SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE VIRTUS FUNDS
(Exact Name of Registrant as Specified in Charter)
(412) 288-1900
(Area Code and Telephone Number)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
JOHN W. MCGONIGLE, ESQUIRE
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Copy to:
Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P
2101 L Street, N.W.
Washington, D.C. 20037
It is proposed that this filing will become effective on December 9, 1995
pursuant to Rule 488. (Approximate Date of Proposed Public Offering)
An indefinite amount of the Registrant's securities has been registered
under the Securities Act of 1933 pursuant to Rule 24f-2 under The Investment
Company Act of 1940. In reliance upon such Rule, no filing fee is being paid at
this time. A Rule 24f-2 notice for the Registrant for the year ended September
30, 1994 was filed on November 15, 1994.
CROSS REFERENCE SHEET
Pursuant to Item 1(a) of Form N-14 Showing Location in Prospectus of Information
Required by
Form N-14
Item of Part A of Form N-14 and Caption Caption or Location in Prospectus
1. Beginning of Registration Statement
and Outside Front Cover Page of
Prospectus ................ Cross Reference Sheet; Cover Page
2. Beginning and Outside
Back Cover Page of Prospectus Table of Contents
3. Synopsis Information
and Risk Factors .......... Summary; Risk Factors
4. Information About the
Transaction ............... Information About the Reorganization
5. Information About the Registrant Information About Blanchard Funds,
The Virtus Funds, Blanchard Treasury, and
Virtus Treasury
6. Information About the Company
Being Acquired ............ Information About Blanchard Funds, The Virtus
Funds, Blanchard Treasury, and Virtus
Treasury
7. Voting Information ........ Voting Information
8. Interest of Certain Persons and Experts Not Applicable
9. Additional Information Required
for Reoffering by Persons Deemed
to be Underwriters ........ Not Applicable
BLANCHARD GROUP OF FUNDS
VERY IMPORTANT
ENCLOSED IS A PROXY VOTE CARD
WHICH REQUIRES YOUR SIGNATURE.
IT HAS TO DO WITH THE PENDING MERGER OF
THE BLANCHARD 100% TREASURY MONEY MARKET FUND
WITH THE VIRTUS TREASURY MONEY MARKET FUND.
PLEASE REVIEW AND CAST YOUR VOTE TODAY!
Dear Valued Shareholder:
As you may be aware, there have been a number of exciting developments in
regards to the Blanchard Group of Funds in recent months. One of the
benefits has been that the management and Trustees have identified a number
of changes which they feel will either enhance performance, reduce expenses,
or expand the services offered to Blanchard fund shareholders.
I am writing you today to inform you of a recommended change which affects your
Blanchard 100% Treasury Money Market Fund.
Namely, the Board of Trustees has unanimously recommended a merger of the
Blanchard 100% Treasury Money Market Fund with the Virtus Treasury Money
Market Fund.
We believe this merger to be in your best interest for a number of reasons......
SAME EXPERT MANAGER
Both the Blanchard 100% Treasury Money Market Fund and the Virtus Treasury Money
Market Fund are managed by the highly capable E. Christian Goetz of Virtus
Capital Management, Inc., the investment adviser to the Blanchard Group of
Funds.
SIMILAR INVESTMENT OBJECTIVES
Both Funds have similar investment objectives: current income and capital
preservation. And to achieve those objectives, both Funds invest in very short-
term U.S. government money market instruments.
The only difference is that the Virtus Treasury Money Market Fund may also
seek to enhance yield by investing in repurchase agreements of U.S.
government securities,
arrangements that provide for repurchase by the seller within one year from the
date of acquisition.
Naturally, as with any money market fund, the Virtus Treasury Money Market
Fund is carefully managed to maintain a fixed $1 share price at all times
(although there can be no assurance that the share price will always remain
fixed).
HIGHER YIELD POTENTIAL
We believe that the lower operating expenses of the Virtus Treasury Money Market
Fund offer you the potential for higher yields than the Blanchard 100% Treasury
Money Market Fund.
For example, as of X/X/95, the 7-day yield and 7-day effective yield of the
Virtus Treasury Money Market Fund were X% and X%, respectively.*
By comparison, the 7-day yield and 7-day effective yield for the Blanchard
100% Treasury Money Market Fund were lower at X% and X%, respectively, for
that same time period.*
(*Fees of .X% have been voluntarily waived by the adviser of the Virtus Treasury
Money Market Fund and fees of .X% have been waived by the adviser of the
Blanchard 100% Treasury Money Market Fund. If these fees had not been waived,
total fund operating expenses would be X% and X%, respectively, the 7-day yield
would be X% and X%, respectively, and the 7-day effective yield would be X% and
X%, respectively.)
Of course, there is no assurance that yields will always be higher and expenses
lower. Past performance is not a guarantee of future performance and yield and
expenses may vary both up and down.
THE BOARD OF TRUSTEES RECOMMEND VOTING "FOR" THIS MERGER
Enclosed with this letter is a proxy and a voting card. It is very important
that you fill out and return the voting card ASAP. Only then can we move
ahead with proposed changes. In addition to the reasons already discussed,
there are three additional benefits this merger holds for you:
1.This merger of assets is tax-free, so there are no taxable consequences for
you.
2.The increased asset size of the combined fund will result in an even lower
expense ratio for the Virtus Treasury Money Market Fund than it currently
enjoys.
3.You will continue to have all of the same shareholder privileges, including
free check writing, free telephone switches between Blanchard mutual
funds and select Virtus Funds, free telephone redemptions, and a convenient
consolidated account statement.
It is for all of these reasons that the Board of Trustees has unanimously
voted to recommend that you vote "FOR" the merger.
PLEASE VOTE TODAY!
Because shareholder approval is required for this Fund merger, your individual
vote is of critical importance. This gives you an important say in the
management of your investment.
A voting card is enclosed. It is essential that you mark your card in the
appropriate space and return it in the postage-paid envelope provided.
Only by voting will this merger be able to move ahead. If the proxy is
approved, the merger of the Blanchard 100% Treasury Money Market Fund into the
Virtus Treasury Money Market Fund is scheduled to be completed , 1996.
----- --
If a majority of shareholders do not return their votes, additional proxy
statements must be sent out, costing money, as well as valuable time. So please,
take a few moments now to fill out and return the enclosed proxy voting card,
while the material is at hand.
If you wish to vote over the phone, call Shareholders' Services at 1-800-829-
3863 between 9:00 a.m. and 5:30 p.m., EST.
If you wish to return your vote by fax, please use fax number 1-212-XXX-XXXX.
If you wish to vote the proxy in person, you may attend the shareholder meeting
on , 1996 at p.m. at Federated Investors Tower, 19th Floor,
------- -- ----
Pittsburgh, Pennsylvania 15222-3779.
Before voting, please refer to the enclosed Virtus Fund prospectus which
contains more complete details on investment objectives, management fees,
risks and expenses for the Virtus Treasury Money Market Fund. For comparison
purposes, you should also refer to the Blanchard Group of Funds prospectus
already in your possession for complete details on the Blanchard 100%
Treasury Money Market Fund.
If you have additional questions on the voting process, or on the Fund, please
call 1-800-829-3863. A friendly and experienced Shareholders' Service
Representative will be standing by between 8:30 a.m. and 5:30 p.m., EST.
Please vote your proxy today. Thank you for your continued confidence in the
Blanchard Group of Funds.
Sincerely,
The Blanchard Group of Funds
The Blanchard Group of Funds are distributed by Federated Securities Corp.
and are advised by Virtus Capital Management, Inc.
The Blanchard Group of Funds are not deposits, obligations of, or guaranteed by
any bank or other financial institution, and are not insured by the FDIC or any
Federal Agency. In addition, they involve risk, including the possible loss of
principal invested.
BLANCHARD FUNDS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF BLANCHARD 100% TREASURY MONEY MARKET FUND:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Blanchard 100%
Treasury Money Market Fund ("Blanchard Treasury"), a portfolio of Blanchard
Funds, will be held at 2:00 p.m. on January 26, 1996 at Federated Investors
Tower, 19th Floor, Pittsburgh, Pennsylvania 15222-3779 for the following
purposes:
1. To approve disapprove a proposed agreement pursuant to which The
Treasury Money Market Fund, a portfolio of The Virtus Funds ("Virtus
Treasury") would acquire all of Blanchard Treasury's assets in exchange for
Investment Shares of Virtus Treasury. Blanchard Treasury would then
distribute the Investment Shares of Virtus Treasury so received pro rata to its
shareholders and would liquidate and terminate its existence; and
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
By Order of the Board of Trustees,
Dated: December 8, 1995 John W. McGonigle
Secretary
Shareholders of record at the close of business , 1995 are entitled to
--------
vote at the meeting. Whether or not you plan to attend the meeting, please sign
and return the enclosed proxy card or call 1-800-829-3863. You may also fax
your proxy to 1-212-XXX-XXXX. YOUR VOTE IS IMPORTANT.
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AND TO SAVE THE EXPENSE OF FURTHER
MAILINGS, PLEASE MARK YOUR PROXY CARD, SIGN IT, AND RETURN IT IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. YOU MAY
REVOKE YOUR PROXY AT ANY TIME AT OR BEFORE THE MEETING OR VOTE IN PERSON IF YOU
ATTEND THE MEETING.
PROSPECTUS/PROXY STATEMENT
DECEMBER 8, 1995
ACQUISITION OF THE ASSETS OF
BLANCHARD 100% TREASURY MONEY MARKET FUND
("BLANCHARD TREASURY"),
A PORTFOLIO OF BLANCHARD FUNDS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER: 1-800-829-3863
BY AND IN EXCHANGE FOR INVESTMENT SHARES OF
THE TREASURY MONEY MARKET FUND
("VIRTUS TREASURY"),
A PORTFOLIO OF THE VIRTUS FUNDS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER: 1-800-723-3863
This Prospectus/Proxy Statement describes the proposed Agreement and Plan of
Reorganization (the "Plan") whereby Virtus Treasury would acquire all of the
assets of Blanchard Treasury, in exchange for Investment Shares of Virtus
Treasury. These shares would then be distributed pro rata by Blanchard Treasury
to its shareholders, and, as a result, each Blanchard Treasury shareholder will
own Investment Shares of Virtus Treasury having a total net asset value equal to
the total net asset value of his or her holdings in Blanchard Treasury. The
Plan would result in the complete liquidation and the termination of Blanchard
Treasury.
Blanchard Funds is an open-end management investment company which currently
includes ten portfolios, each of which has a distinct investment objective. The
investment objective of Blanchard Treasury is the highest level of current
income as is consistent with the preservation of capital and maintenance of
liquidity.
The Virtus Funds is an open-end management investment company which currently
includes eight portfolios, each of which has a distinct investment objective.
The investment objective of Virtus Treasury is current income consistent with
stability of principal by investing in short-term U.S. Treasury obligations. For
a comparison of the investment policies of the Funds, see "Summary-Investment
Objectives, Policies, and Limitations."
This Prospectus/Proxy Statement should be retained for future reference. It sets
forth concisely the information about Virtus Funds and Virtus Treasury that a
prospective investor should know before investing in Virtus Treasury. This
Prospectus/Proxy Statement is accompanied by the Prospectus of Virtus Treasury
dated March 1, 1995, which is incorporated herein by reference. The Prospectus
of Blanchard Treasury dated August 7, 1995, and the Statements of Additional
Information for Virtus Treasury and Blanchard Treasury, dated March 1, 1995 and
August 7, 1995, respectively (relating to the Prospectuses of Virtus Treasury
and Blanchard Treasury, respectively, of the same date) and December 8, 1995
(relating to this Prospectus/Proxy Statement) containing additional
information have been filed with the Securities and Exchange Commission
and are incorporated herein by reference. Copies of the Statements of
Additional Information may be obtained
without charge by calling the Funds at the telephone number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF SIGNET BANK OR ANY OF ITS AFFILIATES, OR OF ANY BANK, ARE NOT
ENDORSED OR GUARANTEED BY SIGNET BANK OR ANY OF ITS AFFILIATES, OR BY ANY BANK,
AND ARE NOT OBLIGATIONS OF, GUARANTEED BY OR INSURED BY THE U.S. GOVERNMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. VIRTUS TREASURY ATTEMPTS TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE NO
ASSURANCE THAT VIRTUS TREASURY WILL BE ABLE TO DO SO.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Summary................................................ 1
Risk Factors........................................... 4
Information About the Reorganization................... 4
Information About Blanchard Funds, The Virtus Funds, Blanchard Treasury, and
Virtus Treasury...................................... 6
Voting Information..................................... 7
Exhibit A--Agreement and Plan of Reorganization........ i
SUMMARY
ABOUT THE PROPOSED REORGANIZATION
The Board of Trustees of Blanchard Funds has voted to recommend to
shareholders of Blanchard Treasury the approval of a Plan whereby Virtus
Treasury would acquire all of the assets of Blanchard Treasury in exchange
for Investment Shares of Virtus Treasury. These shares would thereupon be
distributed pro rata by Blanchard Treasury to its shareholders and, as a
result, each shareholder of
Blanchard Treasury will become the owner of Investment Shares of Virtus Treasury
having a total net asset value equal to the total net asset value of his or her
holdings in Blanchard Treasury. These transactions (referred to as the
"Reorganization") would result in the complete liquidation and the
termination of Blanchard Treasury.
As a condition to the Reorganization transactions, The Virtus Funds and
Blanchard Funds will receive an opinion of counsel that the Reorganization
will be considered a tax-free "reorganization" under applicable provisions
of the Internal Revenue Code so that no gain or loss will be recognized by
either Virtus Treasury or Blanchard Treasury or their shareholders. The tax
cost basis of the Investment Shares of Virtus Treasury received by Blanchard
Treasury shareholders will be the same as the tax cost basis of their shares
in Blanchard Treasury.
In recommending the Reorganization, the Blanchard Funds' and The Virtus Funds'
investment adviser, Virtus Capital Management, Inc., and the Board of
Trustees of Blanchard Funds and The Virtus Funds, considered the fact that
because Virtus Treasury and Blanchard Treasury have substantially identical
investment objectives and policies (with the exception of Blanchard Treasury's
inability to invest in repurchase agreements), they are redundant and that,
therefore, economies of scale, and potentially lower expense ratios, could be
realized by transferring the assets of Blanchard Treasury into Virtus Treasury.
The following discussion compares certain key aspects of Blanchard Treasury and
Virtus Treasury (collectively, the "Funds").
Combined
Virtus
Treasury/
Virtus Blanchard Blanchard
Treasury Treasury Treasury
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None None None
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering
price) None None None
Contingent Deferred Sales Charge (as a
percentage of original purchase price
or redemption proceeds, as applicable) None None None
Redemption Fees (as a percentage of amount
redeemed, if applicable) None None None
Exchange Fee None None None
Annual Investment Shares Operating Expenses
(as a percentage of projected average net assets)
Management Fee (after waiver)(1) 0.40% 0.42% 0.38%
12b-1 Fee (after waiver)(2) 0.25% None 0.25%
Total Other Expenses 0.20% 0.57% 0.20%
Total Investment Shares Operating
Expenses(3) 0.85% 0.99% 0.83%
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee by the investment adviser. The adviser
can terminate this voluntary waiver at any time at its sole discretion.
The maximum fee is 0.50%
(2) The maximum 12b-1 fee is 0.35%.
(3) The Total Investment Share Operating Expenses for the fiscal year ended
September 30, 1995 would have been 1.05% for Virtus Treasury and Total
Fund Operating Expenses for the fiscal year ended April 30, 1995 would have
been 1.07% for Blanchard Treasury absent the voluntary waivers of
portions of the management fees, and portions of the distribution fees on
Virtus Treasury.
Total expenses for Combined Virtus Treasury/Blanchard Treasury - Investment
Shares are estimated based on average expenses expected to be incurred
during the fiscal year ending September 30, 1996. During the course of
this period, expenses may be more or less than the average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expense that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs
and expenses, see "The Virtus Funds Information" and "Investing in Shares."
Wire-transferred redemptions may be subject to additional fees.
EXAMPLE 1 year 3 years 5 years
You would pay the following expenses on
a $1,00 investment assuming (1) 5% annual
return and (2) redemption at the end of
each time period. The Fund charges no
redemption fees.
Virtus Treasury $9 $27 $47
Blanchard Treasury $10 $32 $55
Combined Virtus/Blanchard Treasury $8 $26 $46
The above example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. This
example is based on estimated data for the Fund's fiscal year ending
September 30, 1996.
INVESTMENT OBJECTIVES, POLICIES, AND LIMITATIONS
The investment objectives of Blanchard Treasury and Virtus Treasury are
substantially identical. Blanchard Treasury seeks to provide the highest
level of current income as is consistent with the preservation of capital
and maintenance of liquidity. Virtus Treasury seeks to provide current
income consistent with stability of principal.
Both Blanchard Treasury and Virtus Treasury pursue their investment
objectives by investing exclusively in a portfolio of U.S. dollar denominated,
short-term U.S. Treasury obligations which are issued by the U.S. government
and are backed by the full faith and credit of the U.S. government.
They mature 397 days or less from the date of acquisition unless
(in the case of Virtus Treasury) they are purchased under a repurchase
agreement that provides for repurchase by the seller within one
year from the date of acquisition. (Blanchard Treasury does not use repurchase
agreements.) The average maturity of these securities, computed on a dollar-
weighted basis, is 90 days or less. Virtus Treasury may enter into reverse
repurchase agreements and may purchase securities on a when-issued or delayed
delivery basis.
Because Virtus Treasury may invest in repurchase agreements and Blanchard
Treasury cannot, the portion of Virtus Treasury's dividends which would be
exempt from state and local taxes may be smaller than the portion of
Blanchard Treasury's dividends which would be so exempt.
Virtus Treasury and Blanchard Treasury are subject to certain investment
limitations. The investment limitations of the two funds are substantially
identical. The limitations include provisions that, in effect, prohibit either
fund from: selling any securities short or purchasing any securities on margin;
issuing senior securities, except that Blanchard Treasury may borrow up to 10%,
and Virtus Treasury may borrow up to one-third, of the value of its respective
total assets; mortgaging, pledging, or hypothecating any assets except to secure
permitted borrowings; lending any of their respective assets, except portfolio
securities up to one-third of the value of their total assets; or investing more
than 10% of the value of their respective net assets in illiquid securities.
Reference is hereby made to the Prospectus and Statement of Additional
Information of Blanchard Treasury, dated August 7, 1995, and the Prospectus
and Statement of Additional Information of Virtus Treasury, dated
March 1, 1995, which set forth in full the investment objectives, policies
and investment limitations of both funds and which are incorporated by
reference herein.
DISTRIBUTION ARRANGEMENTS
Federated Securities Corp. is the principal distributor for shares of Blanchard
Funds and The Virtus Funds. Under distribution plans adopted in accordance with
Investment Company Act Rule 12b-1 (the "12b-1 Plan"), Investment Shares of
Virtus Treasury may pay to Federated Securities Corp. an amount computed at an
annual rate of 0.35 of 1% of such Fund's average daily net assets to finance
any activity which is principally intended to result in the sale of shares
subject to the 12b-1 Plan. Blanchard Treasury has not adopted a 12b-1 Plan.
Currently, the Investment Shares class of Virtus Treasury incurs fees under
the 12b-1 Plan at an annual rate of 0.25 of 1% of such Fund's average daily
net assets.
ADVISORY AND OTHER FEES
Virtus Capital Management, Inc. ("VCM"), a Maryland corporation and a
wholly-owned subsidiary of Signet Banking Corporation, provides overall
management services for Blanchard Funds and Virtus Funds. VCM is entitled to
receive an annual management
fee equal to 0.50 of 1% of each Fund's average daily net assets. See also the
"Summary of Portfolio Expenses." VCM has undertaken to reimburse each
Fund, up to the amount of its management fee, for operating expenses
in excess of limitations established by certain states. VCM may further
voluntarily waive a portion of its fee or reimburse either Fund for certain
operating expenses. This agreement to waive fees or reimburse expenses may
be terminated by VCM at any time in its discretion.
Federated Administrative Services, a subsidiary of Federated Investors, provides
the Funds with certain administrative personnel and services necessary to
operate the Funds. The rate charged for such administrative services is
0.15 of 1% of the first $250 million of average aggregate daily net assets of
Blanchard, 0.125 of 1% on the next $250 million, 0.10 of 1% on the next $250
million and 0.075 of 1% of average aggregate daily net assets of Blanchard
Funds or The Virtus Funds in excess of $750 million. The administrative fee
received during any fiscal year shall be at least $75,000 per Blanchard Fund
and at least $50,000 per Virtus Fund.
During Blanchard Treasury's most recent fiscal year, Blanchard Treasury did not
incur an administrative fee, because the agreement with Federated Administrative
Services did not commence until after the close of such fiscal year. Blanchard
Treasury estimates that its administrative fee expense for the current fiscal
year will be 0.12 of 1% of its average aggregate daily net assets. The
administrative fee for Virtus Treasury's most recent fiscal year was 0.11 of
1% of its average aggregate daily net assets. Virtus Treasury estimates that
its administrative fee expense for the current fiscal year will be 0.10 of
1% of its average aggregate daily net assets.
The total annual operating expenses for Blanchard Treasury are expected to be
0.95 of 1% of average daily net assets. The total annual operating expenses
for Virtus Treasury are expected to be 0.83 of 1% of average daily net assets
and would be 0.95 of 1% of average daily net assets absent the voluntary
waivers of management fees.
PURCHASE AND REDEMPTION PROCEDURES
Procedures for the purchase and redemption of Investment Shares of Virtus
Treasury are similar to procedures applicable to the purchase and redemption
of Blanchard Treasury shares. For a complete description of the purchase
and redemption procedures applicable to purchases and redemptions of shares,
refer to the Prospectus of Blanchard Funds dated August 7, 1995, and the
Prospectus of the Virtus Funds dated March 1, 1995, which are incorporated
herein by reference. Any questions about such procedures may be directed to,
and assistance in effecting purchases, redemptions, or exchanges of shares may
be obtained by calling 1-800-829-3863.
Investment Shares of Virtus Treasury are sold on all business days except on
days on which the New York Stock Exchange is closed. Shares are sold at
their net asset value next determined after an order is received. There is
no sales charge at the time of purchase. The net asset value is calculated
as of the close of the New York Stock Exchange (normally 4:00 p.m., Eastern
time) on days shares are sold. Purchases of shares of either Fund may be
made by wire, by ACH or by check. Orders are considered received after
payment is converted into federal funds. The minimum initial investment in
Virtus Treasury is $1,000.
Redemption requests cannot be executed on days which the New York Stock Exchange
is closed and federal or state holidays restricting wire transfers. Shares of
Blanchard Treasury are redeemed at their net asset value next determined
after the redemption request is received.
Shares of Virtus Treasury are redeemed at their net asset value next
determined after the redemption request is received, except
that a contingent deferred sales charge will be imposed only in certain
instances in which shares of Virtus Treasury being redeemed were acquired
in exchange for shares of other Virtus Funds which charge a contingent
deferred sales charge. Proceeds will be distributed by wire or check.
Requests for redemption can be made by telephone or by mail as more
particularly described in the above-referenced Prospectuses.
EXCHANGE PRIVILEGES
Shareholders of Investment Shares of Virtus Treasury may exchange Investment
Shares of Virtus Treasury for shares of another Virtus Fund at net asset value.
The dollar amount of an exchange must be at least $1,000. In addition,
holders of Virtus Treasury who are also holders of any Fund
(a "Blanchard Fund") of the Blanchard Funds, or who acquired shares of
Virtus Treasury in exchange for shares of a Blanchard Fund, may exchange such
Virtus Treasury shares for shares of any Blanchard Fund at net asset value.
The dollar amount of an exchange into a Blanchard Fund must meet the initial
investment requirement of the Blanchard Fund into which the exchange is being
made. No fees are charged in connection with any such exchange.
Shareholders of Blanchard Treasury and Virtus Treasury may exchange shares of
Blanchard Treasury or Virtus Treasury for shares of another Blanchard Fund or
for Investment Shares of The Virtus Funds' money market portfolios, which
consist of The Money Market Fund, Virtus Treasury, and The Tax-Free Money
Market Fund, at net asset value. No fees are charged in connection with any
such exchange. The dollar amount of an exchange into a Blanchard Fund must
meet the initial investment requirement of the Fund into which the exchange
is being made. All subsequent exchanges into that Fund must be at least
$1,000. The dollar amount of any exchanges into a Virtus money market fund
must be at least $1,000.
TAX CONSEQUENCES
As a condition to the Reorganization transactions, Blanchard Funds and The
Virtus Funds will receive an opinion of counsel that the Reorganization will be
considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either
Virtus Treasury or Blanchard Treasury or their respective shareholders.
The tax cost basis of Virtus Treasury shares received by Blanchard
Treasury shareholders will be the same as the tax cost basis of their shares
in Blanchard Treasury.
RISK FACTORS
Investments in Blanchard Treasury and Virtus Treasury are subject to similar
risks in that, although they both attempt to maintain a stable net asset value
of $1.00 per share, there can be no assurance that they will be able to do so.
INFORMATION ABOUT THE REORGANIZATION
BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION
On July 12, 1995, VCM acquired the assets and business of Sheffield Management
Co. ("Sheffield"), which was, until that time, manager of the Blanchard Funds.
Upon succeeding Sheffield as manager, VCM conducted a review and evaluation of
the investment objectives and strategies of the Funds. As a result of this
review, VCM determined that the Funds are redundant and concluded that
economies of scale, and potentially lower expense ratios, could be realized by
transferring the assets of Blanchard Treasury into Virtus Treasury.
The Trustees of Blanchard Funds and The Virtus Funds, including the independent
Trustees, have unanimously concluded that consummation of the Reorganization
is in the best interests of Blanchard Funds and The Virtus Funds and the
shareholders of Blanchard Treasury and Virtus Treasury and that the
interests of Blanchard Treasury and Virtus Treasury shareholders would not be
diluted as a result of effecting the Reorganization and have unanimously
approved the Plan. The Trustees also noted that the shareholders of Blanchard
Treasury would continue to receive the same quality investment management
services from VCM as shareholders of Virtus Treasury.
DESCRIPTION OF THE PLAN OF REORGANIZATION
The Plan provides that on or about January 26, 1996 (the "Closing Date") Virtus
Treasury will acquire all of the assets of Blanchard Treasury in exchange for
Investment Shares of Virtus Treasury to be distributed pro rata by Blanchard
Treasury to its shareholders in complete liquidation and termination of
Blanchard Treasury. Shareholders of Blanchard Treasury will become
shareholders of Virtus Treasury as of 4:00 p.m. (Eastern time) on the Closing
Date and will begin accruing dividends on the next day. Shares of Virtus
Treasury received by Blanchard Treasury shareholders in connection with the
acquisition of the assets of Blanchard Treasury will not be subject to a
sales load. Shareholders of Blanchard Treasury will earn their last dividend
from Blanchard Treasury on the Closing Date.
Consummation of the Reorganization is subject to the conditions set forth in the
Plan, including receipt of an opinion in form and substance satisfactory to
Blanchard Funds and The Virtus Funds, as described under the caption "Federal
Income Tax Consequences" below. The Plan may be terminated and the
Reorganization may be abandoned at any time before or after approval by
shareholders of Blanchard Treasury prior to the Closing Date by Blanchard
Funds or The Virtus Funds if it believes that consummation of the
Reorganization would not be in the best interests of the shareholders of
either Blanchard Treasury or Virtus Treasury.
VCM is responsible for the payment of all expenses of the Reorganization
incurred by either Fund, whether or not the Reorganization is consummated.
Such expenses include, but are not limited to, legal fees, registration
fees, transfer taxes (if any), the fees of banks and transfer agents and
the costs of preparing, printing, copying and mailing proxy solicitation
materials to shareholders of Blanchard Treasury and the costs of holding the
Special Meeting of Shareholders
The foregoing brief summary of the Plan entered into between Blanchard Treasury
and Virtus Treasury is qualified in its entirety by the terms and provisions of
the Plan, a copy of which is attached hereto as Exhibit A and incorporated
herein by reference.
DESCRIPTION OF INVESTMENT SHARES OF VIRTUS TREASURY
Investment Shares of Virtus Treasury to be issued to shareholders of Blanchard
Treasury under the Plan will be fully paid and nonassessable when issued and
transferable without restriction and will have no preemptive or conversion
rights. Virtus Treasury offers two classes of shares. Trust Shares, the other
class offered by Virtus Treasury, are sold to trusts, fiduciaries and
institutions at net asset value at a minimum investment of $10,000.
Trust Shares are not sold pursuant to a Rule 12b-1 Plan.
The amount of dividends payable to Trust Shares
will exceed those payable to Investment Shares by the difference between class
expenses and distribution expenses borne by shares of each respective class. The
stated advisory fee is the same for both classes of shares. Reference is hereby
made to the Prospectus of Virtus Treasury dated March 1, 1995 provided herewith
for additional information about Investment Shares of Virtus Treasury.
FEDERAL INCOME TAX CONSEQUENCES
As a condition to the Reorganization transactions, Blanchard Funds and The
Virtus Funds will receive an opinion from Dickstein, Shapiro & Morin, L.L.P.,
counsel to Blanchard Funds and The Virtus Funds, to the effect that, on the
basis of the existing provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), current administrative rules and court decisions, for
federal income tax purposes:
(1) the Reorganization as set forth in the Plan will constitute a tax-free
reorganization under section 368(a)(1)(C) of the Code; (2) no gain or loss
will be recognized by Virtus Treasury upon its receipt of Blanchard
Treasury's assets solely in exchange for Investment Shares of Virtus
Treasury; (3) no gain or loss will be recognized by Blanchard Treasury
upon the transfer of its assets to Virtus Treasury in exchange for
Investment Shares of Virtus Treasury or upon the
distribution (whether actual or constructive) of Investment Shares of Virtus
Treasury to Blanchard Treasury shareholders in exchange for their shares of
Blanchard Treasury; (4) no gain or loss will be recognized by shareholders of
Blanchard Treasury upon the exchange of their Blanchard Treasury shares for
Investment Shares of Virtus Treasury; (5) the tax basis of Blanchard Treasury's
assets acquired by Virtus Treasury will be the same as the tax basis of such
assets to Blanchard Treasury immediately prior to the Reorganization; (6)the tax
basis of Investment Shares of Virtus Treasury received by each shareholder of
Blanchard Treasury pursuant to the Plan will be the same as the tax basis of
Blanchard Treasury shares held by such shareholder immediately prior to the
Reorganization;(7) the holding period of the assets of Blanchard Treasury in the
hands of Virtus Treasury will include the period during which those assets were
held by Blanchard Treasury; and (8) the holding period of Investment Shares of
Virtus Treasury received by each shareholder of Blanchard Treasury will include
the period during which the Blanchard Treasury shares exchanged therefor were
held by such shareholder, provided the Blanchard Treasury shares were held as
capital assets on the date of the Reorganization.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS AND OBLIGATIONS
Blanchard Funds and The Virtus Funds are organized as business trusts pursuant
to Declarations of Trust under the laws of the Commonwealth of Massachusetts.The
rights of shareholders of Blanchard Treasury and Virtus Treasury as set forth in
their respective Declarations of Trust are substantially identical. Set forth
below is a brief summary of the significant rights of shareholders of Blanchard
Treasury and Virtus Treasury.
Neither Fund is required to hold annual meetings of shareholders. Shareholder
approval is necessary only for certain changes in operations or the election of
trustees under certain circumstances. A special meeting of shareholders of
either fund for any permissible purpose is required to be called by the
Trustees upon the written request of the holders of at least 10% of the
outstanding shares of the relevant Fund.
Under certain circumstances, shareholders of Blanchard Treasury, Virtus
Treasury, or any other portfolio of Blanchard Funds or The Virtus Funds may be
held personally liable as partners under Massachusetts law for obligations of
Blanchard Funds or The Virtus Funds, as the case may be. To protect
shareholders of all portfolios of Blanchard Funds and The Virtus Funds,
Blanchard Funds and The Virtus Funds have filed legal documents with the
Commonwealth of Massachusetts that expressly disclaim the liability of
shareholders of portfolios of Blanchard Funds
and The Virtus Funds for such acts or obligations of Blanchard Funds and The
Virtus Funds. These documents require that notice of this disclaimer be given
in each agreement, obligation or instrument that Blanchard Funds and The
Virtus Funds or their trustees enter into or sign on behalf of Blanchard Funds
and The Virtus Funds.
In the unlikely event a shareholder of a portfolio of Blanchard Funds or The
Virtus Funds is held personally liable for obligations of Blanchard Funds or The
Virtus Funds, Blanchard Funds and The Virtus Funds are required to use their
property to protect or compensate the shareholder. On request, Blanchard Funds
and The Virtus Funds will defend any claims made and pay any judgment against a
shareholder of a portfolio of Blanchard Funds and The Virtus Funds for any
act or obligation of Blanchard Funds and The Virtus Funds.
Therefore, financial loss resulting from liability as a shareholder of a
portfolio of Blanchard Funds and
The Virtus Funds will occur only if Blanchard Funds or The Virtus Funds cannot
meet their obligation to indemnify shareholders and pay judgments against them
from the assets of Blanchard Funds or The Virtus Funds.
CAPITALIZATION
The following table sets forth the capitalization of Blanchard Treasury and
Virtus Treasury as of October 31, 1995, and on a pro forma basis as of that
date:
Blanchard Virtus Pro Forma
Treasury Treasury Combined
Net Assets $140,910,811 $288,290,495 $429,201,306
Price Per Share $1.00 $1.00 $1.00
INFORMATION ABOUT BLANCHARD FUNDS, THE VIRTUS FUNDS, BLANCHARD TREASURY, AND
VIRTUS TREASURY
Information about Blanchard Funds, The Virtus Funds, Blanchard Treasury, and
Virtus Treasury is contained in their respective Prospectuses dated (in the case
of Blanchard Funds and Blanchard Treasury) August 7, 1995 and (in the case of
The Virtus Funds and Virtus Treasury) March 1, 1995, which are incorporated by
reference herein. A copy of the Prospectus for Virtus Treasury is included
herewith. Additional information about The Virtus Funds and Virtus Treasury is
included in the Statement of Additional Information of Virtus Treasury dated
March 1, 1995 (relating to the Prospectus of Virtus Treasury of the same date),
and December 8, 1995 (relating to this Prospectus/Proxy Statement) which are
incorporated herein by reference. Additional information about Blanchard
Treasury is included in the Statement of Additional Information of Blanchard
Treasury dated August 7, 1995, and December 8, 1995 (relating to this
Prospectus/Proxy Statement) which are incorporated herein by reference.
Copies of the Statements of Additional Information of Blanchard Treasury and
Virtus Treasury, which have been
filed with the Securities and Exchange Commission (the "SEC"), may be obtained
without charge by contacting Blanchard Funds at 1-800-829-3863 or by writing to
Signet Financial Services, Inc., 41 Madison Avenue, 24th Floor, New York, NY
10010.
Blanchard Funds and The Virtus Funds, on behalf of the Funds, are subject to the
informational requirements of the Securities Act of 1933 (the "1933 Act"), the
Securities Exchange Act of 1934 (the "1934 Act") and the Investment Company
Act of 1940 (the "1940 Act") and in accordance therewith file reports and other
information with the SEC. Reports, proxy and information statements and other
information filed by Blanchard Funds and The Virtus Funds, on behalf of the
Funds, can be obtained by calling or writing to Blanchard Funds or The
Virtus Funds and can also be inspected and copied by the public at the
public reference facilities maintained by the SEC in Washington, D.C.
located at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at certain of its regional offices located at
Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, IL
60621 and 13th Floor, Seven World Trade Center, New York, NY 10048. Copies of
such material also may be obtained at prescribed rates from the Public Reference
Branch, Office of Consumer Affairs and Information Services, SEC, 450 Fifth
Street, N.W., Washington, D.C. 20549.
This Prospectus/Proxy Statement and the related Statement of Additional
Information do not contain all of the information set forth in the registration
statement that The Virtus Funds have filed with the SEC under the 1933 Act to
which reference is hereby made. Statements contained herein concerning the
provisions of documents are necessarily summaries of such documents, and
each such statement is qualified in its entirety by reference to the copy
of the applicable documents filed with the SEC. The SEC file number for
Blanchard Funds' prospectuses and related Statements of Additional
Information which are incorporated by reference herein is Registration
No. 33-3165. The SEC file number for The Virtus Funds' prospectuses and
related Statements of Additional Information which are incorporated by
reference herein is Registration No. 33-36451.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the solicitation
by the Board of Trustees of Blanchard Treasury of proxies for use at the Special
Meeting of Shareholders (the "Meeting") to be held on December 8, 1995 and
at any adjournment thereof. The proxy confers discretionary authority on
the persons designated therein to vote on other business not currently
contemplated which may properly come before the Meeting. A proxy, if properly
executed, duly returned and not revoked, will be voted in accordance with
the specifications thereon; if no instructions are given, such proxy will be
voted in favor of the Plan. A shareholder may revoke a proxy at any time
prior to use by filing with the Secretary of Blanchard Funds an instrument
revoking the proxy, by submitting a proxy bearing a later date or by attending
and voting at the Meeting.
The cost of the solicitation, including the printing and mailing of proxy
materials, will be borne by VCM. In addition to solicitations through the
mails, proxies may be solicited by officers, employees and agents of Blanchard
Funds and VCM at no additional cost to Blanchard Funds. Such solicitations
may be made by telephone. VCM will reimburse custodians, nominees and
fiduciaries for the reasonable costs incurred by them in connection with
forwarding solicitation materials to the beneficial owners of shares held
of record by such persons. A shareholder may vote by faxing a properly
executed proxy to 1-212-XXX-XXXX. In addition, a shareholder may vote his
or her proxy by telephone by calling 1-800-829-3863, ext. between the hours
of 9:00 a.m. and 5:30 p.m., and a
shareholder may be contacted by telephone by an employee of Signet Financial
Services, Inc. to ask for his or her vote.
OUTSTANDING SHARES AND VOTING REQUIREMENTS
The Board of Trustees has fixed the close of business on , 1995 as the
-------
record date for the determination of shareholders entitled to notice of, and to
vote at, the Special Meeting of Shareholders and any adjournment thereof. As of
the record date, there were shares of Blanchard Treasury outstanding. Each
----
Blanchard Treasury share is entitled to one vote and fractional shares have
proportionate voting rights. On the record date, owned of record shares,
or % of Blanchard Treasury's outstanding shares. On such date, no other person
owned of record, or to the knowledge of VCM, beneficially owned, 5% or more of
Blanchard Treasury's outstanding shares. On the record date, the trustees and
officers of Blanchard Funds as a group owned less than 1% of the outstanding
shares of Blanchard Treasury.
The votes of the shareholders of Virtus Treasury are not being solicited, since
their approval or consent is not necessary for approval of the Reorganization.
As of the record date, there were shares of Virtus Treasury outstanding.
On the record date, owned of record shares, or % of Virtus Treasury's
--- --- ---
outstanding shares. On such date, no other person owned of record, or to the
knowledge of VCM, beneficially owned, 5% or more of Virtus Treasury's
outstanding shares.
Approval of the Plan requires the affirmative vote of the majority of Blanchard
Treasury's outstanding shares. The votes of shareholders of Virtus Treasury are
not being solicited since their approval is not required in order to effect the
Reorganization.
A majority of the outstanding shares of Blanchard Treasury, represented in
person or by proxy, will be required to constitute a quorum at the Special
Meeting for the purpose of voting on the proposed Reorganization. For
purposes of determining the presence of a quorum, shares represented by
abstentions and "broker non-votes" will be counted as present, but not as
votes cast, at the Special Meeting. Under the Declaration of Trust, the
approval of any action submitted to shareholders is determined on the basis
of a majority of votes entitled to be cast at the Special Meeting.
If at the time any session of the Special 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 Special
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 Special 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 Special 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.
DISSENTER'S RIGHT OF APPRAISAL
Shareholders of Blanchard Treasury objecting to the Reorganization have no
appraisal or dissenter's rights under the Declaration of Trust or Massachusetts
law. Under the Plan, if approved by Blanchard Treasury shareholders, each
Blanchard Treasury shareholder will become the owner of Investment Shares of
Virtus Treasury having a total net asset value equal to the total net asset
value of his or her holdings in Blanchard Treasury at the Closing Date.
OTHER MATTERS
Management of Blanchard Treasury knows of no other matters that may properly be,
or which are likely to be, brought before the meeting. However, if any other
business shall properly come before the meeting, the persons named in the proxy
intend to vote thereon in accordance with their best judgment.
So far as management is presently informed, there is no litigation pending or
threatened against Blanchard Funds or The Virtus Funds.
Whether or not shareholders expect to attend the meeting, all shareholders are
urged to sign, fill in and return the enclosed proxy form promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated October 27, 1995 (the "Agreement"),
between THE VIRTUS FUNDS, a Massachusetts business trust ("Virtus"), on
behalf of its portfolio, The Treasury Money Market Fund (hereinafter called
the "Acquiring Fund"), and BLANCHARD FUNDS, a Massachusetts business trust
("Blanchard"), on behalf of Blanchard 100% Treasury Money Market Fund
(hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of reorganization and
liquidation within the meaning of Section 368(a)(1)(C) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all of the assets of the
Acquired Fund in exchange solely for Investment Shares of the Acquiring Fund
(the "Acquiring Fund Shares") and the distribution, after the Closing Date
hereinafter referred to, of the Acquiring Fund Shares to the shareholders
of the Acquired Fund in liquidation of the Acquired Fund as provided herein,
all upon the terms and conditions hereinafter set forth in this Agreement.
WHEREAS, Virtus and Blanchard are registered open-end management investment
companies and the Acquired Fund owns securities in which the Acquiring Fund is
permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized to issue
their shares of beneficial interest;
WHEREAS, the Board of Trustees, including a majority of the Trustees who are not
"interested persons" (as defined under the Investment Company Act of 1940, as
amended (the "1940 Act")), of Virtus has determined that the exchange of all of
the assets of the Acquired Fund for Acquiring Fund Shares is in the best
interests of the Acquiring Fund shareholders and that the interests of the
existing shareholders of the Acquiring Fund would not be diluted as a
result of this transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees who are not
"interested persons" (as defined under the 1940 Act), of Blanchard has
determined that the exchange of all of the assets of the Acquired Fund for
Acquiring Fund Shares is in the best interests of the Acquired Fund
shareholders and that the interests of the existing shareholders of the
Acquired Fund would not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties agree as follows:
1.TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash other than
cash in an amount necessary to pay any unpaid dividends and distributions
as provided in paragraph 1.5 and the Acquiring Fund agrees in exchange
therefor (i) to deliver to the Acquired Fund the number of Acquiring Fund
Shares, including fractional Acquiring Fund Shares, determined as set
forth in paragraph 2.3. Such transaction shall take place at the closing
(the "Closing") on the closing date (the "Closing Date") provided for in
paragraph 3.1. In lieu of delivering certificates for the
Acquiring Fund Shares, the Acquiring Fund shall credit the Acquiring Fund Shares
to the Acquired Fund's account on the stock record books of the Acquiring
Fund and shall deliver a confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred shall be
made on the Closing Date and shall be delivered to Signet Trust Company,
Richmond, Virginia, the Acquiring Fund's custodian (the "Custodian"), for
the account of the
Acquiring Fund, together with proper instructions and all necessary documents to
transfer to the account of the Acquiring Fund, free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered shall be in
the form of currency and immediately available funds payable to the order of the
Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring Fund
any dividends or interest received on or after the Closing Date with respect to
assets transferred to the Acquiring Fund hereunder. The Acquired Fund will
transfer to the Acquiring Fund any distributions, rights or other assets
received by the Acquired Fund after the Closing Date as distributions on or
with respect to the securities transferred. Such assets shall be deemed
included in assets transferred to the Acquiring Fund on the Closing Date
and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable (the
"Liquidation Date"), the Acquired Fund will liquidate and distribute pro rata to
the Acquired Fund's shareholders of record, determined as of the close of
business on the Closing Date (the "Acquired Fund Shareholders"), the
Acquiring Fund Shares received by the Acquired Fund pursuant to paragraph 1.1.
In addition, each shareholder of record of the Acquired Fund shall have the
right to receive any
unpaid dividends or other distributions which were declared before the Valuation
Date with respect to the shares of the Acquired Fund that are held by the
shareholders on the Valuation Date. Such liquidation and distribution will be
accomplished by the transfer of the Acquiring Fund Shares then credited to the
account of the Acquired Fund on the books of the Acquiring Fund to open accounts
on the share record books of the Acquiring Fund in the names of the Acquired
Fund Shareholders and representing the respective pro rata number of the
Acquiring Fund Shares due such shareholders.
All issued and outstanding shares of the Acquired Fund will simultaneously
be canceled on the books of the Acquired Fund. Share
certificates representing interests in the Acquired Fund will represent a number
of Acquiring Fund Shares after the Closing Date as determined in accordance with
Section 2.3. The Acquiring Fund shall not issue certificates representing the
Acquiring Fund Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be issued in
the manner described in the Acquiring Fund's current prospectus and statement of
additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund Shares
in a name other than the registered holder of the Acquired Fund shares on the
books of the Acquired Fund as of that time shall, as a condition of such
issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Acquired Fund up to and including the
Closing Date and such later dates, with respect to liquidation and
termination of the Acquired Fund, on which the Acquired Fund is
liquidated and terminated.
2.VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of the
close of the New York Stock Exchange (normally 4:00 p.m., Eastern time) on the
Closing Date (such time and date being hereinafter called the "Valuation Date"),
using the valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.2 The net asset value of an Acquiring Fund Share shall be the net asset
value per share computed as of the close of the New York Stock Exchange
(normally 4:00 p.m., Eastern time) on the Valuation Date, using the
valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in
paragraph 2.1 by the net asset value of one Acquiring Fund Share determined
in accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the regular
practices of the Acquiring Fund.
3.CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be January 26, 1996 or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall be
deemed to take place simultaneously as of the close of business on the Closing
Date unless otherwise provided. The Closing shall be held at 4:00 p.m. (Eastern
time) at the offices of the Acquiring Fund, Federated Investors Tower,
Pittsburgh, PA 15222-3779, or such other time and/or place as the parties may
mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for portfolio
securities of the Acquiring Fund or the Acquired Fund shall be closed to trading
or trading thereon shall be restricted; or (b) trading or the reporting of
trading shall be disrupted so that accurate appraisal of the value of the
net assets of the Acquiring Fund or the Acquired Fund is impracticable, the
Closing Date shall be postponed until the first business day after the day
when trading shall have been fully resumed and reporting shall have been
restored.
3.3 Federated Services Company, as transfer agent for each of the
Acquired Fund and Acquiring Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of the Acquired Fund Shareholders and the number and
percentage ownership of outstanding
shares owned by each such shareholder immediately prior to the Closing. The
Acquiring Fund shall issue and deliver a confirmation evidencing the Acquiring
Fund Shares to be credited on the Closing Date to the Secretary of the Acquired
Fund, or provide evidence satisfactory to the Acquired Fund that such Acquiring
Fund Shares have been credited to the Acquired Fund's account on the books of
the Acquiring Fund. At the Closing, each party shall deliver to the other
such bills of sale, checks, assignments, assumption agreements, share
certificates, if any, receipts or other documents as such other party or its
counsel may reasonably request.
4.REPRESENTATIONS AND WARRANTIES.
4.1 Blanchard represents and warrants to Virtus as follows:
(a) Blanchard is a business trust duly organized, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts and has
power to own all of its properties and assets and to carry out this Agreement.
(b) Blanchard is registered under the 1940 Act, as an open-end,
management investment company, and such registration has not been revoked or
rescinded and is in full force and effect.
(c) Blanchard is not, and the execution, delivery and performance of
this Agreement will not result, in material violation of its Declaration of
Trust or By-Laws or of any agreement, indenture, instrument, contract, lease
or other undertaking to which the Acquired Fund is a party or by which it is
bound.
(d) The Acquired Fund has no material contracts or other commitments
outstanding (other than this Agreement) which will result in liability to it
after the Closing Date.
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its knowledge
threatened against the Acquired Fund or any of its properties or assets which,
if adversely determined, would materially and adversely affect its financial
condition or the conduct of its business. The Acquired Fund knows of no facts
which might form the basis for the institution of such proceedings, and is not a
party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions herein contemplated.
(f) The current prospectus and statement of additional information of
the Acquired Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933, as amended (the "1933 Act"),
and the 1940 Act and the rules and regulations of the Securities and Exchange
Commission (the "Commission") thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein as necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(g) The Statements of Assets and Liabilities of the Acquired Fund at
April 30, 1995 have been audited by Price Waterhouse LLP, independent
accountants, and have been prepared in accordance with generally accepted
accounting principles, consistently applied, and such statements
(copies of which have been furnished to the Acquiring Fund) fairly reflect
the financial condition of the Acquired Fund as of such dates, and there are
no known contingent liabilities of the Acquired Fund as of such dates not
disclosed therein.
(h) Since April 30, 1995, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns and reports
of the Acquired Fund required by law to have been filed by such date shall have
been filed, and all Federal and other taxes shall have been paid so far as
due, or provision shall have been made for the payment thereof, and to the
best of the Acquired Fund's knowledge no such return is currently under audit
and no assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Acquired Fund has met
the requirements of Subchapter M of the Code for qualification and treatment
as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund are, and at
the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. All of the issued and outstanding shares of the Acquired
Fund will, at the time of the Closing, be held by the persons and in the
amounts set forth in the records of the transfer agent as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired
Fund shares, nor is there outstanding any security convertible into any of
the Acquired Fund shares.
(l) On the Closing Date, the Acquired Fund will have full right, power
and authority to sell, assign, transfer and deliver the assets to be transferred
by it hereunder.
(m) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of Blanchard's Trustees
and, subject to the approval of the Acquired Fund Shareholders, this Agreement
constitutes the valid and legally binding obligation of the Acquired Fund
enforceable in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws relating to or affecting creditors' rights generally and court decisions
with respect thereto, and to general principles of equity and the discretion
of the court (regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund (the
"Prospectus/Proxy Statement") to be included in the Registration Statement
referred to in paragraph 5.5 (other than information therein that relates to the
Acquiring Fund) will, on the effective date of the Registration Statement and on
the Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(o) Virtus Capital Management, Inc. has agreed to assume the expense
of the reorganization including accountants' fees, legal fees, registration
fees, transfer taxes (if any), the fees of banks and transfer agents and the
costs of preparing, printing, copying and mailing proxy solicitation
materials to the Acquiring Fund's shareholders and the costs of holding the
Special Meeting of Shareholders.
4.2 Virtus represents and warrants to Blanchard as follows:
(a) Virtus is a business trust duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts and has the
power to carry on its business as it is now being conducted and to carry out
this Agreement.
(b) Virtus is registered under the 1940 Act as an open-end, management
investment company, and such registration has not been revoked or rescinded
and is in full force and effect.
(c) The current prospectus and statement of additional information of the
Acquiring Fund conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(d) Virtus is not, and the execution, delivery and performance of this
Agreement will not result, in material violation of its Declaration of Trust or
By-Laws or of any agreement, indenture, instrument, contract, lease or other
undertaking to which the Acquiring Fund is a party or by which it is bound.
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its knowledge
threatened against the Acquiring Fund or any of its properties or assets
which, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business. The Acquiring Fund
knows of no facts which might form the basis for the institution of such
proceedings, and is not a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which materially and
adversely affects its business or its ability to consummate the transactions
contemplated herein.
(f) The Statement of Assets and Liabilities of the Acquiring Fund at
September 30, 1994, have been audited by Deloitte & Touche LLP, independent
auditors, and have been prepared in accordance with generally accepted
accounting principles, consistently applied, and such statements (copies of
which have been furnished to the Acquired Fund) fairly reflect the financial
condition of the Acquiring Fund as of such date.
(g) The unaudited Statement of Assets and Liabilities of the Acquiring
Fund at March 31, 1995, have been prepared in accordance with generally accepted
accounting principles, consistently applied, and such statements (copies of
which have been supplied to the Acquired Fund) fairly reflect the financial
condition of the Acquiring Fund as of such date.
(h) Since September 30, 1994, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of any indebtedness, except as otherwise
disclosed to and accepted by the Acquired Fund.
(i) At the Closing Date, all Federal and other tax returns and reports
of the Acquiring Fund required by law then to be filed shall have been filed,
and all Federal and other taxes shown as due on said returns and reports
shall have been paid or provision shall have been made for the payment thereof.
(j) For each fiscal year of its operation, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification and treatment
as a regulated investment company.
(k) All issued and outstanding shares of the Acquiring Fund are, and
at the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. The Acquiring Fund does not have outstanding any options,
warrants or other right to subscribe for or purchase any of the Acquiring Fund
Shares, nor is there outstanding any security convertible into any Acquiring
Fund Shares.
(l) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action, if any, on the part of Virtus'
Trustees, and this Agreement constitutes the valid and legally binding
obligation of the Acquiring Fund enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto, and
to general principles of equity and the discretion of the court (regardless
of whether the enforceability is considered in a proceeding in equity or
at law).
(m) The Prospectus/Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund) will, on the
effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
misleading.
(n) The Acquiring Fund has entered into an agreement under which
Virtus Capital Management, Inc. will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
5.COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date, it
being understood that such ordinary course of business will include customary
dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days after
the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in such
form as is reasonably satisfactory to the Acquiring Fund, a statement of the
earnings and profits of the Acquired Fund for Federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section
381 of the Code and which will be certified by the Acquired Fund's
President and its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(n), all
to be included in a Registration Statement on Form N-14 of the Acquiring
Fund (the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state Blue Sky or securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
5.7 Prior to the Valuation Date, the Acquired Fund shall have declared a
dividend or dividends, with a record date and ex-dividend date prior to the
Valuation Date, which, together with all previous dividends, shall have the
effect of distributing to its shareholders all of its investment company
taxable income, if any, for the taxable periods or years ended on or before
April 30, 1995 and for the period from said date to and including the Closing
Date (computed without regard to any deduction for dividends paid), and all
of its net capital gain, if any, realized in taxable periods or years ended
on or before April 30, 1995 and in the period from said date to and including
the Closing Date.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions provided for
herein shall be subject, at its election, to the performance by the Acquired
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Acquired Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot and
the holding periods of such securities, as of the Closing Date, certified by the
Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquiring Fund, to the effect that the representations
and warranties of the Acquired Fund made in this Agreement are true and
correct at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquiring Fund shall reasonably request.
7.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions provided
herein shall be subject, at its election, to the performance by the Acquiring
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of Blanchard Funds contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
reasonably satisfactory to the Acquired Fund, to the effect that the
representations and warranties of the Acquiring Fund made in this
Agreement are true and correct at and as of the Closing Date, except as
they may be affected by the transactions contemplated by this Agreement,
and as to such other matters as the Acquired Fund shall reasonably request.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND AND
THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required
to consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of the Acquired Fund's
Declaration of Trust.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit
consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Acquired Fund,
provided that either party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act.
8.5 Blanchard and Virtus shall have received an opinion of Dickstein,
Shapiro & Morin, L.L.P. substantially to the effect that for Federal income tax
purposes:
(a) The transfer of all of the Acquired Fund assets in
exchange for the Acquiring Fund Shares and the distribution of the Acquiring
Fund Shares to the shareholders of the Acquired Fund in liquidation of the
Acquired Fund will constitute a "reorganization" within the meaning of Section
368(a)(1)(C) of the Code; (b) No gain or loss will be recognized by the
Acquiring Fund upon the receipt of the assets of the Acquired Fund solely in
exchange for the Acquiring Fund Shares; (c) No gain or loss will be
recognized by the Acquired Fund upon the transfer of the Acquired Fund
assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the
distribution (whether actual or constructive) of the Acquiring Fund Shares to
Acquired Fund Shareholders in exchange for their shares of the Acquired
Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares; (e) The tax basis of the Acquired Fund assets
acquired by the Acquiring Fund will be the same as the tax basis of
such assets to the Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by each of the
Acquired Fund Shareholders pursuant to the Reorganization
will be the same as the tax basis of the Acquired Fund shares held by such
shareholder immediately prior to the Reorganization; (g) The holding period of
the assets of the Acquired Fund in the hands of the Acquiring Fund will
include the period during which those assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares to be received by each
Acquired Fund Shareholder will include the period during which the Acquired
Fund shares exchanged therefor were held by such shareholder
(provided the Acquired Fund shares were held as capital assets on the date
of the Reorganization).
9.TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the Acquired
Fund or the Acquiring Fund at any time prior to the Closing Date (and
notwithstanding any vote of the Board of Trustees of the Acquired Fund) if
circumstances should develop that, in the opinion of either of the parties'
Board of Trustees, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated hereby
is abandoned pursuant to the provisions of this Section 9, this Agreement shall
become void and have no effect, without any liability on the part of any party
hereto or the trustees, officers or shareholders of the Acquiring Fund or of the
Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing conditions may be
waived by the Board of Trustees of the Acquiring Fund or of the Acquired
Fund, if, in the judgment of either, such waiver will not have a material
adverse effect on the benefits intended under this Agreement to the
shareholders of the Acquiring Fund or of the Acquired Fund, as the case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided for
herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings
of every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Massachusetts, without giving effect to
principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts,
each of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
11.6 The Acquired Fund is hereby expressly put on notice of the limitation
of liability as set forth in Article XI of the Declaration of Trust of the
Acquiring Fund and agrees that the obligations assumed by the Acquiring Fund
pursuant to this Agreement shall be limited in any case to the Acquiring
Fund and its assets and the Acquired Fund shall not seek satisfaction of
any such obligation from the shareholders of the Acquiring Fund, the
trustees, officers, employees or agents of the Acquiring Fund or any of them.
11.7 The Acquiring Fund is hereby expressly put on notice of the limitation
of liability as set forth in Article XI of the Declaration of Trust of the
Acquired Fund and agrees that the obligations assumed by the Acquired Fund
pursuant to this Agreement shall be limited in any case to the Acquired Fund and
its assets and the Acquiring Fund shall not seek satisfaction of any such
obligation from the shareholders of the Acquired Fund, the trustees, officers,
employees or agents of the Acquired Fund or any of them.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have caused this
Agreement and Plan of Reorganization to be executed and attested on its
behalf by its duly authorized representatives as of the date first above
written.
Acquired Fund:
BLANCHARD FUNDS,
on behalf of its Portfolio,
BLANCHARD 100% TREASURY MONEY
MARKET FUND
Attest:
By: /s/ Joseph S. Machi
/s/ C. Grant Anderson
Assistant Secretary Name: Joseph S. Machi
Title: Vice President
Acquiring Fund:
THE VIRTUS FUNDS,
on behalf of its Portfolio,
THE TREASURY MONEY MARKET FUND
Attest:
By: /s/ Joseph S. Machi
/s/ C. Grant Anderson
Assistant Secretary Name: Joseph S. Machi
Title: Vice President
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 8, 1995
ACQUISITION OF THE ASSETS OF
BLANCHARD 100% TREASURY MONEY MARKET FUND,
A PORTFOLIO OF BLANCHARD FUNDS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER: 1-800-829-3863
BY AND IN EXCHANGE FOR INVESTMENT SHARES OF
THE TREASURY MONEY MARKET FUND,
A PORTFOLIO OF THE VIRTUS FUNDS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER: 1-800-723-9512
This Statement of Additional Information dated December 8, 1995 is not a
prospectus. A Prospectus/Proxy Statement dated December 8, 1995 related to the
above-referenced matter may be obtained from The Virtus Funds on behalf of its
portfolio, The Treasury Money Market Fund, through The Virtus Funds at Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779. This Statement of
Additional Information should be read in conjunction with such Prospectus/Proxy
Statement.
TABLE OF CONTENTS
1. Statement of Additional Information of The Treasury Money Market Fund,
dated March 1, 1995
2. Statement of Additional Information of Blanchard 100% Treasury Money Market
Fund, dated August 7, 1995
3. Financial Statements of The Treasury Money Market Fund, dated September 30,
1994
FEDERATED SECURITIES
4.
CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
Financial Statements of Blanchard 100% Treasury Money Market Fund, dated
April 30, 1995
5. Financial Statements (unaudited) of The Treasury Money Market Fund, dated
March 31, 1995
6. Pro Forma Financial Statements
The Statement of Additional Information of The Treasury Money Market Fund dated
January 31, 1995 (reprinted on March 21, 1995), is incorporated herein by
reference to Post-Effective Amendment No. 11 to The Virtus Funds' Registration
Statement on Form N-1A (File No. 33-36451) which was filed with the Securities
and Exchange Commission on or about January 26, 1995. A copy may be obtained
from The Virtus Funds at Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779. Telephone Number: 1-800-723-9512.
The Statement of Additional Information of Blanchard 100% Treasury Money Market
Fund dated August 7, 1995, is incorporated herein by reference to Post-Effective
Amendment No. 29 to Blanchard Funds' Registration Statement on Form N-1A (File
No. 33-3165) which was filed with the Securities and Exchange Commission on or
about August 7, 1995. A copy may be obtained from Signet Financial Services,
Inc. at 41 Madison Avenue, 24th Floor, New York, New York 10010. Telephone
Number: 1-800-829-3863.
The audited financial statements of The Treasury Money Market Fund dated
September 30, 1994 are incorporated herein by reference to the Amended Annual
Report dated September 30, 1994, and filed with the Securities and Exchange
Commission on or about March 21, 1995.
The audited financial statements of Blanchard 100% Treasury Money Market Fund
dated April 30, 1995 are incorporated herein by reference to the Statement of
Additional Information dated August 7, 1995, and filed with the Securities and
Exchange Commission on or about August 7, 1995.
The unaudited financial statements of The Treasury Money Market Fund dated March
31, 1995 are incorporated herein by reference to the Semi-Annual Report dated
March 31, 1995, and filed with the Securities and Exchange Commission on or
about June 2, 1995.
ii
THE BLANCHARD 100% TREASURY MONEY MARKET FUND
THE TREASURY MONEY MARKET FUND
INTRODUCTION TO PROPOSED FUND MERGER
SEPTEMBER 30, 1995 (UNAUDITED)
The accompanying unaudited Pro Forma Combining Portfolio of Investments,
Statement of Assets and Liabilities and the Statement of Operations reflect the
records of The Blanchard 100% Treasury Money Market Fund and The Treasury Money
Market Fund (the "Funds") at and for the year ended September 30, 1995. These
statements have been derived from the Funds' books and records utilized in
calculating daily net asset value at September 30, 1995.
THE BLANCHARD 100% TREASURY MONEY MARKET FUND
THE TREASURY MONEY MARKET FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO OF INVESTMENTS (UNAUDITED)
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNTVALUE
THE BLANCHARD THE THE BLANCHARD THE
100% TREASURY TREASURY 100% TREASURY TREASURY
MONEY MARKET MONEY MARKET PRO FORMA MONEY MARKET MONEY MARKET PRO FORMA
FUND FUND COMBINED FUND FUND COMBINED
<S> <C> <C> <C> <C> <C> <C>
U.S. TREASURY BILLS - 33.8%
$132,268,000 $132,268,000 10/5/1995 - 12/7/1995 $131,538,640 $----- $131,538,640
U.S. Treasury Notes - 32.3%
10,000,000 10,000,000 4.625%, 2/15/1996 9,961,781 9,961,781
115,000,000 115,000,000 3.875% - 9.50%, 10/15/1995 -
7/15/1996 115,521,383 115,521,383
Total U.S. Treasury Notes 9,961,781 115,521,383 125,483,164
Repurchase Agreements - 33.9%
10,000,000 10,000,000 Bear, Stearns & Co., Inc.,
5.75%,
dated 9/27/1995, due 10/4/1995 10,000,000 10,000,000
10,000,000 10,000,000 Merrill Lynch, Pierce, Fenner
& Smith Co., Inc., 5.70%,
dated 9/29/1995, due 10/2/1995 10,000,000 10,000,000
55,000,000 55,000,000 NationsBank, 6.40%, dated
9/29/1995, due 10/2/1995 55,000,000 55,000,000
24,000,000 24,000,000 Nikko Securities Co.
International, Inc., 6.45%,
dated 9/29/1995, due 10/2/1995 24,000,000 24,000,000
32,747,139 32,747,139 Prudential Securities, Inc.,
6.25% , dated 9/29/1995, due
10/2/1995 32,747,139 32,747,139
Total Repurchase Agreements ----- 131,747,139 131,747,139
Total Investments, at amortized
cost $141,500,421 $247,268,522 $388,768,943
</TABLE>
*The repurchase agreements are fully collateralized by U.S. treasury
obligations based on market prices at the date of the portfolio.
**Although final maturity falls beyond seven days, a liquidity feature is
included in the transaction to permit termination of the repurchase
agreement.
Note: The categories of investments are shown as a percentage of net assets
THE BLANCHARD 100% TREASURY MONEY MARKET FUND
THE TREASURY MONEY MARKET FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
THE BLANCHARD THE
100% TREASURY TREASURY
MONEY MARKET MONEY MARKET PRO FORMA
FUND FUND COMBINED
<S> <C> <C> <C>
ASSETS:
Repurchase agreements, at amortized cost $ ----- $ 131,747,139 $ 131,747,139
Investments in securities, at amortized
cost and value 141,500,421 115,521,383 257,021,804
0
Cash 137,294 ----- 137,294
Receivables for: 0
Investments sold 20,299,582 ----- 20,299,582
Shares of beneficial interest sold 207,443 ----- 207,443
Interest 60,326 2,577,248 2,637,574
Total assets 162,205,066 249,845,770 412,050,836
LIABILITIES: 0
Payables for:
Shares of beneficial interest
repurchased 786,380 ----- 786,380
Investments purchased 19,832,077 ----- 19,832,077
Dividends to shareholders 565,551 1,564,680 2,130,231
Payable to adviser ----- 137,806 137,806
Accrued expenses and other liabilities 136,121 124,041 260,162
Total liabilities 21,320,129 1,826,527 23,146,656
NET ASSETS $ 140,884,937 $ 248,019,243 $ 388,904,180
Trust Shares $ ----- $ 208,656,142 $ 208,656,142
Investment Shares $ 140,884,937 $ 39,363,101 $ 180,248,038
SHARES OUTSTANDING
Trust Shares ----- 208,656,142 208,656,142
Investment Shares 140,980,041 39,363,101 180,343,142
NET ASSET VALUE, OFFERING PRICE AND
Redemption Proceeds Per Share: $1.00 $1.00 $ 1.00
</TABLE>
(See Notes to Pro Forma Financial Statements)
THE BLANCHARD 100% TREASURY MONEY MARKET FUND
THE TREASURY MONEY MARKET FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
THE BLANCHARD THE
100% TREASURY TREASURY
MONEY MARKET MONEY MARKET PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $9,246,150 $27,060,335 $0 $36,306,485
EXPENSES:
Investment management fee 841,086 2,347,424 3,188,510
Administration fee 15,192 500,283 33,275 A 548,750
Plan of distribution fee -- 80,097 (80,097) B --
Transfer agent fees 455,315 48,887 (24,000) C 480,202
Trustees' fees, retirement plan
curtailment and expenses 268,091 2,432 (206,000) D 64,523
Custodian fees 34,300 135,276 (47,000) E 122,576
Accounting fees 156,026 83,695 (26,000) F 213,721
Professional fees 56,779 29,822 86,601
Shareholder reports and notices 96,020 17,026 (12,000) G 101,046
Registration fees 38,181 67,929 (38,181) H 67,929
Other 17,274 30,294 47,568
Total expenses 1,978,264 3,343,165 (400,003) 4,921,426
Waivers--
Investment management fee (241,210) (469,485) 72,993 I (637,702)
Net expenses 1,737,054 2,873,680 (327,010) 4,283,724
Net investment income $7,509,096 $24,186,655 $327,010 $32,022,761
</TABLE>
(See Legend on following page)
THE BLANCHARD 100% TREASURY MONEY MARKET FUND
THE TREASURY MONEY MARKET FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED SEPTEMBER 30, 1995 (UNAUDITED)
A) Federated Administrative Services ("FAS") provides the Funds with certain
administrative personnel and services. FAS fees would be charged at the
rate of .15 of 1% on the first $250 million of average net assets; .125 of
1% of the next $250 million of average net assets; .10 of 1% of the next
$250 million of average net assets; and .075 of 1% on assets in excess of $750
million.
B) Federated Securities Corp. ("FSC") serves as distributor for The Treasury
Money Market Fund. This adjustment reflects the waiver of the entire
distribution fee by FSC.
C) Federated Services Company ("FServ") serves as transfer agent for the
Funds. This adjustment reflects the elimination of the fixed monthly charge
per fund for The Blanchard 100% Treasury Money Market Fund.
D) Adjustment to reflect the elimination of the pension plan expense covering
the independent Trustees of The Blanchard 100% Treasury Money Market Fund.
E) Signet Trust Company serves as custodian for the Funds. Custody Fees would
be charged at the rate of .05 of 1% on the first $100 million of average net
assets of the Fund, and .025 of 1% of the remaining assets. This adjustment
reflects the decrease in fees due to the increased assets of the combined
fund.
F) FServ maintains the Funds accounting records. The FServ Fee is based on
the level of each Fund's average net assets for the period, plus out-of-pocket
expenses. This adjustment reflects the decrease of the minimum charge
associated with The Treasury Money Market Fund.
G) Printing and postage expenses are adjusted to reflect estimated savings to
be realized by combining two portfolios into a single portfolio.
H) Adjustment to reflect the elimination of state registration costs for The
Blanchard 100% Treasury Money Market Fund.
I) Virtus Capital Management, Inc. (The "Manager") receives for its services
an advisory fee of 0.50 of 1% of the Fund's average daily net assets. The
Manager may voluntarily choose to waive a portion of its fee. The Manager
can modify or terminate this voluntary waiver at any time at its sole
discretion.
THE BLANCHARD 100% TREASURY MONEY MARKET FUND
THE TREASURY MONEY MARKET FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF COMBINATION
The unaudited Pro Forma Combining Portfolio of Investments, Statement of
Assets and Liabilities and Statement of Operations reflect the records of
the Blanchard 100% Treasury Money Market Fund and The Treasury Money Market
Fund (collectively, the "Funds") for the year ended September 30, 1995.
These statements have been derived from the books and records utilized in
calculating daily net asset value at September 30, 1995.
The Pro Forma Combining Portfolio of Investments, Statement of Assets and
Liabilities and Statement of Operations should be read in conjunction with
the historical financial statements of the Funds which are incorporated by
reference in the Statement of Additional Information.
The Pro Forma financial statements reflect the anticipated custodial and
accounting fee arrangements for the surviving entity, including anticipated
voluntary fee waivers. Certain other operating costs have also been
adjusted to reflect anticipated expenses of the combined entity. Other
costs which may change as a result of the reorganization are currently
undeterminable.
2. SHARES OF BENEFICIAL INTEREST
The Pro Forma net asset value per share assumes the issuance of 388,845,346
shares of The Treasury Money Market Fund (140,980,041 shares from the
Blanchard 100% Treasury Money Market Fund) which would have been issued at
September 30, 1995, in conjunction with the proposed reorganization.
BLANCHARD 100% TREASURY MONEY MARKET FUND
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
BLANCHARD 100% TREASURY MONEY MARKET FUND
CUSIP NO. 093215101
FOR SPECIAL MEETING OF SHAREHOLDERS JANUARY 26, 1996
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned shareholders of
Blanchard 100% Treasury Money Market Fund, a portfolio of Blanchard Funds,
hereby appoint C. Grant Anderson, Patricia F. Conner, Cathy Ryan, Suzanne Land
and Gia Albanowski or any one of them, true and lawful attorneys, with the power
of substitution of each, to vote all shares of Blanchard 100% Treasury Money
Market Fund, which the undersigned is entitled to vote, at the Special Meeting
of Shareholders to be held on January 26, 1996, at Federated Investors Tower,
Pittsburgh, Pennsylvania, at 2:00 p.m. (Eastern time) and at any adjournment or
postponement thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
PROPOSAL(S)
1) TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION PROVIDING
FOR THE TRANSFER OF THE ASSETS OF BLANCHARD 100% TREASURY MONEY MARKET FUND
TO THE TREASURY MONEY MARKET FUND OF THE VIRTUS FUNDS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES WHO RECOMMEND THAT
YOU VOTE FOR THE PROPOSED REORGANIZATION. The attorneys named will vote the
shares represented by this proxy in accordance with the choices made on this
card. IF NO CHOICE IS INDICATED AS TO ANY ITEM, THIS PROXY WILL BE VOTED
AFFIRMATIVELY ON THAT MATTER.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND RETAIN
THE TOP PORTION. Place the ballot so that the return address, located on the
reverse side of the mail-in-stub, appears through the window of the envelope.
BLANCHARD 100% TREASURY MONEY MARKET FUNDPROXY VOTING MAIL-IN STUB
RECORD DATE SHARES
Please sign EXACTLY as your name(s) appear above. When signing as attorney,
executor, administrator, guardian, trustee, custodian, etc., please give your
full title as such. If a corporation or partnership, please sign the full name
by an authorized officer or partner. If stock is owned jointly, all parties
should sign.
PROPOSAL(S):
1) FOR AGAINST ABSTAIN
---- ---- ----
Dated: , 19
=============== ====
- - - - - ---------------------------
Signature(s) of Shareholders(s)
PART C - OTHER INFORMATION
Item 15. Indemnification
Indemnification is provided to officers and trustees of the Registrant
pursuant to the Registrant's Declaration of Trust, except where such
indemnification is not permitted by law. However, the Declaration of Trust does
not protect the trustees from liabilities based on willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of their office.
Trustees and officers of the Registrant are insured against certain
liabilities, including liabilities arising under the Securities Act of 1933 (the
"Act").
Insofar as indemnification for liabilities arising under the Act may be
permitted to trustees, officers, and controlling persons of the Registrant by
the Registrant pursuant to the Declaration of Trust or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by trustees, officers, or controlling persons of the Registrant in
connection with the successful defense of any act, suit, or proceeding) is
asserted by such trustees, officers, or controlling persons in connection with
the shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Insofar as indemnification for liabilities may be permitted pursuant to
Section 17 of the Investment Company Act of 1940 for trustees, officers, and
controlling persons of the Registrant by the Registrant pursuant to the
Declaration of Trust or otherwise, the Registrant is aware of the position of
the Securities and Exchange Commission as set forth in Investment Company Act
Release No. IC-11330. Therefore, the Registrant undertakes that in addition to
complying with the applicable provisions of the Declaration of Trust or
otherwise, in the absence of a final decision on the merits by a court or other
body before which the proceeding was brought, that an indemnification payment
will not be made unless in the absence of such a decision, a reasonable
determination based upon factual review has been made: (i) by a majority vote of
a quorum of non-party trustees who are not interested persons of the Registrant;
or (ii) by independent legal counsel in a written opinion that the indemnitee
was not liable for an act of willful misfeasance, bad faith, gross negligence,
or reckless disregard of duties. The Registrant further undertakes that
advancement of expenses incurred in the defense of a proceeding (upon
undertaking for repayment unless it is ultimately determined that
indemnification is appropriate) against an officer, trustee, or controlling
person of the Registrant will not be made absent the fulfillment of at least one
of the following conditions: (i) the indemnitee provides security for his
undertaking; (ii) the Registrant is insured against losses arising by reason of
any lawful advances; or (iii) a majority of a quorum of disinterested non-party
trustees or independent legal counsel in a written opinion makes a factual
determination that there is reason to believe the indemnitee will be entitled to
indemnification.
Item 16. Exhibits
1.1 Conformed Copy of Declaration of Trust of the Registrant dated June 20,
1990(2)
1.2 Conformed Copy of Amendment No. 1, dated September 20, 1990, to the
Declaration of Trust;(5)
1.3 Conformed Copy of Amendment No. 2, dated November 14, 1991, to the
Declaration of Trust;(6)
1.4 Conformed Copy of Amendment No. 3, dated October 1, 1992, to the
Declaration of Trust;(7)
1.5 Conformed Copy of Amendment No. 4, dated October 1, 1992, to the
Declaration of Trust;(2)
1.6 Conformed Copy of Amendment No. 5, dated May 27, 1994, to the
Declaration of Trust;(2)
1.7 Conformed Copy of Amendment No. 6, dated July 28, 1994, to the
Declaration of Trust;(2)
1.8 Conformed Copy of Amendment No. 7, dated December 25, 1993, to the
Declaration of Trust;(2)
1.9 Conformed Copy of Amendment No. 8, dated December 1, 1994, to the
Declaration of Trust;(2)
2. Copy of Bylaws of the Registrant(1)
3. Not Applicable
4. Agreement and Plan of Reorganization is included as Appendix A to the
Combined Proxy Statement and Prospectus of this Registration Statement*
5. Not Applicable
6.1 Conformed Copy of Investment Advisory Contract of the Registrant, and
Exhibits A-G thereto(2)
6.2 Form of Exhibit H to the present Investment Advisory Contract of the
Registrant to add The Strategic Stock Fund to the existing Investment
Advisory Contract(3)
7.1 Conformed Copy of Distributor's Contract of the Registrant and Exhibits
A-D thereto(2)
7.2 Form of Exhibit E to the Distributor's Contract of the Registrant(3)
8. Not Applicable
9.1 Conformed Copy of Custodian Agreement of the Registrant(4)
9.2 Conformed copy of Transfer Agency and Service Agreement (Fund Accounting
and Shareholder Recordkeeping) of the Registrant(4)
10.1 Conformed Copy of the Distribution Plan of the Registrant and Amendment
No. 1 and Exhibit A thereto, and Amendment No. 2 thereto(2)
10.2 Copy of Rule 12b-1 Agreement of the Registrant and Amendment Nos. 1 and
2 thereto(2)
11. Opinion regarding legality of shares being issued*
12. Form of Opinion regarding tax consequences of Reorganization*
13.1 Conformed Copy of Administrative Services Agreement of the Registrant(2)
13.2 Conformed Copy of previous Administrative Services Agreement of the
Registrant(2)
14.1 Conformed Copy of Consent of Deliotte & Touche LLP, Independent Public
Accountants*
14.2 Conformed Copy of Consent of Price Waterhouse LLP, Independent
Accountants*
15. Not Applicable
16. Conformed Copy of Power of Attorney(1)
17.1 Copy of Declaration under Rule 24f-2*
17.2 Form of Proxy*
* Filed electronically.
(1) Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed on August 24, 1990 (File Nos. 33-36451 and 811-
6158).
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 to its Registration Statement on Form N-1A filed December 21,
1994 (File Nos. 33-36451 and 811-6158).
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 on Form N-1A filed January 26, 1995 (File Nos. 33-36451 and
811-6158).
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 to its Registration Statement on Form N-1A filed June 20, 1994
(File Nos. 33-36451 and 811-6158).
(5) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 3 to its Registration Statement on Form N-1A filed October 9, 1990
(File Nos. 33-36451 and 811-6158).
(6) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 3 to its Registration Statement on Form N-1A filed December 2,
1991 (File Nos. 33-36451 and 811-6158).
(7) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 to its Registration Statement on Form N-1A filed November 24,
1993 (File Nos. 33-36451 and 811-6158).
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public reofferring
of the securities registered through the use of a prospectus which is a part of
this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the
reofferring prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
THE VIRTUS FUNDS, has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Pittsburgh, Commonwealth of Pennsylvania, on November 9, 1995.
THE VIRTUS FUNDS
(Registrant)
By:/s/ C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
November 9, 1995
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
NAME TITLE DATE
By:/s/C. Grant Anderson
C. Grant Anderson Attorney In Fact November 9, 1995
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Edward C. Gonzales* President, Treasurer and
Trustee (Principal Financial
and Accounting Officer)
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
Exhibit 11
FEDERATED ADMINISTRATIVE SERVICES
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
October 30, 1995
The Trustees of
The Virtus Funds
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
The Virtus Funds, a Massachusetts business trust ("Trust"), proposes to
issue shares of beneficial interest representing interests in a separate
portfolio of securities known as The Treasury Money Market Fund, Investment
Shares (such shares of beneficial interest being herein referred to as "Shares")
in connection with the acquisition of the assets of Blanchard 100% Treasury
Money Market Fund, a portfolio of Blanchard Funds, a Massachusetts business
trust, pursuant to the Agreement and Plan of Reorganization dated October 27,
1995 ("Agreement"), filed as an exhibit to the registration statement of the
Trust filed on Form N-14 (Securities Act of 1933 No. to be assigned) under the
Securities Act of 1933 as amended ("N-14 Registration").
As counsel I have participated in the organization of the Trust, its
registration under the Investment Company Act of 1940, the registration of its
securities on Form N-1A under the Securities Act of 1933 and its N-14
Registration. I have examined and am familiar with the written Declaration of
Trust dated June 20, 1990 ("Declaration of Trust"), the Bylaws of the Trust, the
Agreement and such other documents and records deemed relevant. I have also
reviewed questions of law and consulted with counsel thereon as deemed
necessary or appropriate for the purposes of this opinion.
Based upon the foregoing, it is my opinion that:
1. The Trust is duly organized and validly existing pursuant to the
Declaration of Trust.
2. The Shares which are currently being registered by the N-14
Registration may be legally and validly issued in accordance with the provisions
of the Agreement and the Declaration of Trust upon receipt of consideration
sufficient to comply with the provisions of Article III, Section 3, of the
Declaration of Trust and subject to compliance with the Investment
Company Act of 1940, as amended, and applicable state laws regulating the sale
of securities. Such Shares, when so issued, will be fully paid and non-
assessable.
I consent to your filing this opinion as an exhibit to the N-14
Registration referred to above and to any application or registration statement
filed under the securities laws of any of the states of the United States.
Very truly yours,
FEDERATED ADMINISTRATIVE
SERVICES
By:/s/ C. Grant Anderson
October 27, 1995
The Virtus Funds, on behalf of its portfolio,
The Treasury Money Market Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Blanchard Funds, on behalf of its portfolio,
Blanchard 100% Treasury Money Market Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Ladies and Gentlemen:
We have acted as special counsel in connection with, and you have requested
our opinion concerning the federal income tax consequences of, a transaction
(the "Reorganization") in which all of the assets of Blanchard 100% Treasury
Money Market Fund, (the "Acquired Fund"), a portfolio of Blanchard Funds, a
Massachusetts business trust ("Blanchard"), will be acquired by The Virtus
Funds, a Massachusetts business trust ("Virtus"), on behalf of its portfolio,
The Treasury Money Market Fund (the "Acquiring Fund"), in exchange solely for
Institutional Shares of Acquiring Fund (the "Acquiring Fund Shares"). The terms
and conditions of this transaction are set forth in an Agreement and Plan of
Reorganization dated October 27, 1995 between Virtus, on behalf of the Acquiring
Fund, and Blanchard, on behalf of the Acquired Fund (the "Agreement"). This
opinion is rendered to you pursuant to paragraph 8.5 of the Agreement, and all
terms used herein have the meanings assigned to them in the Agreement.
Both Virtus and Blanchard are open-end, management investment companies
which qualify as regulated investment companies described in Section 851(a) of
the Internal Revenue Code of 1986, as amended (the "Code"). The Acquired Fund
and the Acquiring Fund are engaged in the business of investing in
professionally managed portfolios of short-term U.S. Treasury obligations.
On the Closing Date under the Agreement, the Acquired Fund will transfer
its entire investment portfolio to the Acquiring Fund. In exchange, the
Acquiring Fund will transfer, to the Acquired Fund, Acquiring Fund Shares in an
amount equal in value to the assets transferred by the Acquired Fund to the
Acquiring Fund. The Acquired Fund will thereupon liquidate and distribute its
Acquiring Fund Shares pro rata to its shareholders ("Acquired Fund
Shareholders").
We have reviewed and relied upon the representations contained in the
Agreement and in such other documents and instruments as we have deemed
necessary for the purposes of this opinion, and have reviewed the applicable
provisions of the Code, current regulations and administrative rules thereunder
and pertinent case law.
Based upon the foregoing, and assuming that the Reorganization and related
transactions will take place as described in the Agreement, we are of the
opinion that, for federal income tax purposes:
(a) The transfer of all of the Acquired Fund assets in exchange for the
Acquiring Fund Shares and the distribution of the Acquiring Fund Shares to the
Acquired Fund Shareholders in liquidation of the Acquired Fund will constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code;
(b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for the Acquiring
Fund Shares;
(c) No gain or loss will be recognized by the Acquired Fund upon the
transfer of the Acquired Fund assets to the Acquiring Fund in exchange for the
Acquiring Fund Shares or upon the distribution (whether actual or constructive)
of the Acquiring Fund Shares to Acquired Fund Shareholders in exchange for their
shares of the Acquired Fund;
(d) No gain or loss will be recognized by the Acquired Fund Shareholders
upon the exchange of their Acquired Fund shares for the Acquiring Fund Shares;
(e) The tax basis of the Acquired Fund assets acquired by the Acquiring
Fund will be the same as the tax basis of such assets to the Acquired Fund
immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by each of the
Acquired Fund Shareholders pursuant to the Reorganization will be the same as
the tax basis of the Acquired Fund shares held by such shareholder immediately
prior to the Reorganization;
(g) The holding period of the assets of the Acquired Fund in the hands of
the Acquiring Fund will include the period during which those assets were held
by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares received by each
Acquired Fund Shareholder will include the period during which the Acquired Fund
shares exchanged therefor were held by such shareholder (provided the Acquired
Fund shares were held as capital assets on the date of the Reorganization).
We hereby consent to the filing of a copy of this opinion with the
Securities and Exchange Commission as an exhibit to the Registration Statement
on Form N-14 filed by Virtus in connection with the Reorganization, and to the
references to this firm and this opinion in the Prospectus/Proxy Statement which
is contained in such Registration Statement.
Very truly yours,
/s/ Dickstein, Shapiro & Morin, L.L.P.
Exhibit 14.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement on
Form N-14 of The Virtus Funds of our report dated November 11, 1994 appearing in
the Annual Report of The Virtus Funds for the year ended September 30, 1994 and
incorporated by reference in the Statement of Additional Information dated
January 31, 1995 (revised March 1, 1995).
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
Exhibit 14.2
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of Post-Effective Amendment No. 29 to the registration
statement on Form N-1A, which is incorporated by reference into the
Prospectus/Proxy Statement and Statement of Additional Information constituting
parts of this registration statement on Form N-14 (the "Registration
Statement"), of our report dated June 20, 1995, relating to the financial
statements and financial highlights appearing in the April 30, 1995 Annual
Report to Shareholders of the Blanchard 100% Treasury Money Market Fund, which
appears in such Statement of Additional Information dated August 7, 1995 and to
the incorporation by reference of our report into the Prospectus which
constitutes part of the Registration Statement. We also consent to the
references to us under the headings "Financial Highlights" and "Independent
Accountants" in the Prospectus dated August 7, 1995.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
New York, New York
November 6, 1995
EXHIBIT 17.1
Rule 24f-2 Notice
THE MEDALIST FUNDS
(formerly, Signet Select Funds)
(Fund Name)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
1933 Act No. 33-36451
(i) fiscal period for which notice is filed September 30, 1994
(ii) The number or amount of securities of the
same class or series, if any, which had
been registered under the Securities Act
of 1933, other than pursuant to Rule 24f-2
but which remained unsold at October 1, 1993,
the beginning of the Registrant's fiscal
period -0-
(iii) The number or amount of securities, if
any, registered during the fiscal period
of this notice other than pursuant to
Rule 24f-2 -0- -0-
(iv) The number or amount of securities
sold during the fiscal period of this
notice 1,421,918,146
(v) The number or amount of securities sold
during the fiscal period of this notice
in reliance upon registration pursuant
to Rule 24f-2 (see attached Computation
of Fee) 1,421,918,146
WITNESS the due execution hereof this 15th day of November, 1994.
By: /s/ C. Grant Anderson
C. Grant Anderson
Assistant Secretary
COMPUTATION OF FEE
1. Actual aggregate sale price of Registrant's
securities sold pursuant to Rule 24f-2 during
the fiscal period for which the 24f-2 notice
is filed (see Section v)..................................... $1,587,174,242
2. Reduced by the difference between:
(a) actual aggregate redemption price
of such securities redeemed by the
issuer during the fiscal period for
which the 24f-2 notice is filed........ $1,375,009,656
(b) actual aggregate redemption price
of such redeemed securities
previously applied by the issuer
pursuant to Section 24e(2)(a) for
the fiscal period for which the
24f-2 notice is filed.................. -0- 1,375,009,656
Total amount upon which the fee calculation specified
in Section 6(b) of the Securities Act of 1933 is
based........................................................... $ 212,164,586
FEE SUBMITTED (1/29 of 1% of Total amount)................. $ 73,160
HOUSTON, HOUSTON & DONNELLY
ATTORNEYS AT LAW
2510 CENTRE CITY TOWER
PITTSBURGH, PA. 15222
WILLIAM McC. HOUSTON
FRED CHALMERS HOUSTON, JR.
THOMAS J. DONNELLY
JOHN F. MECK (412) 471-5828 FRED CHALMERS HOUSTON
FAX (412) 471-0736 (1914 - 1971)
MARIO SANTILLI, JR.
THEODORE M. HAMMER
November 15, 1994
The Medalist Funds
(formerly Signet Select Funds)
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
You have requested our opinion for use in conjunction with a
Rule 24f-2 Notice for The Medalist Funds ("Trust") to be filed in
respect of shares of the Trust ("Shares") sold for the fiscal
year ended September 30, 1994, pursuant to the Trust's
registration statement filed with the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933 (File No. 33-
36451) ("Registration Statement").
In its Registration Statement, the Trust elected to register
an indefinite number of Shares pursuant to the provisions of SEC
Rule 24f-2.
We have reviewed the amended Registration Statement of the
Trust and such other documents and records deemed relevant. On
the basis of the foregoing, it is our opinion that the Shares
sold for the fiscal year ended September 30, 1994, registration
of which the Rule 24f-2 Notice makes definite in number, were
legally issued, fully paid and non-assessable.
We consent to your filing this opinion as an Exhibit to the
Rule 24f-2 Notice referred to above, the Registration Statement
of the Trust and to any application or registration statement
filed under the Securities Laws of any of the States of the
United States.
Very truly yours,
Houston, Houston & Donnelly
By: /s/ Thomas J. Donnelly
