RESPECT THERETO IN ACCORDANCE WITH THE VIEW OF
MANAGEMENT.
IMPORTANT VOTING INSTRUCTIONS - URGENT ACTION REQUIRED
YOUR VOTE IS CRITICAL. PLEASE VOTE TODAY. YOUR PROMPT ATTENTION WILL BENEFIT ALL
SHAREHOLDERS AND HELP US OBTAIN A SUFFICIENT NUMBER OF SHARES TO HOLD THE
MEETING AS SCHEDULED AND AVOID THE COST OF ADDITIONAL PROXY SOLICITATION.
YOU MAY CAST YOUR VOTE BY ANY ONE OF THE CONVENIENT METHODS LISTED BELOW.
1. BY PHONE: CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL-FREE AT
1-800-733-8485, EXT. 450. OPERATORS WILL BE AVAILABLE TO TAKE YOUR
VOTE 9:00 A.M. TO 11:00 P.M. EASTERN STANDARD TIME, MONDAY THROUGH
FRIDAY.
2. BY FAX: VOTE IN THE SPACES BELOW, SIGN AND FAX THIS PROXY CARD TO
SHAREHOLDER COMMUNICATION CORPORATION TOLL-FREE AT 1-800-733-1885.
YOU MAY FAX YOUR CARD AT ANY TIME, DAY OR NIGHT.
3. BY MAIL: VOTE IN THE SPACES BELOW, SIGN AND MAIL THIS PROXY CARD IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOU HAVE ANY QUESTIONS, OR NEED ADDITIONAL ASSISTANCE WITH VOTING, PLEASE
CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL FREE AT 1-800-733-8485 ext.
450. WE THANK YOU FOR YOUR PROMPT RESPONSE.
TO VOTE MARK AN X BELOW IN BLUE OR BLACK INK AS FOLLOWS [X]
KEEP THIS PORTION FOR YOUR RECORDS
<PAGE>
(DETACH HERE AND RETURN THIS PORTION ONLY)
BLANCHARD AMERICAN EQUITY FUND
VOTE ON PROPOSAL 1 1. APPROVAL OF THE NEW INVESTMENT ADVISORY CONTRACT,
TO TAKE EFFECT UPON THE CLOSING OF THE PROPOSED
TRANSACTION WITH SIGNET BANKING CORPORATION AND ITS
SUBSIDIARY, VIRTUS CAPITAL MANAGEMENT, INC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 2 2. TO ELECT NEW BOARD MEMBERS, THE NOMINEES ARE:
J. DONAHUE, T. BIGLEY, J. CONROY, JR., W. COPELAND,
J. DOWD, L. ELLIS, E. FLAHERTY, JR., E. GONZALES, P.
MADDEN, G. MEYER, J. MURRAY, JR., W. POSVAR AND M.
SMUTS.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK THE "FOR ALL EXCEPT" BOX, AND STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
FOR ALL
FOR WITHHOLD EXCEPT
[ ] [ ] [ ]
VOTE ON PROPOSAL 3 3. RATIFICATION OF SELECTION OF INDEPENDENT
ACCOUNTANTS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 4 4. APPROVAL OF THE NEW DISTRIBUTION PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 5 5. APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 6 6. APPROVAL OF AMENDMENT TO THE AGREEMENT AND DEC-
LARATION OF TRUST.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN A PARTNERSHIP NAME BY AUTHORIZED
PERSON.
________________________________________ ______________________________________
SIGNATURE DATE SIGNATURE (JOINT OWNER) DATE
<PAGE>
PLEASE VOTE, SIGN BELOW, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
BLANCHARD FLEXIBLE INCOME FUND
SPECIAL MEETING OF SHAREHOLDERS-___________, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES AND WILL BE VOTED AS
SPECIFIED.
THE UNDERSIGNED REVOKE(S) ALL PREVIOUS PROXIES AND APPOINT(S)_________________
AND _________________ OR EITHER OF THEM, THE ATTORNEYS AND PROXIES OF THE
UNDERSIGNED WITH FULL POWER OF SUBSTITUTION TO VOTE ALL SHARES OF THE:
BLANCHARD FLEXIBLE INCOME FUND
THAT THE UNDERSIGNED IS ENTITLED TO VOTE AT THE SPECIAL MEETING OF SUCH
SHAREHOLDERS OF SAID FUND TO BE HELD AT THE OFFICES OF KRAMER, LEVIN, NAFTALIS,
NESSEN, KAMIN & FRANKEL, 919 THIRD AVENUE, ____ FLOOR, NEW YORK, NEW YORK 10022,
ON ____________, 1995 AT ______ A.M., AND AT ANY ADJOURNMENTS THEREOF.
PLEASE INDICATE YOUR VOTES BY AN "X" IN THE APPROPRIATE BOXES BELOW.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS. IF ANY
OTHER MATTERS DO COME BEFORE THE MEETING,THE PERSONS NAMED IN THIS PROXY WILL
VOTE, ACT AND CONSENT WITH RESPECT THERETO IN ACCORDANCE WITH THE VIEW OF
MANAGEMENT.
IMPORTANT VOTING INSTRUCTIONS - URGENT ACTION REQUIRED
YOUR VOTE IS CRITICAL. PLEASE VOTE TODAY. YOUR PROMPT ATTENTION WILL BENEFIT ALL
SHAREHOLDERS AND HELP US OBTAIN A SUFFICIENT NUMBER OF SHARES TO HOLD THE
MEETING AS SCHEDULED AND AVOID THE COST OF ADDITIONAL PROXY SOLICITATION.
YOU MAY CAST YOUR VOTE BY ANY ONE OF THE CONVENIENT METHODS LISTED BELOW.
1. BY PHONE: CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL-FREE AT
1-800-733-8485, EXT. 450. OPERATORS WILL BE AVAILABLE TO TAKE YOUR
VOTE 9:00 A.M. TO 11:00 P.M. EASTERN STANDARD TIME, MONDAY THROUGH
FRIDAY.
2. BY FAX: VOTE IN THE SPACES BELOW, SIGN AND FAX THIS PROXY CARD TO
SHAREHOLDER COMMUNICATION CORPORATION TOLL-FREE AT 1-800-733-1885.
YOU MAY FAX YOUR CARD AT ANY TIME, DAY OR NIGHT.
3. BY MAIL: VOTE IN THE SPACES BELOW, SIGN AND MAIL THIS PROXY CARD IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOU HAVE ANY QUESTIONS, OR NEED ADDITIONAL ASSISTANCE WITH VOTING, PLEASE
CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL FREE AT 1-800-733-8485 ext.
450. WE THANK YOU FOR YOUR PROMPT RESPONSE.
TO VOTE MARK AN X BELOW IN BLUE OR BLACK INK AS FOLLOWS [X]
KEEP THIS PORTION FOR YOUR RECORDS
<PAGE>
(DETACH HERE AND RETURN THIS PORTION ONLY)
BLANCHARD FLEXIBLE INCOME FUND
VOTE ON PROPOSAL 1 1. APPROVAL OF THE NEW INVESTMENT ADVISORY CONTRACT,
TO TAKE EFFECT UPON THE CLOSING OF THE PROPOSED
TRANSACTION WITH SIGNET BANKING CORPORATION AND ITS
SUBSIDIARY, VIRTUS CAPITAL MANAGEMENT, INC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 2 2. TO ELECT NEW BOARD MEMBERS, THE NOMINEES ARE:
J. DONAHUE, T. BIGLEY, J. CONROY, JR., W. COPELAND,
J. DOWD, L. ELLIS, E. FLAHERTY, JR., E. GONZALES, P.
MADDEN, G. MEYER, J. MURRAY, JR., W. POSVAR AND M.
SMUTS.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK THE "FOR ALL EXCEPT" BOX, AND STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
FOR ALL
FOR WITHHOLD EXCEPT
[ ] [ ] [ ]
VOTE ON PROPOSAL 3 3. RATIFICATION OF SELECTION OF INDEPENDENT
ACCOUNTANTS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 4 4. APPROVAL OF THE NEW DISTRIBUTION PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 5 5. APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 6 6. APPROVAL OF AMENDMENT TO THE AGREEMENT AND DEC-
LARATION OF TRUST.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN A PARTNERSHIP NAME BY AUTHORIZED
PERSON.
________________________________________ ______________________________________
SIGNATURE DATE SIGNATURE (JOINT OWNER) DATE
<PAGE>
PLEASE VOTE, SIGN BELOW, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
BLANCHARD SHORT-TERM BOND FUND
SPECIAL MEETING OF SHAREHOLDERS-___________, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES AND WILL BE VOTED AS
SPECIFIED.
THE UNDERSIGNED REVOKE(S) ALL PREVIOUS PROXIES AND APPOINT(S)_________________
AND _________________ OR EITHER OF THEM, THE ATTORNEYS AND PROXIES OF THE
UNDERSIGNED WITH FULL POWER OF SUBSTITUTION TO VOTE ALL SHARES OF THE:
BLANCHARD SHORT-TERM BOND FUND
THAT THE UNDERSIGNED IS ENTITLED TO VOTE AT THE SPECIAL MEETING OF SUCH
SHAREHOLDERS OF SAID FUND TO BE HELD AT THE OFFICES OF KRAMER, LEVIN, NAFTALIS,
NESSEN, KAMIN & FRANKEL, 919 THIRD AVENUE, ____ FLOOR, NEW YORK, NEW YORK 10022,
ON ____________, 1995 AT ______ A.M., AND AT ANY ADJOURNMENTS THEREOF.
PLEASE INDICATE YOUR VOTES BY AN "X" IN THE APPROPRIATE BOXES BELOW.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS. IF ANY
OTHER MATTERS DO COME BEFORE THE MEETING,THE PERSONS NAMED IN THIS PROXY WILL
VOTE, ACT AND CONSENT WITH RESPECT THERETO IN ACCORDANCE WITH THE VIEW OF
MANAGEMENT.
IMPORTANT VOTING INSTRUCTIONS - URGENT ACTION REQUIRED
YOUR VOTE IS CRITICAL. PLEASE VOTE TODAY. YOUR PROMPT ATTENTION WILL BENEFIT ALL
SHAREHOLDERS AND HELP US OBTAIN A SUFFICIENT NUMBER OF SHARES TO HOLD THE
MEETING AS SCHEDULED AND AVOID THE COST OF ADDITIONAL PROXY SOLICITATION.
YOU MAY CAST YOUR VOTE BY ANY ONE OF THE CONVENIENT METHODS LISTED BELOW.
1. BY PHONE: CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL-FREE AT
1-800-733-8485, EXT. 450. OPERATORS WILL BE AVAILABLE TO TAKE YOUR
VOTE 9:00 A.M. TO 11:00 P.M. EASTERN STANDARD TIME, MONDAY THROUGH
FRIDAY.
2. BY FAX: VOTE IN THE SPACES BELOW, SIGN AND FAX THIS PROXY CARD TO
SHAREHOLDER COMMUNICATION CORPORATION TOLL-FREE AT 1-800-733-1885.
YOU MAY FAX YOUR CARD AT ANY TIME, DAY OR NIGHT.
3. BY MAIL: VOTE IN THE SPACES BELOW, SIGN AND MAIL THIS PROXY CARD IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOU HAVE ANY QUESTIONS, OR NEED ADDITIONAL ASSISTANCE WITH VOTING, PLEASE
CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL FREE AT 1-800-733-8485 ext.
450. WE THANK YOU FOR YOUR PROMPT RESPONSE.
TO VOTE MARK AN X BELOW IN BLUE OR BLACK INK AS FOLLOWS [X]
KEEP THIS PORTION FOR YOUR RECORDS
<PAGE>
(DETACH HERE AND RETURN THIS PORTION ONLY)
BLANCHARD SHORT-TERM BOND FUND
VOTE ON PROPOSAL 1 1. APPROVAL OF THE NEW INVESTMENT ADVISORY CONTRACT,
TO TAKE EFFECT UPON THE CLOSING OF THE PROPOSED
TRANSACTION WITH SIGNET BANKING CORPORATION AND ITS
SUBSIDIARY, VIRTUS CAPITAL MANAGEMENT, INC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 2 2. TO ELECT NEW BOARD MEMBERS, THE NOMINEES ARE:
J. DONAHUE, T. BIGLEY, J. CONROY, JR., W. COPELAND,
J. DOWD, L. ELLIS, E. FLAHERTY, JR., E. GONZALES, P.
MADDEN, G. MEYER, J. MURRAY, JR., W. POSVAR AND M.
SMUTS.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK THE "FOR ALL EXCEPT" BOX, AND STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
FOR ALL
FOR WITHHOLD EXCEPT
[ ] [ ] [ ]
VOTE ON PROPOSAL 3 3. RATIFICATION OF SELECTION OF INDEPENDENT
ACCOUNTANTS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 4 4. APPROVAL OF THE NEW DISTRIBUTION PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 5 5. APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 6 6. APPROVAL OF AMENDMENT TO THE AGREEMENT AND DEC-
LARATION OF TRUST.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN A PARTNERSHIP NAME BY AUTHORIZED
PERSON.
________________________________________ ______________________________________
SIGNATURE DATE SIGNATURE (JOINT OWNER) DATE
<PAGE>
PLEASE VOTE, SIGN BELOW, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
SPECIAL MEETING OF SHAREHOLDERS-___________, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES AND WILL BE VOTED AS
SPECIFIED.
THE UNDERSIGNED REVOKE(S) ALL PREVIOUS PROXIES AND APPOINT(S)_________________
AND _________________ OR EITHER OF THEM, THE ATTORNEYS AND PROXIES OF THE
UNDERSIGNED WITH FULL POWER OF SUBSTITUTION TO VOTE ALL SHARES OF THE:
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
THAT THE UNDERSIGNED IS ENTITLED TO VOTE AT THE SPECIAL MEETING OF SUCH
SHAREHOLDERS OF SAID FUND TO BE HELD AT THE OFFICES OF KRAMER, LEVIN, NAFTALIS,
NESSEN, KAMIN & FRANKEL, 919 THIRD AVENUE, ____ FLOOR, NEW YORK, NEW YORK 10022,
ON ____________, 1995 AT ______ A.M., AND AT ANY ADJOURNMENTS THEREOF.
PLEASE INDICATE YOUR VOTES BY AN "X" IN THE APPROPRIATE BOXES BELOW.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS. IF ANY
OTHER MATTERS DO COME BEFORE THE MEETING,THE PERSONS NAMED IN THIS PROXY WILL
VOTE, ACT AND CONSENT WITH RESPECT THERETO IN ACCORDANCE WITH THE VIEW OF
MANAGEMENT.
IMPORTANT VOTING INSTRUCTIONS - URGENT ACTION REQUIRED
YOUR VOTE IS CRITICAL. PLEASE VOTE TODAY. YOUR PROMPT ATTENTION WILL BENEFIT ALL
SHAREHOLDERS AND HELP US OBTAIN A SUFFICIENT NUMBER OF SHARES TO HOLD THE
MEETING AS SCHEDULED AND AVOID THE COST OF ADDITIONAL PROXY SOLICITATION.
YOU MAY CAST YOUR VOTE BY ANY ONE OF THE CONVENIENT METHODS LISTED BELOW.
1. BY PHONE: CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL-FREE AT
1-800-733-8485, EXT. 450. OPERATORS WILL BE AVAILABLE TO TAKE YOUR
VOTE 9:00 A.M. TO 11:00 P.M. EASTERN STANDARD TIME, MONDAY THROUGH
FRIDAY.
2. BY FAX: VOTE IN THE SPACES BELOW, SIGN AND FAX THIS PROXY CARD TO
SHAREHOLDER COMMUNICATION CORPORATION TOLL-FREE AT 1-800-733-1885.
YOU MAY FAX YOUR CARD AT ANY TIME, DAY OR NIGHT.
3. BY MAIL: VOTE IN THE SPACES BELOW, SIGN AND MAIL THIS PROXY CARD IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOU HAVE ANY QUESTIONS, OR NEED ADDITIONAL ASSISTANCE WITH VOTING, PLEASE
CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL FREE AT 1-800-733-8485 ext.
450. WE THANK YOU FOR YOUR PROMPT RESPONSE.
TO VOTE MARK AN X BELOW IN BLUE OR BLACK INK AS FOLLOWS [X]
KEEP THIS PORTION FOR YOUR RECORDS
<PAGE>
(DETACH HERE AND RETURN THIS PORTION ONLY)
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
VOTE ON PROPOSAL 1 1. APPROVAL OF THE NEW INVESTMENT ADVISORY CONTRACT,
TO TAKE EFFECT UPON THE CLOSING OF THE PROPOSED
TRANSACTION WITH SIGNET BANKING CORPORATION AND ITS
SUBSIDIARY, VIRTUS CAPITAL MANAGEMENT, INC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 2 2. TO ELECT NEW BOARD MEMBERS, THE NOMINEES ARE:
J. DONAHUE, T. BIGLEY, J. CONROY, JR., W. COPELAND,
J. DOWD, L. ELLIS, E. FLAHERTY, JR., E. GONZALES, P.
MADDEN, G. MEYER, J. MURRAY, JR., W. POSVAR AND M.
SMUTS.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK THE "FOR ALL EXCEPT" BOX, AND STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
FOR ALL
FOR WITHHOLD EXCEPT
[ ] [ ] [ ]
VOTE ON PROPOSAL 3 3. RATIFICATION OF SELECTION OF INDEPENDENT
ACCOUNTANTS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 4 4. APPROVAL OF THE NEW DISTRIBUTION PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 5 5. APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 6 6. APPROVAL OF AMENDMENT TO THE AGREEMENT AND DEC-
LARATION OF TRUST.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN A PARTNERSHIP NAME BY AUTHORIZED
PERSON.
________________________________________ ______________________________________
SIGNATURE DATE SIGNATURE (JOINT OWNER) DATE
<PAGE>
PLEASE VOTE, SIGN BELOW, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
SPECIAL MEETING OF SHAREHOLDERS-___________, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES AND WILL BE VOTED AS
SPECIFIED.
THE UNDERSIGNED REVOKE(S) ALL PREVIOUS PROXIES AND APPOINT(S)_________________
AND _________________ OR EITHER OF THEM, THE ATTORNEYS AND PROXIES OF THE
UNDERSIGNED WITH FULL POWER OF SUBSTITUTION TO VOTE ALL SHARES OF THE:
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
THAT THE UNDERSIGNED IS ENTITLED TO VOTE AT THE SPECIAL MEETING OF SUCH
SHAREHOLDERS OF SAID FUND TO BE HELD AT THE OFFICES OF KRAMER, LEVIN, NAFTALIS,
NESSEN, KAMIN & FRANKEL, 919 THIRD AVENUE, ____ FLOOR, NEW YORK, NEW YORK 10022,
ON ____________, 1995 AT ______ A.M., AND AT ANY ADJOURNMENTS THEREOF.
PLEASE INDICATE YOUR VOTES BY AN "X" IN THE APPROPRIATE BOXES BELOW.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS. IF ANY
OTHER MATTERS DO COME BEFORE THE MEETING,THE PERSONS NAMED IN THIS PROXY WILL
VOTE, ACT AND CONSENT WITH RESPECT THERETO IN ACCORDANCE WITH THE VIEW OF
MANAGEMENT.
IMPORTANT VOTING INSTRUCTIONS - URGENT ACTION REQUIRED
YOUR VOTE IS CRITICAL. PLEASE VOTE TODAY. YOUR PROMPT ATTENTION WILL BENEFIT ALL
SHAREHOLDERS AND HELP US OBTAIN A SUFFICIENT NUMBER OF SHARES TO HOLD THE
MEETING AS SCHEDULED AND AVOID THE COST OF ADDITIONAL PROXY SOLICITATION.
YOU MAY CAST YOUR VOTE BY ANY ONE OF THE CONVENIENT METHODS LISTED BELOW.
1. BY PHONE: CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL-FREE AT
1-800-733-8485, EXT. 450. OPERATORS WILL BE AVAILABLE TO TAKE YOUR
VOTE 9:00 A.M. TO 11:00 P.M. EASTERN STANDARD TIME, MONDAY THROUGH
FRIDAY.
2. BY FAX: VOTE IN THE SPACES BELOW, SIGN AND FAX THIS PROXY CARD TO
SHAREHOLDER COMMUNICATION CORPORATION TOLL-FREE AT 1-800-733-1885.
YOU MAY FAX YOUR CARD AT ANY TIME, DAY OR NIGHT.
3. BY MAIL: VOTE IN THE SPACES BELOW, SIGN AND MAIL THIS PROXY CARD IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOU HAVE ANY QUESTIONS, OR NEED ADDITIONAL ASSISTANCE WITH VOTING, PLEASE
CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL FREE AT 1-800-733-8485 ext.
450. WE THANK YOU FOR YOUR PROMPT RESPONSE.
TO VOTE MARK AN X BELOW IN BLUE OR BLACK INK AS FOLLOWS [X]
KEEP THIS PORTION FOR YOUR RECORDS
<PAGE>
(DETACH HERE AND RETURN THIS PORTION ONLY)
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
VOTE ON PROPOSAL 1 1. APPROVAL OF THE NEW INVESTMENT ADVISORY CONTRACT,
TO TAKE EFFECT UPON THE CLOSING OF THE PROPOSED
TRANSACTION WITH SIGNET BANKING CORPORATION AND ITS
SUBSIDIARY, VIRTUS CAPITAL MANAGEMENT, INC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 2 2. TO ELECT NEW BOARD MEMBERS, THE NOMINEES ARE:
J. DONAHUE, T. BIGLEY, J. CONROY, JR., W. COPELAND,
J. DOWD, L. ELLIS, E. FLAHERTY, JR., E. GONZALES, P.
MADDEN, G. MEYER, J. MURRAY, JR., W. POSVAR AND M.
SMUTS.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK THE "FOR ALL EXCEPT" BOX, AND STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
FOR ALL
FOR WITHHOLD EXCEPT
[ ] [ ] [ ]
VOTE ON PROPOSAL 3 3. RATIFICATION OF SELECTION OF INDEPENDENT
ACCOUNTANTS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 4 4. APPROVAL OF THE NEW DISTRIBUTION PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 5 5. APPROVAL OF THE NEW SUB-ADVISORY AGREEMENTS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 6 6. APPROVAL OF AMENDMENT TO THE AGREEMENT AND DEC-
LARATION OF TRUST.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN A PARTNERSHIP NAME BY AUTHORIZED
PERSON.
________________________________________ ______________________________________
SIGNATURE DATE SIGNATURE (JOINT OWNER) DATE
<PAGE>
PLEASE VOTE, SIGN BELOW, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
BLANCHARD GROWTH & INCOME FUND
SPECIAL MEETING OF SHAREHOLDERS-___________, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES AND WILL BE VOTED AS
SPECIFIED.
THE UNDERSIGNED REVOKE(S) ALL PREVIOUS PROXIES AND APPOINT(S)_________________
AND _________________ OR EITHER OF THEM, THE ATTORNEYS AND PROXIES OF THE
UNDERSIGNED WITH FULL POWER OF SUBSTITUTION TO VOTE ALL SHARES OF THE:
BLANCHARD GROWTH & INCOME FUND
THAT THE UNDERSIGNED IS ENTITLED TO VOTE AT THE SPECIAL MEETING OF SUCH
SHAREHOLDERS OF SAID FUND TO BE HELD AT THE OFFICES OF KRAMER, LEVIN, NAFTALIS,
NESSEN, KAMIN & FRANKEL, 919 THIRD AVENUE, ____ FLOOR, NEW YORK, NEW YORK 10022,
ON ____________, 1995 AT ______ A.M., AND AT ANY ADJOURNMENTS THEREOF.
PLEASE INDICATE YOUR VOTES BY AN "X" IN THE APPROPRIATE BOXES BELOW.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS. IF ANY
OTHER MATTERS DO COME BEFORE THE MEETING,THE PERSONS NAMED IN THIS PROXY WILL
VOTE, ACT AND CONSENT WITH RESPECT THERETO IN ACCORDANCE WITH THE VIEW OF
MANAGEMENT.
IMPORTANT VOTING INSTRUCTIONS - URGENT ACTION REQUIRED
YOUR VOTE IS CRITICAL. PLEASE VOTE TODAY. YOUR PROMPT ATTENTION WILL BENEFIT ALL
SHAREHOLDERS AND HELP US OBTAIN A SUFFICIENT NUMBER OF SHARES TO HOLD THE
MEETING AS SCHEDULED AND AVOID THE COST OF ADDITIONAL PROXY SOLICITATION.
YOU MAY CAST YOUR VOTE BY ANY ONE OF THE CONVENIENT METHODS LISTED BELOW.
1. BY PHONE: CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL-FREE AT
1-800-733-8485, EXT. 450. OPERATORS WILL BE AVAILABLE TO TAKE YOUR
VOTE 9:00 A.M. TO 11:00 P.M. EASTERN STANDARD TIME, MONDAY THROUGH
FRIDAY.
2. BY FAX: VOTE IN THE SPACES BELOW, SIGN AND FAX THIS PROXY CARD TO
SHAREHOLDER COMMUNICATION CORPORATION TOLL-FREE AT 1-800-733-1885.
YOU MAY FAX YOUR CARD AT ANY TIME, DAY OR NIGHT.
3. BY MAIL: VOTE IN THE SPACES BELOW, SIGN AND MAIL THIS PROXY CARD IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOU HAVE ANY QUESTIONS, OR NEED ADDITIONAL ASSISTANCE WITH VOTING, PLEASE
CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL FREE AT 1-800-733-8485 ext.
450. WE THANK YOU FOR YOUR PROMPT RESPONSE.
TO VOTE MARK AN X BELOW IN BLUE OR BLACK INK AS FOLLOWS [X]
KEEP THIS PORTION FOR YOUR RECORDS
<PAGE>
(DETACH HERE AND RETURN THIS PORTION ONLY)
BLANCHARD GROWTH & INCOME FUND
VOTE ON PROPOSAL 1 1. APPROVAL OF THE NEW INVESTMENT ADVISORY CONTRACT,
TO TAKE EFFECT UPON THE CLOSING OF THE PROPOSED
TRANSACTION WITH SIGNET BANKING CORPORATION AND ITS
SUBSIDIARY, VIRTUS CAPITAL MANAGEMENT, INC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 2 2. TO ELECT NEW BOARD MEMBERS, THE NOMINEES ARE:
J. DONAHUE, T. BIGLEY, J. CONROY, JR., W. COPELAND,
J. DOWD, L. ELLIS, E. FLAHERTY, JR., E. GONZALES, P.
MADDEN, G. MEYER, J. MURRAY, JR., W. POSVAR AND M.
SMUTS.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK THE "FOR ALL EXCEPT" BOX, AND STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
FOR ALL
FOR WITHHOLD EXCEPT
[ ] [ ] [ ]
VOTE ON PROPOSAL 3 3. RATIFICATION OF SELECTION OF INDEPENDENT
ACCOUNTANTS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 4 4. APPROVAL OF THE NEW DISTRIBUTION PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 5 5. APPROVAL OF AMENDMENT TO THE AGREEMENT AND DEC-
LARATION OF TRUST.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN A PARTNERSHIP NAME BY AUTHORIZED
PERSON.
________________________________________ ______________________________________
SIGNATURE DATE SIGNATURE (JOINT OWNER) DATE
<PAGE>
PLEASE VOTE, SIGN BELOW, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
BLANCHARD CAPITAL GROWTH FUND
SPECIAL MEETING OF SHAREHOLDERS-___________, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES AND WILL BE VOTED AS
SPECIFIED.
THE UNDERSIGNED REVOKE(S) ALL PREVIOUS PROXIES AND APPOINT(S)_________________
AND _________________ OR EITHER OF THEM, THE ATTORNEYS AND PROXIES OF THE
UNDERSIGNED WITH FULL POWER OF SUBSTITUTION TO VOTE ALL SHARES OF THE:
BLANCHARD CAPITAL GROWTH FUND
THAT THE UNDERSIGNED IS ENTITLED TO VOTE AT THE SPECIAL MEETING OF SUCH
SHAREHOLDERS OF SAID FUND TO BE HELD AT THE OFFICES OF KRAMER, LEVIN, NAFTALIS,
NESSEN, KAMIN & FRANKEL, 919 THIRD AVENUE, ____ FLOOR, NEW YORK, NEW YORK 10022,
ON ____________, 1995 AT ______ A.M., AND AT ANY ADJOURNMENTS THEREOF.
PLEASE INDICATE YOUR VOTES BY AN "X" IN THE APPROPRIATE BOXES BELOW.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS. IF ANY
OTHER MATTERS DO COME BEFORE THE MEETING,THE PERSONS NAMED IN THIS PROXY WILL
VOTE, ACT AND CONSENT WITH RESPECT THERETO IN ACCORDANCE WITH THE VIEW OF
MANAGEMENT.
IMPORTANT VOTING INSTRUCTIONS - URGENT ACTION REQUIRED
YOUR VOTE IS CRITICAL. PLEASE VOTE TODAY. YOUR PROMPT ATTENTION WILL BENEFIT ALL
SHAREHOLDERS AND HELP US OBTAIN A SUFFICIENT NUMBER OF SHARES TO HOLD THE
MEETING AS SCHEDULED AND AVOID THE COST OF ADDITIONAL PROXY SOLICITATION.
YOU MAY CAST YOUR VOTE BY ANY ONE OF THE CONVENIENT METHODS LISTED BELOW.
1. BY PHONE: CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL-FREE AT
1-800-733-8485, EXT. 450. OPERATORS WILL BE AVAILABLE TO TAKE YOUR
VOTE 9:00 A.M. TO 11:00 P.M. EASTERN STANDARD TIME, MONDAY THROUGH
FRIDAY.
2. BY FAX: VOTE IN THE SPACES BELOW, SIGN AND FAX THIS PROXY CARD TO
SHAREHOLDER COMMUNICATION CORPORATION TOLL-FREE AT 1-800-733-1885.
YOU MAY FAX YOUR CARD AT ANY TIME, DAY OR NIGHT.
3. BY MAIL: VOTE IN THE SPACES BELOW, SIGN AND MAIL THIS PROXY CARD IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOU HAVE ANY QUESTIONS, OR NEED ADDITIONAL ASSISTANCE WITH VOTING, PLEASE
CALL SHAREHOLDER COMMUNICATIONS CORPORATION TOLL FREE AT 1-800-733-8485 ext.
450. WE THANK YOU FOR YOUR PROMPT RESPONSE.
TO VOTE MARK AN X BELOW IN BLUE OR BLACK INK AS FOLLOWS [X]
KEEP THIS PORTION FOR YOUR RECORDS
<PAGE>
(DETACH HERE AND RETURN THIS PORTION ONLY)
BLANCHARD CAPITAL GROWTH FUND
VOTE ON PROPOSAL 1 1. APPROVAL OF THE NEW INVESTMENT ADVISORY CONTRACT,
TO TAKE EFFECT UPON THE CLOSING OF THE PROPOSED
TRANSACTION WITH SIGNET BANKING CORPORATION AND ITS
SUBSIDIARY, VIRTUS CAPITAL MANAGEMENT, INC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 2 2. TO ELECT NEW BOARD MEMBERS, THE NOMINEES ARE:
J. DONAHUE, T. BIGLEY, J. CONROY, JR., W. COPELAND,
J. DOWD, L. ELLIS, E. FLAHERTY, JR., E. GONZALES, P.
MADDEN, G. MEYER, J. MURRAY, JR., W. POSVAR AND M.
SMUTS.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK THE "FOR ALL EXCEPT" BOX, AND STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
FOR ALL
FOR WITHHOLD EXCEPT
[ ] [ ] [ ]
VOTE ON PROPOSAL 3 3. RATIFICATION OF SELECTION OF INDEPENDENT
ACCOUNTANTS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 4 4. APPROVAL OF THE NEW DISTRIBUTION PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
VOTE ON PROPOSAL 5 5. APPROVAL OF AMENDMENT TO THE AGREEMENT AND DEC-
LARATION OF TRUST.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN A PARTNERSHIP NAME BY AUTHORIZED
PERSON.
________________________________________ ______________________________________
SIGNATURE DATE SIGNATURE (JOINT OWNER) DATE
<PAGE>
May 25, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Document Control Room 1004
Re: Blanchard Funds
File No. 333165
---------------
Dear Sir or Madam:
We are electronically filing via EDGAR, pursuant to Rule 14a-6c under the
Securities Exchange Act of 1934, preliminary copies of proxy material, including
a Shareholder letter, Notice of Special Meetings, Proxy Statement and form of
Proxy, to be furnished to shareholders of Blanchard Funds and the Schedule 14A
Information required to accompany the filing, in connection with the Special
Meetings of Shareholders scheduled to be held on or about June 30, 1995. The
$125 fee to cover filing fees for the preliminary proxy solicitation materials,
pursuant to Rule 20a-l(c) of the Investment Company Act of 1940, was fedwired to
your account at Mellon Bank on May 16, 1995.
Very truly yours,
Joanne Doldo
JD:vec
cc: Arthur Kiriacon
Lawrence Liebman, Esq.
Eric Lomas
Gerald Morris
C. Grant Anderson, Esq.
Robert Anderson
David Galland
Leslie P. Hunter
Robert McHenry
Paul Torre
Joel Whitman
John C. Coates IV, Esq.
Marc Weitzen, Esq.
Carl Frischling, Esq.
Susan J. Penry-Williams, Esq.
<PAGE>
Schedule 14A Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Preliminary Additional Materials
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.149-ll(c) or Section 240.14a-12
Blanchard Funds
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Joanne Doldo
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check appropriate box):
[X] $125 per Exchange Act Rule 20a-l(c)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(j)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(j)(4) and 0-11
1. Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
<PAGE>
Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-ll(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid.
- --------------------------------------------------------------------------------
2. Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
3. Filing Party:
- --------------------------------------------------------------------------------
4. Date Filed:
- --------------------------------------------------------------------------------
