SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No..........)
Filed by the Registrant ( X )
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( X ) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Sec. 240.14a-11(c) or
Sec. 240.14a-12
BLANCHARD FUNDS
(Name of Registrant as Specified In Its Charter)
Federated Investors
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
( X ) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
( ) $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
( ) Fee paid previously with preliminary proxy materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
PRELIMINARY PROXY MATERIALS
FOR THE INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
BLANCHARD CAPITAL GROWTH FUND
AND
BLANCHARD GROWTH & INCOME FUND
FEDERATED INVESTORS TOWERS
PITTSBURGH, PENNSYLVANIA 15222-3779
Dear Valued Shareholder:
As you may already know, The Chase Manhattan Bank, N.A., the adviser to
the Portfolios in which Blanchard Capital Growth Fund and Blanchard Growth &
Income Fund invest, has agreed to be acquired by Chemical Banking Corporation.
Although nothing will change the portfolio management of the Funds or the
Portfolios, we are required to send you the enclosed proxy so that you are
aware of the change in ownership and may vote upon whether to have your
investment in either Fund managed by what is now Chemical Banking Corporation
and upon certain other matters described below.
The Board of Trustees of your Funds recommends that you vote "YES".
Please complete and return proxy ballot today.
The remainder of these materials further discuss these matters.
Sincerely,
THE BLANCHARD GROUP OF FUNDS
PRELIMINARY PROXY MATERIALS
FOR THE INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
BLANCHARD CAPITAL GROWTH FUND
AND
BLANCHARD GROWTH & INCOME FUND
FEDERATED INVESTORS TOWERS
PITTSBURGH, PENNSYLVANIA 15222-3779
Dear Valued Shareholder:
Blanchard Capital Growth Fund and Blanchard Growth & Income Fund (each a
"Fund" and collectively, hereinafter referred to as the "Funds"), unlike many
other investment companies which directly acquire and manage their own
portfolio of securities, seek to achieve their investment objectives by
investing all of their investable assets in, respectively, Capital Growth
Portfolio and Growth & Income Portfolio, open-end management investment
companies managed by Chase Manhattan Bank, N.A. (the "Adviser"), with
investment objectives that are substantially identical to those of the
respective Funds (each a "Master Portfolio" and collectively, hereinafter
referred to as the "Master Portfolios"). In addition, other entities may
invest in each Master Portfolio (e.g., other investment companies, insurance
company separate accounts and common and commingled trust funds). Whenever
Blanchard Funds (the "Trust") is requested to vote on matters pertaining to a
Master Portfolio, the Trust will hold a meeting of its corresponding Fund's
shareholders and will cast its vote as instructed by Fund shareholders. At
this time, you are being asked to cast your vote on each proposal with respect
to your Fund and its Master Portfolio.
As you may be aware, The Chase Manhattan Corporation ("Chase") has entered
into an Agreement and Plan of Merger with Chemical Banking Corporation
("Chemical") pursuant to which Chase will merge with and into Chemical (the
"Holding Company Merger"). Pursuant to the Investment Company Act of 1940, as
amended, consummation of the Holding Company Merger will result in the
automatic termination of the investment advisory agreements between the Master
Portfolios and The Chase Manhattan Bank, N.A. ("the Adviser"). In addition,
subsequent to the Holding Company Merger, the Adviser will be merged with and
into Chemical Bank in a secondary merger of the principal operating entities
of Chase and Chemical (the "Bank Merger"). The Bank Merger may also be deemed
to result in the automatic termination of the investment advisory agreements
between the Adviser and the Master Portfolios. In anticipation of the
completion of the Holding Company Merger and the Bank Merger, and to provide
continuity in investment advisory services to your Fund's Master Portfolio, we
urge you to review the enclosed proxy statement. In the proxy statement you
are asked to vote on the approval of an interim and a new advisory agreement
between your Fund's Master Portfolio and the Adviser, on the approval of
certain changes to your Fund's fundamental investment objective and on the
approval of certain changes to the fundamental investment restrictions of your
Fund's Master Portfolio, to permit your Fund to continue to invest in its
Master Portfolio.
The Board of Trustees of Blanchard Funds has voted unanimously in favor of
each proposal and recommends that you vote "FOR" them as well. You will find
more information on the proposals in the enclosed proxy statement.
Please be assured that there is no increase to the advisory fee rate in the
proposed advisory agreements for the Master Portfolios.
YOUR VOTE IS IMPORTANT. Please read the enclosed proxy statement and vote now
by completing, signing and returning the enclosed proxy ballot form(s) in the
pre-paid envelope. If you own shares in both Funds, you will receive a
separate proxy card for each of your Funds. Please note and return EACH proxy
card you receive. EVERY VOTE COUNTS. If you have any questions, please call
the Fund at 800- 829-3863.
Very truly yours,
PRELIMINARY PROXY MATERIALS
FOR THE INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
BLANCHARD CAPITAL GROWTH FUND
AND
BLANCHARD GROWTH & INCOME FUND
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS TO BE HELD MAY 15, 1996
Special meetings of the shareholders of Blanchard Capital Growth Fund and
Blanchard Growth & Income Fund (each a "Fund" and collectively, hereinafter
referred to as the "Funds") will be held at 2:00 p.m. (Eastern time) with
respect to Blanchard Capital Growth Fund, and 2:30 p.m. (Eastern time) with
respect to Blanchard Growth & Income Fund at Federated Investors Tower,
Pittsburgh, Pennsylvania, on May 15, 1996, for the purposes indicated below:
1. To approve or disapprove an interim investment advisory agreement
between each of the Master Portfolios and The Chase Manhattan Bank,
N.A. (and the successor entity thereto) (the "Adviser") which will
take effect upon the merger of The Chase Manhattan Corporation (the
parent company of the Adviser) and Chemical Banking Corporation (to be
voted on separately by the shareholders of each Fund). No fee
increase is proposed.
2. To approve or disapprove a new investment advisory agreement between
each of the Master Portfolios and the Adviser, and a sub-advisory
agreement between the Adviser and Chase Asset Management, Inc. with
respect to each of the Master Portfolios to take effect as soon as
practicable after approval by shareholders (to be voted on separately
by the shareholders of each Fund). No fee increase is proposed.
3. To consider the following proposals pertaining to the fundamental
investment restrictions of each Fund's Master Portfolio and of each
Fund (to be voted on separately by shareholders of each Fund):
a. To approve or disapprove an amendment to the Master Portfolio's and
the Fund's fundamental investment restriction concerning borrowing;
b. To approve or disapprove an amendment to the Master Portfolio's and
the Fund's fundamental investment restriction concerning investment
for the purpose of exercising control;
c. To approve or disapprove an amendment to the Master Portfolio's and
the Fund's fundamental investment restriction concerning the making
of loans;
d. To approve or disapprove an amendment to the Master Portfolio's and
the Fund's fundamental investment restriction concerning purchases
of securities on margin;
e. To approve or disapprove an amendment to the Master Portfolio's and
the Fund's fundamental investment restriction concerning
concentration of investment;
f. To approve or disapprove an amendment to the Master Portfolio's and
the Fund's fundamental investment restriction concerning
commodities and real estate;
g. To approve or disapprove an amendment to the Master Portfolio's and
the Fund's fundamental investment restriction regarding investments
in restricted and illiquid securities;
h. To approve or disapprove of a reclassification, as non-fundamental,
of the Master Portfolio's and the Fund's fundamental restriction
concerning the use of options;
i. To approve or disapprove an amendment to the Master Portfolio's and
the Fund's fundamental investment restriction concerning senior
securities; and
j. To approve or disapprove an amendment to the Master Portfolio's and
the Fund's fundamental investment restriction regarding short sales
of securities.
4. To approve or disapprove an amendment to each Fund's fundamental
investment objective to conform such objective to the investment
objective and policies of the Master Portfolio in which such Fund
invests (to be voted on separately by shareholders of each Fund).
5. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
Shareholders of record as of the close of business on March 18, 1996 are
entitled to receive notice of, and to vote at, the Meeting of their Fund and
any and all adjournments thereof. Your attention is called to the
accompanying proxy statement.
By Order of the Board of Trustees
John W. McGonigle
Secretary
March 27, 1996
YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS TO
ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. IF YOU ARE UNABLE
TO ATTEND THE MEETING OF YOUR FUND, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE MEETING.
THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
PRELIMINARY PROXY MATERIALS
FOR THE INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
BLANCHARD CAPITAL GROWTH FUND
AND
BLANCHARD GROWTH & INCOME FUND
FEDERATED INVESTORS TOWERS
PITTSBURGH, PENNSYLVANIA 15222-3779
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Trustees of
Blanchard Funds (the "Trust"). The proxy is revocable at any time before it
is voted by sending written notice of the revocation to the Trust or by
appearing personally at a May 15, 1996 special meeting of shareholders (the
"Meeting"). The cost of preparing and mailing the notice of meeting, the
proxy card, this proxy statement and any additional proxy material ("Meeting
Cost") has been or is to be borne by The Chase Manhattan Corporation, Chemical
Banking Corporation and/or their affiliates. The Chase Manhattan Bank, N.A.
(the "Adviser") is currently the investment adviser to each of the Master
Portfolios. Proxy solicitations will be made primarily by mail, but may also
be made by telephone, telegraph, facsimile or personal interview conducted by
certain officers or employees of the Trust, the Adviser or its affiliates, or,
if necessary, a commercial firm retained for this purpose. In the event that
the shareholder signs and returns the proxy ballot, but does not indicate a
choice as to any of the items on the proxy ballot, the persons named in the
accompanying proxy will vote those shares in favor of such proposal(s).
On March 18, 1996, the record date for determining shareholders entitled to
receive notice of and vote at the Meetings (the "Record Date"), each Fund had
the following number of shares of beneficial interest ("Shares") outstanding,
each Share being entitled to one vote:
TOTAL SHARES
FUND OUTSTANDING
Blanchard Growth & Income Fund
Blanchard Capital Growth Fund
Each proposal and each item of other business which may properly come before
the Meetings will be voted on separately by the shareholders of each Fund.
The holders of shares of each Fund shall be entitled to one vote for each full
share and a fractional vote for each fractional share.
A copy of each Fund's Annual Report (which contains information pertaining to
the Fund) may be obtained, without charge, by calling the Fund, at (800) 829-
3863.
This proxy statement and the enclosed notice of meeting and proxy card are
first being mailed to shareholders on or about March 27, 1996.
INTRODUCTION
The Meetings are being called for the following purposes.
With respect to each of the Funds: (1) to approve or disapprove an interim
investment advisory agreement (the "Interim Agreement") between each of the
Master Portfolios and the Adviser which will take effect upon the merger of
The Chase Manhattan Corporation and Chemical Banking Corporation; (2) to
approve or disapprove a new investment advisory agreement (the "New Advisory
Agreement") between each of the Master Portfolios and the Adviser (and its
successor in the Bank Merger) and a Sub-Advisory Agreement between the Adviser
and Chase Asset Management, Inc. to take effect as soon as practicable after
approval by shareholders; (3) to approve or disapprove amendments to each
Master Portfolio's and each Fund's fundamental investment restrictions; (4) to
approve or disapprove an amendment to each Fund's fundamental investment
objective to conform such objective to the investment objective and policies
of the Master Portfolio in which the Fund invests; and (5) to transact such
other business as may properly come before the Meetings or any adjournment
thereof.
All information with respect to each of the proposals was provided to the
Board of Trustees of Blanchard Funds by the Adviser.
PROPOSAL
NUMBER
NAME OF FUND 1 2 3 4
Blanchard Growth & Income X X X X
Fund
Blanchard Capital Growth X X X X
Fund
SUBCHART FOR PROPOSALS 3A-J
NAME OF FUND A B C D E F G H I J
BLANCHARD GROWTH & X X X X X X X X X X
INCOME FUND
BLANCHARD CAPITAL GROWTH X X X X X X X X X X
FUND
Approval of Proposals 1, 2 and 3 with respect to a Fund requires the vote of a
"majority of the outstanding voting securities," within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act"), of the Master
Portfolio in which that Fund invests and, in addition, approval of Proposal 3
with respect to a Fund requires the vote of a "majority of the outstanding
voting securities," within the meaning of the 1940 Act, of that Fund.
Approval of Proposal 4 with respect to a Fund requires the vote of a "majority
of the outstanding voting securities," within the meaning of the 1940 Act, of
that Fund. The term "majority of the outstanding voting securities" is
defined under the 1940 Act to mean: (a) 67% or more of the outstanding shares
present at a meeting of shareholders of a Master Portfolio or a Fund, as the
case may be, if the holders of more than 50% of the outstanding shares are
present or represented by proxy, or (b) more than 50% of the outstanding
shares of a Master Portfolio or a Fund, as the case may be, whichever is less.
For purposes of determining the presence of a quorum and counting votes on the
matters presented, Shares represented by abstentions and "broker non-votes"
will be counted as present, but not as votes cast, at the Meeting. Under the
1940 Act, the affirmative vote necessary to approve a matter under
consideration may be determined with reference to a percentage of votes
present at a meeting of shareholders, which would have the effect of treating
abstentions and non-votes as if they were votes against the proposal.
If Proposal 1 is approved, it is anticipated that it will become effective
upon the occurrence of the Holding Company Merger (and remain effective after
the Bank Merger). If Proposal 2 is approved, it is anticipated that the New
Advisory Agreement and the CAM, Inc. Agreement will become effective as soon
as practicable after shareholder approval (and remain effective after the Bank
Merger.) If Proposals 3 and 4 are approved, it is anticipated that the
changes effected thereby will become effective as soon as practicable after
shareholder approval.
PROPOSAL 1
APPROVAL OR DISAPPROVAL OF AN INTERIM INVESTMENT
ADVISORY AGREEMENT BETWEEN EACH MASTER PORTFOLIO
AND THE CHASE MANHATTAN BANK, N.A. (AND THE
SUCCESSOR ENTITY THERETO)
INTRODUCTION
The Chase Manhattan Bank, N.A. currently serves as each Master Portfolio's
investment adviser pursuant to a separate Investment Advisory Agreement (the
"Current Advisory Agreement") for each Master Portfolio. The Chase Manhattan
Bank, N.A. is a wholly owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company.
On August 27, 1995, The Chase Manhattan Corporation announced its entry into
an Agreement and Plan of Merger (the "Merger Agreement") with Chemical Banking
Corporation ("Chemical"), a bank holding company, pursuant to which The Chase
Manhattan Corporation will merge with and into Chemical (the "Holding Company
Merger"). Under the terms of the Merger Agreement, Chemical will be the
surviving corporation in the Holding Company Merger and will continue its
corporate existence under Delaware law under the name "The Chase Manhattan
Corporation" ("New Chase"). The board of directors and shareholders of each
holding company have approved the Holding Company Merger, which will create
the largest bank holding company in the United States based on assets. The
consummation of the Holding Company Merger is subject to certain closing
conditions. The Holding Company Merger is expected to be completed during the
first quarter of 1996.
Subsequent to the Holding Company Merger, it is expected that the adviser to
the Master Portfolios, The Chase Manhattan Bank, N.A., will be merged with and
into Chemical Bank, a New York State chartered bank ("Chemical Bank") (the
"Bank Merger" and together with the Holding Company Merger, the "Mergers").
The surviving bank will continue operations under the name The Chase Manhattan
Bank (as used herein, the term "Chase" refers to The Chase Manhattan Bank,
N.A. and its successor in the Bank Merger, and the term "Adviser" means Chase
(including its successor in the Bank Merger) in its capacity as investment
adviser to the Master Portfolios). The consummation of the Bank Merger is
subject to certain closing conditions, including the receipt of certain
regulatory approvals. The Bank Merger is expected to be completed on or about
July 31, 1996.
Chemical is a publicly owned bank holding company incorporated under Delaware
law and registered under the Federal Bank Holding Company Act of 1956, as
amended. As of December 31, 1995, through its direct or indirect
subsidiaries, Chemical managed more than $57 billion in assets, including
approximately $6.9 billion in mutual fund assets in 11 mutual fund portfolios.
Chemical Bank is a wholly owned subsidiary of Chemical and is a New York State
chartered bank.
As required by the 1940 Act, each Current Advisory Agreement provides for its
automatic termination upon its "assignment" (as defined in the 1940 Act).
Consummation of the Holding Company Merger may be deemed to result in an
assignment of the Current Advisory Agreements and, consequently, to terminate
the Current Advisory Agreements in accordance with their terms. Similarly,
the consummation of the Bank Merger may also be deemed to result in an
assignment and consequently, terminate the then-existing investment advisory
contract. In anticipation of the consummation of the Mergers and to provide
continuity in investment advisory services, at a meeting held on December 14,
1995, the Board of Trustees of The Master Portfolio, including a majority of
the Board members who are not "interested persons" (as defined in the 1940
Act) of the Investment Company, approved an Interim Advisory Agreement between
each Master Portfolio and the Adviser to take effect upon the consummation of
the Holding Company Merger. The Board also directed that such agreement be
submitted to shareholders for approval. In addition, the Board of Trustees of
each Master Portfolio approved the continuation of the Interim Advisory
Agreement after the Bank Merger, on the same terms and conditions as in effect
immediately prior to the merger (except for effective and termination dates)
in the event the Interim Advisory Agreement is deemed to terminate as a result
of the Bank Merger. Approval of Proposal 1 will also be deemed approval of
such continuation of the Interim Advisory Agreement after the Bank Merger, if
applicable. EACH INTERIM ADVISORY AGREEMENT IS IDENTICAL TO THE CURRENT
ADVISORY AGREEMENT, EXCEPT FOR ITS EFFECTIVE AND TERMINATION DATES. THE
AGGREGATE CONTRACTUAL RATE CHARGEABLE FOR INVESTMENT ADVISORY SERVICES WILL
REMAIN THE SAME.
In connection with each Master Portfolio's approval of the Interim Advisory
Agreement, the Board of Trustees of each Master Portfolio considered that the
terms of the Mergers do not require any change in the Adviser's investment
management or operation of the Master Portfolios, the investment personnel
managing the Master Portfolios, the shareholder services or other business
activities of the Master Portfolios, or, the investment objectives of the
Master Portfolios. Chemical and the Adviser have informed the Board of
Trustees of each Master Portfolio that the Mergers will not at this time
result in any such change, although no assurance can be given that such a
change will not occur. Each also has advised that, at present, neither plans
nor proposes to make any material changes in the business, corporate structure
or composition of senior management or personnel of the Adviser, or in the
manner in which the Adviser renders investment advisory services to each. If,
after the Mergers, changes in the Adviser are proposed that might materially
affect its services to the Master Portfolios, the Board of each Master
Portfolio will consider the effect of those changes and take such action as it
deems advisable under the circumstances.
The Adviser has informed each Master Portfolio that it proposes to comply with
Section 15(f) of the 1940 Act. Section 15(f) provides a non-exclusive safe
harbor for an investment adviser or any of its affiliated persons to receive
any amount or benefit in connection with a change in control of the investment
adviser as long as two conditions are met. First, for a period of three years
after the transaction, at least 75% of the Board members of an investment
company must not be interested persons of such investment adviser. Second, an
"unfair burden" must not be imposed on an investment company as a result of
such transaction or any express or implied terms, conditions or understandings
applicable thereto. The term "unfair burden" is defined in Section 15(f) to
include any arrangement during the two-year period after the transaction
whereby the investment adviser, or any interested person of any such adviser,
receives or is entitled to receive any compensation, directly or indirectly,
from an investment company or its security holders (other than fees for bona
fide investment advisory or other services) or, with certain exceptions, from
any person in connection with the purchase or sale of securities or other
property to, from or on behalf of an investment company. The Adviser, after
due inquiry, is not aware of any express or implied term, condition,
arrangement or understanding which would impose an "unfair burden" on the
Master Portfolios as a result of the Mergers. New Chase, the Adviser and
their affiliates have agreed to take no action that would have the effect of
imposing an "unfair burden" on the Master Portfolios as a result of the
Mergers. Chase, Chemical and/or one or more of their affiliates have
undertaken to pay all costs relating to the Mergers, including the costs of
the shareholders' meetings.
THE INVESTMENT ADVISER
THE ADVISORY AGREEMENTS. The Chase Manhattan Bank, N.A., One Chase Manhattan
Plaza, New York, New York 10081, currently serves as investment adviser to the
Master Portfolios pursuant to an investment advisory agreement between the
Adviser and each Master Portfolio (the "Current Advisory Agreement"). The
Adviser will serve as investment adviser to the Master Portfolios after the
Holding Company Merger under an investment advisory agreement with each Master
Portfolio (the "Interim Advisory Agreement") which is identical in all
material respects to the Current Advisory Agreement except for its effective
and termination dates. A copy of the form of the Interim Advisory Agreement
is attached hereto as Appendix A and should be read in conjunction with the
following.
THE CHASE MANHATTAN BANK, N.A. The Chase Manhattan Bank, N.A., a wholly owned
subsidiary of The Chase Manhattan Corporation, a registered bank holding
company, is a commercial bank offering a wide range of banking and investment
services to customers throughout the United States and around the world. Its
headquarters are at One Chase Manhattan Plaza, New York, New York 10081. As
of December 31, 1995, Chase was one of the largest commercial banks in the
United States, with assets of $ 100.2 billion. As of such date, The Chase
Manhattan Corporation was one of the largest bank holding companies in the
United States, having total assets of approximately $121.2 billion. As of
September 30, 1995, The Chase Manhattan Corporation through various
subsidiaries provided personal, corporate and institutional investment
management services for approximately $57.9 billion in assets, of which Chase
provided investment management services to Vista portfolios containing
approximately $10.4 billion in assets. Included among Chase's accounts are
commingled trust funds and a broad spectrum of individual trust and investment
management portfolios. These accounts have varying investment objectives.
Effective upon consummation of the Holding Company Merger, The Chase Manhattan
Bank, N.A. will be a wholly owned subsidiary of New Chase. Upon consummation
of the Bank Merger, The Chase Manhattan Bank, a New York State chartered bank
(the successor entity to The Chase Manhattan Bank, N.A.) will continue to be a
wholly owned subsidiary of New Chase.
The other mutual funds for which the Adviser serves as investment adviser,
their assets as of December 31, 1995, and their annual advisory fees are:
Mutual Fund Trust Fee Total
Assets
(In
Millions)
as of
12/31/95
Vista California Tax Free Money $
Market 0.10% 42.822
Vista New York Tax Free Money Market 0.10
438.386
Vista Tax Free Money Market 0.10
430.000
Vista U.S. Government Money Market 0.10 2263.872
Vista Global Money Market 0.10 1715.658
Vista Federal Money Market 0.10
496.456
Vista Treasury Plus Money Market 0.10 195.22
Vista Prime Money Market 0.10 1198.243
Vista Tax Free Income 0.30
103.047
Vista New York Tax Free Income 0.30
110.567
Vista California Intermediate Tax 0.30
Free Income 32.191
Mutual Fund Group Fee Total
Assets
(In
Millions)
as of
12/31/95
Vista Short Term Bond Fund $ 36.493
0.25%
Vista U.S. Government Income Fund 0.30 114.170
Vista Bond Fund 0.30
59.191
Vista Equity Income Fund 0.40
11.564
Vista Equity Fund 0.40
49.847
Vista Balanced Fund 0.50
41.393
IEEE Balanced Fund 0.65
11.459
Vista Small Cap Equity Fund 0.65
80.898
Vista Southeast Asian Fund 1.00
4.724
Vista Japan Fund 1.00
3.620
Vista European Fund 1.00
4.518
Total
Assets
Mutual Fund Variable Annuity Trust Fee (In
Millions)
as of
12/31/95
International Equity Portfolio $ 2.375
0.80%
Capital Growth Portfolio 0.60 4.273
Growth and Income Portfolio 0.60 3.680
Asset Allocation Portfolio 0.55 2.566
U.S. Treasury Income Portfolio 0.50 2.320
Money Market Portfolio 0.25 2.292
The Adviser is currently a wholly-owned subsidiary of The Chase Manhattan
Corporation, a registered bank holding company, and is a commercial bank
offering a wide range of banking and investment services to customers
throughout the U.S. and around the world. Effective upon consummation of the
Holding Company Merger, the Adviser will be a wholly owned subsidiary of New
Chase. Upon consummation of the Bank Merger, the Adviser will continue to be
a wholly owned subsidiary of New Chase.
The principal executive officers and Directors of the Adviser are as follows:
Thomas G. Labreque, Chairman of the Board, Chief Executive Officer and
Director.
Richard J. Boyle, Vice Chairman of the Board and Director.
Donald L. Boudreau, Vice Chairman of the Board and Director.
E. Michel Kruse, Vice Chairman of the Board and Director.
Susan V. Berresford, Director. Ms. Berresford is also an Executive Vice
President of The Ford Foundation.
M. Anthony Burns, Director. Mr. Burns is also Chairman of the Board,
President and Chief Executive Officer of Ryder System, Inc.
James L. Ferguson, Director. Mr. Ferguson is also a retired Chairman and
Chief Executive Officer of General Foods Corporation.
H. Laurance Fuller, Director. Mr. Fuller is also President and Chief
Executive Officer of the United Negro College Fund, Inc.
David T. Kearns, Director. Mr. Kearns is also a retired Chairman and Chief
Executive Officer of The Xerox Corporation.
Delano E. Lewis, Director. Mr. Lewis is also the President and Chief
Executive Officer of National Public Radio.
Paul W. MacAvoy, Director. Mr. MacAvoy is also the Williams Brothers
Professor of Management Studies at the Yale School of Management.
John H. McArthur, Director. Mr. McArthur is also a Professor of the Harvard
Graduate School of Business Administration.
David T. McLaughlin, Director. Mr. McLaughlin is also Chairman of the Board
and Chief Executive Officer of The Aspen Institute.
Edmund T. Pratt, Jr., Director. Mr. Pratt is also Chairman Emeritus of Pfizer
Inc.
Henry B. Schnacht, Director. Mr. Schnacht is also a Member of the Board of
Trustees of Cummins Engine Company, Inc.
Donald H. Trautlein, Director. Mr. Trautlein is also a retired Chairman and
Chief Executive Officer of Bethlehem Steel Corporation.
The business address of the above persons is One Chase Manhattan Plaza, New
York, New York 10081.
CURRENT AND INTERIM ADVISORY AGREEMENTS
The Current and Interim Advisory Agreements for each Master Portfolio are
identical, except for their effective and termination dates. The Current and
Interim Advisory Agreements provide for the Adviser to render investment,
supervisory and certain corporate administrative services subject to the
control of the Board of Trustees. The Current and Interim Advisory Agreements
state that the Adviser shall, at its expense, provide to the particular Master
Portfolio all office space and facilities, equipment and clerical personnel
necessary to carry out its duties under each Advisory Agreement.
Under each of the Current and Interim Advisory Agreements, the Adviser pays
all compensation of those officers and employees of the Master Portfolios and
of those Trustees who are affiliated with the Adviser. Each Master Portfolio
bears the cost of the preparation and setting in type of its prospectuses and
reports to shareholders and the costs of printing and distributing those
copies of such prospectuses and reports as are sent to shareholders. Under
the Current and Interim Advisory Agreements all other expenses of the Master
Portfolios not expressly assumed by the Adviser are paid by the Master
Portfolios. Each Advisory Agreement lists examples of such expenses; the
major categories of such expenses relate to interest, taxes, legal and audit
expenses, custodian and transfer agent or shareholder servicing agency
expenses, stock issuance and redemption costs, certain printing costs,
registration costs of each Master Portfolio and its shares under federal and
state securities laws, and non-recurring expenses, including litigation.
For the services it provides under the terms of the Current and Interim
Advisory Agreement, each Master Portfolio pays the Adviser a monthly fee equal
to a specified percentage per annum of its average daily net assets computed
at the close of each business day. See "Fees and Fee Waivers" below which
sets forth the applicable percentage for each Master Portfolio. The Adviser
may voluntarily agree to waive a portion of the fees payable to it.
The Current Advisory Agreements are currently in effect until August 19, 1996
and continue from year to year thereafter, provided that each Agreement is
specifically approved in a manner consistent with the 1940 Act. However, the
Current Advisory Agreements may be deemed to terminate upon consummation of
the Holding Company Merger. The 1940 Act requires approval at least annually
by each Master Portfolio's Board of Trustees, including the vote of a majority
of the Trustees who are not "interested persons" (as defined in the 1940 Act)
of any party to the Agreement cast in person at a meeting called for the
purpose of voting on approval, or by the vote of the holders of a "majority"
of the outstanding voting securities (as defined in the 1940 Act) of the
Master Portfolio. The Interim Agreement will terminate on May 30, 1996 with
respect to a Master Portfolio, unless its shareholders approve the Interim
Agreement prior to such scheduled termination date (see "Additional
Information").
A Master Portfolio may terminate the Current and Interim Advisory Agreements
without penalty on not more than 60 days' nor less than 30 days' written
notice when authorized by either a vote of the shareholders of the Master
Portfolio or by a vote of a majority of the Master Portfolio's Board of
Trustees, including the vote of a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of any party to the
Agreement. The Adviser may terminate the Current and Interim Advisory
Agreements on not more than 60 days' nor less than 30 days' written notice.
An Advisory Agreement will automatically terminate in the event of its
assignment (as defined in the 1940 Act).
In addition, the Current and Interim Advisory Agreements provide that, in the
event the operating expenses of a Master Portfolio, including all investment
advisory and administration fees, but excluding brokerage commissions and
fees, distribution fees, taxes, interest and extraordinary expenses such as
litigation expenses, for any fiscal year exceed the most restrictive expense
limitation applicable to the Master Portfolio imposed by the securities laws
or regulations thereunder of any state in which the shares of the Master
Portfolio are qualified for a sale, as such limitations may be raised or
lowered from time to time, the Adviser shall reduce its advisory fee described
above to the extent of its share of such excess expenses. The amount of any
such reduction to be borne by the Adviser will be deducted from the monthly
fee otherwise payable to the Adviser during such fiscal year; and if such
amounts should exceed the monthly fee, the Adviser will pay to the Master
Portfolio its share of such excess expenses no later than the last day of the
first month of the next succeeding fiscal year.
CERTAIN RELATIONSHIPS AND ACTIVITIES. The Adviser and its affiliates may have
deposit, loan and other commercial banking relationships with the issuers of
securities purchased on behalf of any of the Master Portfolios, including
outstanding loans to such issuers which may be repaid in whole or in part with
the proceeds of securities so purchased. The Adviser and its affiliates deal,
trade and invest for their own accounts in U.S. Government obligations and
municipal obligations and are among the leading dealers of various types of
U.S. Government obligations and municipal obligations. The Adviser and its
affiliates may sell U.S. Government obligations and municipal obligations to
and purchase them from other investment companies distributed by Vista Broker
Dealer Services. The Adviser will not invest any Master Portfolio assets in
any U.S. Government obligations or municipal obligations purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which the Adviser
or an affiliate is a non-principal member. This restriction may limit the
amount or type of U.S. Government obligations or municipal obligations
available to be purchased on behalf of the Master Portfolios. The Adviser has
informed each Master Portfolio that in making its investment decisions it does
not obtain or use material inside information in the possession of any other
division or department of the Adviser or in the possession of any affiliate of
the Adviser.
Both the Current and Interim Advisory Agreements provide that, in the absence
of willful misfeasance, bad faith, gross negligence or reckless disregard for
its obligations thereunder, the Adviser shall not be liable for any act or
omission in the course of or in connection with the rendering of its services
thereunder.
BOARD CONSIDERATION
In considering whether to approve the Interim Advisory Agreement and to submit
it to the shareholders for their approval, the Board of Trustees of each
Master Portfolio considered the following factors: (1) the representation
that there would be no diminution in the scope and quality of advisory and
other services provided by the Adviser under the Interim Advisory Agreement,
and (2) the identical nature of the terms and conditions, including
compensation payable, contained in the Interim Advisory Agreement as compared
to the Current Advisory Agreement. Additionally, each Board considered the
benefits that would be obtained by the Master Portfolio in maintaining
continuity in the advisory services provided to it, and determined that
continuity was advantageous to the Master Portfolio as it would serve to
minimize uncertainty and confusion, provide for the continued utilization of
the demonstrated skills and capability of the staff of the Adviser and its
familiarity with the operations of the Master Portfolio, and avoid the
possibility of disruptive effects on the Master Portfolio that might otherwise
result from a change in the management and operations of the Master Portfolio.
REQUIRED VOTE AND BOARD OF DIRECTOR'S RECOMMENDATION
Approval of its Interim Advisory Agreement will require the affirmative vote
of a "majority of the outstanding voting securities" of the relevant Master
Portfolio which for this purpose means the affirmative vote of the lesser of
(1) more than 50% of the outstanding shares of the Master Portfolio or (2) 67%
or more of the shares of such Master Portfolio present at the meeting if more
than 50% of the outstanding shares of such Master Portfolio is represented at
the meeting in person or by proxy (a "Majority Vote"). If the shareholders of
a Master Portfolio do not approve the Interim Advisory Agreement, The Chase
Manhattan Corporation and Chemical Banking Corporation nevertheless intend to
proceed with the Holding Company Merger and, in such case, the affected
Current Advisory Agreement will terminate automatically. In that event, the
Board of the Master Portfolio will take such further action as it may deem to
be in the best interests of the Master Portfolio's shareholders.
THE BOARD OF TRUSTEES OF BLANCHARD FUNDS RECOMMENDS THAT SHAREHOLDERS OF EACH
FUND VOTE "IN FAVOR OF" PROPOSAL 1.
ADDITIONAL INFORMATION
Chase also serves as each Master Portfolio's administrator pursuant to
separate Administration Agreements. Under each Administration Agreement,
Chase generally assists in all aspects of a Master Portfolio's operations,
other than providing investment advice, subject to the overall authority of
the Board of Trustees of the Master Portfolio in accordance with applicable
state law. Under the terms of the relevant Administration Agreement, Chase
receives a monthly fee at the annual rate of .10% of the value of each Master
Portfolio's average daily net assets. For each Master Portfolio, the
administration fee payable, the amount by which such fee was reduced pursuant
to a waiver by Chase, and the net administration fees paid by the Master
Portfolio under the Administration Agreement for the indicated period are set
forth below under "Fees and Fee Waivers."
Each Master Portfolio engaged Vista Broker-Dealer Services, Inc. (the "Sub-
Administrator"), a wholly owned subsidiary of BISYS Fund Services, Inc.,
located at 125 West 55th Street, New York, New York 10019, to assist it in
providing certain administrative services for each Master Portfolio pursuant
to a Sub-Administration Agreement between each Master Portfolio and the Sub-
Administrator. The Sub-Administrator receives an annual fee, payable monthly,
of .05% of the average daily net assets of each Master Portfolio.
On November 6, 1995, each Master Portfolio, other investment companies advised
by Chase, and Chase filed an application (the "Application") with the
Securities and Exchange Commission (the "Commission") requesting an order of
the Commission permitting implementation, without prior shareholder approval,
of the Interim Advisory Agreements during the interim period commencing on the
date of the closing on the Holding Company Merger and ending at the earlier of
such time as sufficient votes are cast by the applicable Master Portfolio's
shareholders to approve the Interim Agreement or May 30, 1996 (the "Interim
Period").
As a condition to the requested exemptive relief, the Master Portfolio has
undertaken in the Application that the advisory compensation payable by any
Master Portfolio during the Interim Period will be maintained in an interest-
bearing escrow account and, with respect to each Master Portfolio, amounts in
the account will be paid to Chase only upon approval by the shareholders of
the Master Portfolio of the applicable Interim Advisory Agreement and the
compensation payable thereunder. In addition, the Application contains
representations that Chase (and its successor, if applicable), will take all
appropriate steps to ensure that the scope and quality of its advisory and
other services provided to the Master Portfolios during the Interim Period
will be at least equivalent to the scope and quality of the services
previously provided; and that, in the event of any material change in the
personnel providing services pursuant to the Interim Advisory Agreements
during the Interim Period, the Board of each Master Portfolio will be apprised
and consulted to assure that they are satisfied that the services provided
will not be diminished in scope or quality.
The Board of Trustees of each Master Portfolio concluded that payment of the
investment advisory fee under the Interim Advisory Agreement, during the
Interim Period would be appropriate and fair considering that (1) the fee
would be paid at the same rate as was previously in effect under the Current
Advisory Agreement and services would be provided in the same manner, (2)
because of the relatively short time frame necessary to complete the Holding
Company Merger, there was a possibility that some or all of the Master
Portfolios would not obtain the requisite number of votes to approve the
Interim Advisory Agreement prior to the Holding Company Merger, and (3) the
non-payment of advisory fees during the Interim Period would be an unduly
harsh result in view of the services provided to each Master Portfolio under
the Interim Advisory Agreements.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
Approval of a Master Portfolio's Interim Advisory Agreement will require the
affirmative vote of a "majority of the outstanding voting securities" of such
Master Portfolio, which for this purpose means the affirmative vote of the
lesser of (1) more than 50% of the outstanding shares of such Master Portfolio
or (2) 67% or more of the shares of such Master Portfolio present at the
meeting if more than 50% of the outstanding shares of such Master Portfolio
are represented at the meeting in person or by proxy (a "Majority Vote"). If
the shareholders of a Master Portfolio do not approve the Interim Advisory
Agreement, the consummation of the Holding Company Merger will not be
affected, the Current Advisory Agreement for that Master Portfolio will have
terminated or will terminate upon the consummation of the Holding Company
Merger and the Interim Advisory Agreement for that Master Portfolio will
terminate on May 30, 1996. In that event, if the shareholders shall not have
approved new advisory arrangements in accordance with Proposal 2, the relevant
Board will take such further action as it may deem to be in the best interests
of the Master Portfolio's shareholders.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE FOREGOING PROPOSAL
PROPOSAL 2
APPROVAL OR DISAPPROVAL OF A NEW
INVESTMENT ADVISORY AGREEMENT BETWEEN
EACH MASTER PORTFOLIO AND THE CHASE MANHATTAN BANK, N.A.
(AND THE SUCCESSOR ENTITY THERETO), AND A SUB-ADVISORY AGREEMENT BETWEEN THE
CHASE MANHATTAN BANK, N.A. (AND THE SUCCESSOR ENTITY THERETO) AND CHASE ASSET
MANAGEMENT, INC.
INTRODUCTION
The Chase Manhattan Bank, N.A., the current investment adviser of the Master
Portfolios (as used herein, the term "Chase" refers to The Chase Manhattan
Bank, N.A. and its successor in the Bank Merger, and the term "Adviser" means
Chase (including its successor in the Bank Merger) in its capacity as Adviser
to the Master Portfolios) recommended to the Board of each Master Portfolio
that each Master Portfolio enter into a new Investment Advisory Agreement with
the Adviser (the "New Advisory Agreement") effective as soon as practicable
after the approval of shareholders. The Adviser also recommended to the Board
of each Master Portfolio that the Adviser be permitted to utilize the services
of its wholly owned subsidiary, Chase Asset Management, Inc. ("CAM Inc."), to
render advisory services to each Master Portfolio. CAM Inc. is a registered
investment adviser which was recently incorporated for the purpose of
rationalizing the delivery of investment advisory services by Chase to its
institutional clients. CAM Inc. will be retained pursuant to a proposed Sub-
Advisory Agreement (the "CAM Inc. Agreement"). The Board of each Master
Portfolio has approved, and recommends that the shareholders of the Master
Portfolio approve, the New Advisory Agreement and CAM Inc. Agreement
(collectively, the "Agreements"). In addition, the Board of Trustees of each
Master Portfolio approved the continuation of the Agreements after the Bank
Merger, on the same terms and conditions as in effect immediately prior to the
merger (except for effective and termination dates) in the event the
Agreements are deemed to terminate as a result of the Bank Merger. Approval
of Proposal 2 will be deemed approval of such continuation of the Agreements
after the Bank Merger. If approved, the Agreement will become effective as
soon as practicable after the approval of shareholders.
No increase is proposed to the contractual fee rates under the New Advisory
Agreement and the Adviser, and not the Master Portfolios, will compensate CAM
Inc. for its services as Sub-Adviser. THEREFORE, THE MASTER PORTFOLIOS WILL
NOT BEAR ANY INCREASE IN THE CONTRACTUAL ADVISORY FEE RATES RESULTING FROM THE
NEW ADVISORY AGREEMENTS OR THE CAM INC. AGREEMENT.
While the New Advisory Agreement is described below, the discussion is
qualified by the provisions of the complete agreement, a copy of which is
attached as Appendix B. If the shareholders of a Master Portfolio do not
approve this Proposal, then Chase will continue to act, commencing on the
Holding Company Merger, as the adviser to such Master Portfolio under the
terms of the Interim Advisory Agreement, assuming Proposal 1 is approved. If
the Interim Advisory Agreement is not approved by shareholders, the relevant
Board will consider the appropriate course of action for the Master Portfolio.
The New Advisory Agreement should be read in conjunction with the following.
Background. In connection with the Mergers, New Chase intends to rationalize
its corporate wide investment management operations in order to more fully
take advantage of portfolio management skills that will exist within the
various corporate entities controlled by New Chase. As part of this
structuring, New Chase would like to consolidate its mutual fund supervisory
functions within one entity (Chase), and its portfolio management
responsibilities within another entity (CAM Inc.). The Adviser also seeks to
retain the ability to utilize portfolio managers employed by the various
investment management entities affiliated with the Adviser through common
ownership by New Chase.
Thus, the New Advisory Agreement would provide the Adviser with the ability to
utilize the specialized portfolio skills of employees of all its various
affiliates, thereby providing the Master Portfolios with greater opportunities
and flexibility in accessing investment expertise. For the foreseeable
future, the Adviser would employ certain members of the Adviser's senior
management.
SIMILARITIES BETWEEN THE CURRENT AND NEW ADVISORY AGREEMENTS:
The New Advisory Agreement is similar in many respects to the Current Advisory
Agreement and Interim Advisory Agreement. The New Advisory Agreement contains
the material terms of the Current Advisory Agreement, but reflects the
proposed change of the investment adviser from The Chase Manhattan Bank, N.A.
to its successor entity, and incorporates additional provisions designed to
clarify and supplement the rights and obligations of the parties.
MOST IMPORTANTLY, THE CONTRACTUAL RATE AT WHICH FEES ARE REQUIRED TO BE PAID
BY EACH FUND FOR INVESTMENT ADVISORY SERVICES, AS A PERCENTAGE OF AVERAGE
DAILY NET ASSETS, WILL REMAIN THE SAME. Under the provisions of both the
Current and the New Advisory Agreements, each Master Portfolio is required to
pay the Adviser a monthly fee equal to a stated percentage per annum of its
average daily net assets. These amounts are set forth below under "Fees and
Fee Waivers."
The following summarizes certain additional aspects of the Current and New
Advisory Agreements (collectively, the "Agreements") which are materially the
same in both Agreements:
In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the obligations or duties of the Adviser, the Adviser
shall not be liable to the Master Portfolios or to any shareholder for any
losses that may be sustained by the Master Portfolios in connection with its
performance of the Agreement.
The Adviser bears all expenses in connection with the performance of its
services under the Agreement. The Master Portfolios bear the expenses
incurred in their operations. Both agreements provide that the Adviser shall,
at its expense, provide the Master Portfolios with office space, furnishings
and equipment and personnel required by it to perform the services to be
provided by the Adviser and that the Master Portfolios shall be responsible
for all of their expenses and liabilities.
Under the Agreement, if the aggregate expenses incurred by a Master Portfolio
in any fiscal year is in excess of the lowest applicable expense limitation
imposed by state securities laws or regulations thereunder, the Adviser shall
reduce its investment advisory fee, but not below zero, to the extent of its
share of such excess expenses; provided, however, that certain provided
expenses are specifically excluded from such calculation. No such
reimbursement was required during either Master Portfolio's most recent fiscal
period.
A Master Portfolio may terminate the Agreement as to that Master Portfolio
without penalty on not more than 60 days' written notice when authorized by
either a vote of shareholders holding a "majority of the outstanding voting
securities" (within the meaning of the 1940 Act) of the Master Portfolio or by
a vote of a majority of the Master Portfolio's Board of Trustees. The Adviser
may terminate the Agreement on 60 days' written notice to the Master
Portfolio. The Agreement terminates in the event of its assignment (as
defined in the 1940 Act).
DIFFERENCES BETWEEN THE CURRENT AND NEW ADVISORY AGREEMENTS:
The following highlights summarize some of the additional provisions which are
included in the New Advisory Agreement:
After the Bank Merger, Chase Manhattan Bank, a New York State charted bank,
the successor entity to The Chase Manhattan Bank, N.A., will be the adviser to
the Master Portfolios rather than The Chase Manhattan Bank, N.A., and will
continuously supervise the investment and reinvestment of cash, securities and
other property comprising the assets of the Master Portfolios. The Chase
Manhattan Bank, N.A. will be the Adviser to the Master Portfolios until the
Bank Merger.
Details Regarding the Adviser's Duties. The New Advisory Agreement clearly
specifies the duties of the Adviser. For example, the Adviser will be
required to obtain and evaluate pertinent data and other significant events
and developments which affect the economy, the Master Portfolios' investment
programs, the issuers of securities and the industries in which they engage,
and furnish a continuous investment program for each Master Portfolio. The
Adviser will be obligated to furnish such reports, evaluations, information or
analyses to a Master Portfolio as its Board may request, make recommendations
to its Board with respect to trust policies, and carry out such policies as
are adopted by its Board.
Use of Affiliated Entities. The New Advisory Agreement clarifies that the
Adviser may render services through its own employees or the employees of one
or more affiliated companies that are qualified to act as an investment
adviser to the Master Portfolio under applicable laws and are under the common
control of New Chase as long as all such persons are functioning as part of an
organized group of persons, and such organized group of persons is managed at
all times by authorized officers of the Adviser. The Adviser will be as fully
responsible to the Master Portfolios for the acts and omissions of such
persons as it is for its own acts and omissions.
Use of a Sub-Adviser. The New Advisory Agreement clarifies that the Adviser
may from time to time employ or associate with such other entities or persons
(a "Sub-Adviser") as it believes appropriate to assist in the performance of
its obligations under of the New Advisory Agreement with respect to a
particular Master Portfolio. However, the Master Portfolios will not pay any
additional compensation for any Sub-Adviser, and the Adviser will be as fully
responsible to the Master Portfolios for the acts and omissions of the Sub-
Adviser as it is for its own acts and omissions, and the Adviser must review,
monitor and report to the Board of each Master Portfolio regarding the
performance and investment procedures of any Sub-Adviser. The proposed Sub-
Advisory agreement is discussed below under "Consideration and Proposal of the
CAM Inc. Agreement."
Execution of Portfolio Transactions. The New Advisory Agreement sets forth
specific terms as to brokerage transactions and the Adviser's use of broker-
dealers. For example, the Adviser will be obligated to use its best efforts
to seek to execute portfolio transactions at prices which, under the
circumstances, result in total costs or proceeds being the most favorable to
the Master Portfolios. In assessing the best overall terms available for any
transaction, the Adviser will consider all factors it deems relevant,
including the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer, research services provided and the reasonableness of the commission,
if any, both for the specific transaction and on a continuing basis.
"Soft Dollars." A provision of the New Advisory Agreement explicitly allows
the Adviser to select brokers or dealers who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Adviser, the Master Portfolios and/or
the other accounts over which the Adviser exercises investment discretion, and
provides that, notwithstanding the above, the Adviser may pay a broker or
dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for a Master Portfolio which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction if the Adviser determines in good faith that the
total commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the overall responsibilities of the Adviser
with respect to accounts over which it exercises investment discretion.
Aggregation of Orders. There is also a clarification of the authority of the
Adviser to aggregate the securities to be sold or purchased with those of
other series of funds or its other clients if, in the Adviser's reasonable
judgment, such aggregation will result in an overall benefit to a Master
Portfolio, taking into consideration the advantageous selling or purchase
price, brokerage commission and other expenses, and trading requirements.
Other Clarifications. The New Advisory Agreement contains certain additional
provisions which are intended to clarify the status, rights or obligations of
the parties. For example, the Adviser is deemed to be an independent
contractor.
CONSIDERATION AND PROPOSAL OF THE CAM INC. AGREEMENT
It is being proposed that the Adviser be permitted to utilize the services of
CAM Inc. as a sub-adviser under a proposed Investment Sub-Advisory Agreement
(the "CAM Inc. Agreement") in order to enable the Adviser to more efficiently
render advisory services to each of the Master Portfolios.
The proposed form of the CAM Inc. Agreement is attached as Appendix C and
should be read in conjunction with the following.
The Adviser's decision to utilize the services of CAM Inc. in a sub-advisory
capacity was based on various considerations, including the Adviser's desire
to consolidate its asset management responsibilities in one entity, that the
portfolio managers which currently manage the assets of the Master Portfolios
for the Adviser will also manage the Master Portfolios as employees of CAM
Inc., that CAM Inc. provides a wide range of investment management
capabilities, including the ability to discriminate among a wide range of
potential investments as part of an investment program for each of the Master
Portfolios, that risk control is integral to its methodology, and the
attractiveness of the fee structure and estimated transaction costs that would
be incurred.
Based upon the foregoing, the Adviser recommended to the Board of Trustees of
each Master Portfolio that, subject to approval by such Boards and such Master
Portfolio's shareholders of the New Advisory Agreement and the CAM Inc.
Agreement, the Adviser enter into the CAM Inc. Agreement with CAM Inc. In
considering whether to recommend that the CAM Inc. Agreement be approved by
shareholders, the Board of each Master Portfolio requested and evaluated
various information from the Adviser and CAM Inc. relevant to the Adviser's
decision. In addition, the Board of each Master Portfolio considered various
other factors which it deemed to be relevant, including, but not limited to,
the fact that the managers of the Master Portfolios will continue to manage
the assets of the Master Portfolios as employees of CAM Inc., capabilities to
be provided by CAM Inc., the stability of its investment staff, the trading
systems to be utilized and the potential to minimize transaction costs, the
ability to customize the portfolio for the Master Portfolios, and the
Adviser's access to the various investment and research resources of CAM Inc.
DESCRIPTION OF THE PROPOSED CAM INC. AGREEMENT
The proposed arrangement between the Adviser and CAM Inc. under the CAM Inc.
Agreement would enable the Adviser to manage the investment activities of the
Master Portfolios covered in the CAM Inc. Agreement most effectively by
delegating to CAM Inc. portfolio management duties relating to transactions in
the securities held by such Master Portfolios. With respect to the day to day
management of the Master Portfolios under the CAM Inc. Agreement, CAM Inc.
would make decisions concerning, and place all orders for, purchases and sales
of securities and help maintain the records relating to such purchases and
sales. CAM Inc. may, in its discretion, provide such services through its own
employees or the employees of one or more affiliated companies that are
qualified to act as an investment adviser to the Master Portfolios under
applicable laws and are under the common control of New Chase; provided that
(i) all persons, when providing services under the CAM Inc. Agreement, are
functioning as part of an organized group of persons, and (ii) such organized
group of persons is managed at all times by authorized officers of CAM Inc.
The Adviser and CAM Inc. would bear all expenses in connection with the
performance of their respective services under the Agreement.
As investment adviser, the Adviser would oversee the management of the Master
Portfolios under the CAM Inc. Agreement, and, subject to the general
supervision of the Board of Trustees of each Master Portfolio, would make
recommendations and provide guidelines to CAM Inc. based on general economic
trends and macroeconomic factors. Among the recommendations which may be
provided by the Adviser to CAM Inc. would be guidelines and benchmarks against
which the Master Portfolios would be managed. From the fee paid by each
Master Portfolio under the New Advisory Agreement to the Adviser, the Adviser
will bear responsibility for payment of sub-advisory fees to CAM Inc.
Therefore, the Master Portfolios would not bear any increase in advisory fee
rates resulting from the New Advisory Agreement and the CAM Inc. Agreement.
The Board of Trustees of each Master Portfolio, including a majority of the
Trustees who are not interested persons of each Master Portfolio, the Adviser
or CAM Inc., unanimously approved the CAM Inc. Agreement at a meeting held on
December 14, 1995. If approved by shareholders, unless sooner terminated, the
CAM Inc. Agreement will remain in effect for two years and will thereafter
continue for successive one-year periods, provided that such continuation is
specifically approved at least annually by the Board of Trustees of each
Master Portfolio, or by the vote of a "majority of the outstanding voting
securities" of each Master Portfolio under the CAM Inc. Agreement as defined
under the 1940 Act and, in either case, by a majority of the Disinterested
Trustees of each Master Portfolio who are not interested persons of the
Adviser or CAM Inc., by votes cast in person at a meeting called for such
purpose. The CAM Inc. Agreement is terminable at any time, without penalty,
by vote of the Board of Trustees of a Master Portfolio, by the Adviser, by the
vote of "a majority of the outstanding voting securities" of a Master
Portfolio under the CAM Inc. Agreement, or by CAM Inc., upon 60 days' written
notice. The CAM Inc. Agreement will terminate automatically in the event of
its assignment, as defined under the 1940 Act.
In the event that both the New Advisory Agreement and the CAM Inc. Agreement
are not approved by shareholders of any Master Portfolio, neither the New
Advisory Agreement nor the CAM Inc. Agreement will be implemented for such
Master Portfolio, and the Interim Advisory Agreement between such Master
Portfolio and the Adviser will remain in effect. If the Interim Agreement is
not approved by shareholders, the Board of such Master Portfolio will consider
the appropriate course of action.
INFORMATION ABOUT CHASE ASSET MANAGEMENT, INC.
Chase Asset Management, Inc. was organized as a Delaware corporation on
September 1, 1995, and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended. CAM Inc. is a wholly owned
subsidiary of The Chase Manhattan Bank, N.A., which is a wholly owned
subsidiary of The Chase Manhattan Corporation. After the completion of the
mergers, CAM Inc. will continue to be a wholly owned subsidiary of the Adviser
which will be a wholly owned subsidiary of New Chase. CAM Inc. is registered
with the Commission as an investment adviser and was formed for the purpose of
providing discretionary investment advisory services to institutional clients
and to consolidate Chase's investment management function. Information about
the Adviser and its affiliates is set forth above.
The principal executive officers and directors of CAM Inc. are as follows:
James W. Zeigon, Director and Chairman of the Board. Mr. Zeigon is also an
Executive Vice President of The Chase Manhattan Bank, N.A.
Mark R. Richardson, Director, President and Chief Investment Officer. Mr.
Richardson is also a Managing Director of The Chase Manhattan Bank, N.A.
Stephen E. Prostano, Director, Executive Vice President and Chief Operating
Officer. Mr. Prostano is also a Managing Director of The Chase Manhattan
Bank, N.A.
The business address of each of the foregoing individuals is 1211 Avenue of
the Americas, New York, New York 10036.
BOARD CONSIDERATIONS
In considering whether to recommend that the New Advisory Agreement and CAM
Inc. Agreement be approved by shareholders, the Board of each Master Portfolio
considered the nature and quality of services to be provided by the Adviser
and CAM Inc. and comparative data as to advisory fees and expenses, and the
Board of each Master Portfolio requested and evaluated such other information
from Chase and Chemical which the Board deemed to be relevant, including, but
not limited to, the Adviser's ability to select and utilize portfolio managers
from its affiliates; that the rate at which advisory fees will initially be
paid to the Adviser would be identical to the rate at which fees are now paid;
and that the New Advisory Agreement would include certain provisions designed
to modernize the terms of the agreement and reflect regulatory developments,
such as those concerning "soft dollars" and aggregation of orders under
regulations and releases recently issued by the Commission.
The Board of each Master Portfolio, including a majority of the Trustees who
are not interested persons of the Master Portfolio or the Adviser
("Disinterested Trustees"), unanimously approved the New Advisory Agreement
and CAM Inc. Agreement at a meeting held on December 14, 1995.
FEES AND FEE WAIVERS
Under the Current Advisory Agreement each Master Portfolio pays the Adviser
(and under the Interim and New Advisory Agreements, each Master Portfolio
would pay the Adviser) a fee, computed daily and paid monthly, at the annual
rate of 0.40% as a percentage of average daily net assets. Each Current
Advisory Agreement, dated August 19, 1987, was last approved by shareholders
on .
-------------
Under the Current Advisory Agreement, the Interim Advisory Agreement and New
Advisory Agreement, the Adviser may periodically reduce all or a portion of
its advisory fee with respect to a Master Portfolio. In the fiscal period
ended October 31, 1995, the Master Portfolios paid to the Adviser aggregate
investment advisory fees as follows:
Name of Master Portfolio Fees Paid
Growth & Income Portfolio $6,815,197
Capital Growth Portfolio 3,563,194
Chase also serves as the Administrator to each Master Portfolio. For the
fiscal period ended October 31, 1995, Chase received fees, and waived its fees
and/or reimbursed expenses to each Master Portfolio, as follows:
Fee Waiver
and/or
Name of Master Portfolio Fees Paid Expense
Reimbursem
ent*
Growth & Income Portfolio $830,077 $252,586
Capital Growth Portfolio 435,668 116,282
* This voluntary waiver and/or limitation is currently in effect but may be
terminated.
ADDITIONAL INFORMATION
Additional information concerning the Adviser, the Administrator and the Sub-
Administrator is set forth under "Additional Information" under Proposal 1.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
Approval of the Proposed Advisory Agreement and CAM Inc. Agreement will
require the affirmative vote of a "majority of the outstanding voting
securities" of the relevant Master Portfolio, which for this purpose means the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares
of such Master Portfolio or (2) 67% or more of the shares of such Master
Portfolio present at the meeting if more than 50% of the outstanding shares of
such Master Portfolio are represented at the meeting in person or by proxy (a
"Majority Vote"). If the shareholders of a Master Portfolio do not approve
the Proposed Advisory Agreement and CAM Inc. Agreement, the Adviser will
continue to manage the Master Portfolio's investments under the Interim
Advisory Agreement, assuming Proposal 1 is approved. If the Interim Agreement
is not approved by shareholders, the Board of the relevant Master Portfolio
will take such further action as it may deem to be in the best interests of
such Master Portfolio's shareholders.
THE BOARD OF TRUSTEES OF BLANCHARD FUNDS RECOMMENDS THAT SHAREHOLDERS OF EACH
FUND "VOTE IN FAVOR" OF PROPOSAL 2.
PROPOSALS 3A-J
APPROVAL OR DISAPPROVAL OF CERTAIN CHANGES TO
THE FUNDAMENTAL INVESTMENT RESTRICTIONS
OF THE MASTER PORTFOLIOS AND THE FUNDS
INTRODUCTION TO PROPOSALS 3A-J
Proposals 3a-j concern proposed changes to certain current fundamental
portfolio investment restrictions ("Restrictions") of the Master Portfolios
and the Funds. Each of these proposals relate to Restrictions of the Master
Portfolios (and Restrictions of the Funds which are substantially similar to
the Restrictions of the Master Portfolios) which are presently classified as
"fundamental," which means that they can only be changed by a vote of the
majority of each Master Portfolio's shareholders. A favorable vote on each of
these Proposals constitutes a vote in favor of making a change to the
applicable Restriction both of the Master Portfolios and of the Funds.
The Adviser recommended to the Trustees of each Master Portfolio that it be
authorized to analyze the Master Portfolios' current Restrictions and, where
practical and appropriate for the Master Portfolio's investment objective,
recommend to the Trustees of each Master Portfolios, subject to shareholder
approval, that certain changes be adopted. Based on the Adviser's review and
recommendations, the Trustees of each Master Portfolio believe that such
changes should be implemented for each Master Portfolio. These changes fall
within the following categories:
Modification. The proposal involves a modification of certain Restrictions
for reasons outlined below.
Elimination. The proposal involves an elimination of certain Restrictions,
for reasons outlined below.
Reclassification. The proposal involves a reclassification of certain
Restrictions as non-fundamental restrictions, which could thereafter be
changed with the approval of the Board of Trustees of each Master Portfolio,
without a shareholder vote.
Based on the recommendations of the Adviser, the Trustees of each Master
Portfolio have approved the proposed changes and believe that they are in the
best interests of each Master Portfolio and its shareholders for the following
reasons:
Standardization. Some of the Master Portfolios' Restrictions differ in form
and substance from similar restrictions of similar mutual funds currently
advised by the Adviser. Increased standardized restrictions among all of the
Adviser's mutual funds will help promote operational efficiencies and
facilitate the monitoring of portfolio compliance. In all cases, the adoption
of the new or revised restriction is not expected to have any impact on the
investment techniques employed by the Master Portfolios at this time.
Modernization. The Master Portfolios' Restrictions are derived from
restrictions which have been in effect, without changes, for many years. In
connection with the Mergers, the Adviser has recommended to all advised funds
(including the Master Portfolios) that their investment restrictions be
evaluated and amended as necessary. The Trustees of each Master Portfolio,
acting on the Adviser's recommendation, recommend that each Master Portfolio
modernize its Restrictions, where appropriate, to conform to current
regulation and authorize the use of currently available financial instruments
and investment techniques.
Clarification. Some of the Master Portfolios' Restrictions contain
ambiguities that, if interpreted in a narrow way, might prevent the Master
Portfolio from following the original intent of the Restriction. Accordingly,
the Trustees of each Master Portfolio, acting on the Adviser's recommendation,
recommend that each Master Portfolio change the Restriction, where
appropriate, to eliminate any ambiguities. Some of these proposals include
the proposed division of a Restriction which currently covers multiple topics
into two or more distinct restrictions.
Flexibility. Several of the Master Portfolios' Restrictions are proposed to
be changed so as to allow the Master Portfolios to respond to recent and
future regulatory developments and changes in the financial markets. In
addition, restrictions prohibiting certain transactions have been or may be
changed or eliminated by a federal or state securities regulator. In order to
take advantage of such changes, the Master Portfolios would need shareholder
approval, which is time consuming and costly to the Master Portfolios and
their shareholders. The Adviser believes that in most cases, the proposed
changes are not expected to have any immediate effect on a Master Portfolio's
investment strategy, since the Master Portfolios may not have a current
intention of changing their investment strategy. However, in order to give
the Master Portfolios more flexibility in responding to regulatory and market
developments, the Trustees of each Master Portfolio, acting on the Adviser's
recommendations, recommend changing, reclassifying or eliminating some of the
Restrictions described below so that they can be changed by the Trustees of
each Master Portfolio without a shareholder vote. In the future, when changes
to non-fundamental restrictions of the Master Portfolios are adopted, the
Fund's prospectus and statement of additional information will be amended to
reflect the changes and shareholders will be notified thereof.
The proposals regarding the Restrictions are presented in the Proposals 3a-j,
below, categorized by topic (e.g., borrowing, concentration, etc.). In each
case, the Master Portfolios' current Restriction is set forth in the left hand
column under "Current" and where it is proposed that the Restriction be
restated, eliminated, reclassified, or otherwise changed is set forth in the
right hand column under "Proposed." In each case, the reason for, and an
explanation of, the proposed change, is set forth below the comparison.
PROPOSAL 3A
AMENDMENT TO EACH MASTER PORTFOLIO'S
(AND EACH FUND'S) FUNDAMENTAL
INVESTMENT RESTRICTION CONCERNING BORROWING
CURRENT MASTER PORTFOLIO PROPOSED MASTER PORTFOLIO
RESTRICTION: AND FUND RESTRICTION:
The Portfolio may not FUNDAMENTAL RESTRICTION
borrow money or pledge, The Portfolio may not
mortgage or hypothecate borrow money, except that
its assets, except that, the Portfolio may borrow
as a temporary measure for money for temporary or
extraordinary or emergency emergency purposes, or by
purposes, it may borrow in engaging in reverse
an amount not to exceed repurchase transactions,
1/3 of the current value in an amount not exceeding
of its net assets, 33 1/3% of the value of
including the amount its total assets at the
borrowed, and may pledge, time when the loan is made
mortgage or hypothecate and may pledge, mortgage
not more than 1/3 of such or hypothecate no more
assets to secure such than 1/3 of its net assets
borrowings (it is intended to secure such borrowings.
that money would be Any borrowings
borrowed by the Portfolio representing more than 5%
only from banks and only of the Portfolio's total
to accommodate requests assets must be repaid
for the repurchase of before the Portfolio may
shares of the Portfolio make additional
while effecting an orderly investments.
liquidation of portfolio
securities), provided that
collateral arrangements
with respect to the
Portfolio's permissible
futures and options
transactions, including
initial and variation
margin, are not considered
to be a pledge of assets
for purposes of this
restriction; the Portfolio
will not purchase
investment securities if
its outstanding borrowing,
including reverse
repurchase agreements,
exceeds 5% of the value of
the Portfolio's total
assets.
EXPLANATION OF THE PROPOSED CHANGE: The proposed amendment clarifies and
modernizes the restriction on borrowing. The proposed restriction will treat
borrowings for temporary or emergency purposes separately from other
borrowings. Borrowing may be necessary to address excessive or unanticipated
liquidations of Master Portfolios shares that exceed available cash. The
proposed amendment also would allow the Master Portfolios to enter into
reverse repurchase agreements, subject to a limitation of 33 1/3% of each
Master Portfolio's assets.
Reverse repurchase agreements involve the sale of securities by the Master
Portfolios with an agreement that the Master Portfolios will repurchase such
securities at an agreed upon price and date. The Master Portfolios may employ
reverse repurchase agreements when necessary to meet unanticipated net
redemptions so as to avoid liquidating portfolio investments during
unfavorable market conditions. At the time it enters into a reverse
repurchase agreement, a Master Portfolio will place in a segregated custodial
account high-quality liquid debt securities having a dollar value equal to the
repurchase price.
PROPOSAL 3B
AMENDMENT TO EACH MASTER PORTFOLIO'S
(AND EACH FUND'S) FUNDAMENTAL
INVESTMENT RESTRICTION CONCERNING INVESTMENT
FOR THE PURPOSE OF EXERCISING CONTROL
CURRENT MASTER PORTFOLIO PROPOSED MASTER PORTFOLIO AND
RESTRICITON: FUND RESTRICTION:
The Portfolio may not NON-FUNDAMENTAL RESTRICTION
purchase securities of any The Portfolio may not, with
issuer if such purchase at respect to 50% of its assets,
the time thereof would cause hold more than 10% of the
more than 10% of the voting outstanding voting securities
securities of such issuer to of an issuer.
be held by the Portfolio.
EXPLANATION OF THE PROPOSED CHANGE: The proposed amendment would clarify, for
the Master Portfolios, that the restriction involving a 10% limitation on
investments in an issuer is a limitation based upon the outstanding voting
securities of the issuer as provided for in Subchapter M of the Internal
Revenue Code and would not be applicable outside the diversification
requirements which are applicable only to 50% of a Master Portfolio's assets.
This restatement of the restriction would clarify and help standardize the
restriction and provide additional flexibility for the investment of the
Master Portfolios' assets. Although the restrictions as restated would allow
the non-diversified Master Portfolios to hold a larger portion of each its
assets in the outstanding voting securities of one issuer, there is no current
intention for any of the Master Portfolios to do so. The Master Portfolios
would still be required to meet the additional diversification requirements of
the 1940 Act. In addition, the reclassification as nonfundamental and
restatement of the restriction would clarify and help standardize the
restriction.
PROPOSAL 3C
AMENDMENT TO EACH MASTER PORTFOLIO'S (AND EACH
FUND'S) FUNDAMENTAL INVESTMENT RESTRICTION
CONCERNING THE MAKING OF LOANS
CURRENT MASTER PORTFOLIO PROPOSED MASTER PORTFOLIO
RESTRICTION: AND FUND RESTRICTION:
The Portfolio is not FUNDAMENTAL RESTRICTION
permitted to make loans to The Portfolio may not
other persons, except make loans, except that
(i) through the lending of the Portfolio may: (i)
its portfolio securities purchase and hold debt
and provided that any such instruments (including
loans not exceed 30% of the without limitation,
Portfolio's total assets bonds, notes, debentures
(taken at market value), or other obligations and
(ii) through the use of certificates of deposit,
repurchase agreements or bankers' acceptances and
the purchase of short-term fixed time deposits) in
obligations and provided accordance with its
that not more than 10% of investment objectives and
the Portfolio's total policies; (ii) enter into
assets will be invested in repurchase agreements
repurchase agreements with respect to portfolio
maturing in more than seven securities; and (iii)
days, or (iii) by lend portfolio securities
purchasing, subject to the with a value not in
limitation in paragraph 5 excess of one-third of
above [referring to the the value of its total
current investment assets.
restriction under Proposal
3g below], a portion of an
issue of debt securities of
types commonly distributed
privately to financial
institutions, for which
purposes the purchase of
short-term commercial paper
or a portion of an issue of
debt securities which are
part of an issue to the
public shall not be
considered the making of a
loan.
EXPLANATION OF THE PROPOSED CHANGE: The proposed amendment is intended to
clarify the basic limitation on securities lending, and would also exclude
those transactions that current regulatory interpretations and policies allow.
The investment adviser will not make loans of a Master Portfolio's portfolio
securities (or enter into repurchase agreements) unless it receives collateral
that is at least 102% of the value of the loan, including accrued interest.
During the time portfolio securities are on loan, the borrower pays the Master
Portfolio any dividends or interest paid on such securities, and a Master
Portfolio may invest the cash collateral and earn additional income, or it may
receive an agreed-upon amount of interest income from the borrower who has
delivered equivalent collateral or a letter of credit. As with other
extensions of credit, there are risks of delay in recovery or even loss of
rights in the collateral should the borrower of any loaned securities fail
financially.
PROPOSAL 3D
RECLASSIFICATION OF EACH MASTER PORTFOLIO'S (AND EACH
FUND'S) FUNDAMENTAL INVESTMENT RESTRICTION
CONCERNING PURCHASES OF SECURITIES ON MARGIN
CURRENT MASTER PORTFOLIO PROPOSED MASTER PORTFOLIO AND
RESTRICTION: FUND RESTRICTION:
The Portfolio may not NON-FUNDAMENTAL RESTRICTION
purchase any security or The Portfolio may not make
evidence of interest therein short sales of securities,
on margin, except that such other than short sales
short-term credit may be "against the box," or
obtained as may be necessary purchase securities on margin
for the clearance of except for short-term credits
purchases and sales of necessary for clearance of
securities and except that, portfolio transactions,
with respect to the provided that this
Portfolio's permissible restriction will not be
options and futures applied to limit the use of
transactions, deposits of options, futures contracts
initial and variation margin and related options, in the
may be made in connection manner otherwise permitted by
with the purchase, ownership, the investment restrictions,
holding or sale of futures or policies and investment
options positions. program of the Portfolio.
EXPLANATION OF THE PROPOSED CHANGE: The proposed change modernizes and
clarifies the circumstances under which the Master Portfolios may make
purchases on margin. The reclassification as non-fundamental could enable the
Master Portfolios to respond more quickly to changes in financial markets.
In a short sale, an investor sells a borrowed security and has a corresponding
obligation to the lender to return the identical security. In an investment
technique known as a short sale "against the box," an investor sells
securities short while owning the same securities in the same amount, or
having the right to obtain equivalent securities. Certain state regulations
currently prohibit mutual funds from entering into any short sales, other than
short sales against the box. If the proposal is approved, however, each Board
of Trustees would be able to change the proposed non-fundamental restriction
in the future, without a vote of shareholders, if state regulations were to
change to permit other types of short sales, or if waivers from existing
requirements were available, subject to appropriate disclosure to investors.
Although elimination of each Master Portfolio's fundamental restriction on
short selling will not affect the Master Portfolio's investment techniques at
this time, in the event of a change in state regulatory requirements, a Master
Portfolio may alter its investment practices in the future.
PROPOSAL 3E
AMENDMENT TO EACH MASTER PORTFOLIO'S (AND EACH
FUND'S) FUNDAMENTAL INVESTMENT RESTRICTION
CONCERNING CONCENTRATION OF INVESTMENT
CURRENT MASTER PORTFOLIO PROPOSED MASTER PORTFOLIO AND
RESTRICTION: FUND RESTRICTION:
The Portfolio may not FUNDAMENTAL RESTRICTION
concentrate its investments The Portfolio may not
in any particular industry, purchase the securities of
but if it is deemed any issuer (other than
appropriate for the securities issued or
achievement of the guaranteed by the U.S.
Portfolio's investment government or any of its
objective, up to 25% of the agencies or
assets of the Portfolio, at instrumentalities, or
market value at the time of repurchase agreements secured
each investment, may be thereby) if, as a result,
invested in any one industry, more than 25% of the
except that this restriction Portfolio's total assets
does not apply to U.S. would be invested in the
government securities (in securities of companies whose
addition, so long as a single principal business activities
foreign government or are in the same industry.
supernational organization is Notwithstanding the
considered to be an foregoing, with respect to
"industry" for purposes of the Portfolio's permissible
this 25% limitation, the futures and options
Portfolio will comply transactions in U.S.
therewith), and except that, government
with respect to the securities, positions in such
Portfolio's permissible options and futures shall not
futures and options be subject to this
transaction, positions in restriction.
options and futures shall not
be subject to this
restriction.
For purposes of this
restriction, industrial
development bonds, where the
payment of principal and
interest is the ultimate
responsibility of companies
within the same industry, are
grouped together as an
"industry."
EXPLANATION OF THE PROPOSED CHANGE: The proposed amendment is intended to
clarify the basic limitation on concentration of investment and now would
specifically exclude government securities, repurchase agreements secured
thereby and positions in options and futures from the limitations imposed by
the restriction.
PROPOSAL 3F
AMENDMENT TO EACH MASTER PORTFOLIO'S (AND EACH
FUND'S) FUNDAMENTAL INVESTMENT RESTRICTION
CONCERNINGCOMMODITIES AND REAL ESTATE
CURRENT MASTER PORTFOLIO PROPOSED MASTER AND FUND
RESTRICTION: RESTRICTION:
The Portfolio may not FUNDAMENTAL RESTRICTION
purchase or sell real estate The Portfolio may not
(including limited purchase or sell physical
partnership interests but commodities unless acquired
excluding securities secured as a result of ownership of
by real estate or interests securities or other
therein), interests in oil, instruments but this shall
gas or mineral leases, not prevent the Portfolio
commodities or commodity from (i) purchasing or
contracts in the ordinary selling options and futures
course of business, other contracts or from investing
than (i) with respect to the in securities or other
Portfolio's permissible instruments backed by
futures and options physical commodities or (ii)
transactions or (ii) forward engaging in forward purchases
purchases and sales of or sales of foreign
foreign currencies or currencies or securities.
securities (the Portfolio
reserves the freedom of FUNDAMENTAL RESTRICTION
action to hold and sell real The Portfolio may not
estate acquired as a result purchase or sell real estate
of its ownership of unless acquired as a result
securities). of ownership of securities or
other instruments (but this
shall not prevent the
Portfolio from investing in
securities or other
instruments backed by real
estate or securities of
companies engaged in the real
estate business).
Investments by the Portfolio
in securities backed by
mortgages on real estate or
in marketable securities of
companies engaged in such
activities are not hereby
precluded.
NON-FUNDAMENTAL RESTRICTION
The Portfolio may not
purchase or sell interests in
oil, gas or mineral leases.
EXPLANATION OF THE PROPOSED CHANGES: The proposed changes conform the
application of the restrictions pertaining to commodities and real estate to
the current regulations of the 1940 Act by clarifying that certain real
estate-related financial instruments may be purchased by the Master
Portfolios. To a large extent, the proposed amendment would also standardize
the restrictions applicable to the Master Portfolios by allowing the Master
Portfolios to engage in certain transactions such as forward purchases when it
is consistent with a Master Portfolio's investment objectives and policies.
PROPOSAL 3G
AMENDMENT OF EACH MASTER PORTFOLIO'S (AND EACH
FUND'S) FUNDAMENTALINVESTMENT RESTRICTION
REGARDING INVESTMENTSIN RESTRICTED AND ILLIQUID
SECURITIES
CURRENT MASTER PORTFOLIO PROPOSED MASTER PORTFOLIO AND
RESTRICTION: FUND RESTRICTION:
The Portfolio may not NON-FUNDAMENTAL RESTRICTION
knowingly invest in The Portfolio may not invest
securities which are subject more than 15% of its net
to legal or contractual assets in illiquid
restrictions on resale securities.
(including securities that
are not readily marketable,
but not including repurchase
agreements maturing in not
more than seven days) if, as
a result thereof, more than
10% of the Portfolio's total
assets (taken at market
value) would be so invested
(including repurchase
agreements maturing in more
than seven days). This
limitation may be subject to
additional restrictions
imposed by jurisdictions in
which the Portfolio's shares
are offered for sale
(currently 10%).
EXPLANATION OF THE PROPOSED CHANGES: The current fundamental restrictions
limit purchases of all securities that are subject to restrictions on resale,
including securities that are not readily marketable and repurchase agreements
maturing in more than seven days. These restrictions include securities
eligible for resale under Rule 144A and Section 4(2) commercial obligations.
The proposed non-fundamental restriction incorporates recent developments in
securities markets. Under the proposed restrictions, securities issued under
such exemptions from registration, although restricted, may still be
classified as liquid in accordance with procedures adopted by the Board of
Trustees. This investment practice could have the effect of increasing the
level of illiquidity in the Master Portfolios. Furthermore, to the extent
that a market fails to develop or ceases to exist with respect to these
restricted securities, illiquidity levels will increase.
When purchasing securities which could not be sold without registration under
the Securities Act of 1933, the Master Portfolios will endeavor to obtain the
right to registration at the expense of the issuer. Generally, there will be
a lapse of time between a Master Portfolio's decision to sell any such
security and the registration of the security permitting sale. During any
such period, the price of the securities will be subject to market
fluctuations.
The proposed changes would standardize the applicable investment restriction,
and would remove certain interpretations of what may constitute illiquid
securities. By doing this, the Master Portfolios would be subject to the same
current interpretations, from time to time, of what constitutes an illiquid
security, under Commission releases and other relevant authority. The
defundamentalization of this restriction would avoid the delay and expense of
a shareholder vote in the event that the permissible guidelines for
investments in illiquid securities changes at some time in the future. This
limitation may be subject to additional restrictions imposed by jurisdictions
in which the Master Portfolios' shares are offered for sale.
PROPOSAL 3H
RECLASSIFICATION OF EACH MASTER PORTFOLIO'S (AND EACH
FUND'S) FUNDAMENTAL RESTRICTION CONCERNING
THE USE OF OPTIONS
CURRENT MASTER PORTFOLIO PROPOSED MASTER AND FUND
RESTRICTION: RESTRICTION:
The Portfolio may not write, NON-FUNDAMENTAL RESTRICTION
purchase or sell any put or The Portfolio may not write,
call option or any purchase or sell any put or
combination thereof, provided call option or any
that this shall not prevent combination thereof, provided
(i) the purchase, ownership, that this shall not prevent
holding or sale of warrants (i) the purchase, ownership,
where the grantor of the holding or sale of warrants
warrants is the issuer of the where the grantor of the
underlying securities, warrants is the issuer of the
(ii) the writing, purchasing underlying securities,
or selling of puts, calls or (ii) the writing, purchasing
combinations thereof with or selling of puts, calls or
respect to U.S. Government combinations thereof with
securities or (iii) with respect to portfolio
respect to the Portfolio's securities or (iii) with
permissible futures and respect to the Portfolio's
options transactions, the permissible futures and
writing, purchasing, options transactions, the
ownership, holding or selling writing, purchasing,
of futures and options ownership, holding or selling
positions or of puts, calls of futures and options
or combinations thereof with positions or of puts, calls
respect to futures. or combinations thereof with
respect to futures.
EXPLANATION OF THE PROPOSED CHANGE: The proposed reclassification of this
restriction as non-fundamental would avoid the delay and expense of a
shareholder vote in the event that the permissible guidelines for such
investments changes at some time in the future. The terms of this restriction
are consistent with general restrictions, including limitations on liquidity
and portfolio diversification. Therefore, no foreseeable impact on the Master
Portfolios is anticipated by the proposed reclassification.
PROPOSAL 3I
AMENDMENT TO EACH MASTER PORTFOLIO'S (AND EACH
FUND'S) FUNDAMENTAL INVESTMENT RESTRICTION
CONCERNING SENIOR SECURITIES
CURRENT MASTER PORTFOLIO PROPOSED MASTER PORTFOLIO AND
RESTRICTION: FUND RESTRICTION:
The Portfolio may not issue FUNDAMENTAL RESTRICTION
any senior security (as that The Portfolio may not issue
term is defined in the 1940 any senior security (as
Act) if such issuance is defined in the 1940 Act),
specifically prohibited by except that (a) the Portfolio
the 1940 Act or the rules and may engage in transactions
regulations promulgated that may result in the
thereunder, provided that issuance of senior securities
collateral arrangements with to the extent permitted under
respect to the Portfolio's applicable regulations and
permissible options and interpretations of the 1940
futures transactions, Act or an exemptive order;
including deposits of initial (b) the Portfolio may acquire
and variation margin, are not other securities, the
considered to be the issuance acquisition of which may
of a senior security for result in the issuance of a
purposes of this restriction. senior security, to the
extent permitted under
applicable regulations or
interpretations of the 1940
Act; and (c) subject to the
restrictions set forth above,
the Portfolio may borrow
money as authorized by the
1940 Act. For purposes of
this restriction, collateral
arrangements with respect to
the Portfolio's permissible
options and futures
transactions, including
deposits of initial and
variation margin, are not
considered to be the issuance
of a senior security.
EXPLANATION OF PROPOSED CHANGE: Under the 1940 Act, an open-end investment
company (such as the Master Portfolios) cannot issue senior securities except
under certain very limited conditions. The proposed amendment clarifies and
modernizes the language concerning senior securities to conform to provisions
of the 1940 Act. It is proposed that this restriction exclude those
transactions which are allowed by current regulatory interpretations and
policies, and which are consistent with current investment marketplace
practices. Therefore, the proposed fundamental restrictions will allow, for
example, the following investments even though they may result in the issuance
of senior securities: the Master Portfolios could, to the extent permitted by
applicable law or exemptive order (a) enter into commitments, including
reverse repurchase agreements and delayed delivery and when-issued securities;
(b) engage in transactions that may result in the issuance of a senior
security; (c) engage in short sales of securities; (d) purchase and sell
futures contracts and related options; (e) borrow money; and (f) issue
multiple classes of securities in each case subject to any other applicable
restrictions.
PROPOSAL 3J
AMENDMENT TO EACH MASTER PORTFOLIO'S
(AND EACH FUND'S) FUNDAMENTAL INVESTMENT
RESTRICTION REGARDING SHORT SALES OF SECURITIES
CURRENT MASTER PORTFOLIO PROPOSED MASTER PORTFOLIO AND
RESTRICTION: FUND RESTRICTION:
The Portfolio may not make It is proposed that this
short sales of securities or restriction be eliminated, as
maintain a short position; it has been combined with a
except that the Portfolio may non-fundamental restriction
only make such short sales of concerning purchases of
securities or maintain a securities on margin. (See
short position if when a Proposal 3d above.)
short position is open the
Portfolio owns an equal
amount of such securities or
securities convertible into
or exchangeable, without
payment of any further
consideration, for securities
of the same issue as, and
equal in amount to, the
securities sold short, and
not more than 10% of the
Portfolio's net assets (taken
at market value) is held as
collateral for such sales at
any one time (it is the
present intention of
management to make such sales
only for the purpose of
deferring realization of gain
or loss for federal income
tax purposes; such sales
would not be made of
securities subject to
outstanding options).
EXPLANATION OF THE PROPOSED CHANGE: The proposed change modernizes and
clarifies the circumstances under which the Master Portfolios may make short
sales of securities. The reclassification as non-fundamental could enable the
Master Portfolios to respond more quickly to changes in financial markets.
ADDITIONAL INFORMATION REGARDING PROPOSALS 3A-J.
Unless otherwise noted, whenever an amended or restated investment policy or
limitation states a maximum percentage of a Master Portfolio's assets that may
be invested, such percentage limitation will be determined immediately after
and as a result of the acquisition of such security or other asset, except in
the case of borrowing (or other activities that may be deemed to result in the
issuance of a "senior security" under the 1940 Act) or illiquid securities.
Any subsequent change in values, assets, or other circumstances will not be
considered when determining whether the investment complies with such Master
Portfolio's investment policies and limitations. If any of Proposals 3a-j are
not approved by shareholders, the current restriction will remain unchanged.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
Each of the above proposals to change a Master Portfolio's restrictions
requires the approval of a "majority of the outstanding voting securities" of
such Master Portfolio, which for this purpose means the affirmative vote of
the lesser of (1) more than 50% of the outstanding shares of such Master
Portfolio or (2) 67% or more of the shares of such Master Portfolio present at
a meeting of shareholders if more than 50% of the outstanding shares of such
Master Portfolio are represented at a meeting in person or by proxy.
Similarly, each of the above proposals to change a Fund's Restrictions
requires the approval of a "majority of the outstanding voting securities" of
such Fund which for this purpose means the affirmative vote of the lesser of
(1) more than 50% of the outstanding shares of such Fund or (2) 67% or more of
the shares of such Fund present at a meeting of shareholders if more than 50%
of the outstanding shares of such Fund are represnted at a meeting, in person
or by proxy.
THE BOARD OF TRUSTEES OF BLANCHARD FUNDS RECOMMENDS THAT SHAREHOLDERS VOTE "IN
FAVOR OF" THE FOREGOING PROPOSALS.
PROPOSAL 4
APPROVAL OR DISAPPROVAL OF AMENDMENTS TO THE
FUNDS' FUNDAMENTAL INVESTMENT OBJECTIVES
TO CONFORM SUCH OBJECTIVES TO THE
INVESTMENT OBJECTIVES AND POLICIES OF
THE MASTER PORTFOLIOS IN WHICH THE FUNDS INVEST
At a Meeting of the Board of Trustees of Blanchard Funds held on February 28,
1996, the Trustees of Blanchard Funds, including each of the Disinterested
Trustees (who are not "interested persons," within the meaning of the 1940
Act, of the Company or the adviser), on the recommendation of the Adviser to
the Master Portfolios, considered and unanimously approved changes to the
investment objective of the Funds, subject to approval by each Fund's
shareholders.
The Adviser has evaluated the various types of portfolios that it acts as
investment adviser to and recommended to the Trustees of each Master Portfolio
that it would be appropriate to clarify the investment objectives, policies
and restrictions, and implement certain changes that would provide greater
flexibility and uniformity in managing the investment portfolios, including
the Master Portfolios. The Trustees of each Master Portfolio determined that
many of the portfolios' investment objectives should be restated so as to be
less restrictive.
The Trustees of each Master Portfolio also approved amendments to the non-
fundamental investment objectives of the Master Portfolios. These changes (at
the Master Portfolio level) do not require approval by Fund shareholders.
CURRENT MASTER PORTFOLIO PROPOSED MASTER PORTFOLIO
INVESTMENT OBJECTIVE INVESTMENT OBJECTIVE
CAPITAL GROWTH PORTFOLIO
"to provide its "to provide its
shareholders with as long- shareholders with long-
term capital growth term capital growth."
primarily through a broad As a non-fundamental
portfolio (i.e., at least policy, the Portfolio will
80% of its assets under seek to achieve its
normal circumstances) of objective "primarily
common stocks." through investment in a
broad portfolio (i.e., at
least 80% of its assets
under normal
circumstances) of common
stocks."
Reasons for the proposal:
standardization/
clarification,
flexibility.
GROWTH & INCOME PORTFOLIO
"to provide its "to provide its
shareholders with long- shareholders with long-
term capital appreciation term capital appreciation
and to provide dividend and to provide dividend
income primarily through a income."
broad portfolio (i.e., at As a non-fundamental
least 80% of its assets policy, the Portfolio will
under normal seek to achieve its
circumstances) of common objective "primarily
stocks" through investment in a
broad portfolio (i.e., at
least 80% of its assets
under normal
circumstances) of common
stock".
Reasons for the proposal:
standardization/
clarification,
flexibility.
In addition, the Trustees of each Master Portfolio, based on representations
from the Adviser, believe that the risks inherent in investing in each of the
respective Master Portfolio should not change from those inherent at the
present time under each Master Portfolio's current investment objective and
policies, since the Adviser has represented that none of the proposed changes
is intended or anticipated to have an immediate impact on the day to day
investment program utilized by a Master Portfolio.
In the table below, the current investment objective of each Fund is set forth
in quotations in the left hand column. In each case, it is proposed that the
investment objective be amended to read as indicated in quotations in the
right hand column to conform such investment objective to the investment
objective of the Master Portfolio in which your Fund owns shares.
OBJECTIVES
CURRENT FUND INVESTMENT PROPOSED FUND INVESTMENT
OBJECTIVE OBJECTIVE
BLANCHARD CAPITAL GROWTH
FUND
"to provide long-term "to provide its
capital growth through a shareholders with long-
broad portfolio of common term capital growth."
stocks."
BLANCHARD GROWTH & INCOME FUND
"to provide long-term "to provide its
capital appreciation and to shareholders with long-
provide dividend income term capital appreciation
through a broad portfolio and to provide dividend
of common stocks." income."
REASONS FOR THE PROPOSALS REGARDING THE INVESTMENT OBJECTIVES
IT IS IMPORTANT TO BEAR IN MIND THAT THE PROPOSED CHANGES TO EACH FUND'S
(MASTER PORTFOLIO'S) INVESTMENT OBJECTIVES GENERALLY INVOLVE A JUDGMENT ONLY
AS TO WHAT SHOULD MAKE UP EACH FUND'S (MASTER PORTFOLIO'S) FUNDAMENTAL
INVESTMENT OBJECTIVE, NOT A JUDGMENT AS TO WHAT INVESTMENT STRATEGIES,
POLICIES OR RESTRICTIONS SHOULD BE FOLLOWED IN PURSUING THAT OBJECTIVE. IF
THIS PROPOSAL IS APPROVED, THE ADVISER TO THE MASTER PORTFOLIOS BELIEVES THAT
THE CHANGES WILL HAVE NO IMMEDIATE MATERIAL EFFECT ON THE WAY IN WHICH THE
MASTER PORTFOLIOS ARE MANAGED.
Each of Master Portfolio's proposals has been made for the following reasons:
flexibility and clarification/standardization. The following discussion
provides greater detail as to what is meant, in each case, by flexibility and
clarification/standardization.
Flexibility. If a Master Portfolio's stated investment objective contains
details as to an investment strategy to be pursued or an investment policy to
be followed, or is otherwise more restrictive than necessary, it may impose an
unnecessarily rigid restraint on management's ability to respond to certain
regulatory developments or changes in the financial markets. In order to make
any changes to a strategy or policy included as part of a Master Portfolio's
investment objective, the Master Portfolio may need shareholder approval,
which is time consuming and potentially costly to the Master Portfolio and its
shareholders. The Adviser does not anticipate that the proposed change to
each Fund's investment objective will have an immediate effect on the related
Master Portfolio's investment strategy, since there is no current intention of
changing stated strategy or policy. However, the Master Portfolios will have
greater flexibility to respond to future regulatory and market developments.
If changes to a Master Portfolio's non-fundamental investment objective,
policies or restrictions are adopted by the Trustees of such Master Portfolio
in the future, the applicable Fund's prospectus and statement of additional
information will be amended to reflect any such changes and notice thereof
will be provided to shareholders.
Clarification/standardization. Some of the portfolios' investment objectives
contain descriptive terms that are superfluous or ambiguous. In addition, the
terms used in some of the portfolio's investment objectives differ from the
description of the terms used in the stated investment objective of a similar
portfolio. The Adviser has recommended the standardization, to the extent
possible, of the description of an investment objective, or an aspect thereof,
as between portfolios for which the investment objective or aspect thereof is
not intended to differ. By doing so, potential investors may be expected to
have a clearer understanding of the similarities or differences in the
investment objectives of the respective portfolios.
RISK FACTORS: Because each of the proposals involve only a change to the
stated investment objective and are not expected to alter the fundamental
character of any Fund (Master Portfolio) or any of their operations for the
foreseeable future, for each Fund, the adoption of the proposal is not
expected to have any effect on the risk factors to be considered in making or
continuing an investment in a Fund. In the future, however, each Board of
Trustees may, without shareholder approval, change a non-fundamental
investment objective, policy or restriction in a way that may create more
risk. Each Fund will notify shareholders of such changes.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
The restatement of the fundamental investment objective of a Fund requires the
approval of a "majority of the outstanding voting securities" of such Fund,
which for this purpose means the affirmative vote of the lesser of (1) more
than 50% of the outstanding shares of such Fund or (2) 67% or more of the
shares of such Fund present at the Meeting if more than 50% of the outstanding
shares of such Fund are represented at the Meeting in person or by proxy.
THE BOARD OF TRUSTEES OF BLANCHARD FUNDS RECOMMENDS THAT SHAREHOLDERS OF EACH
FUND VOTE "IN FAVOR OF" PROPOSAL 4.
In addition, for shareholders of each Fund, to transact such other business as
may properly come before the meeting or any adjournment thereof.
OTHER INFORMATION
The Master Portfolios' present Sub-Administrator is Vista Broker Dealer
Services, Inc. ("VBDS"), a wholly owned subsidiary of BISYS Funds Services,
Inc. See "Administrator" under Proposal 1. [The following are officers of
the Master Portfolios who may be deemed to have an interest in VBDS by virtue
of their status as employees and/or executive officers of VBDS:]
NAME POSITION AG OFFICER OF
WITH E MASTER
MASTER PORTFOLIO
PORTFOLIO SINCE
Ann Bergin Secretary 35 1995
and
Assistant
Treasurer
Martin R. Dean Treasurer 31 1995
and
Assistant
Secretary
SUBSTANTIAL SHAREHOLDERS. As of the Record Date, the Company believed that
the following persons beneficially owned more than 5% of each Fund:
[TO COME]
Voting Information and Discretion of the Persons Named as Proxies. While the
Meeting is called to act upon any other business that may properly come before
it, at the date of this proxy statement the only business which the management
intends to present or knows that others will present is the business mentioned
in the Notice of Meeting. If any other matters lawfully come before the
Meeting, and in all procedural matters at the Meeting, it is the intention
that the enclosed proxy shall be voted in accordance with the best judgment of
the persons named as proxies therein, or their substitutes, present and acting
at the Meeting.
If at the time any session of the Meeting is called to order a quorum is not
present, in person or by proxy, the persons named as proxies may vote those
proxies which have been received to adjourn the Meeting to a later date. In
the event that a quorum is present but sufficient votes in favor of one or
more of the proposals have not been received, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further solicitation
of proxies with respect to any such proposal. All such adjournments will
require the affirmative vote of a majority of the Shares present in person or
by proxy at the session of the Meeting to be adjourned. The persons named as
proxies will vote those proxies which they are entitled to vote in favor of
the proposal, in favor of such an adjournment, and will vote those proxies
required to be voted against the proposal, against any such adjournment. A
vote may be taken on one or more of the proposals in this proxy statement
prior to any such adjournment if sufficient votes for its approval have been
received and it is otherwise appropriate.
Submission of Proposals for the Next Annual Meeting of Blanchard Funds Under
the Trust's Declaration of Trust and By-Laws, annual meetings of shareholders
are not required to be held unless necessary under the 1940 Act (for example,
when fewer than a majority of the Trustees have been elected by shareholders).
Therefore, the Trust does not hold shareholder meetings on an annual basis. A
shareholder proposal intended to be presented at any meeting hereafter called
should be sent to the Trust at Federated Investors Towers, Pittsburgh,
Pennsylvania 15222-3779, and must be received by the Trust within a reasonable
time before the solicitation relating thereto is made in order to be included
in the notice or proxy statement related to such meeting. The submission by a
shareholder of a proposal for inclusion in a proxy statement does not
guarantee that it will be included. Shareholder proposals are subject to
certain regulations under federal securities law.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. IF YOU DO NOT EXPECT TO
ATTEND THE MEETING, PLEASE SIGN YOUR PROXY CARD PROMPTLY AND RETURN IT IN THE
ENCLOSED ENVELOPE TO AVOID UNNECESSARY EXPENSE AND DELAY. NO POSTAGE IS
NECESSARY.
March 27, 1996
BY ORDER OF THE BOARD OF TRUSTEES OF
BLANCHARD FUNDS
John W. McGonigle
Secretary
APPENDIX A
FORM OF INTERIM
INVESTMENT ADVISORY AGREEMENT
BETWEEN
MUTUAL FUND GROUP
AND
THE CHASE MANHATTAN BANK, N.A.
AGREEMENT made this day of , by and between MUTUAL FUND GROUP (the
"Trust") on behalf of the series of the Trust (the "Fund") and THE CHASE
MANHATTAN BANK, N.A. (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Trust is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as amended (the
"Act"); and
WHEREAS, the Trust and the Adviser desire to enter into an agreement to
provide advisory services for the Fund on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises and agreements herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. Appointment. The Adviser agrees, all as more fully set forth herein,
to act as investment adviser to the Fund with respect to the investment of
its assets and to supervise and arrange the purchase of securities for and
the sale of securities held in the portfolio of the Fund.
2. Duties and Obligations of the Adviser With Respect to Investments of
Assets of the Fund.
(a) Subject to the succeeding provisions of this section
and subject to the direction and control of the Board of Trustees of the
Trust, the Adviser shall:
(i) supervise continuously the investment program of the Fund
and
the composition of its portfolio;
(ii) determine what securities shall be purchased or sold by the
Fund; and
(iii) arrange for the purchase and the sale of securities held in
the portfolio of the Fund.
(b) Any investment program furnished by the Adviser under this
section
shall at all times conform to, and be in accordance with, any
requirements
imposed by:
(i) the provisions of the Act and of any rules or regulations in
force thereunder;
(ii) any other applicable provisions of state and federal law;
(iii) the provisions of the Declaration of Trust and By-Laws of
the
Trust, as amended from time to time;
(iv) any policies and determinations of the Board of Trustees of
the Trust; and
(v) the fundamental policies of the Fund, as reflected in its
Registration Statement under the Act, as amended from time to time.
(c) In making recommendations for the Fund, Trust Division personnel
of
the Adviser will not inquire or take into consideration whether the
issuer of securities proposed for purchase or sale for the Fund's
account
are customers of the Commercial Division of the Adviser. In dealing with
commercial customers, the Commercial Division will not inquire or take
into consideration whether securities of those customers are held by
the Fund.
(d) The Adviser shall give the Fund the benefit of its best judgment
and
effort in rendering services hereunder, but the Adviser shall not be
liable for any loss sustained by the Fund in connection with the matters
to which this Agreement relates, including specifically but not limited
to, the calculation of net asset value and the adoption of any
investment
policy or the purchase, sale or retention of any security, whether or
not
such purchase, sale or retention shall have been based upon its own
investigation and research or upon investigation and research made by
any
other individual, firm or corporation, if such purchase, sale or
retention
shall have been made and such other individual, firm or corporation
shall
have been selected in good faith. Nothing herein contained shall,
however, be construed to protect the Adviser against any liability to
the Fund or its security holders by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason
of its reckless disregard of its obligations and duties under this
Agreement.
(e) Nothing in this Agreement shall prevent the Adviser or any
affiliated person (as defined in the Act) of the Adviser from acting as
investment adviser or manager for any other person, firm or corporation
(including other investment companies) and shall not in any way limit or
restrict the Adviser or any such affiliated person from buying, selling
or
trading any securities for its or their own accounts or for the accounts
of others for whom it or they may be acting; provided, however, that the
Adviser expressly represents that it will undertake no activities which,
in its judgment, will adversely affect the performance of its
obligations
to the Fund under this Agreement.
(f) The Fund will supply the Adviser with certified copies of the
following documents: (i) the Trust's Declaration of Trust and By-Laws, as
amended; (ii) resolutions of the Trust's Board of Trustees and
shareholders
authorizing the appointment of the Adviser and approving this Agreement;
(iii) the Trust's Registration Statement, as filed with the SEC; and (iv)
the Fund's most recent prospectus and statement of additional
information.
The Fund will furnish the Adviser from time to time with copies of all
amendments or supplements to the foregoing, if any, and all documents,
notices and reports filed with the SEC.
(g) The Fund will supply, or cause its custodian bank to supply, to
the
Adviser such financial information as is necessary or desirable for the
functions of the Adviser hereunder.
3. Broker-Dealer Relationships. The Adviser is responsible for decisions
to buy and sell securities for the Fund, broker-dealer selection and
negotiation of its brokerage commission rates. The Adviser's primary
consideration in effecting a security transaction will be execution at the
most favorable price. The Fund understands that a substantial majority of
the Fund's portfolio transactions will be transacted with primary market
makers acting as principal on a net basis, with no brokerage commissions
being paid by the Fund. Such principal transactions may, however, result in
a profit to the market makers. In certain instances the Adviser may make
purchases of underwritten issues at prices which include underwriting fees.
In selecting a broker or dealer to execute each particular transaction, the
Adviser will take the following into consideration; the best price
available; the reliability, integrity and financial condition of the broker
or dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker or dealer to the investment
performance of the Fund on a continuing basis. Accordingly, the price to
the Fund in any transaction may be less favorable than that available from
another broker or dealer if the difference is reasonably justified by other
aspects of the portfolio execution services offered. Subject to such
policies as the Board of Trustees may determine, the Adviser shall not be
deemed to have acted unlawfully or to have breached any duty created by
this Agreement or otherwise solely by reason of its having caused the Fund
to pay a broker or dealer that provides brokerage and research services to
the Adviser an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction, if the Adviser
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by
such broker or dealer, viewed in terms of either that particular
transaction or the Adviser's overall responsibilities with respect to the
Fund. The Adviser is further authorized to allocate the orders placed by it
on behalf of the Fund to such brokers and dealers who also provide research
or statistical material, or other services to the Fund (which material or
services may also assist the Adviser in rendering services to other
clients). Such allocation shall be in such amounts and proportions as the
Adviser shall determine and the Adviser will report on said allocations
regularly to the Board of Trustees indicating the brokers to whom such
allocations have been made and the basis therefor.
4. Allocation of Expenses. The Adviser agrees that it will furnish the
Fund, at its expense, all office space and facilities, equipment and
clerical
personnel necessary for carrying out its duties under this Agreement and
the
keeping of certain accounting records of the Fund. The Adviser agrees that
it
will supply to any sub-adviser or administrator (the "Administrator") of
the
Fund all necessary financial information in connection with the
Administrator's duties under any Agreement between the Administrator and
the
Trust. The Adviser will also pay all compensation of all Trustees, officers
and employees of the Fund who are "affiliated persons" of the Adviser as
defined in the Act. All costs and expenses not expressly assumed by the
Adviser under this Agreement or by the Administrator under the
administration
agreement between it and the Trust shall be paid by the Fund, including,
but
not limited to (i) fees paid to the Adviser and the Administrator; (ii)
interest and taxes; (iii) brokerage commissions; (iv) insurance premiums;
(v)
compensation and expenses of its Trustees other than those affiliated with
the Adviser or the Administrator; (vi) legal, accounting and audit
expenses;
(vii) custodian and transfer agent, or shareholder servicing agent, fees
and
expenses; (viii) expenses, including clerical expenses, incident to the
issuance, redemption or repurchase of shares, including issuance on the
payment of, or reinvestment of, dividends; (ix) fees and expenses incident
to
the registration under Federal or state securities laws of the Fund or its
shares; (x) expenses of preparing, setting in type, printing and mailing
prospectuses, statements of additional information, reports and notices and
proxy material to shareholders of the Fund; (xi) all other expenses
incidental to holding meetings of the Fund's shareholders; and (xii) such
extraordinary expenses as may arise, including litigation affecting the
Fund
and the legal obligations which the Trust may have to indemnify its
officers
and Trustees with respect thereto.
5. Compensation of the Adviser.
(a) For the services to be rendered and the expenses assumed by the
Adviser, the Fund shall pay to the Adviser monthly compensation at an
annual rate of % [see attached Schedule] of the Fund's average daily net
assets. Except as hereinafter set forth, compensation under this
Agreement
shall be calculated and accrued daily and the amounts of the daily
accruals
shall be paid monthly. If the Agreement becomes effective subsequent to
the first day of a month or shall terminate before the last day of a
month,
compensation for that part of the month this Agreement is in effect shall
be prorated in a manner consistent with the calculation of the fees as
set
forth above. Subject to the provisions of subsection (b) hereof, payment
of the Adviser's compensation for the preceding month shall be made as
promptly as possible after completion of the computations contemplated by
subsection (b) hereof.
(b) In the event the operating expenses of the Fund including all
investment advisory, sub-advisory and administration fees, for any fiscal
year ending on a date on which this Agreement is in effect exceed the
expense limitations applicable to the Fund imposed by the securities laws
or regulations thereunder of any state in which the Fund's shares are
qualified for sale, as such limitations may be raised or lowered from
time
to time, the Adviser shall reduce its investment advisory fee, but not
below zero, to the extent of its share of such excess expenses; provided,
however, there shall be excluded from such expenses the amount of any
interest, taxes, brokerage commissions and extraordinary expenses
2
(including but not limited to legal claims and liabilities and litigation
costs and any indemnification related thereto) paid or payable by the
Fund.
Such reduction, if any, shall be computed and accrued daily, shall be
settled on a monthly basis and shall be based upon the expense limitation
applicable to the Fund as at the end of the last business day of the
month.
Should two or more of such expense limitations be applicable as at the
end
of the last business day of the month, that expense limitation which
results in the largest reduction in the Adviser's fee shall be
applicable.
For the purposes of this paragraph, the Adviser's share of any excess
expenses shall be computed by multiplying such excess expenses by a
fraction, the numerator of which is the amount of the investment advisory
fee which would otherwise be payable to the Adviser for such fiscal year
were it not for this subsection 5(b) and the denominator of which is the
sum of all investment advisory and administrative fees which would
otherwise be payable by the Fund were it not for the expense limitation
provisions of any investment advisory or administrative agreement to
which
the Fund is a party.
6. Duration, Amendment and Termination.
(a) This Agreement shall go into effect as to the Fund on the date set
forth above (the "Effective Date") and shall, unless terminated as
hereinafter provided, continue in effect until May 30, 1996, unless the
Fund's shareholders approve the Agreement prior to such date. Upon
approval
by shareholders, this agreement shall, unless terminated as hereinafter
provided, continue in effect for two years from the date of such approval
and shall continue from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the Board of
Trustees of the Trust, including the vote of a majority of the Trustees
who
are not parties to this Agreement or "interested persons" (as defined in
the
Act) of any such party cast in person at a meeting called for the purpose
of
voting on such approval, or by the vote of the holders of a "majority" (as
so defined) of the outstanding voting securities of the Fund and by such a
vote of the Trustees.
(b) This Agreement may not be amended except in accordance with the
ovisions of the Act, including specifically, the provisions of the Act and
the rules and regulations thereunder regarding series votes by
shareholders
of the Fund.
(c) This Agreement may be terminated by the Adviser at any time without
penalty upon giving the Fund sixty (60) days' written notice (which notice
may be waived by the Fund) and may be terminated by the Fund at any time
without penalty upon giving the Adviser sixty (60) days' written notice
(which notice may be waived by the Adviser), provided that such
termination
by the Fund shall be approved by the vote of a majority of all the
Trustees
in office at the time or by the vote of the holders of a majority (as
defined in the Act) of the voting securities of the Fund at the time
outstanding and entitled to vote. This Agreement may only be terminated in
accordance with the provisions of the Act, and shall automatically
terminate
in the event of its assignment (as defined in the Act).
7. Board of Trustees Meeting. The Fund agrees that notice of each
meeting
of the Board of Trustees of the Trust will be sent to the Adviser and that
the Fund will make appropriate arrangements for the attendance (as persons
present by invitation) of such person or persons as the Adviser may
designate.
8. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of
the Fund for this purpose shall be 125 West 55th Street, New York, New York
10019, and that of the Adviser shall be One Chase Manhattan Plaza,
New York, New York 10081.
9. Questions of Interpretation. Any question of interpretation of any
term
or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the Act, as amended, shall be resolved by
reference to such term or provision of the Act and to interpretations
thereof,
if any, by the United States Courts or in the absence of any controlling
decision of any such court, by rules, regulations or orders of the
Securities
and Exchange Commission issued pursuant to said Act. In addition, where the
effect of a requirement of the Act, reflected in any provision of this
Agreement is revised by rule, regulation or order of the Securities and
Exchange Commission, such provision shall be deemed to incorporate the
effect
of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by their duly authorized officers and their seals to be
hereunder affixed, all as of the day and year first above written.
MUTUAL FUND GROUP
By:-----------------------------
Name:
Title:
ATTEST:
THE CHASE MANHATTAN BANK, N.A.
By:------------------------------
Name:
Title:
ATTEST:
3
Schedule A
Mutual Fund Group Fee
- ------------------ ----
Vista Short Term Bond Fund 0.25%
Vista U.S. Treasury Income Fund 0.30
Vista Bond Fund 0.30
Vista Equity Income Fund 0.40
Vista Equity Fund 0.40
Vista Balanced Fund 0.50
IEEE Balanced Fund 0.60
Vista Small Cap Equity Fund 0.65
Vista Southeast Asian Fund 0.65
Vista Japan Fund 1.00
Vista European Fund 1.00
Master Portfolios:
- ------------------
Vista Capital Growth Portfolio 0.40%
Vista Growth and Income Portfolio 0.40
Vista International Equity
Portfolio 1.00
Vista Global Fixed Income
Portfolio 0.75
4
APPENDIX B
FORM OF NEW
INVESTMENT ADVISORY AGREEMENT
BETWEEN
MUTUAL FUND GROUP
AND
THE CHASE MANHATTAN BANK, N.A.
AND ITS SUCCESSOR
AGREEMENT made this day of , 1996, by and between Mutual Fund Group, a
Massachusetts business trust which may issue one or more series of shares
(hereinafter the "Trust"), and The Chase Manhattan Bank, N.A., a national
banking association, and its successor, The Chase Manhattan Bank, a New York
State chartered bank (hereinafter the "Adviser").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services in connection with the series of the Trust listed on
Schedule A (each, a "Fund" and collectively, the "Funds"), and the Adviser
represents that it is willing and possesses legal authority to so furnish
such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Structure of Agreement. The Trust is entering into this Agreement on
behalf of the Funds severally and not jointly. The responsibilities and
benefits set forth in this Agreement shall refer to each Fund severally and
not jointly. No individual Fund shall have any responsibility for any
obligation with respect to any other Fund arising out of this Agreement.
Without otherwise limiting the generality of the foregoing,
(a) any breach of any term of this Agreement regarding the Trust with
respect to any one Fund shall not create a right or obligation with respect
to any other Fund;
(b) under no circumstances shall the Adviser have the right to set off
claims relating to a Fund by applying property of any other Fund; and
(c) the business and contractual relationships created by this
Agreement,
the consideration for entering into this Agreement, and the consequences of
such relationships and consideration relate solely to the Trust and the
particular Fund to which such relationship and consideration applies.
2. Delivery of Documents. The Trust has delivered to the Adviser copies of
each of the following documents and will deliver to it all future amendments
and supplements thereto, if any:
(a) The Trust's Declaration of Trust;
(b) The By-Laws of the Trust;
(c) Resolutions of the Board of Trustees of the Trust authorizing the
execution and delivery of this Agreement;
(d) The most recent Post-Effective Registration Statement under the
Securities Act of 1933, as amended (the "1933 Act"), and the Investment
Company Act of 1940, as amended (the "1940 Act"), on Form N-1A as filed
with
the Securities and Exchange Commission (the "Commission") (the
"Registration
Statement");
(e) Notification of Registration of the Trust under the 1940 Act on Form
N-8A as filed with the Commission; and
(f) Prospectuses and Statements of Additional Information of the Funds
(collectively, the "Prospectuses").
3. Appointment.
(a) General. The Trust hereby appoints the Adviser to act as investment
adviser to the Funds for the period and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
(b) Employees of Affiliates. The Adviser may, in its discretion, provide
such services through its own employees or the employees of one or more
affiliated companies that are qualified to act as an investment adviser to
the Trust under applicable laws and are under the control of The Chase
Manhattan Corporation, the parent of the Adviser; provided that (i) all
persons, when providing services hereunder, are functioning as part of an
organized group of persons, and (ii) such organized group of persons is
managed at all times by authorized officers of the Adviser.
(c) Sub-Advisers. It is understood and agreed that the Adviser may from
time to time employ or associate with such other entities or persons as the
Adviser believes appropriate to assist in the performance of this Agreement
with respect to a particular Fund or Funds (each a "Sub-Adviser"), and that
any such Sub-Adviser shall have all of the rights and powers of the Adviser
set forth in this Agreement; provided that a Fund shall not pay any
additional compensation for any Sub- Adviser and the Adviser shall be as
fully responsible to the Trust for the acts and omissions of the Sub-
Adviser
as it is for its own acts and omissions; and provided further that the
retention of any Sub-Adviser shall be approved in advance by (i) the Board
of
Trustees of the Trust and (ii) the shareholders of the relevant Fund if
required under any applicable provisions of the 1940 Act. The Adviser will
review, monitor and report to the Trust's Board of Trustees regarding the
performance and investment procedures of any Sub-Adviser. In the event that
the services of any Sub-Adviser are terminated, the Adviser may provide
investment advisory services pursuant to this Agreement to the Fund without
a
Sub-Adviser and without further shareholder approval, to the extent
consistent with the 1940 Act. A Sub-Adviser may be an affiliate of the
Adviser.
4. Investment Advisory Services.
(a) Management of the Funds. The Adviser hereby undertakes to act as
investment adviser to the Funds. The Adviser shall regularly provide
investment advice to the Funds and continuously supervise the investment
and
reinvestment of cash, securities and other property composing the assets of
the Funds and, in furtherance thereof, shall:
(i) supervise all aspects of the operations of the Trust and each
Fund;
(ii) obtain and evaluate pertinent economic, statistical and
financial
data, as well as other significant events and developments, which
affect
the economy generally, the Funds' investment programs, and the issuers
of securities included in the Funds' portfolios and the industries in
which they engage, or which may relate to securities or other
investments which the Adviser may deem desirable for inclusion in a
Fund's portfolio;
(iii) determine which issuers and securities shall be included in the
portfolio of each Fund;
(iv) furnish a continuous investment program for each Fund;
(v) in its discretion and without prior consultation with the
Trust,
buy, sell, lend and otherwise trade any stocks, bonds and other
securities and investment instruments on behalf of each Fund; and
(vi) take, on behalf of each Fund, all actions the Adviser may deem
necessary in order to carry into effect such investment program and the
Adviser's functions as provided above, including the making of
appropriate periodic reports to the Trust's Board of Trustees.
(b) Covenants. The Adviser shall carry out its investment advisory and
supervisory responsibilities in a manner consistent with the investment
objectives, policies, and restrictions provided in: (i) each Fund's
Prospectus and Statement of Additional Information as revised and in effect
from time to time; (ii) the Company's Trust Instrument, By-Laws or other
governing instruments, as amended from time to time; (iii) the 1940 Act;
(iv)
other applicable laws; and (v) such other investment policies, procedures
and/or limitations as may be adopted by the Company with respect to a Fund
and provided to the Adviser in writing. The Adviser agrees to use
reasonable
efforts to manage each Fund so that it will qualify, and continue to
qualify,
as a regulated investment company under Subchapter M of the Internal
Revenue
Code of 1986, as amended, and regulations issued thereunder (the "Code"),
except as may be authorized to the contrary by the Company's Board of
Trustees. The management of the Funds by the Adviser shall at all times be
subject to the review of the Company's Board of Trustees.
(c) Books and Records. The Adviser shall keep each Fund's books and
records required by applicable law to be maintained by the Funds with
respect
to advisory services. The Adviser agrees that all records which it
maintains
for a Fund are the property of the Fund and it will promptly surrender any
of such records to the Fund upon the Fund's request. The Adviser further
agrees to preserve for the periods prescribed by the 1940 Act any such
records of the Fund required to be preserved by such Rule.
(d) Reports, Evaluations and Other Services. The Adviser shall furnish
reports, evaluations, information or analyses to the Trust with respect to
the Funds and in connection with the Adviser's services hereunder as the
Trust's Board of Trustees may request from time to time or as the Adviser
may otherwise deem to be desirable. The Adviser shall make recommendations
to the Trust's Board of Trustees with respect to Trust policies, and shall
carry out such policies as are adopted by the Board of Trustees. The
Adviser
shall, subject to review by the Board of Trustees, furnish such other
services as the Adviser shall from time to time determine to be necessary
or useful to perform its obligations under this Agreement.
(e) Purchase and Sale of Securities. The Adviser shall place all orders
for the purchase and sale of portfolio securities for each Fund with
brokers
or dealers selected by the Adviser, which may include brokers or dealers
affiliated with the Adviser to the extent permitted by the 1940 Act and the
Trust's policies and procedures applicable to the Funds. The Adviser shall
use its best efforts to seek to execute portfolio transactions at prices
which, under the circumstances, result in total costs or proceeds being the
most favorable to the Funds. In assessing the best overall terms available
for any transaction, the Adviser shall consider all factors it deems
relevant, including the breadth of the market in the security, the price
of the security, the financial condition and execution capability of the
broker or dealer, research services provided to the Adviser, and the
reasonableness of the commission, if any, both for the specific transaction
and on a continuing basis. In no event
2
shall the Adviser be under any duty to obtain the lowest commission or the
best net price for any Fund on any particular transaction, nor shall the
Adviser be under any duty to execute any order in a fashion either
preferential to any Fund relative to other accounts managed by the Adviser
or
otherwise materially adverse to such other accounts.
(f) Selection of Brokers or Dealers. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers may be
selected who also provide brokerage and research services (as those terms
are
defined in Section 28(e) of the Securities Exchange Act of 1934) to the
Adviser, the Funds and/or the other accounts over which the Adviser
exercises
investment discretion. The Adviser is authorized to pay a broker or dealer
who provides such brokerage and research services a commission for
executing
a portfolio transaction for a Fund which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Adviser determines in good faith that the total
commission
is reasonable in relation to the value of the brokerage and research
services
provided by such broker or dealer, viewed in terms of either that
particular
transaction or the overall responsibilities of the Adviser with respect to
accounts over which it exercises investment discretion. The Adviser shall
report to the Board of Trustees of the Trust regarding overall commissions
paid by the Funds and their reasonableness in relation to the benefits to
the
Funds.
(g) Aggregation of Securities Transactions. In executing portfolio
transactions for a Fund, the Adviser may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the
securities to be sold or purchased with those of other Funds or its other
clients if, in the Adviser's reasonable judgment, such aggregation (i) will
result in an overall economic benefit to the Fund, taking into
consideration
the advantageous selling or purchase price, brokerage commission and other
expenses, and trading requirements, and (ii) is not inconsistent with the
policies set forth in the Trust's registration statement and the Fund's
Prospectus and Statement of Additional Information. In such event, the
Adviser will allocate the securities so purchased or sold, and the expenses
incurred in the transaction, in an equitable manner, consistent with its
fiduciary obligations to the Fund and such other clients.
5. Expenses.
(a) The Adviser shall, at its expense, provide the Funds with office
space, furnishings and equipment and personnel required by it to perform
the services to be provided by the Adviser pursuant to this Agreement. The
Adviser also hereby agrees that it will supply to any sub-adviser or
administrator (the "Administrator") of a Fund all necessary financial
information in connection with the Administrator's duties under any
Agreement between the Administrator and the Trust.
(b) Except as provided in subparagraph (a), the Trust shall be
responsible
for all of the Funds' expenses and liabilities, including, but not limited
to, taxes; interest; fees (including fees paid to its trustees who are not
affiliated with the Adviser or any of its affiliates); fees payable to the
Securities and Exchange Commission; state securities qualification fees;
association membership dues; costs of preparing and printing Prospectuses
for
regulatory purposes and for distribution to existing shareholders; advisory
and administration fees; charges of the custodian and transfer agent;
insurance premiums; auditing and legal expenses; costs of shareholders'
reports and shareholders' meetings; any extraordinary expenses; and
brokerage
fees and commissions, if any, in connection with the purchase or sale of
portfolio securities.
6. Compensation.
(a) In consideration of the services to be rendered by the Adviser under
this Agreement, the Trust shall pay the Adviser monthly fees on the first
Business Day (as defined in the Prospectuses) of each month based upon the
average daily net assets of each Fund during the preceding month (as
determined on the days and at the time set forth in the Prospectuses for
determining net asset value per share) at the annual rate set forth
opposite
the Fund's name on Schedule A attached hereto. If the fees payable to the
Adviser pursuant to this paragraph begin to accrue before the end of any
month or if this Agreement terminates before the end of any month, the fees
for the period from such date to the end of such month or from the
beginning
of such month to the date of termination, as the case may be, shall be
prorated according to the proportion which such period bears to the full
month in which such effectiveness or termination occurs. For purposes of
calculating each such monthly fee, the value of the Funds' net assets shall
be computed in the manner specified in the Prospectuses and the Articles
for
the computation of the value of the Funds' net assets in connection with
the
determination of the net asset value of shares of the Funds' capital stock.
(b) If the aggregate expenses incurred by, or allocated to, each Fund in
any fiscal year shall exceed the lowest expense limitation, if applicable
to
such Fund, imposed by state securities laws or regulations thereunder, as
such limitations may be raised or lowered from time to time, the Adviser
shall reduce its investment advisory fee, but not below zero, to the extent
of its share of such excess expenses; provided, however, there shall be
excluded from such expenses the amount of any interest, taxes, brokerage
commissions and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Such reduction, if any, shall be
computed and accrued daily, shall be settled on a monthly basis and shall
be based upon the expense limitation applicable to the Fund as at the end
of
the last business day of the month. Should two or more of such expense
limitations be applicable at the end of the last business day of the month,
that expense limitation which results in the largest reduction in the
Adviser's fee shall be applicable. For the purposes of this paragraph, the
Adviser's share of any excess expenses shall be computed by multiplying
such
excess expenses by a fraction, the numerator of which is the amount of the
investment advisory fee which would otherwise be payable to the Adviser for
such fiscal year were it not for this subsection 6(b) and the denominator
of
which is the sum of all investment advisory and administrative fees which
would otherwise be payable by the Fund
3
were it not for the expense limitation provisions of any investment
advisory
or administrative agreement to which the Fund is a party.
(c) In consideration of the Adviser's undertaking to render the services
described in this Agreement, the Trust agrees that the Adviser shall not be
liable under this Agreement for any error of judgment or mistake of law or
for any act or omission or loss suffered by the Trust in connection with
the
performance of this Agreement, provided that nothing in this Agreement
shall
be deemed to protect or purport to protect the Investment Adviser against
any
liability to the Trust or its stockholders to which the Adviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Adviser's duties under this Agreement
or
by reason of the Adviser's reckless disregard of its obligations and duties
hereunder or breach of fiduciary duty with respect to receipt of
compensation.
7. Non-Exclusive Services. Except to the extent necessary to perform the
Investment Adviser's obligations under this Agreement, nothing herein shall
be deemed to limit or restrict the right of the Adviser, or any affiliate of
the Adviser, including any employee of the Adviser, to engage in any other
business or to devote time and attention to the management or other aspects
of any other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other corporation, firm, individual or
association.
8. Effective Date; Modifications; Termination. This Agreement shall become
effective on the date hereof (the "Effective Date"), provided that it shall
have been approved by a majority of the outstanding voting securities of each
Fund, in accordance with the requirements of the 1940 Act, or such later date
as may be agreed by the parties following such shareholder approval.
(a) Subject to prior termination as provided in sub-paragraph (d) of
this
paragraph, this Agreement shall continue in force for two years from the
date
hereof and shall continue in effect from year to year thereafter, but only
so
long as the continuance after such date shall be specifically approved at
least annually by vote of the Trustees of the Trust or by vote of a
majority
of the outstanding voting securities of each Fund.
(b) This Agreement may be modified by mutual consent, such consent on
the
part of the Trust to be authorized by vote of a majority of the outstanding
voting securities of each Fund.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this
paragraph, the terms of any continuance or modification of this Agreement
must have been approved by the vote of a majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of any
such
party, cast in person at a meeting called for the purpose of voting on such
approval.
(d) Either party hereto may, at any time on sixty (60) days prior
written
notice to the other, terminate this Agreement, without payment of any
penalty, by action of its Trustees or Board of Trustees, as the case may
be,
or by action of its authorized officers or, with respect to a Fund, by vote
of a majority of the outstanding voting securities of that Fund. This
Agreement may remain in effect with respect to a Fund even if it has been
terminated in accordance with this paragraph with respect to the other
Funds.
This Agreement shall terminate automatically in the event of its assignment
as that term is defined under the 1940 Act.
9. Board of Trustees Meetings. The Trust agrees that notice of each meeting
of the Board of Trustees of the Trust will be sent to the Adviser and that
the Trust will make appropriate arrangements for the attendance (as persons
present by invitation) of such person or persons as the Adviser may
designate.
10. Governing Law. This Agreement shall be governed by the laws of the
State
of New York.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized, and their respective
seals to be hereunto affixed, all as of the date written above.
MUTUAL FUND GROUP THE CHASE MANHATTAN BANK, N.A.
By:---------------------------------- By:------------------------------
Name: Name:
Title: Title:
4
Schedule A
Mutual Fund Group Fee
- ------------------ -----
Vista Short Term Bond Fund 0.25%
Vista U.S. Treasury Income Fund 0.30
Vista Bond Fund 0.30
Vista Equity Income Fund 0.40
Vista Equity Fund 0.40
Vista Balanced Fund 0.50
IEEE Balanced Fund 0.60
Vista Small Cap Equity Fund 0.65
Vista Southeast Asian Fund 1.00
Vista Japan Fund 1.00
Vista European Fund 1.00
Master Portfolios:
- -------------------
Vista Capital Growth Portfolio 0.40%
Vista Growth and Income Portfolio 0.40
Vista International Equity
Portfolio 1.00
Vista Global Fixed Income Portfolio 0.75
5
MFG 020796
APPENDIX
C
FORM OF PROPOSED
INVESTMENT SUBADVISORY AGREEMENT
BETWEEN
THE CHASE MANHATTAN BANK, N.A.
AND ITS SUCCESSOR
AND
CHASE ASSET MANAGEMENT, INC.
AGREEMENT made as of the day of , 1996, by and between The Chase Manhattan
Bank, N.A., a national banking association, and its successor, The Chase
Manhattan Bank, a New York State chartered bank (the "Adviser"), and Chase
Asset Management, Inc., a Delaware corporation (the "Sub-Adviser").
WHEREAS, the Adviser is a registered investment adviser under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Adviser provides investment advisory services to the series of
Mutual Fund Group, a Massachusetts business trust (the "Trust"), an open-end,
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act") pursuant to an Investment Advisory
Agreement dated , 1996 (the "Advisory Agreement"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish investment
subadvisory services in connection with the series of the Trust listed on
Schedule A (each, a "Fund" and collectively, the "Funds"), and the
Sub-Adviser represents that it is willing and possesses legal authority to so
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment.
(a) General. The Adviser hereby appoints the Sub-Adviser to act as
investment subadviser to the Funds for the period and on the terms set
forth
in this Agreement. The Sub-Adviser accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
(b) Employees of Affiliates. The Sub-Adviser may, in its discretion,
provide such services through its own employees or the employees of one or
more affiliated companies that are qualified to act as an investment
subadviser to the Funds under applicable laws and are under the control of
New Chase, the parent of the Sub-Adviser; provided that (i) all persons,
when providing services hereunder, are functioning as part of an organized
group of persons, and (ii) such organized group of persons is managed at
all times by authorized officers of the Sub-Adviser.
2. Delivery of Documents. The Adviser has delivered to the Sub-Adviser
copies
of each of the following documents along with all amendments thereto through
the date hereof, and will promptly deliver to it all future amendments and
supplements thereto, if any:
(a) the Trust's Declaration of Trust;
(b) the By-Laws of the Trust;
(c) resolutions of the Board of Trustees of the Trust authorizing the
execution and delivery of the Advisory Agreement and this Agreement;
(d) the most recent Post-Effective Amendment to the Trust's Registration
Statement under the Securities Act of 1933, as amended (the "1933 Act"),
and
the 1940 Act, on Form N-1A as filed with the Securities and Exchange
Commission (the "Commission");
(e) Notification of Registration of the Trust under the 1940 Act on
Form N-8A as filed with the Commission; and
(f) the currently effective Prospectuses and Statements of Additional
Information of the Funds.
3. Investment Advisory Services.
(a) Management of the Portfolios. The Sub-Adviser hereby undertakes to
act as investment subadviser to the Funds. The Sub-Adviser shall regularly
provide investment advice to the Funds and continuously supervise the
investment and reinvestment of cash, securities and other property
composing
the assets of the Portfolios and, in furtherance thereof, shall:
(i) obtain and evaluate pertinent economic, statistical and
financial data, as well as other significant events and developments,
which affect the economy generally, the Funds' investment programs,
and the issuers of securities included in the portfolio of each Fund
and the industries in which they engage, or which may relate to
securities or other investments which the Sub-Adviser may deem
desirable for inclusion in a Fund's portfolio;
(ii) determine which issuers and securities shall be included in
the
portfolio of each Fund;
(iii) furnish a continuous investment program for each Fund;
(iv) in its discretion, and without prior consultation, buy, sell,
lend and otherwise trade any stocks, bonds and other securities and
investment instruments on behalf of each Fund; and
(v) take, on behalf of each Fund, all actions the Sub-Adviser may
deem necessary in order to carry into effect such investment program
and the Sub-Adviser's functions as provided above, including the
making of appropriate periodic reports to the Adviser and the Trust's
Board of Trustees.
(b) Covenants. The Sub-Adviser shall carry out its investment
subadvisory
responsibilities in a manner consistent with the investment objectives,
policies, and restrictions provided in: (i) each Fund's Prospectus and
Statement of Additional Information as revised and in effect from time to
time; (ii) the Trust's Declaration of Trust, By-Laws or other governing
instruments, as amended from time to time; (iii) the 1940 Act; (iv) the
provisions of the Internal Revenue Code of 1986, as amended. (v) other
applicable laws; and (vi) such other investment policies, procedures and/or
limitations as may be adopted by the Trust with respect to a Fund and
provided to the Adviser in writing. The management of the Funds by the
Adviser shall at all times be subject to the review of the Trust's Board of
Trustees.
(c) Books and Records. Pursuant to applicable law, the Sub-Adviser shall
keep each Fund's books and records required to be maintained by, or on
behalf of, the Funds with respect to subadvisory services rendered
hereunder.
The Sub-Adviser agrees that all records which it maintains for a Fund are
the property of the Fund and it will promptly surrender any of such records
to the Fund upon the Fund's request. The Sub-Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any
such records of the Portfolio required to be preserved by such Rule.
(d) Reports, Evaluations and Other Services. The Sub-Adviser shall
furnish
reports, evaluations, information or analyses to the Adviser and the Trust
with respect to the Funds and in connection with the Sub-Adviser's services
hereunder as the Adviser and/or the Trust's Board of Trustees may request
from time to time or as the Sub-Adviser may otherwise deem to be desirable.
The Sub-Adviser shall make recommendations to the Adviser and the Trust's
Board of Trustees with respect to the Trust's policies, and shall carry out
such policies as are adopted by the Board of Trustees. The Sub-Adviser may,
subject to review by the Adviser, furnish such other services as the
Sub-Adviser shall from time to time determine to be necessary or useful to
perform its obligations under this Agreement.
(e) Purchase and Sale of Securities. The Sub-Adviser shall place all
orders for the purchase and sale of portfolio securities for each Fund with
brokers or dealers selected by the Sub-Adviser, which may include brokers
or
dealers affiliated with the Adviser or the Sub-Adviser to the extent
permitted by the 1940 Act and the Trust's policies and procedures
applicable
to the Funds. The Sub-Adviser shall use its best efforts to seek to execute
portfolio transactions at prices which, under the circumstances, result in
total costs or proceeds being the most favorable to the Funds. In assessing
the best overall terms available for any transaction, the Sub-Adviser shall
consider all factors it deems relevant, including the breadth of the market
in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, research services provided to
the Sub-Adviser, and the reasonableness of the commission, if any, both for
the specific transaction and on a continuing basis. In no event shall the
Sub-Adviser be under any duty to obtain the lowest commission or the best
net
price for any Fund on any particular transaction, nor shall the Sub-Adviser
be under any duty to execute any order in a fashion either preferential to
any Fund relative to other accounts managed by the Sub-Adviser or otherwise
materially adverse to such other accounts.
(f) Selection of Brokers or Dealers. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers may be
selected who also provide brokerage and research services (as those terms
are
defined in Section 28(e) of the Securities Exchange Act of 1934) to the
Sub-Adviser, the Funds, and/or the other accounts over which the Sub-
Adviser
exercises investment discretion. The Sub-Adviser is authorized to pay a
broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for a Fund which is in
excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in
good
faith that the total commission is reasonable in relation to the value of
the
brokerage and research services provided by such broker or dealer, viewed
in
terms of either that particular transaction or the overall responsibilities
of the Sub-Adviser with respect to accounts over which it exercises
investment discretion. The Sub-Adviser shall report to the Board of
Trustees
of the Trust regarding overall commissions paid by the Funds and their
reasonableness in relation to their benefits to the Funds.
(g) Aggregation of Securities Transactions. In executing portfolio
transactions for a Fund, the Sub-Adviser may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the
securities to be sold or purchased with those of other Funds or its other
clients if, in the Sub-Adviser's reasonable judgment, such aggregation (i)
will result in an overall economic benefit to the Fund, taking into
consideration the advantageous selling or purchase price, brokerage
commission and other expenses, and trading requirements, and (ii) is not
inconsistent with the policies set forth in the Trust's registration
statement and the Fund's Prospectus and Statement of Additional
Information.
In such event, the Sub-Adviser will allocate the securities so purchased or
sold, and the expenses incurred in the transaction, in an equitable manner,
consistent with its fiduciary obligations to the Fund and such other
clients.
4. Representations and Warranties.
(a) The Sub-Adviser hereby represents and warrants to the Adviser as
follows:
2
(i) The Sub-Adviser is a corporation duly organized and in good
standing under the laws of the State of Delaware and is fully authorized
to enter into this Agreement and carry out its duties and obligations
hereunder.
(ii) The Sub-Adviser is registered as an investment adviser with the
Commission under the Advisers Act, and is registered or licensed as an
investment adviser under the laws of all applicable jurisdictions. The
Sub-Adviser shall maintain such registrations or licenses in effect at
all
times during the term of this Agreement.
(iii) The Sub-Adviser at all times shall provide its best judgment
and
effort to the Adviser in carrying out the Sub- Adviser's obligations
hereunder.
(b) The Adviser hereby represents and warrants to the
Sub-Adviser as follows:
(i) The Adviser is a state chartered bank duly organized and in good
standing under the laws of the State of New York and is fully authorized
to enter into this Agreement and carry out its duties and obligations
hereunder.
(ii) The Trust has been duly organized as a business trust under the
laws of the State of Massachusetts.
(iii) The Trust is registered as an investment company with the
Commission under the 1940 Act, and shares of each Fund are registered
for
offer and sale to the public under the 1933 Act and all applicable state
securities laws where currently sold. Such registrations will be kept in
effect during the term of this Agreement.
5. Compensation.
(a) As compensation for the services which the Sub-Adviser is to provide
or cause to be provided pursuant to Paragraph 3, with respect to each Fund,
the Adviser shall pay to the Sub-Adviser (or cause to be paid by the Trust
directly to the Sub- Adviser) a fee, which shall be accrued daily and paid
in
arrears on the first business day of each month, at an annual rate to be
determined between the parties hereto from time to time, as a percentage of
the average daily net assets of the Fund during the preceding month
(computed
in the manner set forth in the Fund's most recent Prospectus and Statement
of
Additional Information). Average daily net assets shall be based upon
determinations of net assets made as of the close of business on each
business day throughout such month. The fee for any partial month shall be
calculated on a proportionate basis, based upon average daily net assets
for
such partial month, as a percentage of average daily net assets.
(b) The Sub-Adviser shall have the right, but not the obligation, to
voluntarily waive any portion of the sub-advisory fee from time to time.
Any
such voluntary waiver will be irrevocable and determined in advance of
rendering sub-investment advisory services by the Sub-Adviser, and shall be
in writing and signed by the parties hereto.
(c) If the aggregate expenses incurred by, or allocated to, each Fund in
any fiscal year shall exceed the lowest expense limitation, if applicable
to
such Fund, imposed by state securities laws or regulations thereunder, as
such limitations may be raised or lowered from time to time, the Sub-
Adviser
shall reduce its investment advisory fee, but not below zero, to the extent
of its share of such excess expenses; provided, however, there shall be
excluded from such expenses the amount of any interest, taxes, brokerage
commissions and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Such reduction, if any, shall be
computed and accrued daily, shall be settled on a monthly basis and shall
be
based upon the expense limitation applicable to the Fund as at the end of
the
last business day of the month. Should two or more of such expense
limitations be applicable at the end of the last business day of the month,
that expense limitation which results in the largest reduction in the Sub-
Adviser's fee shall be applicable. For the purposes of this paragraph, the
Sub-Adviser's share of any excess expenses shall be computed by multiplying
such excess expenses by a fraction, the numerator of which is the amount of
the investment advisory fee which would otherwise be payable to the
Sub-Adviser for such fiscal year were it not for this subsection 5(b) and
the
denominator of which is the sum of all investment advisory and
administrative
fees which would otherwise be payable by the Fund were it not for the
expense
limitation provisions of any investment advisory or administrative
agreement
to which the Fund is a party.
6. Interested Persons. It is understood that, to the extent consistent with
applicable laws, the Trustees, officers and shareholders of the Trust or the
Adviser are or may be or become interested in the Sub-Adviser as directors,
officers or otherwise and that directors, officers and shareholders of the
Sub-Adviser are or may be or become similarly interested in the Trust or the
Adviser.
7. Expenses. The Sub-Adviser will pay all expenses incurred by it in
connection with its activities under this Agreement other than the cost of
securities (including brokerage commissions) purchased for or sold by the
Funds.
8. Non-Exclusive Services; Limitation of Sub-Adviser's Liability. The
services of the Sub-Adviser hereunder are not to be deemed exclusive, and the
Sub-Adviser may render similar services to others and engage in other
activities. The Sub-Adviser and its affiliates may enter into other
agreements with the Funds, the Trust or the Adviser for providing additional
services to the Funds, the Trust or the Adviser which are not covered by this
Agreement, and to receive additional compensation for such services. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Sub-Adviser,
or a breach of fiduciary duty with respect to receipt of compensation,
neither the Sub-Adviser nor any of its directors, officers, shareholders,
agents, or employees shall be liable or responsible to the Adviser, the
Trust, the Funds or to any shareholder of the Funds for any error of judgment
or mistake of law or for any act or omission in the course of, or connected
with, rendering services hereunder or for any loss suffered by the Adviser,
the Trust, a Fund, or any shareholder of a Fund in connection with the
performance of this Agreement.
3
9. Effective Date; Modifications; Termination. This Agreement shall become
effective on the date hereof (the "Effective Date") provided that it shall
have been approved by a majority of the outstanding voting securities of each
Portfolio, in accordance with the requirements of the 1940 Act, or such later
date as may be agreed by the parties following such shareholder approval.
(a) This Agreement shall continue in force for two years from the
Effective Date. Thereafter, this Agreement shall continue in effect as to
each Fund for successive annual periods, provided such continuance is
specifically approved at least annually (i) by a vote of the majority of
the
Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the
purpose
of voting on such approval, and (ii) by a vote of the Board of Trustees of
the Trust or a majority of the outstanding voting securities of the Fund.
(b) The modification of any of the non-material terms of this Agreement
may be approved by a vote of a majority of those Trustees of the Trust who
are not interested persons of any party to this Agreement, cast in person
at
a meeting called for the purpose of voting on such approval.
(c) Notwithstanding the foregoing provisions of this Paragraph 9, either
party hereto may terminate this Agreement as to any Fund(s) at any time on
sixty (60) days' prior written notice to the other, without payment of any
penalty. A termination of the Sub-Adviser may be effected as to any
particular Fund by the Adviser, by a vote of the Trust's Board of Trustees,
by vote of a majority of the outstanding voting securities of the Fund.
This
Agreement shall terminate automatically in the event of its assignment.
10. Limitation of Liability of Trustees and Shareholders. The Sub-Adviser
acknowledges the following limitation of liability:
The terms "Mutual Fund Group"and "Trustees of Mutual Fund Group" refer,
respectively, to the trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Declaration of
Trust, to which reference is hereby made and a copy of which is on file at
the office of the Secretary of State of the State of Massachusetts, such
reference being inclusive of any and all amendments thereto so filed or
hereafter filed. The obligations of "Mutual Fund Group" entered into in the
name or on behalf thereof by any of the Trustees, representatives or agents
are made not individually, but in such capacities and are not binding upon
any of the Trustees, shareholders or representatives of the Trust personally,
but bind only the assets of the Trust, and all persons dealing with the Trust
or a Fund must look solely to the assets of the Trust or Fund for the
enforcement of any claims against the Trust or Fund.
11. Certain Definitions. The terms "vote of a majority of the outstanding
voting securities," "assignment," "control," and "interested persons," when
used herein, shall have the respective meanings specified in the 1940 Act.
References in this Agreement to the 1940 Act and the Advisers Act shall be
construed as references to such laws as now in effect or as hereafter
amended, and shall be understood as inclusive of any applicable rules,
interpretations and/or orders adopted or issued thereunder by the Commission.
12. Independent Contractor. The Sub-Adviser shall for all purposes herein
be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Board of Trustees of the Trust from time
to time, have no authority to act for or represent a Fund in any way or
otherwise be deemed an agent of a Fund.
13. Structure of Agreement. The Adviser and Sub-Adviser are entering into
this Agreement with regard to the respective Funds severally and not jointly.
The responsibilities and benefits set forth in this Agreement shall be deemed
to be effective as between the Adviser and Sub-Adviser in connection with
each Fund severally and not jointly. This Agreement is intended to govern
only the relationships between the Adviser, on the one hand, and the
Sub-Adviser, on the other hand, and is not intended to and shall not govern
(i) the relationship between the Adviser or Sub-Adviser and any Fund, or (ii)
the relationships among the respective Funds.
14. Governing Law. This Agreement shall be governed by the laws of the
State
of New York, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or the Advisers Act.
15. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby and, to this extent, the
provisions of this Agreement shall be deemed to be severable.
16. Notices. Notices of any kind to be given to the Adviser hereunder by
the
Sub-Adviser shall be in writing and shall be duly given if mailed or
delivered to the Adviser at or at such other address or to such individual as
shall be so specified by the Adviser to the Sub-Adviser. Notices of any kind
to be given to the Sub-Adviser hereunder by the Adviser shall be in writing
and shall be duly given if mailed or delivered to the Sub-Adviser at or at
such other address or to such individual as shall be so specified by the
Sub-Adviser to the Adviser. Notices shall be effective upon delivery.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized as of the date written
above.
CHASE ASSET MANAGEMENT, INC. THE CHASE MANHATTAN BANK, N.A.
By:-------------------------- By:--------------------------
Name: Name:
Title: Title:
4
Schedule A
Fund:
- -----
Vista Short Term Bond Fund
Vista U.S. Treasury Income Fund
Vista Bond Fund
Vista Equity Income Fund
Vista Equity Fund
Vista Balanced Fund
IEEE Balanced Fund
Vista Small Cap Equity Fund
Vista Southeast Asian Fund
Vista Japan Fund
Vista European Fund
Master Portfolio:
- -----------------
Vista Capital Growth Portfolio
Vista Growth and Income Portfolio
Vista International Equity Portfolio
Vista Global Fixed Income Portfolio
5
APPENDIX D
MUTUAL FUND GROUP
FORM OF
CLASS A SHARES
PROPOSED PLAN FOR PAYMENT OF CERTAIN EXPENSES FOR
DISTRIBUTION OR SHAREHOLDER SERVICING ASSISTANCE
Distribution Plan (the "Plan") of MUTUAL FUND GROUP, a Massachusetts business
trust (the "Trust"), an open-end, non- diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"Act"), on behalf of the class of shares designated as the Class A Shares of
its Vista U.S. Government Income Fund, Vista Balanced Fund, Vista Equity
Income Fund, Vista Bond Fund, Vista Short Term Bond Fund, Vista Equity Fund
and Vista Small Cap Equity Fund Series, and the Class A Shares or any series
of the Trust which may be created in the future, adopted pursuant to Section
12(b) of the Act and Rule 12b-1 promulgated thereunder ("Rule 12b-1").
1. Principal Underwriter. Vista Broker-Dealer Services, Inc., a Delaware
corporation (the "Distributor"), acts as the principal underwriter of the
shares of each series of the Trust pursuant to a Distribution and
Sub-Administration Agreement.
2. Distribution Payments.
(a) The Trust may make payments periodically (i) to the Distributor or
to
any broker-dealer (a "Broker") who is registered under the Securities
Exchange Act of 1934 and a member in good standing of the National
Association of Securities Dealers, Inc. and who has entered into a selected
dealer agreement with the Distributor in a form similar to the one annexed
hereto as Exhibit A or (ii) to other persons or organizations ("Servicing
Agents") who have entered into shareholder processing and service
agreements
with the Trust or with the Distributor, in a form similar to the one
annexed
hereto as Exhibit B, with respect to Trust shares owned by shareholders for
which such broker is the dealer or holder of record or such Servicing Agent
has a servicing relationship.
(b) Payments may be made pursuant to the Plan for any advertising and
promotional expenses relating to selling efforts of the shares of each
series
of the Trust, including but not limited to the incremental costs of
printing
(excluding typesetting) of prospectuses, statements of additional
information, annual reports and other periodic reports for distribution to
persons who are not shareholders of the Trust; the costs of preparing and
distributing any other supplemental sales literature; expenses of certain
personnel engaged in the distribution of shares; costs of travel, office
expenses (including rent and overhead), equipment, printing, delivery and
mailing costs incurred in the distribution of shares.
(c) The aggregate amount of payments by the Trust in a fiscal year, to
brokers, servicing agents, or the Distributor pursuant to paragraphs (a)
and
(b) shall not exceed .25% of the average daily net assets of each series of
the Trust.
(d) The schedule of such fees and the basis upon which such fees will be
paid shall be determined from time to time by the Board of Trustees of the
Trust. 3. Reports. Quarterly, in each year that this Plan remains in
effect,
the Trust and the Distributor shall prepare and furnish to the Board of
Trustees of the Trust a written report, complying with the requirements of
Rule 12b-1, setting forth the amounts expended by the Trust under the Plan
and purposes for which such expenditures were made.
4. Approval of Plan. This Plan shall become effective upon approval of the
Plan, the form of Selected Dealer Agreement and the form of Shareholder
Service Agreement, by the majority votes of both (a) the Trust's Board of
Trustees and the Qualified Trustees (as defined in Section 6), cast in person
at a meeting called for the purpose of voting on the Plan and (b) the
outstanding voting securities of each series of the Trust, as defined in
Section 2(a)(42) of the Act.
5. Term. This Plan shall remain in effect for one year from its adoption
date
and may be continued thereafter if this Plan and all related agreements are
approved at least annually by a majority vote of the Trustees of the Trust,
including a majority of the Qualified Trustees, cast in person at a meeting
called for the purpose of voting on such Plan and agreements. This Plan may
not be amended in order to increase materially the amount to be spent for
distribution assistance without shareholder approval in accordance with
Section 4 hereof. All material amendments to this Plan must be approved by a
vote of the Board of Trustees of the Trust, and of the Qualified Trustees (as
hereinafter defined), cast in person at a meeting called for the purpose of
voting thereon.
6. Termination. This Plan may be terminated as to any series at any time by
a
majority vote of the Trustees who are not interested persons (as defined in
Section 2(a)(19) of the Act) of the Trust and have no direct or indirect
financial interest in the operation of the Plan or in any agreements related
to the Plan (the "Qualified Trustees") or by vote of a majority of the
outstanding voting securities of the Trust, as defined in Section 2(a)(42) of
the Act.
7. Nomination of "Disinterested" Trustees. While this Plan shall be in
effect, the selection and nomination of the "disinterested" trustees of the
Trust shall be committed to the discretion of the Qualified Trustees then in
office.
8. Miscellaneous.
(a) Any termination or noncontinuance of (i) a selected dealer agreement
between the Distrixibutor and a particular broker or (ii) a shareholder
service agreement between the Distributor or the Trust and a particular
person or organization, shall have no effect on any similar agreements
between brokers or other persons and the Distributor of the Trust pursuant
to
this Plan.
(b) Neither the Distributor nor the Trust shall be under any obligation
because of this Plan to execute any selected dealer agreement with any
broker
or any shareholder service agreement with any person or organization.
(c) All agreements with any person or organization relating to the
implementation of this Plan shall be in writing and any agreement related
to
this Plan shall be subject to termination, without penalty, pursuant to the
provisions of Section 6 hereof.
Dated: , 1996
2
BLANCHARD CAPITAL GROWTH FUND
FOR SPECIAL MEETING OF SHAREHOLDERS May 15, 1996
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned shareholders of
BLANCHARD CAPITAL GROWTH FUND hereby appoint Patricia F. Conner, Patricia
Godlewski, Gia Albanowsi, Suzanne Land, and C. Grant Anderson, or any one of
them true and lawful attorneys, with power of substitution of each, to vote
all shares of BLANCHARD CAPITAL GROWTH FUND, which the undersigned is entitled
to vote, at the Special Meeting of Shareholders to be held on May 15, 1996, at
Federated Investors Tower, Pittsburgh, Pennsylvania, at 2:00 P.M., and at any
adjournment thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The attorneys
named will vote the shares represented by this proxy in accordance with the
choice made on this card. IF NO CHOICE IS INDICATED FOR ANY MATTER, THIS
PROXY WILL BE VOTED AFFIRMATIVELY ON THE MATTER PRESENTED.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND
RETAIN THE TOP PORTION.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
BLANCHARD CAPITAL GROWTH FUNDKEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
FOR AGAINST ABSTAIN1. Approve an interim investment advisory agreement
between
Captial Growth Porfolio (the "Master Portfolio") and
- --- --- ---
The Chase Manhattan Bank, N.A. (and the successor
entity thereto) (the "Adviser") which will take
effect upon the merger of The Chase Manhattan
Corporation (the parent company of the Adviser) and
Chemical Banking Corporation. No fee increase is
proposed.
FOR AGAINST ABSTAIN2. Approve a new investment advisory agreement between
the Master Portfolio and the Adviser, and a sub-
- --- --- ---
advisory agreement between the Adviser and Chase
Asset Management, Inc. with respect to the Master
Portfolio to take effect as soon as practicable after
approval by shareholders. No fee increase is
proposed.
3. Vote on proposals to approve of changes to
fundamental investment restrictions of the Master
Portfolio and of the Fund. The lettering of the
boxes match the lettering of the Proposals.
FOR the changes to each restriction listed as (a) - (j)
ABSTAIN
below (except as marked to the contrary below)
- ---
PLEASE CHECK THE BOX for any changes you do NOT wish to approve:
AGAINST CHANGES TO:
a. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction concerning borrowing;
b. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction concerning investment for the
purpose of exercising control;
c. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction concerning the making of loans;
d. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction concerning purchases of
securities on margin;
e. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction concerning concentration of
investment;
f. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction concerning commodities and real
estate;
g. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction regarding investments in
restricted and illiquid securities;
h. Approve of a reclassification, as non-fundamental, of the Master
- ----
Portfolio's and the Fund's fundamental restriction concerning the
use of options;
i. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction concerning senior securities;
and
j. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction regarding short sales of
securities.
FOR AGAINST ABSTAIN4. Approve an amendment to the Fund's fundamental
investment objective to conform such objective to the
- --- --- ---
investment objective and policies of the Master
Portfolio.
FOR AGAINST ABSTAIN5. To transact such other business as may properly
come before the Meeting or any adjournment thereof.
- --- --- ---
Please sign EXACTLY as your name(s) appear below. When signing as attorney,
executor, administrator, guardian, trustee, custodian, etc., please give 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.
SIGNATURE SIGNATURE (JOINT OWNERS) DATE
BLANCHARD GROWTH & INCOME FUND
FOR SPECIAL MEETING OF SHAREHOLDERS May 15, 1996
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned shareholders of
BLANCHARD GROWTH & INCOME FUND hereby appoint Patricia F. Conner, Patricia
Godlewski, Gia Albanowsi, Suzanne Land, and C. Grant Anderson, or any one of
them true and lawful attorneys, with power of substitution of each, to vote
all shares of BLANCHARD GROWTH & INCOME FUND, which the undersigned is
entitled to vote, at the Special Meeting of Shareholders to be held on May 15,
1996, at Federated Investors Tower, Pittsburgh, Pennsylvania, at 3:00 P.M.,
and at any adjournment thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The attorneys
named will vote the shares represented by this proxy in accordance with the
choice made on this card. IF NO CHOICE IS INDICATED FOR ANY MATTER, THIS
PROXY WILL BE VOTED AFFIRMATIVELY ON THE MATTER PRESENTED.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND
RETAIN THE TOP PORTION.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
BLANCHARD GROWTH & INCOME FUNDKEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
FOR AGAINST ABSTAIN1. Approve an interim investment advisory agreement
between
Growth & Income Porfolio (the "Master Portfolio") and
- --- --- ---
The Chase Manhattan Bank, N.A. (and the successor
entity thereto) (the "Adviser") which will take
effect upon the merger of The Chase Manhattan
Corporation (the parent company of the Adviser) and
Chemical Banking Corporation. No fee increase is
proposed.
FOR AGAINST ABSTAIN2. Approve a new investment advisory agreement between
the Master Portfolio and the Adviser, and a sub-
- --- --- ---
advisory agreement between the Adviser and Chase
Asset Management, Inc. with respect to the Master
Portfolio to take effect as soon as practicable after
approval by shareholders. No fee increase is
proposed.
3. Vote on proposals to approve of changes to
fundamental investment restrictions of the Master
Portfolio and of the Fund. The lettering of the
boxes match the lettering of the Proposals.
FOR the changes to each restriction listed as (a) - (j)
ABSTAIN
below (except as marked to the contrary below)
- ---
PLEASE CHECK THE BOX for any changes you do NOT wish to approve:
AGAINST CHANGES TO:
a. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction concerning borrowing;
b. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction concerning investment for the
purpose of exercising control;
c. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction concerning the making of loans;
d. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction concerning purchases of
securities on margin;
e. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction concerning concentration of
investment;
f. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction concerning commodities and real
estate;
g. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction regarding investments in
restricted and illiquid securities;
h. Approve of a reclassification, as non-fundamental, of the Master
- ----
Portfolio's and the Fund's fundamental restriction concerning the
use of options;
i. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction concerning senior securities;
and
j. Approve an amendment to the Master Portfolio's and the Fund's
- ----
fundamental investment restriction regarding short sales of
securities.
FOR AGAINST ABSTAIN4. Approve an amendment to the Fund's fundamental
investment objective to conform such objective to the
- --- --- ---
investment objective and policies of the Master
Portfolio.
FOR AGAINST ABSTAIN5. To transact such other business as may properly
come before the Meeting or any adjournment thereof.
- --- --- ---
Please sign EXACTLY as your name(s) appear below. When signing as attorney,
executor, administrator, guardian, trustee, custodian, etc., please give 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.
