SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BLANCHARD FUNDS
(Exact Name of Registrant as Specified in Charter)
(412) 288-1900
(Area Code and Telephone Number)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
JOHN W. MCGONIGLE, ESQUIRE
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Copy to:
Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
It is proposed that this filing will become effective on November 23,
1995 pursuant to Rule 488. (Approximate Date of Proposed Public Offering)
An indefinite amount of the Registrant's securities has been registered
under the Securities Act of 1933 pursuant to Rule 24f-2 under The Investment
Company Act of 1940. In reliance upon such Rule, no filing fee is being paid at
this time. A Rule 24f-2 notice for the Registrant for the year ended April 30,
1995 was filed on June 27, 1995.
CROSS REFERENCE SHEET
Pursuant to Item 1(a) of Form N-14 Showing Location in Prospectus of Information
Required by
Form N-14
Item of Part A of Form N-14 and Caption Caption or Location in Prospectus
1. Beginning of Registration Statement
and Outside Front Cover Page of
Prospectus ................ Cross Reference Sheet; Cover Page
2. Beginning and Outside
Back Cover Page of Prospectus Table of Contents
3. Synopsis Information
and Risk Factors .......... Summary; Risk Factors
4. Information About the
Transaction ............... Information About the Reorganization
5. Information About the Registrant Information About Blanchard Funds,
Short-Term Flexible, and Short-Term Global
6. Information About the Company
Being Acquired ............ Information About Blanchard Funds, Short-Term
Flexible, and Short-Term Global
7. Voting Information ........ Voting Information
8. Interest of Certain Persons and Experts Not Applicable
9. Additional Information Required
for Reoffering by Persons Deemed
to be Underwriters ........ Not Applicable
BLANCHARD GROUP OF FUNDS
VERY IMPORTANT
ENCLOSED IS A PROXY VOTE CARD
WHICH REQUIRES YOUR SIGNATURE.
IT HAS TO DO WITH THE PENDING MERGER OF
THE BLANCHARD SHORT-TERM GLOBAL INCOME FUND
INTO THE BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND.
PLEASE REVIEW AND CAST YOUR VOTE TODAY!
Dear Valued Shareholder:
As you may be aware, there have been a number of exciting developments in
regards to the Blanchard Group of Funds in recent months. One of the benefits
has been that the management and Trustees have identified a number of changes
which they feel will either enhance performance, reduce expenses, or expand the
services offered to Blanchard fund shareholders.
I am writing you today to inform you of a recommended change which affects your
Blanchard Short-Term Global Income Fund.
. Namely, the Board of Trustees has unanimously recommended a merger of the
Blanchard Short-Term Global Income Fund into the Blanchard Short-Term
Flexible Income Fund.
A MORE APPROPRIATE INVESTMENT STRATEGY
The reasons for the proposed merger can be best summed up as follows: while
both Funds have similar investment objectives--helping investors to earn a
solid level of income while enjoying a relative stability of principal--the
Blanchard Short-Term Flexible Income Fund appears to be better positioned to
meet this objective on an on-going basis.
This is because the costs associated with hedging the foreign currency component
of the Blanchard Short-Term Global Income Fund have reached a level at which we
believe it is no longer in the best interest of the shareholders to continue
utilizing the same portfolio strategy.
By contrast, while the Blanchard Short-Term Flexible Income Fund enjoys the
ability to invest in overseas markets, and to hedge those investments, the
portfolio strategy revolves around utilizing a high-quality blended portfolio
that concentrates on U.S. markets. The Fund, which was established April
16, 1993, has an unbroken record of paying monthly dividends and an
exceptional record of stability of principal.
A COMPARISON OF PAST PERFORMANCE
Below are data which compare the performance of the Blanchard Short-Term Global
Income Fund (BSTGIF) with the Blanchard Short-Term Flexible Income Fund
(BSTFIF). While past performance is no guarantee of future results, you can
see the success which has been attained by the BSTFIF as compared to the
BSTGIF over the past few years.
You may wish to note that the BSTFIF has had a positive total return in each
calendar year as traced from April 16, 1993 through July 31, 1995--a time period
which included one of the worst bear bond markets in history in which only a
handful of U.S. fixed income funds had positive total returns.
[BAR GRAPHS]
Total Returns by Fund Each Year
(Since Inception of BSTFIF 4/16/93 - 9/30/95)
4/16/93- 1/1/94 1/1/95-
12/31/93 12/31/94 9/30/95
BSTFIF . % . % . %
-- -- -- -- -- --
BSTGIF . % . % . %
-- -- -- -- -- --
Other important performance numbers of which you should be aware.....
. The one-year average annual return of the Blanchard Short-Term Flexible Income
Fund through 9/30/95 is . % vs. . %* for the Blanchard Short-Term Global
-- -- -- --
Income Fund.
. Since the Blanchard Short-Term Flexible Income Fund's inception on 4/16/93
through 9/30/95, the total return of the Fund is . % vs. . %* for the
-- -- -- --
Blanchard Short-Term Global Income Fund.
. The 30-day yield as of 9/30/95 for the Blanchard Short-Term Flexible Income
Fund is . % vs. . %* for the Blanchard Short-Term Global Income Fund.
-- -- -- --
(For the Blanchard Short-Term Flexible Income Fund, the average annual return
since inception, 4/16/93, through 9/30/95 is . %. For the Blanchard Short-
-- --
Term Global Income Fund, the average annual return since inception, 1/8/91,
through 9/30/95 is . %.)
-- --
Naturally, as with all bond funds, the yield, investment return and principal
value of both the Blanchard Short-Term Flexible Income Fund and the Blanchard
Short-Term Global Income Fund will vary with changing market conditions so that
shares, when redeemed, may be worth more or less than their original purchase
price.
THE BOARD OF TRUSTEES RECOMMEND VOTING "FOR" THIS MERGER
Enclosed with this letter is a proxy and a voting card. It is very important
that you fill out and return the voting card ASAP. Only then can we move
ahead with proposed changes. In addition to an investment strategy that
appears more appropriate for today's global economic environment, there are
three more reasons we believe this merger is in your best interest:
1.This merger of assets is tax-free, so there are no taxable consequences
for you.
2.The increased asset size of the combined fund will result in an expense ratio
that is lower than that of the Blanchard Short-Term Global Income Fund, which
will be dissolved upon the successful conclusion of the merger.
3.You will continue to enjoy all of the same shareholder privileges, including
free check writing, free telephone switches between Blanchard mutual funds,
free telephone redemptions, and convenient monthly account statements.
It is for all of these reasons that the Board of Trustees has unanimously voted
to recommend that you vote "FOR" the merger.
* The returns and yield quoted above for the Blanchard Short-Term Flexible
Income Fund do not reflect certain management fees which were waived during the
period. If reflected, the returns and yield would be lower. The returns and
yield quoted above for the Blanchard Short-Term Global Income Fund do not
reflect the one-time account opening fee which was charged at the Fund's
inception, but is no longer charged. If reflected, the returns and yield would
be lower. Average annual return numbers are total return annualized and
compounded, and assume reinvestment of all distributions.
PLEASE VOTE TODAY!
Because shareholder approval is required for this Fund merger, your individual
vote is of critical importance. This gives you an important say in the
management of your investment.
. A voting card is enclosed. It is essential that you mark your card in the
appropriate space and return it in the postage-paid envelope provided.
Only by voting will this merger be able to move ahead. If the proxy is
approved, the merger of the Blanchard Short-Term Global Income Fund into the
Blanchard Short-Term Flexible Income Fund is scheduled to be completed
January 15, 1996. 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 now to fill out and return the
enclosed proxy voting card, while the material is at hand.
. If you wish to vote over the phone, call Shareholders' Services at 1-800-829-
3863 between 9:00 a.m. and 5:30 p.m., EST.
. If you wish to return your vote by fax, please use fax number 1-212-XXX-XXXX.
If you wish to vote the proxy in person, you may attend the shareholder
meeting on January 15, 1996 at 2:00 p.m. at Federated Investors Tower,
19th Floor, Pittsburgh, Pennsylvania 15222-3779.
Before voting, please refer to the sections of the Blanchard Group of Funds'
prospectus which contains more complete details on investment objectives,
management fees, risks and expenses for both the Blanchard Short-Term Flexible
Income Fund and, for comparison purposes, the Blanchard Short-Term Global Income
Fund.
For your information, a fact sheet on the Blanchard Short-Term Flexible Income
Fund is enclosed. If you have additional questions on the voting process, or on
the Fund, please call 1-800-829-3863. A friendly and experienced Shareholders'
Service Representative will be standing by between 8:30 a.m. and 5:30 p.m., EST.
Please vote your proxy today. Thank you for your continued confidence in the
Blanchard Group of Funds.
Sincerely,
Blanchard Short-Term Global Income Fund
Michael Freedman
Executive Vice-President
Signet Financial Services, Inc.
The Blanchard Group of Funds are distributed by Federated Securities Corp. and
are advised by Virtus Capital Management, Inc.
The Blanchard Group of Funds are not deposits, obligations of, or guaranteed by
any bank or other financial institution, and are not insured by the FDIC or and
Federal Agency. In addition, they involve risk, including the possible loss of
principal invested.
BLANCHARD SHORT-TERM
FLEXIBLE INCOME FUND
ABOUT THE BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
(formerly the Blanchard Short-Term Bond Fund)
INVESTMENT OBJECTIVE:
To produce a solid level of income for investors, while maintaining a stable
principal value. Since inception, 4/16/93, the share price of the Fund has
fluctuated no more than 4% up or down.
FEDERATED SECURITIES
1)
CORP.
Month
end share Distributor
prices for the BSTFIF:
4/16/93 - $3.00 1/31/94 - $3.01 1/31/95 - $2.89
4/30/93 - $3.00 2/28/94 - $2.99 2/28/95 - $2.92
5/31/93 - $3.00 3/31/94 - $2.95 3/31/95 - $2.93
6/30/93 - $3.00 4/30/94 - $2.93 4/30/95 - $2.94
7/31/93 - $3.00 5/31/94 - $2.93 5/31/95 - $2.97
8/31/93 - $3.01 6/30/94 - $2.92 6/30/95 - $2.97
9/30/93 - $3.01 7/31/94 - $2.92 7/31/95 - $2.97
10/31/93 - $3.01 8/31/94 - $2.92 8/31/95 - $2.97
11/30/93 - $3.01 9/30/94 - $2.90 9/30/95 - $2.97
12/31/93 - $3.00 10/31/94 - $2.90
11/30/94 - $2.88
12/31/94 - $2.88
2) Of the 3,233 fixed income funds in the Lipper fixed income
universe, excluding money market funds, only 214 funds had
gains. BSTFIF was one out of 214 funds to have turned in a
positive gain for 1994.
While past performance is no guarantee of future results...
IN 1994, THE MOST VOLATILE YEAR FOR BONDS IN RECORDED HISTORY, THE
BLANCHARD SHORT- TERM FLEXIBLE INCOME FUND WAS ONE OF ONLY 214 FIXED INCOME
FUNDS TO HAVE TURNED IN A POSITIVE PERFORMANCE OUT OF 3,233 FIXED INCOME
FUNDS TRACKED BY LIPPER ANALYTICAL SERVICES.
PORTFOLIO MANAGER:
The Fund's portfolio is managed by OFFITBANK, one of the nation's premier
private trust banks. OFFITBANK specializes in the management of fixed income
portfolios for a clientele comprised of wealthy family groups, corporate pension
plans and non-profit organizations. OFFITBANK currently manages over $6 billion
in globally diversified fixed income investments.
PORTFOLIO QUALITY:
While the Fund has the flexibility to invest across the spectrum of fixed income
investments, including all grades of U.S. Treasuries, GNMAs, asset-backed
securities, corporate bonds and, when appropriate, foreign issues, the Fund
places an emphasis on quality. Since inception, the Fund has consistently
maintained an average portfolio quality rating of "A" or better.
PORTFOLIO MATURITY:
The Blanchard Flexible Short-Term Income Fund has been designed to serve the
needs of cautious investors interested in higher income, but who are concerned
about the prospect of rising interest rates.
Historically, the price of shorter-term fixed income securities has been far
less volatile than longer-term securities. Especially in a rising interest rate
environment. That's why the average portfolio maturity of the Blanchard
Flexible Short-Term Inocme Fund will normally not exceed 3 years.
RISK MANAGEMENT:
One of the primary reason that OFFITBANK was chosen as portfolio manager is
because of their expertise in the risk management of fixed income portfolios.
With the Blanchard Flexible Short-Term Income Fund they utilize a number of
important tools in the attempt to better manage risk:
o A short maturity portfolio, offering more price than longer-term
bonds.
o Diversification between fixed income sectors and issues -- including
the ability to shift a portion of the Fund's assets overseas if market
conditions warrant.
o An emphasis on quality -- with a current high "A" average portfolio
rating.
Of course, past performance, no matter how strong, is not an assurance of future
success. There can never be a guarantee that the Fund will meet the objective
of higher yields and a stable share price. The Fund's yield, investment return
and principal value will vary with changing market conditions so that shares,
when redeemed, may be worth more or less than their original purchase price.
FOR MORE INFORMATION ON THE BLANCHARD FLEXIBLE SHORT-TERM INCOME FUND, CALL
INVESTORS' SERVICE AT 1-800-829-3863.
The Blanchard Group of Funds are available through Signet Financial Services,
Inc., and are advised by Virtus Capital Management, Inc. an affiliate of Signet
Financial Services, Inc. (1107) 03PR1095
PRODUCTS OFFERED THROUGH SIGNET FINANCIAL SERVICES, INC., ARE NOT DEPOSITS,
OBLIGATIONS OF, OR GUARANTEED BY SIGNET FINANCIAL SERVICES, INC., ANY BANK OR
OTHER FINANCIAL INSTITUTION, AND ARE NOT INSURED BY THE FDIC OR ANY FEDERATED
AGENCY. IN ADDITION, THEY INVOLVE RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL
INVESTED.
BLANCHARD FUNDS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF BLANCHARD SHORT-TERM GLOBAL INCOME FUND:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Blanchard
Short-
Term Global Income Fund ("Short-Term Global"), a portfolio of Blanchard Funds,
will be held at 2:00 p.m. on January 15, 1996 at Federated Investors Tower, 19th
Floor, Pittsburgh, Pennsylvania 15222-3779 for the following purposes:
1. To approve or disapprove a proposed agreement pursuant to which
Blanchard
Short-Term Flexible Income Fund (formerly known as Blanchard Short-Term
Bond Fund) would acquire all of Short-Term Global's assets in exchange
for shares of Blanchard Short-Term Flexible Income Fund ("Short-Term
Flexible Shares"). Short-Term Global would then distribute the Short-
Term Flexible Shares so received pro rata to its shareholders and would
terminate its existence; and
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
By Order of the Board of Trustees,
Dated: December 4, 1995 John W. McGonigle
Secretary
Shareholders of record at the close of business November 17, 1995 are entitled
to
vote at the meeting. Whether or not you plan to attend the meeting, please sign
and return the enclosed proxy card or call 1-800-829-3863. You may also fax
your
proxy to 1-212-XXX-XXXX. YOUR VOTE IS IMPORTANT.
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AND TO SAVE THE EXPENSE OF FURTHER
MAILINGS, PLEASE MARK YOUR PROXY CARD, SIGN IT, AND RETURN IT IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. YOU MAY
REVOKE YOUR PROXY AT ANY TIME AT OR BEFORE THE MEETING OR VOTE IN PERSON IF YOU
ATTEND THE MEETING.
PROSPECTUS/PROXY STATEMENT
NOVEMBER 20, 1995
ACQUISITION OF THE ASSETS OF
BLANCHARD SHORT-TERM GLOBAL INCOME FUND
("SHORT-TERM GLOBAL"),
BY AND IN EXCHANGE FOR SHARES OF
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
("SHORT-TERM FLEXIBLE")
(FORMERLY, BLANCHARD SHORT-TERM BOND FUND),
EACH A PORTFOLIO OF BLANCHARD FUNDS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER: 1-800-829-3863
This Prospectus/Proxy Statement describes the proposed Agreement and Plan of
Reorganization (the "Plan") whereby Short-Term Flexible would acquire all of the
assets of Short-Term Global, in exchange for Short-Term Flexible Shares. These
shares would then be distributed pro rata by Short-Term Global to its
shareholders, and as a result, each Short-Term Global shareholder will own
Short-
Term Flexible shares having a total net asset value equal to the total net asset
value of his or her holdings in Short-Term Global. The Plan would result in the
complete liquidation and the termination of Short-Term Global.
Blanchard Funds is an open-end management investment company which currently
includes ten portfolios, each of which has a distinct investment objective. The
investment objective of Short-Term Flexible is a high level of current income
consistent with preservation of capital through investing primarily in a broad
range of short-term debt securities. The investment objective of Short-Term
Global is high current income with minimum risk of principal and relative
stability of net asset value. Both Funds invest primarily in investment grade
short-term debt securities. For a comparison of the investment policies of the
Funds, see "Summary-Investment Objectives, Policies, and Limitations."
This Prospectus/Proxy Statement should be retained for future reference. It
sets
forth concisely the information about Blanchard Funds and Short-Term Flexible
that
a prospective investor should know before investing in Short-Term Flexible.
This
Prospectus/Proxy Statement is accompanied by the Prospectus of Short-Term
Flexible
and Short-Term Global dated August 7, 1995, which is incorporated herein by
reference. The Statements of Additional Information for Short-Term Flexible and
Short-Term Global, each dated August 7, 1995 (relating to the Prospectuses of
Short-Term Flexible and Short-Term Global, respectively, of the same date) and
November 20, 1995 (relating to this Prospectus/Proxy Statement) containing
additional information have been filed with the Securities and Exchange
Commission
and are incorporated herein by reference. Copies of the Statements of
Additional
Information may be obtained without charge by calling the Funds at the telephone
number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF SIGNET BANK OR ANY OF ITS AFFILIATES, OR OF ANY BANK, ARE NOT
ENDORSED OR GUARANTEED BY SIGNET BANK OR ANY OF ITS AFFILIATES, OR BY ANY BANK,
AND ARE NOT OBLIGATIONS OF, GUARANTEED BY OR INSURED BY THE U.S. GOVERNMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
TABLE OF CONTENTS
Summary................................................
--
Risk Factors...........................................
--
Information About the Reorganization...................
--
Information About Blanchard Funds, Short-Term Flexible and Short-Term Global
.......................................................
--
Voting Information.....................................
--
Exhibit A--Agreement and Plan of Reorganization........
--
Blanchard Funds
Summary of Fund Expenses
Combined
Short-Term
Global/
Short-Term Short-Term Short-Term
Global Flexible Flexible
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)...None None None
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering
price)............................None None None
Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds,as applicable).None None None
Redemption Fees (as a percentage of amount
redeemed, if applicable) None None None
Exchange Fee None None None
Annual Operating Expenses
(as a percentage of projected average net assets)
Management Fee (after waiver) (1) 0.71% 0.17% (2) 0.60%
12b-1 Fee (after waiver) (3) 0.24% 0.23% 0.25%
Total Other Expenses 0.56% 0.98% 0.53%
Total Fund Operating Expenses(4) 1.38% 1.38% (5)
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee by the investment adviser.
The asdviser can terminate this voluntary waiver at any time at its sole
discretion. Tha maximum management fee is 0.75%.
(2) VCM has conditioned its right to receive a portion of any earned but
deferred fees and expenses based upon this Fund reaching and maintaining a
certain level of net assets. See "Management of the Funds."
(3) The maximum 12b-1 fee is 0.25%.
(4) The Total Fund Operating Expenses for the fiscal year ended April 30, 1995
would have been 1.56% and 1.98% for Short-Term Global and Short-Term Flexible,
respectively, absent the voluntary waivers of portions of the management fees
and distribution fees.
(5) VCM has agreed to cap the Fund's total operating expenses until July 11,
1997 so that the expense ratio will not exceed the Fund ratio for the fiscal
year ended April 30, 1995.
Total expenses for Short-Term Flexible are estimated based on average expenses
expected to be incurred during the fiscal year
ending April 30, 1996. During the course of this period, expenses may be more
or less than the average amount shown.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of the Fund will bear, either directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "The Blanchard Funds Information" and "Investing in the Fund." Wire-
Transferred redemptions may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years
<S> <C> <C> <C>
You would pay the following expenses
on a $1,000 investment assuming (1)
5% annual return and (2) redemption
at the end of each time period.
The Fund charges no redemption fees.
Short-Term Global $15 $48 $83
Short-Term Flexible $14 $44 $76
Combined Short-Term Global/ Short-Term Flexible $14 $44 $76
</TABLE>
The above example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. This
example is based on estimated data for the Fund's fiscal year ending April 30,
1996.
SUMMARY
ABOUT THE PROPOSED REORGANIZATION
The Board of Trustees of Blanchard Funds has voted to recommend to shareholders
of
Short-Term Global the approval of a Plan whereby Short-Term Flexible would
acquire
all of the assets of Short-Term Global in exchange for shares of Short-Term
Flexible. These shares would thereupon be distributed pro rata by Short-Term
Global to its shareholders and, as a result, each shareholder of Short-Term
Global
will become the owner of Short-Term Flexible shares having a total net asset
value
equal to the total net asset value of his or her holdings in Short-Term Global.
These transactions (referred to as the "Reorganization") would result in the
complete liquidation and the termination of Short-Term Global.
As a condition to the Reorganization transactions, Blanchard Funds will receive
an
opinion of counsel that the Reorganization will be considered a tax-free
"reorganization" under applicable provisions of the Internal Revenue Code so
that
no gain or loss will be recognized by either Short-Term Flexible or Short-Term
Global or their shareholders. The tax cost basis of the Short-Term Flexible
shares received by Short-Term Global shareholders will be the same as the tax
cost
basis of their shares in Short-Term Global.
In recommending the Reorganization, the Blanchard Funds' investment adviser,
Virtus Capital Management, Inc., and the Board of Trustees of Blanchard Funds,
considered the fact that Short -Term Flexible, which has an investment objective
similar to that of Short-Term Global, has been more effective in producing price
stability and acceptable total returns than has Short-Term Global, and have
concluded that economies of scale, and potentially lower expense ratios, could
be
realized by transferring the assets of Short-Term Global into Short-Term
Flexible.
The following discussion compares certain key aspects of Short-Term Flexible and
Short-Term Global (collectively, the "Funds").
INVESTMENT OBJECTIVES, POLICIES, AND LIMITATIONS
The investment objectives of Short-Term Global and Short-Term Flexible are
substantially identical. Short-Term Global seeks to produce high current income
with minimum risk of principal and relative stability of net asset value.
Short-
Term Flexible seeks to provide a high level of current income consistent with
preservation of capital.
Short-Term Flexible pursues its investment objective by investing at least 80%
of
its assets in U.S. debt securities, and may invest up to 20% of its assets in
foreign debt securities. Short-Term Global is managed in accordance with a
global
investment strategy, with Short-Term Global's assets being allocated among
securities denominated in the U.S. dollar as well as the currencies of a number
of
foreign countries.
Short-Term Flexible will normally invest 65% of its assets in investment grade
debt securities, which are securities rated at least Baa by Moody's Investors
Service, Inc. ("Moody's") or at least BBB by Standard & Poor's Ratings Group
("S&P"), and may invest up to 34.9% of its assets in securities rated as low as
Caa by Moody's or Ccc by S&P. Short-Term Global will invest primarily in
investment grade debt securities, but may invest up to 10% of its assets in debt
securities rated as low as Ba by Moody's or BB by S&P.
Short-Term Flexible's portfolio consists of the following categories of U.S. and
foreign debt securities: bonds, notes, mortgage securities, asset-backed
securities, government and government agency obligations, zero coupon
securities,
convertible securities, and short-term obligations such as banker's acceptances,
certificates of deposits and commercial paper. Short-Term Global's portfolio
consists of the following categories of debt securities: U.S. government
securities, obligations of foreign governments and supra-national organizations,
corporate debt securities, certificates of deposit, banker's acceptances, and
commercial paper. Both Funds may enter into repurchase agreements, futures
contracts, options on futures contracts, options on foreign currencies, options
on
portfolio securities, and forward foreign currency exchange contracts.
Short-Term Flexible and Short-Term Global are subject to certain investment
limitations. The investment limitations of the two funds are substantially
identical. These limitations include provisions that, in effect, prohibit
either
fund from: selling any securities short or purchasing any securities on margin;
issuing senior securities, except that each fund may borrow up to 20% of the
value
of its total assets; mortgaging, pledging, or hypothecating any assets except to
secure permitted borrowings; and lending any of their respective assets, except
portfolio securities up to one-third of the value of their total assets or
investing more than 10% of the value of their respective net assets in illiquid
securities.
Reference is hereby made to the Prospectuses and the Statements of Additional
Information of Short-Term Flexible and Short-Term Global, all dated August 7,
1995, which set forth in full the investment objectives, policies and investment
limitations of both funds and which are incorporated by reference herein.
DISTRIBUTION ARRANGEMENTS
Federated Securities Corp. is the principal distributor for shares of Blanchard
Funds. Under distribution plans adopted in accordance with Investment Company
Act
Rule 12b-1 (the "12b-1 Plan"), Short-Term Flexible and Short-Term Global may
each
pay to Federated Securities Corp. an amount computed at an annual rate of 0.25
of
1% of each respective Fund's average daily net assets to finance any activity
which is principally intended to result in the sale of shares subject to the
12b-1
Plan. Currently, Short-Term Flexible and Short-Term Global are paying fees
under
the 12b-1 Plan at an annual rate of 0.23 of 1% and 0.24 of 1%, respectively, of
such respective Fund's average daily net assets.
ADVISORY AND OTHER FEES
Virtus Capital Management, Inc. ("VCM"), a Maryland corporation and a
wholly-owned
subsidiary of Signet Banking Corporation provides overall management services
for
Short-Term Flexible and Short-Term Global. In carrying out its obligations, VCM
shall: (i) provide or arrange for investment research and supervision of the
Funds; (ii) select and evaluate the performance of the Funds' Portfolio Advisers
(if any); (iii) select and evaluate the performance of the administrator; and
(iv)
conduct or arrange for a continuous program of appropriate sale or other
distribution and reinvestment of a Fund's assets. VCM is entitled to receive an
annual management fee equal to 0.75 of 1% of each Fund's average daily net
assets.
Currently, Short-Term Flexible and Short-Term Global are paying management fees
of
0.17 of 1% and 0.71 of 1%, respectively. See also the "Summary of Fund
Expenses."
VCM has undertaken to reimburse each Fund, up to the amount of its management
fee,
for operating expenses in excess of limitations established by certain states.
VCM may further voluntarily waive a portion of its fee or reimburse either Fund
for certain operating expenses. This agreement to waive fees or reimburse
expenses may be terminated by VCM at any time in its discretion.
VCM selects, monitors and evaluates the Portfolio Advisers to Short-Term
Flexible
and Short-Term Global. The Portfolio Advisers -- OFFITBANK, in the case of
Short-
Term Flexible, and Lombard Odier International Portfolio Limited ("Lombard
Odier"), in the case of Short-Term Global, receive sub-advisory fees from VCM at
the annual rate of, in the case of OFFITBANK, .30% of the first $25 million of
Short-Term Flexible'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; and, in the case of Lombard Odier, at the annual rate of .35% of the
first $10 million of Short-Term Global'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.
Federated Administrative Services, a subsidiary of Federated Investors, provides
the Funds with certain administrative personnel and services necessary to
operate
the Funds. The rate charged for such administrative services is 0.15 of 1% of
the
first $250 million of average aggregate daily net assets of Blanchard Funds,
0.125
of 1% on the next $250 million, 0.10 of 1% on the next $250 million and 0.075
of
1% of average aggregate daily net assets of Blanchard Funds in excess of $750
million. The administrative fee received during any fiscal year shall be at
least
$75,000 per fund. During Blanchard's most recent fiscal year, neither
Short-Term
Flexible nor Short-Term Global incurred an administrative fee, because the
agreement with Federated Administrative Services did not commence until
after the
close of such fiscal year. Short-Term Flexible estimates that its
administrative
fee expense for the current fiscal year will be 0.35 of 1% of its average
aggregate daily net assets. Short-Term Global estimates that its administrative
fee expense for the current fiscal year will be 0.12 of 1% of its average
aggregate daily net assets.
The total annual operating expenses for Short-Term Flexible are expected to be
1.38% of average daily net assets and would be 2.23% of average daily net assets
absent the voluntary waivers of portions of the
12b-1 fee and the advisory fee. The total annual operating expenses for Short-
Term Global are expected to be 1.51% of average daily net assets.
PURCHASE AND REDEMPTION PROCEDURES
Procedures for the purchase and redemption of shares of Short-Term Flexible are
identical to procedures applicable to the purchase and redemption of Short-Term
Global shares. For a complete description of the purchase and redemption
procedures applicable to purchases and redemptions of shares, refer to the
Prospectuses of the Funds dated August 7, 1995, which are incorporated herein by
reference. Any questions about such procedures may be directed to, and
assistance
in effecting purchases, redemptions, or exchanges of shares may be obtained by
calling 1-800-829-3863.
Shares of Short-Term Flexible and Short-Term Global are sold on all business
days
except on days on which the New York Stock Exchange is closed and federal or
state
holidays restricting wire transfers. Shares are sold at their net asset value
next determined after an order is received. The net asset value is calculated
as
of the close of the New York Stock Exchange (normally 4:00 p.m., Eastern
time) on
days shares are sold. Purchases of shares of either Fund may be made by wire,
by
check, or by ACH. Orders are considered received after payment is converted
into
federal funds. The minimum initial investment in each of the Funds is $3,000,
except for qualified pension Plans (IRAs, Keoghs, etc.), which require a minimum
initial investment of $2,000.
Redemption requests cannot be executed on days which the New York Stock Exchange
is closed and federal or state holidays restricting wire transfers. Shares are
redeemed at their net asset value next determined after the redemption request
is
received. Proceeds will be distributed by wire or check. Requests for
redemption
can be made by telephone or by mail as more particularly described in the above-
referenced Prospectuses.
EXCHANGE PRIVILEGES
Shareholders of Short-Term Flexible and Short-Term Global may exchange shares of
Short-Term Flexible and Short-Term Global for shares of another Fund in the
Blanchard Funds on the basis of relative net asset values per share at the
time of
exchange. No fees are charged in connection with the exchange. The dollar
amount
of an exchange must meet the initial investment requirement of the Fund into
which
the exchange is being made. All subsequent exchanges into that Fund must be at
least $1,000.
Shareholders of Short-Term Flexible and Short-Term Global may exchange shares of
Short-Term Flexible or Short-Term Global for shares of The Virtus Funds' money
market portfolios, which consist of The Money Market Fund, The Treasury Money
Market Fund, and The Tax-Free Money Market Fund, at net asset value. No
fees are
charged in connection with the exchange. The dollar amount of any exchange
into a
Virtus money market fund must be at least $1,000.
TAX CONSEQUENCES
As a condition to the Reorganization transactions, Blanchard Funds will receive
an
opinion of counsel that the Reorganization will be considered a tax-free
"reorganization" under applicable provisions of the Internal Revenue Code so
that
no gain or loss will be recognized by either Short-Term Flexible or Short-Term
Global or their respective shareholders. The tax cost basis of Short-Term
Flexible shares received by Short-Term Global shareholders will be the same as
the tax cost basis of their shares in Short-Term Global.
RISK FACTORS
Investment in Short-Term Flexible is subject to certain risks which are set
forth
in its Prospectus dated August 7, 1995, and its Statement of Additional
Information dated August 7, 1995 and incorporated herein by reference thereto.
Briefly, these risks include, but are not limited to, fluctuation of the
value of
shares of Short-Term Flexible; the ability of the issuers of securities owned by
Short-Term Flexible to meet their obligations for the payment of principal and
interest when due; unanticipated pre-payment of mortgages; uncertainty that a
secondary market for options or for positions in futures contracts will exist at
all times; imperfect correlation between financial futures and options on
financial futures with the prices of the securities subject to the futures
contracts which could cause a futures contract and any related options to react
differently than the portfolio securities to market changes; the greater price
volatility, lesser liquidity and greater risk of default of lower rated fixed
income securities; and, with respect to foreign securities, the risks of
currency
fluctuation and imposition of currency exchange control regulation, the lack of
information available concerning foreign issuers, the fact that foreign issuers
are not subject to financial reporting standards comparable to those in the U.S.
and the possibility of expropriation of assets and political instability.
Investment in Short-Term Global carries risks of a substantially similar nature,
as more fully described in its Prospectus dated August 7, 1995 and in its
Statement of Additional Information dated August 7, 1995.
INFORMATION ABOUT THE REORGANIZATION
BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION
On July 12, 1995, VCM acquired the assets and business of Sheffield
Management Co.
("Sheffield"), which was, until that time, manager of the Blanchard Funds. Upon
succeeding Sheffield as manager, VCM conducted a review and evaluation of the
viability of the portfolios of the Blanchard Funds. As a result of this review,
VCM proposed to representatives of Short-Term Global that the Board consider a
transfer of all of Short-Term Global's assets to Short-Term Flexible,
which has an
investment objective similar to that of Short-Term Global, and which, in VCM's
opinion, has been more effective in producing share price stability and
acceptable
total returns than has Short-Term Global. In connection with this proposal, VCM
emphasized that the combination of the two Funds would enable shareholders of
both
Funds to benefit from increased diversification. The Board of Trustees of
Blanchard Funds and VCM have concluded that economies of scale, and potentially
lower expense ratios, could be realized by transferring the assets of Short-Term
Global into Short-Term Flexible.
The Trustees also noted that the shareholders of both Short-Term Global
and Short-
Term Flexible will receive the quality portfolio advisory services of OFFITBANK,
Short-Term Flexible's current Portfolio Adviser, following consummation of the
Reorganization.
The Trustees of Blanchard Funds, including the independent Trustees, have
unanimously concluded that consummation of the Reorganization is in the best
interests of Short-Term Flexible and Short-Term Global and the shareholders of
Short-Term Flexible and Short-Term Global and that the interests of Short-Term
Flexible and Short-Term Global shareholders would not be diluted as a result of
effecting the Reorganization and have unanimously approved the Plan.
DESCRIPTION OF THE PLAN OF REORGANIZATION
The Plan provides that on or about January 12, 1996 (the "Closing Date") Short-
Term Flexible will acquire all of the assets of Short-Term Global in
exchange for
Short-Term Flexible shares to be distributed pro rata by Short-Term Global
to its
shareholders in complete liquidation and termination of Short-Term Global.
Shareholders of Short-Term Global will become shareholders of Short-Term
Flexible
as of 4:00 p.m. (Eastern time) on the Closing Date and will begin accruing
dividends on the next day. Shares of Short-Term Flexible received by Short-Term
Global shareholders in connection with the acquisition of the assets of
Short-Term
Global will not be subject to a sales load. Shareholders of Short-Term Global
will earn their last dividend from Short-Term Global on the Closing Date.
Consummation of the Reorganization is subject to the conditions set forth in the
Plan, including receipt of an opinion in form and substance satisfactory to
Blanchard Funds, as described under the caption "Federal Income Tax
Consequences"
below. The Plan may be terminated and the Reorganization may be abandoned
at any
time before or after approval by shareholders of Short-Term Global prior to the
Closing Date by Blanchard Funds if it believes that consummation of the
Reorganization would not be in the best interests of the shareholders of either
Short-Term Global or Short-Term Flexible.
VCM is responsible for the payment of all expenses of the Reorganization
incurred
by either Fund, whether or not the Reorganization is consummated. Such expenses
include, but are not limited to, legal fees, registration fees, transfer taxes
(if
any), the fees of banks and transfer agents and the costs of preparing,
printing,
copying and mailing proxy solicitation materials to shareholders of Short-Term
Global and the costs of holding the Special Meeting of Shareholders.
The foregoing brief summary of the Plan entered into between Short-Term Global
and
Short-Term Flexible is qualified in its entirety by the terms and provisions of
the Plan, a copy of which is attached hereto as Exhibit A and incorporated
herein
by reference.
DESCRIPTION OF SHORT-TERM FLEXIBLE SHARES
Shares of Short-Term Flexible to be issued to shareholders of Short-Term Global
under the Plan will be fully paid and nonassessable when issued and transferable
without restriction and will have no preemptive or conversion rights. Reference
is hereby made to the Prospectus of Short-Term Flexible dated August 7, 1995
provided herewith for additional information about Short-Term Flexible shares.
FEDERAL INCOME TAX CONSEQUENCES
As a condition to the Reorganization transactions, Blanchard Funds will
receive an
opinion from Dickstein, Shapiro & Morin, L.L.P., counsel to Blanchard Funds, to
the effect that, on the basis of the existing provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), current administrative rules and court
decisions, for federal income tax purposes: (1) the Reorganization as set forth
in the Plan will constitute a tax-free reorganization under section 368(a)(1)(C)
of the Code; (2) no gain or loss will be recognized by Short-Term Flexible upon
its receipt of Short-Term Global's assets solely in exchange for Short-Term
Flexible shares; (3) no gain or loss will be recognized by Short-Term Global
upon
the transfer of its assets to Short-Term Flexible in exchange for Short-Term
Flexible shares or upon the distribution (whether actual or constructive) of
Short-Term Flexible shares to Short-Term Global shareholders in exchange for
their
shares of Short-Term Global; (4) no gain or loss will be recognized by
shareholders of Short-Term Global upon the exchange of their Short-Term Global
shares for Short-Term Flexible shares; (5) the tax basis of Short-Term Global's
assets acquired by Short-Term Flexible will be the same as the tax basis of such
assets to Short-Term Global immediately prior to the Reorganization; (6) the tax
basis of Short-Term Flexible shares received by each shareholder of Short-Term
Global pursuant to the Plan will be the same as the tax basis of Short-Term
Global
shares held by such shareholder immediately prior to the Reorganization; (7) the
holding period of the assets of Short-Term Global in the hands of Short-Term
Flexible will include the period during which those assets were held by
Short-Term
Global; and (8) the holding period of Short-Term Flexible shares received by
each
shareholder of Short-Term Global will include the period during which the Short-
Term Global shares exchanged therefor were held by such shareholder, provided
the
Short-Term Global shares were held as capital assets on the date of the
Reorganization.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS AND OBLIGATIONS
Blanchard Funds is organized as a business trust pursuant to a Declaration of
Trust under the laws of the Commonwealth of Massachusetts. The rights of
shareholders of Short-Term Global and Short-Term Flexible as set forth in the
Declaration of Trust are substantially identical. Set forth below is a brief
summary of the significant rights of shareholders of Short-Term Global and
Short-Term Flexible.
Neither Fund is required to hold annual meetings of shareholders. Shareholder
approval is necessary only for certain changes in operations or the election of
trustees under certain circumstances. A special meeting of shareholders of
either
fund for any permissible purpose is required to be called by the Trustees
upon the
written request of the holders of at least 10% of the outstanding shares of the
relevant Fund.
Under certain circumstances, shareholders of Short-Term Global, Short-Term
Flexible, or any other portfolio of Blanchard Funds may be held personally
liable
as partners under Massachusetts law for obligations of Blanchard Funds. To
protect shareholders of all portfolios of Blanchard Funds, Blanchard Funds has
filed legal documents with the Commonwealth of Massachusetts that expressly
disclaim the liability of shareholders of portfolios of Blanchard Funds for such
acts or obligations of Blanchard Funds. These documents require that notice of
this disclaimer be given in each agreement, obligation or instrument of
Blanchard
Funds or its trustees enter into or sign on behalf of Blanchard Funds.
In the unlikely event a shareholder of a portfolio of Blanchard Funds is held
personally liable for obligations of Blanchard Funds, Blanchard Funds is
required
to use its property to protect or compensate the shareholder. On request,
Blanchard Funds will defend any claims made and pay any judgment against a
shareholder of a portfolio of Blanchard Funds for any act or obligation of
Blanchard Funds. Therefore, financial loss resulting from liability as a
shareholder of a portfolio of Blanchard Funds will occur only if Blanchard Funds
cannot meet its obligation to indemnify shareholders and pay judgments
against it
from the assets of Blanchard Funds.
CAPITALIZATION
The following table sets forth the capitalization of Short-Term Global and
Short-
Term Flexible as of September 30, 1995, and on a pro forma basis as of that
date:
Short-Term Short-Term Pro Forma
Global Flexible Combined
Net Assets $200,851,306 $20,739,907 $221,591,213
Price Per Share $1.68 $2.97 $2.97
INFORMATION ABOUT BLANCHARD FUNDS, SHORT-TERM FLEXIBLE, AND SHORT-TERM GLOBAL
Information about Blanchard Funds, Short-Term Flexible, and Short-Term Global is
contained in their Prospectus dated August 7, 1995, which is incorporated by
reference herein, and a copy of which is included herewith. Additional
information about Short-Term Flexible is included in the Statements of
Additional
Information of Short-Term Flexible dated August 7, 1995 (relating to the
Prospectus of Short-Term Flexible of the same date), and November 20, 1995
(relating to this Prospectus/Proxy Statement) which are incorporated herein by
reference. Additional information about Short-Term Global is included in the
Statement of Additional Information of Short-Term Global dated August 7, 1995
(relating to the prospectus of Short-Term Global of the same date) and November
20, 1995 (relating to this Prospectus/Proxy Statement), which are incorporated
herein by reference. Copies of the Statements of Additional Information, which
have been filed with the Securities and Exchange Commission (the "SEC"), may be
obtained without charge by contacting Blanchard Funds at 1-800-829-3863 or by
writing to Signet Financial Services, Inc., 41 Madison Avenue, 24th Floor, New
York, NY 10010.
Blanchard Funds, on behalf of the Funds, are subject to the informational
requirements of the Securities Act of 1933 (the "1933 Act"), the Securities
Exchange Act of 1934 (the "1934 Act") and the Investment Company Act of 1940
(the
"1940 Act") and in accordance therewith file reports and other information with
the SEC. Reports, proxy and information statements and other information
filed by
Blanchard Funds, on behalf of the Funds, can be obtained by calling or writing
to
Blanchard Funds and can also be inspected and copied by the public at the public
reference facilities maintained by the SEC in Washington, D.C. located at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at certain of its
regional offices located at Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, IL 60621 and 13th Floor, Seven World Trade
Center, New
York, NY 10048. Copies of such material also may be obtained at prescribed
rates
from the Public Reference Branch, Office of Consumer Affairs and Information
Services, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
This Prospectus/Proxy Statement and the related Statement of Additional
Information do not contain all of the information set forth in the registration
statement that Blanchard Funds have filed with the SEC under the 1933 Act to
which
reference is hereby made. Statements contained herein concerning the provisions
of documents are necessarily summaries of such documents, and each such
statement
is qualified in its entirety by reference to the copy of the applicable
documents
filed with the SEC. The SEC file number for Blanchard Funds' prospectuses and
related Statements of Additional Information which are incorporated by reference
herein is Registration No. 33-3165.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the solicitation
by the Board of Trustees of Short-Term Global of proxies for use at the Special
Meeting of Shareholders (the "Meeting") to be held on January 15, 1996 and at
any
adjournment thereof. The proxy confers discretionary authority on the persons
designated therein to vote on other business not currently contemplated which
may
properly come before the Meeting. A proxy, if properly executed, duly returned
and not revoked, will be voted in accordance with the specifications thereon; if
no instructions are given, such proxy will be voted in favor of the Plan. A
shareholder may revoke a proxy at any time prior to use by filing with the
Secretary of Blanchard Funds an instrument revoking the proxy, by submitting a
proxy bearing a later date or by attending and voting at the Meeting.
The cost of the solicitation, including the printing and mailing of proxy
materials, will be borne by VCM. In addition to solicitations through the
mails,
proxies may be solicited by officers, employees and agents of Blanchard Funds
and
VCM at no additional cost to Blanchard Funds. Such solicitations may be made by
telephone. VCM will reimburse custodians, nominees and fiduciaries for the
reasonable costs incurred by them in connection with forwarding solicitation
materials to the beneficial owners of shares held of record by such persons.
A shareholder may vote by faxing a properly executed proxy to 1-212-XXX-XXXX.
In
addition, a shareholder may vote his or her proxy by telephone by calling 1-800-
829-3863, ext. between the hours of 9:00 a.m. and 5:30 p.m., and a
-----
shareholder may be contacted by telephone by an employee of Signet Financial
Services to ask for his or her vote.
OUTSTANDING SHARES AND VOTING REQUIREMENTS
The Board of Trustees has fixed the close of business on November 17, 1995 as
the
record date for the determination of shareholders entitled to notice of, and to
vote at, the Special Meeting of Shareholders and any adjournment thereof. As of
the record date, there were shares of Short-Term Global outstanding. Each
----
Short-Term Global share is entitled to one vote and fractional shares have
proportionate voting rights. On the record date, owned of record
--- ---
shares, or % of Short-Term Global's outstanding shares. On such date, no
other person
owned of record, or to the knowledge of VCM, beneficially owned, 5% or more of
Short-Term Global's outstanding shares. On the record date, the trustees and
officers of Blanchard Funds as a group owned less than 1% of the outstanding
shares of Short-Term Global.
The votes of the shareholders of Short-Term Flexible are not being solicited,
since their approval or consent is not necessary for approval of the
Reorganization. As of the record date, there were shares of Short-Term
----
Flexible outstanding. On the record date, owned of record shares, or
% of Short-Term Flexible's outstanding shares. On such date, no other
person owned of record, or to the knowledge of VCM, beneficially owned, 5% or
more of Short-Term Flexible's outstanding shares.
Approval of the Plan requires the affirmative vote of the majority of Short-Term
Global's outstanding shares. The votes of shareholders of Short-Term Flexible
are not being solicited since their approval is not required in order to effect
the Reorganization.
A majority of the outstanding shares of Short-Term Global, represented in person
or by proxy, will be required to constitute a quorum at the Special Meeting for
the purpose of voting on the proposed Reorganization. For purposes of
determining he presence of a quorum, shares represented by abstentions and
"broker non-votes" will be counted as present, but not as votes cast, at the
Special Meeting. Under the Declaration of Trust, the approval of any action
submitted to shareholders is determined on the basis of a majority of votes
entitled to be cast at the Special Meeting.
DISSENTER'S RIGHT OF APPRAISAL
Shareholders of Short-Term Global objecting to the Reorganization have no
appraisal or dissenter's rights under the Declaration of Trust or Massachusetts
law. Under the Plan, if approved by Short-Term Global shareholders, each Short-
Term Global shareholder will become the owner of Short-Term Flexible shares
having
a total net asset value equal to the total net asset value of his or her
holdings
in Short-Term Global at the Closing Date.
OTHER MATTERS
Management of Short-Term Global knows of no other matters that may properly
be, or
which are likely to be, brought before the meeting. However, if any other
business shall properly come before the meeting, the persons named in the proxy
intend to vote thereon in accordance with their best judgment.
So far as management is presently informed, there is no litigation pending or
threatened against Blanchard Funds.
Whether or not shareholders expect to attend the meeting, all shareholders are
urged to sign, fill in and return the enclosed proxy form promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated October 6, 1995 (the "Agreement"),
between Blanchard Short-Term Flexible Income Fund (hereinafter called the
"Acquiring Fund"), and Blanchard Short-Term Global Income Fund (hereinafter
called
the "Acquired Fund"). Both the Acquiring Fund and the Acquired Fund are
portfolios of BLANCHARD FUNDS, a Massachusetts business trust (the "Trust").
This Agreement is intended to be and is adopted as a plan of reorganization and
liquidation within the meaning of Section 368(a)(1)(C) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all of the assets of the
Acquired Fund in exchange solely for shares of beneficial interest of the
Acquiring Fund (the "Acquiring Fund Shares") and the distribution, after the
Closing Date hereinafter referred to, of the Acquiring Fund Shares to the
shareholders of the Acquired Fund in liquidation of the Acquired Fund as
provided
herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Trust is a registered open-end management investment company and
the
Acquired Fund owns securities in which the Acquiring Fund is permitted to
invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized to issue
their shares of beneficial interest;
WHEREAS, the Board of Trustees, including a majority of the Trustees who are not
"interested persons" (as defined under the Investment Company Act of 1940, as
amended (the "1940 Act")), of the Trust has determined that the exchange of all
of
the assets of the Acquired Fund for Acquiring Fund Shares is in the best
interests
of the Acquiring Fund shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of this
transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees who are not
"interested persons" (as defined under the 1940 Act), of the Trust has
determined
that the exchange of all of the assets of the Acquired Fund for Acquiring Fund
Shares is in the best interests of the Acquired Fund shareholders and that the
interests of the existing shareholders of the Acquired Fund would not be diluted
as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties agree as follows:
1.TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets
of the Acquired Fund, including all securities and cash, other than cash in an
amount necessary to pay any unpaid dividends and distributions as provided in
paragraph 1.5, and the Acquiring Fund agrees in exchange therefor (i) to deliver
to the Acquired Fund the number of Acquiring Fund Shares, including fractional
Acquiring Fund Shares, determined as set forth in paragraph 2.3. Such
transaction
shall take place at the closing (the "Closing") on the closing date (the
"Closing
Date") provided for in paragraph 3.1. In lieu of delivering certificates for
the
Acquiring Fund Shares, the Acquiring Fund shall credit the Acquiring Fund Shares
to the Acquired Fund's account on the stock record books of the Acquiring
Fund and
shall deliver a confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred shall be
made on the Closing Date and shall be delivered to Signet Trust Company,
Richmond, Virginia, the Acquiring Fund's custodian (the "Custodian"), for the
account of the
Acquiring Fund, together with proper instructions and all necessary documents to
transfer to the account of the Acquiring Fund, free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered shall be
in the
form of currency and immediately available funds payable to the order of the
Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring Fund
any dividends or interest received on or after the Closing Date with respect to
assets transferred to the Acquiring Fund hereunder. The Acquired Fund will
transfer to the Acquiring Fund any distributions, rights or other assets
received by the Acquired Fund after the Closing Date as distributions on or
with respect to the securities transferred. Such assets shall be deemed
included in assets transferred to the Acquiring Fund on the Closing Date and
shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable (the
"Liquidation Date"), the Acquired Fund will liquidate and distribute pro rata to
the Acquired Fund's shareholders of record, determined as of the close of
business on the Closing Date (the "Acquired Fund Shareholders"), the Acquiring
Fund Shares received by the Acquired Fund pursuant to paragraph 1.1. In
addition, each shareholder of record of the Acquired Fund shall have the right
to receive any unpaid dividends or other distributions which are declared
before the Evaluation date with respect to the shares of the Acquired Fund that
are held by the shareholders on the Evaluation Date. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund
Shares then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share record books of the Acquiring Fund
in the names of the Acquired Fund Shareholders and representing the respective
pro rata number of the Acquiring Fund Shares due such shareholders. All
issued and outstanding shares of the Acquired
Fund will simultaneously be canceled on the books of the Acquired Fund. Share
certificates representing interests in the Acquired Fund will represent a number
of Acquiring Fund Shares after the Closing Date as determined in accordance with
Section 2.3. The Acquiring Fund shall not issue certificates representing the
Acquiring Fund Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be issued in
the manner described in the Acquiring Fund's current prospectus and statement of
additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund Shares
in a name other than the registered holder of the Acquired Fund shares on
the books
of the Acquired Fund as of that time shall, as a condition of such issuance and
transfer, be paid by the person to whom such Acquiring Fund Shares are to be
issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall remain
the responsibility of the Acquired Fund up to and including the Closing Date and
such later dates, with respect to liquidation and termination of the Acquired
Fund, on which the Acquired Fund is liquidated and terminated.
2.VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of the
close of the New York Stock Exchange (normally 4:00 p.m., Eastern time) on the
Closing Date (such time and date being hereinafter called the "Valuation Date"),
using the valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.2 The net asset value of an Acquiring Fund Share shall be the net asset
value per share computed as of the close of the New York Stock Exchange
(normally 4:00 p.m., Eastern time) on the Valuation Date, using the valuation
procedures set forth in the Acquiring Fund's then-current prospectus or
statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets shall
be determined by dividing the value of the net assets of the Acquired Fund
determined using the same valuation procedures referred to in paragraph 2.1 by
the net asset value of one Acquiring Fund Share determined in accordance with
paragraph 2.2.
2.4 All computations of value shall be made in accordance with the regular
practices of the Acquiring Fund.
3.CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be January 12, 1996 or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall be
deemed to take place simultaneously as of the close of business on the Closing
Date unless otherwise provided. The Closing shall be held at 4:00 p.m. (Eastern
time) at the offices of the Acquiring Fund, Federated Investors Tower,
Pittsburgh, PA 15222-3779, or such other time and/or place as the parties
may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for portfolio
securities of the Acquiring Fund or the Acquired Fund shall be closed to trading
or trading thereon shall be restricted; or (b) trading or the reporting of
trading shall be disrupted so that accurate appraisal of the value of the net
assets of the Acquiring Fund or the Acquired Fund is impracticable, the Closing
Date shall be postponed until the first business day after the day when trading
shall have
been fully resumed and reporting shall have been restored.
3.3 Federated Services Company, as transfer agent for each of the Acquired
Fund and Acquiring Fund, shall deliver at the Closing a certificate of an
authorized officer stating that its records contain the names and addresses
of the Acquired Fund Shareholders and the number and percentage ownership of
outstanding shares owned by each such shareholder immediately prior to the
Closing. The Acquiring Fund shall issue and deliver a confirmation evidencing
the Acquiring Fund Shares to be credited on the Closing Date to the Secretary
of the Acquired Fund, or provide evidence satisfactory to the Acquired Fund
that such Acquiring Fund Shares have been credited to the Acquired Fund's
account on the books of the
Acquiring Fund. At the Closing, each party shall deliver to the other such bills
of sale, checks, assignments, assumption agreements, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4.REPRESENTATIONS AND WARRANTIES.
4.1 With respect to the Acquired Fund, the Trust represents and warrants
as follows:
(a) The Trust is a business trust duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts and has
power to own all of its properties and assets and to carry out this Agreement.
(b) The Trust is registered under the 1940 Act, as an open-end, management
investment company, and such registration has not been revoked or rescinded and
is in full force and effect.
(c) The Trust is not, and the execution, delivery and performance of this
Agreement will not result, in material violation of its Declaration of Trust or
By-Laws or of any agreement, indenture, instrument, contract, lease or other
undertaking to which the Acquired Fund is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other commitments
outstanding (other than this Agreement) which will result in liability to it
after the Closing Date.
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its knowledge
threatened against the Acquired Fund or any of its properties or assets which,
if adversely determined, would materially and adversely affect its financial
condition or the conduct of its business. The Acquired Fund knows of no facts
which might form the basis for the institution of such proceedings, and is
not a party to or subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and adversely affects its
business or its ability to consummate
the transactions herein contemplated.
(f) The current prospectus and statement of additional information of the
Acquired Fund conform in all material respects to the applicable requirements of
the Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act and
the rules and regulations of the Securities and Exchange Commission (the
"Commission") thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein as
necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(g) The Statements of Assets and Liabilities of the Acquired Fund at April
30, 1995 and 1994 have been audited by Price Waterhouse LLP, independent
accountants, and have been prepared in accordance with generally accepted
accounting principles, consistently applied, and such statements (copies of
which
have been furnished to the Acquiring Fund) fairly reflect the financial
condition
of the Acquired Fund as of such dates, and there are no known contingent
liabilities of the Acquired Fund as of such dates not disclosed therein.
(h) Since April 30, 1995, there has not been any material adverse
change in
the Acquired Fund's financial condition, assets, liabilities or business other
than changes occurring in the ordinary course of business, or any incurrence by
the Acquired Fund of indebtedness maturing more than one year from the date such
indebtedness was incurred, except as otherwise disclosed to and accepted by the
Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns and reports of
the Acquired Fund required by law to have been filed by such date shall have
been
filed, and all Federal and other taxes shall have been paid so far as due, or
provision shall have been made for the payment thereof, and to the best of the
Acquired Fund's knowledge no such return is currently under audit and no
assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Acquired Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. All of the issued and outstanding shares of the Acquired
Fund will, at the time of the Closing, be held by the persons and in the
amounts set forth in
the records of the transfer agent as provided in paragraph 3.3. The Acquired
Fund does not have outstanding any options, warrants or other rights to
subscribe for or purchase any of the Acquired Fund shares, nor is there
outstanding any security
convertible into any of the Acquired Fund shares.
(l) On the Closing Date, the Acquired Fund will have full right, power and
authority to sell, assign, transfer and deliver the assets to be transferred
by it hereunder.
(m) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on the
part of the Trustees of the Trust and, subject to the approval of the
Acquired Fund
Shareholders, this Agreement will constitute the valid and legally binding
obligation of the Acquired Fund enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization, moratorium,
fraudulent
conveyance and other similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto, and to general principles of
equity and the discretion of the court (regardless of whether the enforceability
is considered in a proceeding in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund (the
"Prospectus/Proxy Statement") to be included in the Registration Statement
referred to in paragraph 5.5 (other than information therein that relates to the
Acquiring Fund) will, on the effective date of the Registration Statement and on
the Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(o) Virtus Capital Management, Inc. has agreed to assume the expense of
the reorganization including accountants' fees, legal fees, registration fees,
transfer taxes (if any), the fees of banks and transfer agents and the costs of
preparing, printing, copying and mailing proxy solicitation materials to the
Acquiring Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
4.2 With respect to the Acquiring Fund, the Trust represents and
warrants as follows:
(a) The Trust is a business trust duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts and has the
power to carry on its business as it is now being conducted and to carry out
this Agreement.
(b) The Trust is registered under the 1940 Act as an open-end, management
investment company, and such registration has not been revoked or rescinded and
is in full force and effect.
(c) The current prospectus and statement of additional information of the
Acquiring Fund conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(d) The Trust is not, and the execution, delivery and performance of this
Agreement will not result, in material violation of its Declaration of Trust or
By-Laws or of any agreement, indenture, instrument, contract, lease or other
undertaking to which the Acquiring Fund is a party or by which it is bound.
(e) No litigation or administrative proceeding or investigation of or
before
any court or governmental body is currently pending or to its knowledge
threatened
against the Acquiring Fund or any of its properties or assets which, if
adversely
determined, would materially and adversely affect its financial condition or the
conduct of its business. The Acquiring Fund knows of no facts which might form
the basis for the institution of such proceedings, and is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or its
ability to consummate the transactions contemplated herein.
(f) The Statement of Assets and Liabilities of the Acquiring Fund at April
30, 1995, have been audited by Price Waterhouse LLP, independent auditors, and
have been prepared in accordance with generally accepted accounting principles,
consistently applied, and such statements (copies of which have been furnished
to
the Acquired Fund) fairly reflect the financial condition of the Acquiring Fund
as
of such date.
(g) Since April 30, 1995, there has not been any material adverse change
in
the Acquiring Fund's financial condition, assets, liabilities or business other
than changes occurring in the ordinary course of business, or any incurrence by
the Acquiring Fund of any indebtedness, except as otherwise disclosed to and
accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns and reports of
the Acquiring Fund required by law then to be filed shall have been filed, and
all
Federal and other taxes shown as due on said returns and reports shall have been
paid or provision shall have been made for the payment thereof.
(i) For each fiscal year of its operation, the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company.
(j) All issued and outstanding shares of the Acquiring Fund are, and at
the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable. The Acquiring Fund does not have outstanding any options,
warrants or
other right to subscribe for or purchase any of the Acquiring Fund Shares, nor
is there outstanding any security convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action, if any,
on the part of the Trust's Trustees, and this Agreement will constitute the
valid and legally binding obligation of the Acquiring Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting
creditors' rights generally and court decisions with respect thereto, and to
general principles of equity and the discretion of the court (regardless of
whether the enforceability is considered in a proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund) will, on the
effective date of the Registration Statement and on the Closing Date, not
contain
any untrue statement of a material fact or omit to state a material fact
required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under which Virtus
Capital Management, Inc. will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes
(if any), the
fees of banks and transfer agents and the costs of preparing, printing, copying
and mailing proxy solicitation materials to the Acquired Fund's shareholders and
the costs of holding the Special Meeting of Shareholders.
5.COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date,
it being understood that such ordinary course of business will include
customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days after
the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in such
form as is reasonably satisfactory to the Acquiring Fund, a statement of the
earnings and profits of the Acquired Fund for Federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381
of the Code and which will be certified by the Acquired Fund's President and
its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(n), all to
be included in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended, and the 1940 Act in connection with the
meeting of the Acquired Fund Shareholders to consider approval of this
Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state Blue Sky or securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
5.7 Prior to the Valuation Date, the Acquired Fund shall have a dividend
or dividends, with a record date and ex-dividend date prior to the Valuation
Date, which, together with all previous dividends, shall have the effect of
distributing to its shareholders all of its investment company taxable income,
if any, for the taxable periods or years ended on April 30, 1995 and for the
period from said date to and including the Closing Date (computed without
regard to any deduction for dividends paid), and all of its net capital gain,
if any, realized in taxable periods or years ended on or before April 30, 1995
and in the period from said date to and including the Closing Date.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions provided for
herein shall be subject, at its election, to the performance by the Acquired
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Acquired Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot and
the holding periods of such securities, as of the Closing Date, certified by the
Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquiring Fund, to the effect that the representations and
warranties of the Acquired Fund made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as the Acquiring
Fund shall reasonably request.
7.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions provided
herein shall be subject, at its election, to the performance by the Acquiring
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of Acquiring Fund contained in
this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
reasonably satisfactory to the Acquired Fund, to the effect that the
representations and warranties of the Acquiring Fund made in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, and as to such
other matters as the Acquired Fund shall reasonably request.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of the Acquired Fund's
Declaration of Trust.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit
consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse effect
on the assets or properties of the Acquiring Fund or the Acquired Fund,
provided that either party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act.
8.5 The Trust shall have received an opinion of Dickstein, Shapiro &
Morin, L.L.P. substantially to the effect that for Federal income tax purposes:
(a) The transfer of all of the Acquired Fund assets in exchange
for the Acquiring Fund Shares and the distribution of the Acquiring Fund
Shares to the shareholders of the Acquired Fund in liquidation of the
Acquired Fund will constitute a "reorganization" within the meaning of
Section 368(a)(1)(C) of the Code; (b) No gain or loss will be recognized
by the Acquiring Fund upon the receipt of the assets of the Acquired Fund
solely in exchange for the Acquiring Fund Shares; (c) No gain or loss will be
recognized by the Acquired Fund upon
the transfer of the Acquired Fund assets to the Acquiring Fund in exchange
for the Acquiring Fund Shares or upon the distribution (whether actual or
constructive) of the Acquiring Fund Shares to Acquired Fund Shareholders in
exchange for their shares of the Acquired Fund; (d) No gain or loss will be
recognized by the Acquired Fund Shareholders upon the exchange of their
Acquired Fund shares for the Acquiring Fund Shares; (e) The tax basis of the
Acquired Fund assets acquired by the Acquiring Fund will be the same as
the tax basis of such assets to the Acquired Fund immediately prior to the
Reorganization; (f) The tax basis of the Acquiring Fund Shares received by
each of the Acquired Fund Shareholders pursuant to the Reorganization will
be the same as the tax basis of the Acquired Fund shares held by such
shareholder immediately prior to the Reorganization; (g) The holding
period of the assets of the Acquired Fund in the hands of the Acquiring
Fund will include the period during which those assets were held by the
Acquired Fund; and (h) The holding period of the Acquiring Fund Shares to be
received by each Acquired Fund Shareholder will include the period during
which the Acquired Fund shares exchanged therefor were held by
such shareholder (provided the Acquired Fund
shares were held as capital assets on the date of the Reorganization).
9.TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the Trust at
any time prior to the Closing Date if circumstances should develop that, in the
opinion of either of the parties' Board of Trustees, make proceeding with the
Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on the
part of any party hereto or the trustees, officers or shareholders of the
Acquiring Fund or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing conditions may be
waived by the Board of Trustees of the Trust, if, in the judgment of either,
such waiver will not have a material adverse effect on the benefits intended
under this Agreement to the shareholders of the Acquiring Fund or of the
Acquired Fund, as the case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided for
herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof, and merges and
supersedes all prior discussions, agreements, and understandings of every kind
and nature between them relating to the subject matter hereof. Neither party
shall be bound by any condition, definition, warranty or representation, other
than as set forth or provided in this Agreement or as may be set forth in a
later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with the
internal laws of the Commonwealth of Massachusetts, without giving effect to
principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any
person, firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
11.6 The Acquired Fund is hereby expressly put on notice of the limitation
of liability as set forth in Article XI of the Declaration of Trust of the
Acquiring Fund and agrees that the obligations assumed by the Acquiring Fund
pursuant to this Agreement shall be limited in any case to the Acquiring Fund
and its assets and the Acquired Fund shall not seek satisfaction of any such
obligation from the shareholders of the Acquiring Fund, the trustees, officers,
employees or agents of the Acquiring Fund or any of them.
11.7 The Acquiring Fund is hereby expressly put on notice of the limitation
of liability as set forth in Article XI of the Declaration of Trust of the
Acquired Fund and agrees that the obligations assumed by the Acquired Fund
pursuant to this Agreement shall be limited in any case to the Acquired Fund and
its assets and the Acquiring Fund shall not seek satisfaction of any such
obligation from the shareholders of the Acquired Fund, the trustees, officers,
employees or agents of the Acquired Fund or any of them.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have caused this
Agreement and Plan of Reorganization to be executed and attested on its behalf
by its duly authorized representatives as of the date first above written.
Acquired Fund:
BLANCHARD FUNDS,
on behalf of its Portfolio,
BLANCHARD SHORT-TERM GLOBAL
INCOME FUND
Attest:
By: /s/ Joseph S. Machi
/s/ C. Grant Anderson
Assistant Secretary Name: Joseph S. Machi
Title: Vice President
Acquiring Fund:
BLANCHARD FUNDS,
on behalf of its Portfolio,
BLANCHARD SHORT-TERM FLEXIBLE INCOME
FUND
Attest:
By: /s/ Joseph S. Machi
/s/ C. Grant Anderson
Assistant Secretary Name: Joseph S. Machi
Title: Vice President
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 20, 1995
ACQUISITION OF THE ASSETS OF
BLANCHARD SHORT-TERM GLOBAL INCOME FUND
BY AND IN EXCHANGE FOR SHARES OF
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER: 1-800-829-3863
This Statement of Additional Information dated November 20, 1995 is not a
prospectus. A Prospectus/Proxy Statement dated November 20, 1995 related to the
above-referenced matter may be obtained from Blanchard Funds on behalf of its
portfolio, Blanchard Short-Term Flexible Income Fund, through Signet Financial
Services, Inc. at 41 Madison Avenue, 24th Floor, New York, New York 10010. This
Statement of Additional Information should be read in conjunction with such
Prospectus/Proxy Statement.
FEDERATED SECURITIES
CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
1. Statement of Additional Information of Blanchard Short-Term Global Income
Fund, dated August 7, 1995
2. Statement of Additional Information of Blanchard Short-Term Flexible Income
Fund, dated August 7, 1995
3. Financial Statements of Blanchard Short-Term Global Income Fund, dated
April 30, 1995
4. Financial Statements of Blanchard Short-Term Flexible Income Fund, dated
April 30, 1995
5. Pro Forma Financial Statements
The Statements of Additional Information of Blanchard Short-Term Global Income
Fund and Blanchard Short-Term Flexible Income Fund dated August 7, 1995, are
incorporated herein by reference to Post-Effective Amendment No. 29 to Blanchard
Funds' Registration Statement on Form N-1A (File No. 33-3165 which was filed
with the Securities and Exchange Commission on or about August 7, 1995. A copy
may be obtained from Signet Financial Services, Inc. at 41 Madison Avenue, 24th
Floor, New York, New York 10010. Telephone Number: 1-800-829-3863.
The financial statements of Blanchard Short-Term Global Income Fund and
Blanchard Short-Term Flexible Income Fund dated April 30, 1995 are incorporated
herein by reference to their respective Statements of Additional Information
dated August 7, 1995, and filed with the Securities and Exchange Commission on
or about August 7, 1995.
The Blanchard Short-Term Flexible Income Fund
(formerly The Blanchard Short-Term Bond Fund)
The Blanchard Short-Term Global Income Fund
Pro Forma Combining Statement of Assets and Liabilities
(unaudited) April 30, 1995
<TABLE>
<CAPTION>
The Blanchard The Blanchard
Short-Term Short-Term
Flexible Income Global Income Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
Assets:
Investments in securities, at value
(Identified cost, $251,583,475) $22,952,464 $229,015,120 $251,967,584
Cash 47,520 2,426,706 2,474,226
Foreign currencies
(Identified cost $3,278,316) ----- 3,317,575 3,317,575
Receivables for:
Investments sold ----- 50,513,648 50,513,648
Shares of beneficial interest 501 72,379 72,880
Interest 543,053 3,600,873 4,143,926
Forward foreign currency contracts ----- 4,091,165 4,091,165
Deferred organizational expenses 48,680 25,860 74,540
Total assets 23,592,218 293,063,326 316,655,544
Liabilities:
Payables for:
Shares of beneficial interest 106,165 761,158 761,158
repurchased ----- 50,456,095 50,456,095
Investments purchased 7,015 184,269 184,269
Dividends ----- 7,432,426 7,432,426
Forward foreign currency contracts 34,531 359,930 394,461
Accrued expenses and other liabilities 147,711 59,193,878 59,341,589
Total liabilities $23,444,507 $233,869,448 $257,313,955
Net Assets $24,355,402 $259,231,663 $283,587,065
Net Assets Consist of:
Paid-in capital (189,216) (2,599,236) (2,788,452)
Net unrealized appreciation (depreciation)
of investments (58,696) (12,018,933) (12,077,629)
Net accumulated overdistributed
investment income (662,983) (10,744,046) (11,407,029)
Accumulated net realized gain (loss)
on investments $23,444,507 $233,869,448 $257,313,955
Total Net Assets 7,985,358 141,135,916 149,121,274
Shares Outstanding $2.94 $1.66 $1.73
Net Asset Value, and Redemption Proceeds
Per Share:
</TABLE>
THE BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
THE BLANCHARD SHORT-TERM GLOBAL INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO OF INVESTMENTS
SCHEDULE OF OPEN FORWARD CURRENCY CONTRACTS AS OF APRIL 30, 1995 (UNAUDITED)
THE BLANCHARD SHORT-TERM GLOBAL INCOME FUND
<TABLE>
<CAPTION>
THE
BLANCHARD
SHORT-TERM
UNREALIZED FLEXIBLE
CURRENCY CURRENCY DELIVERY APPRECIATION INCOME PRO FORMA
SOLD AMOUNT PURCHASED AMOUNT DATE (DEPRECIATION) FUND COMBINED
<S> <C> <C> <C> <C> <C> <C> <C>
Dem 27,281,492 Nlg 30,561,000 2-May-95 $21,420 $21,420
Dem 20,246,000 Gbp 9,115,714 4-May-95 76,039 76,039
Dem 18,092,800 Itl 22,368,128,640 10-May-95 270,545
270,545
Itl 28,349,000,000 Dem 25,415,766 10-May-95 1,494,739
1,494,739
US$ 7,904,785 Jpy 778,400,000 10-May-95 1,371,578 1,371,578
US$ 10,000,000 Esp 1,289,950,000 10-May-95 471,053
471,053
US$ 24,600,661 Esp 3,075,082,650 10-May-95 385,791
385,791
TOTAL UNREALIZED APPRECIATION $4,091,165 $4,091,165
Nlg 30,561,000 Dem 27,281,735 10-May-95 ($21,246) ($21,246)
Gbp 7,490,400 US$ 11,879,774 10-May-95 (171,000) (171,000)
US$ 10,000,000 Aud 13,747,594 10-May-95 (1,822) (1,822)
US$ 15,000,000 Aud 20,270,270 10-May-95 (258,092) (258,092)
US$ 9,785,787 Aud 13,241,931 10-May-95 (147,651) (147,651)
Dem 48,433,000 US$ 34,643,997 10-May-95 (292,382) (292,382)
Itl 29,710,219,600 US$ 17,099,407 10-May-95 (547,643)
(547,643)
Aud 45,976,000 US$ 33,333,979 10-May-95 (102,868) (102,868)
Dem 29,903,730 Itl 31,967,087,370 10-May-95 (2,583,016)
(2,583,016)
Jpy 778,400,000 US$ 7,942,047 10-May-95 (1,334,316) (1,334,316)
Esp 4,461,200,000 US$ 34,348,630 10-May-95 (1,864,761)
(1,864,761)
Gbp 9,170,090 Dem 20,246,000 4-Aug-95 (107,629) (107,629)
TOTAL UNREALIZED DEPRECIATION ($7,432,426) ($7,432,426)
Dem = Deutsche Marks Nlg = Dutch Guilders Esp =Spanish Pesetas
Itl = Italian Lira Gbp = British Pounds Aud =Australian Dollars
Jpy = Japanese Yen
</TABLE>
SCHEDULE OF FOREIGN CURRENCY HELD AS OF APRIL 30, 1995
<TABLE>
<CAPTION>
THE BLANCHARD
SHORT-TERM
FLEXIBLE INCOME PRO FORMA
CURRENCY HELD COST MARKET VALUE FUND COMBINED
<S> <C> <C> <C>
Australian Dollars 138,898 $101,097 $101,097
$101,097
British Pounds 45 73 73 73
Deutsche Marks 1,101 793 793 793
Italian Lira 5,162,758,058 3,032,897 3,072,156 3,072,156
Spanish Pesetas 17,655,177 143,456 143,456 143,456
$3,278,316 $3,317,575 $3,317,575
</TABLE>
THE BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
(FORMERLY THE BLANCHARD SHORT-TERM BOND FUND)
THE BLANCHARD SHORT-TERM GLOBAL INCOME FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED APRIL 30, 1995
<TABLE>
<CAPTION>
THE THE
BLANCHARD BLANCHARD
SHORT-TERM SHORT-TERM
FLEXIBLE GLOBAL PRO FORMA PRO FORMA
INCOME INCOME
FUND FUND ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income (net of foreign withholding
tax of $85,010) $1,934,317 $27,791,428 $ ---- $29,725,745
31,431,600
EXPENSES: 374,808,933
Investment management fee 235,737 2,811,067 3,046,804 406,240,533 6286.32
Plan of distribution fee 78,579 937,022 1,015,601
Transfer agent fees 75,999 779,000 854,999 812481.0667 42,518
Trustees' fees, retirement plan curtailment 36,894 403,258 440,152
and expenses
Custodian fees 36,080 337,214 (7,678) 365,616 365616.48 (0)
Accounting fees 96,176 230,000 (65,000) 261,176 203120.2667 58,056
Professional fees 34,282 168,029 202,311
Shareholder reports and notices 24,950 62,136 (24,950) 62,136
Organizational expenses 15,429 26,748 (26,748) 15,429
Registration fees 27,500 26,500 (26,500) 27,500
Other 4,474 16,293 20,767 203120.2667 10,508
Total expenses 666,100 5,797,267 (150,876) 6,312,491
Deduct-
Waivers by Manager and Distributor 234,663 182,085 (203,120) 213,628
Net expenses 431,437 5,615,182 (353,996) 6,098,863
Net investment income 1,502,880 22,176,246 353,996 23,626,882
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain (loss) on:
Investments - net (541,619) (10,489,372) ---- (11,030,991)
Futures transactions - net ---- (521,197) (521,197)
Forward currency contracts and foreign
exchange
contracts - net (30,645) (33,387,574) (33,418,219)
Total realized gain(loss) (572,264) (44,398,143) ---- (44,970,407)
Change in unrealized appreciation
(depreciation) on:
Investments - net 443,090 7,167,814 7,610,904
Forward currency contracts, futures
transactions
and translation of other assets and
liabilities
denominated in foreign currency - net ---- 8,408,763 ---- 8,408,763
Total unrealized appreciation 443,090 15,576,577 ---- 16,019,667
(depreciation)
Net realized and unrealized gain (loss) (129,174) (28,821,566) ---- (28,950,740)
on investments
Change in net assets resulting $1,373,706 ($6,645,320) $353,996 ($5,323,858)
from operations
</TABLE>
(See Legend on following page)
(See Notes to Pro Forma Financial Statements)
THE BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
(FORMERLY THE BLANCHARD SHORT-TERM BOND FUND)
THE BLANCHARD SHORT-TERM GLOBAL INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
THE
BLANCHARD THE THE
SHORT- BLANCHARD THE BLANCHARD
TERM SHORT-TERM BLANCHARD SHORT-TERM
FLEXIBLE GLOBAL SHORT-TERM GLOBAL
INCOME INCOME PRO FORMA FLEXIBLE INCOME PRO FORMA
FUND FUND COMBINED INCOME FUND FUND COMBINED
<S> <C> <C> <C> <C> <C> <C>
FOREIGN FIXED INCOME - 23.9%
GERMANY - 6.4%
GOVERNMENT/AGENCY - 6.4%
Dem 17,500,000 17,500,000 Allemagne, 6.63%, 1/20/98 $12,887,568 $12,887,568
5,100,000 5,100,000 Treuhandanat, 6.13%, 6/25/98 3,703,978 3,703,978
Total 16,591,546 16,591,546
NETHERLANDS - 7.3%
GOVERNMENT/AGENCY - 7.3%
Nlg 29,000,000 29,000,000 Hollande, 6.25%, 7/15/98 18,790,416 18,790,416
UNITED KINGDOM - 10.2%
FINANCIAL SERVICES - 5.5%
Gbp 1,000,000 1,000,000 Abbey National, 7.75%, 6/23/98 1,574,870 1,574,870
2,225,000 2,225,000 Abbey National, 6.00%, 8/10/99 3,242,286 3,242,286
1,000,000 1,000,000 Bayerische Hypotheken, 7.00%, 12/21/98 1,530,620 1,530,620
2,000,000 2,000,000 Halifax, 7.75%, 12/03/98 3,113,535 3,113,535
830,000 830,000 Leeds Permanent, 7.38%, 5/06/98 1,285,440 1,285,440
1,000,000 1,000,000 Lloyds Bank, 10.25%, 3/11/98 1,665,379 1,665,379
1,000,000 1,000,000 National Providence Building, 8.25%, 11/04/98 1,586,938 1,586,938
Total 13,999,068 13,999,068
GOVERNMENT/AGENCY - 4.7%
8,140,000 8,140,000 United Kingdom Treasury, 7.00%, 11/06/01 12,217,760 12,217,760
Total United Kingdom 26,216,828 26,216,828
TOTAL FOREIGN FIXED INCOME (IDENTIFIED COST 61,598,790 61,598,790
$61,998,519)
U.S. FIXED INCOME - 65.6%
AIRLINES - 1.3%
$3,000,000 $3,000,000 United Airlines Inc., Series A, 10.67%, 5/01/04 3,268,370 3,268,370
COMPUTERS & RELATED - 2.5%
5,000,000 5,000,000 Comdisco Inc., 7.25%, 4/15/98 4,998,800 4,998,800
1,000,000 1,000,000 Unisys Corp. Sr. Note, 9.75%, 9/15/96 1,026,446 1,026,446
500,000 500,000 Unisys Corp. Sr. Note, 9.50%, 7/15/98 500,750 500,750
Total 6,525,996 6,525,996
CONSUMER RELATED - 2.0%
$500,000 $500,000 RJR Nabisco, 8.30%, 4/15/99 $509,828 $509,828
$2,000,000 2,000,000 RJR Nabisco, 8.75%, 8/15/05 $1,942,688 1,942,688
2,500,000 2,500,000 Valassis Inserts, 9.38%, 3/15/99 2,592,003 2,592,003
Total 509,828 4,534,691 5,044,519
ELECTRICAL UTILITIES - 2.0%
2,750,000 2,750,000 Long Island Lighting, 7.30%, 7/15/99 2,603,736 2,603,736
2,500,000 2,500,000 Niagara Mohawk Power Corp., 9.95%, 6/01/00 2,632,675 2,632,675
Total 5,236,411 5,236,411
ENTERTAINMENT - 2.1%
2,000,000 2,000,000 Caesar's World Inc. Sr. Sub Notes, 8.88%, 8/15/02 2,065,000 2,065,000
3,000,000 3,000,000 Time Warner Entertainment Co., 9.63%, 5/01/02 3,245,991 3,245,991
Total 5,310,991 5,310,991
FINANCIAL SERVICES - 30.4%
5,000,000 5,000,000 Advanta MTC, Series 1995, 7.82%, 8/25/03 4,996,875 4,996,875
3,211,457 3,211,457 CMC Securities Corp., 1993, 7.50%, 2/25/23 3,193,376 3,193,376
5,000,000 5,000,000 Chrysler Financial MTN, 7.44%, 10/20/97 5,013,220 5,013,220
5,802,456 5,802,456 Contimortage 1995-1, 8.75%, 4/15/07 5,894,933 5,894,933
5,000,000 5,000,000 Dean Witter Discover & Co., 6.00%, 3/01/98 4,855,365 4,855,365
10,275,000 10,275,000 Discover Credit Corp. MTN, 7.76%, 5/13/97 10,394,180 10,394,180
5,000,000 5,000,000 Ford Motor Credit Corp., 5.32%, 9/15/98 4,716,200 4,716,200
5,686,741 5,686,741 General Electric Capital Mtg., 1992, 7.50%, 5,681,406 5,681,406
11/25/18
4,642,955 4,642,955 General Motors Acceptance Corp., 1993 B A, 4.00%, 4,537,932 4,537,932
9/15/98
2,500,000 2,500,000 Groupe Videotron, 10.63%, 2/15/05 2,612,500 2,612,500
6,000,000 6,000,000 International Business Machines Credit, 7.40%, 6,035,352 6,035,352
1/19/96
5,000,000 5,000,000 Lehman Brothers Hldg. MTN, 8.63%, 2/26/99 5,104,805 5,104,805
2,470,391 2,470,391 Merrill Lynch Mtge. Inv., 1990, 9.20%, 1/15/11 2,566,465 2,566,465
4,962,460 4,962,460 Money Store, Series 1995-A, 8.00%, 9/15/05 4,999,679 4,999,679
7,500,000 7,500,000 New American Capital, 7.69%, 7/12/95 7,500,000 7,500,000
Total 78,102,288 78,102,288
GOVERNMENT/AGENCY - 21.9%
$1,000,00 $1,000,000 Federal National Mortgage Assoc., 8.20%, 8/10/98 $1,005,763 $1,005,7630
$5,000,000 5,000,000 Government National Mortgage Assoc., 9.50%, $5,262,500 5,262,500
12/15/21
209,064 209,064 Government National Mortgage Assoc. II, 10.00%, 221,673 221,673
6/20/16
Resolution Trust Corp.
250,000 250,000 6.00%, 1/15/04 249,688 249,688
6,795,834 6,795,834 5.33%, 9/25/21 6,583,465 6,583,465
3,559,951 3,559,951 5.83%, 9/25/19 3,453,152 3,453,152
2,728,754 2,728,754 5.90%, 7/25/23 2,701,466 2,701,466
2,106,119 2,106,119 5.97%, 5/25/21 2,042,936 2,042,936
2,093,821 2,093,821 6.98%, 3/25/22 2,088,586 2,088,586
2,340,164 2,340,164 7.32%, 11/25/25 2,305,062 2,305,062
6,456,497 6,456,497 7.75%, 12/25/18 6,424,214 6,424,214
3,886,383 3,886,383 7.87%, 9/25/29 3,879,096 3,879,096
3,931,403 3,931,403 8.15%, 1/25/21 3,975,631 3,975,631
937,699 937,699 8.77%, 3/25/21 937,230 937,230
1,273,000 1,273,000 8.80%, 8/25/23 1,303,234 1,303,234
U.S. Treasury Notes
4,500,000 4,500,000 6.88%, 10/31/96 4,523,904 4,523,904
2,500,000 2,500,000 7.50%, 2/29/96 2,523,438 2,523,438
2,000,000 2,000,000 7.50%, 1/31/96 2,016,874 2,016,874
5,000,000 5,000,000 5.50%, 4/30/96 4,959,375 4,959,375
Total 15,500,715 40,956,572 56,457,287
HOTELS - 1.0%
2,500,000 2,500,000 Embassy Suites, 8.75%, 3/15/00 2,487,500 2,487,500
INDUSTRIAL RELATED - 1.7%
2,500,000 2,500,000 Oryx Energy Co., 9.75%, 9/15/88 2,521,875 2,521,875
500,000 500,000 PDV America Inc., 7.25%, 8/01/98 455,841 455,841
2,000,000 2,000,000 USX Corp., Subordinated Deb., 5.75%, 7/01/01 1,725,000 1,725,000
Total 455,841 4,246,875 4,702,716
UTILITIES - 0.7%
$1,650,000 $1,650,000 Arkla Inc., 8.88%, 7/15/99 $ --- $1,699,106 $1,699,106
TOTAL U.S. FIXED INCOME 16,466,384 152,368,800 168,835,184
(IDENTIFIED COST $167,916,934)
U.S. HIGH YIELD SECURITIES - 2.3%
AIRLINES - 0.1%
$200,000 200,000 U.S. Air Inc., Series D, 9.80%, 1/15/00 173,250 173,250
BASIC MATERIALS - 0.2%
500,000 500,000 Owens Illinois Inc., 10.25%, 4/01/99 511,250 511,250
CONSUMER RELATED - 0.3%
200,000 200,000 MacAndrews & Forbes Group Inc., 12.25%, 7/01/96 201,500 201,500
500,000 500,000 Revlon Consumer Products Corp., 9.50%, 6/01/99 491,250 491,250
Total 692,750 692,750
ENERGY & OIL RELATED - 0.3%
400,000 400,000 Texas New Mexico Power Co., 9.25%, 9/15/00 399,584 399,584
500,000 500,000 Triton Energy Corp., 0%, 11/01/97 398,750 398,750
Total 798,334 798,334
FINANCIAL SERVICES - 0.7%
500,000 500,000 Great American Holding Corp., 11.00%, 8/15/98 501,875 501,875
500,000 500,000 Navistar Financial Group Corp., 8.88%, 11/15/98 492,500 492,500
400,000 400,000 Presidential Life Corp., 9.50%, 12/15/00 386,000 386,000
500,000 500,000 Reliance Group Holdings Inc., 9.00%, 11/15/00 476,875 476,875
Total 1,857,250 1,857,250
INDUSTRIAL RELATED - 0.5%
350,000 350,000 Armco, Inc. 9.38%, 11/01/00 331,625 331,625
350,000 350,000 Sequa Corp., 8.75%, 12/15/01 329,437 329,437
500,000 500,000 Unisys Corp., 10.63%, 10/01/99 527,197 527,197
Total 1,188,259 1,188,259
MEDICAL SERVICES - 0.1%
350,000 350,000 Healthsouth Rehabilitation Corp., 9.50%, 4/01/01 357,875 357,875
TELECOMMUNICATIONS - 0.1%
$168,800 $168,800 SCI Television Inc., 7.50%, 6/30/98 $167,112 $167,112
TOTAL U.S. HIGH YIELD SECURITIES 5,746,080 5,746,080
(IDENTIFIED COST $5,880,640)
SHORT-TERM SECURITIES - 6.1%
$1,000,000 1,000,000 American Express Credit Corp., 5.70%, 5/01/95 $1,000,000 1,000,000
740,000 740,000 Associates Corp. of N.A., 5.80%, 5/01/95 740,000 740,000
5,000,000 5,000,000 Salomon Inc., 5.91%, 9/29/95 4,976,730 4,976,730
9,000,000 9,000,000 U.S. Treasury Bill, 4.56%, 5/04/95 8,995,800 8,995,800
TOTAL SHORT-TERM SECURITIES 740,000 14,972,530 15,712,530
(IDENTIFIED COST $15,715,006)
OUTSTANDING OPTIONS PURCHASED - 0.0%
CONTRACTS PUT OPTIONS
150 150 (d) Euro$ Future, expiring 9/18/95 @ $93.50
TOTAL OUTSTANDING OPTIONS PURCHASED 75,000 75,000
(IDENTIFIED COST $72,376)
TOTAL INVESTMENTS (IDENTIFIED COST $22,952,464 $229,015,120 $251,967,584
$251,583,475) (A)
</TABLE>
* Securities partially segregated to collateralize forward currency contracts
and options. Total market value segregated is $1,089,457.
+Registered under SEC rule 144-A, resale restricted as to qualified
institutional buyers: represents 3.21% of net assets.
(a) The aggregate cost for federal income tax purposes is $251,586,100; the
gross unrealized appreciation is $1,260,810; and the unrealized
depreciation is $878,880; resulting in net unrealized appreciation of
$381,930.
(b) Variable rate security. Rate shown reflects the current rate as of April
30, 1995.
(c) Convertible security.
(d) Non-income producing.
(e) Pays interest at LIBOR plus 137.5 basis points until July 12, 1995. After
July 12, 1995, the rate resets to 7.69%.
MTN = Medium Term Note
Note: The categories of investments are shown as a percentage of net assets
BLANCHARD SHORT-TERM GLOBAL INCOME FUND
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
BLANCHARD SHORT-TERM GLOBAL INCOME FUND
CUSIP NO. 093265205
FOR SPECIAL MEETING OF SHAREHOLDERS JANUARY 15, 1996
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned shareholders of
Blanchard Short-Term Global Income Fund, a portfolio of Blanchard Funds hereby
appoint C. Grant Anderson, Patricia F. Conner, Cathy Ryan, Suzanne Land and Gia
Albanowski or any one of them, true and lawful attorneys, with the power of
substitution of each, to vote all shares of Blanchard Short-Term Global Income
Fund, which the undersigned is entitled to vote, at the Special Meeting of
Shareholders to be held on January 15, 1996, at Federated Investors Tower,
Pittsburgh, Pennsylvania, at 2:00 p.m. (Eastern time) and at any adjournment
thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
PROPOSAL(S)
1) TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION PROVIDING
FOR THE TRANSFER OF THE ASSETS OF BLANCHARD SHORT-TERM GLOBAL INCOME FUND TO
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES WHO RECOMMEND THAT
YOU VOTE FOR THE PROPOSED REORGANIZATION. The attorneys named will vote the
shares represented by this proxy in accordance with the choices made on this
card. IF NO CHOICE IS INDICATED AS TO ANY ITEM, THIS PROXY WILL BE VOTED
AFFIRMATIVELY ON THAT MATTER.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND RETAIN
THE TOP PORTION. Place the ballot so that the return address, located on the
reverse side of the mail-in-stub, appears through the window of the envelope.
BLANCHARD SHORT-TERM GLOBAL INCOME FUNDPROXY VOTING MAIL-IN STUB
RECORD DATE SHARES
Please sign EXACTLY as your name(s) appear above. When signing as attorney,
executor, administrator, guardian, trustee, custodian, etc., please give your
full title as such. If a corporation or partnership, please sign the full name
by an authorized officer or partner. If stock is owned jointly, all parties
should sign.
PROPOSAL(S):
1) FOR AGAINST ABSTAIN
---- ---- ----
Dated: , 19
=============== ====
- ---------------------------
Signature(s) of Shareholders(s)
PART C - OTHER INFORMATION
Item 15. Indemnification
Indemnification is provided to officers and trustees of the Registrant
pursuant to the Registrant's Declaration of Trust, except where such
indemnification is not permitted by law. However, the Declaration of Trust does
not protect the trustees from liabilities based on willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of their office.
Trustees and officers of the Registrant are insured against certain
liabilities, including liabilities arising under the Securities Act of 1933 (the
"Act").
Insofar as indemnification for liabilities arising under the Act may be
permitted to trustees, officers, and controlling persons of the Registrant by
the Registrant pursuant to the Declaration of Trust or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by trustees, officers, or controlling persons of the Registrant in
connection with the successful defense of any act, suit, or proceeding) is
asserted by such trustees, officers, or controlling persons in connection with
the shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Insofar as indemnification for liabilities may be permitted pursuant to
Section 17 of the Investment Company Act of 1940 for trustees, officers, and
controlling persons of the Registrant by the Registrant pursuant to the
Declaration of Trust or otherwise, the Registrant is aware of the position of
the Securities and Exchange Commission as set forth in Investment Company Act
Release No. IC-11330. Therefore, the Registrant undertakes that in addition to
complying with the applicable provisions of the Declaration of Trust or
otherwise, 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 trustees who are not interested persons of the Registrant;
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 Registrant 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, or controlling
person of the Registrant 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 Registrant is insured against losses arising by reason of
any lawful advances; or (iii) a majority of a quorum of disinterested non-party
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.
Item 16. Exhibits
1.1 Conformed Copy of Declaration of Trust of the Registrant dated January
24, 1986(1)
1.2 Conformed Copy of Amendment to the Declaration of Trust of the
Registrant dated December 4, 1990(2)
2. Copy of Bylaws of the Registrant(1)
3. Not Applicable
4. Agreement and Plan of Reorganization is included as Appendix A to the
Combined Proxy Statement and Prospectus of this Registration Statement*
5. Not Applicable
6.1 Form of Management Agreement between Registrant and Sheffield Management
Company for Short-Term Global Income Fund series(2)
6.2 Form of Management Agreement between Registrant and Sheffield Management
Company for Short-Term Bond Fund series(3)
6.3 Form of Sub-Advisory Agreement between Sheffield Management Company and
Lombard Odier International Portfolio Management Limited for Short-Term
Global Income Fund series(2)
6.4 Form of Sub-Advisory Agreement between Sheffield Management Company and
OFFITBANK for Short-Term Bond Fund series(3)
6.5 Forms of Sub-Advisory Agreements for Short-Term Global Income Fund and
Short-Term Bond Fund between Virtus Capital Management, Inc. and Lombard
Odier International Portfolio Management Limited and OFFITBANK,
respectively(4)
6.5 Forms of Sub-Advisory Agreement between Lombard Odier International
Portfolio Management Limited and WLO Global Management for Short-Term
Global Income Fund(4)
7.1 Form of Distribution Agreement between Registrant and Sheffield
Investments, Inc. for Short-Term Global Income Fund series(5)
7.2 Form of Distribution Agreement between Registrant and Sheffield
Investments, Inc. for Short-Term Bond Fund series(3)
7.2 Conformed copy of Distributor's Contract between Registrant, on behalf
of each of the series, and Federated Securities Corp.(6)
8. Not Applicable
9.1 Forms of Custody, Transfer Agency and Fund Accounting and Pricing
Services Agreements between Registrant and United States Trust Company
of New York for Short-Term Global Income Fund series(5)
9.2 Forms of Custody, Transfer Agency and Fund Accounting and Pricing
Services Agreements between Registrant and United States Trust Company
of New York for Short-Term Bond Fund series(3)
9.3 Form of Sub-Custodian Agreement United States Trust Company of New York
and Citibank, N.A. for Short-Term Global Income Fund series(5)
9.4 Form of Sub-Custodian Agreement United States Trust Company of New York
and Morgan Stanley Trust Company for Short-Term Bond Fund series(3)
10.1 Form of Rule 12b-1 Distribution and Marketing Plan for Short-Term Global
Income Fund series(5)
10.2 Form of Rule 12b-1 Distribution and Marketing Plan for Short-Term Bond
Fund series(3)
10.3 Conformed copy of Distribution Plan(6)
10.4 Copy of 12b-1 Agreement(6)
11. Opinion regarding legality of shares being issued*
12. Form of Opinion regarding tax consequences of Reorganization*
13.1 Conformed copy of Administrative Services Agreement between Registrant,
on behalf of each series, and Federated Administrative Services(6)
14. Conformed Copy of Consent of Price Waterhouse LLP, Independent
Accountants*
15. Not Applicable
16. Conformed Copy of Power of Attorney(6)
17.1 Copy of Declaration under Rule 24f-2*
17.2 Form of Proxy*
* Filed electronically.
(1) Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed February 5, 1986 (File Nos. 33-3165 and 811-4579).
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed on December 21, 1990 (File Nos. 33-3165 and
811-4579).
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed February 5, 1993 (File Nos. 33-3165 and 811-
4579).
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 29 on Form N-1A filed August7, 1995 (File Nos. 33-3165 and 811-
4579).
(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed November 2, 1990 (File Nos. 33-3165 and 811-
4579).
(6) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 on Form N-1A filed September 1, 1995 (File Nos. 33-3165 and
811-4579).
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public reofferring
of the securities registered through the use of a prospectus which is a part of
this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the
reofferring prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
BLANCHARD FUNDS, has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh,
Commonwealth of Pennsylvania, on October 18, 1995.
BLANCHARD FUNDS
(Registrant)
By:/s/ C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
October 18, 1995
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
NAME TITLE DATE
By:/s/C. Grant Anderson
C. Grant Anderson Attorney In Fact October 18, 1995
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Edward C. Gonzales* President, Treasurer and
Trustee (Principal Financial
and Accounting Officer)
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
