[LOGO OF BLANCHARD GROUP]
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 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. BECAUSE THE VIRTUS TREASURY MONEY MARKET
FUND MAY INVEST IN REPURCHASE AGREEMENTS AND THE BLANCHARD 100% TREASURY MONEY
MARKET FUND CANNOT, THE PORTION OF THE VIRTUS TREASURY MONEY MARKET FUND'S
DIVIDENDS WHICH WOULD BE EXEMPT FROM STATE AND LOCAL TAXES MAY BE SMALLER THAN
THE PORTION OF THE BLANCHARD 100% TREASURY MONEY MARKET FUND'S DIVIDENDS WHICH
WOULD BE SO EXEMPT.
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 12/21/95, the 7-day yield and 7-day effective yield
of the Virtus Treasury Money Market Fund were 4.88% and 4.99%,
respectively.*
By comparison, the 7-day yield and 7-day effective yield for the
Blanchard 100% Treasury Money Market Fund were lower at 4.66% and
4.77%, respectively, for that same time period.*
(*Fees of 0.20% have been voluntarily waived by the adviser of the Virtus
Treasury Money Market Fund and fees of 0.12% 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 0.97% and 1.04%, respectively,
the 7-day yield would be 4.68% and 4.54%, respectively, and the 7-day
effective yield would be 4.79% and 4.65%, respectively.)
Of course, there is no assurance that yields will always be higher and ex-
penses 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.
2. The increased asset size of the combined fund could result in a
potentially lower expense ratio for the Virtus Treasury Money
Market Fund than it currently enjoys, although there is no
assurance that this will be the case.
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 February 16,
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. In
addition, as the meeting date approaches, the Investors' Services staff may
call you to remind you to send in your proxy voting card. So please, take a
few moments now to fill out and return the enclosed proxy voting card, while
the material is at hand.
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 Investors' Services
Representative will be standing by between 9:00 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.
[LOGO OF FEDERATED SECURITIES CORP.]
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
[LOGO OF BLANCHARD FUNDS]
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 February 12, 1996 at Federated
Investors Tower, 19th Floor, Pittsburgh, Pennsylvania 15222-3779 for the
following purposes:
1. To approve or disapprove a proposed agreement pursuant to which
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,
John W. McGonigle
Dated: December 29, 1995 Secretary
Shareholders of record at the close of business December 14, 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. 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 9, 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 November 30, 1995 (revised December 29, 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 November 30, 1995 and August 7, 1995,
respectively (relating to the Prospectuses of Virtus Treasury and Blanchard
Treasury, respectively, of the same date) and December 9, 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
<TABLE>
<S> <C>
Summary.................................................................... 1
Risk Factors............................................................... 6
Information About the Reorganization....................................... 6
Information About Blanchard Funds, The Virtus Funds, Blanchard Treasury,
and
Virtus Treasury........................................................... 9
Voting Information......................................................... 9
Exhibit A--Agreement and Plan of Reorganization............................ A-1
</TABLE>
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
(but will not necessarily) 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").
VIRTUS FUNDS
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
COMBINED
VIRTUS
TREASURY/
VIRTUS BLANCHARD BLANCHARD
TREASURY TREASURY TREASURY
-------- --------- ---------
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C>
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) (1).................................. None None None
Redemption Fees (as a percentage of amount
redeemed, if applicable).......................... None None None
Exchange Fee...................................... None None None
<CAPTION>
ANNUAL INVESTMENT SHARES OPERATING EXPENSES
(as a percentage of projected average net assets)
<S> <C> <C> <C>
Management Fee (after waiver) (2)................. 0.40% 0.42% 0.38%
12b-1 Fee (after waiver) (3)...................... 0.25% None 0.25%
Total Other Expenses.............................. 0.20% 0.57% 0.20%
Total Investment Shares Operating Expenses
(4)............................................... 0.85% 0.99% 0.83%
</TABLE>
(1) A contingent deferred sales charge of 2.00% will be imposed on Virtus
Treasury only in limited circumstances in which shares being redeemed are
acquired for Investment Shares in those Virtus Funds which charge a
contingent deferred sales charge. The contingent deferred sales charge is
2.00% of the lesser of the original purchase price or the net asset value
of shares redeemed within five years of purchase date.
(2) 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 management fee is 0.50% for Virtus Treasury, Blanchard Treasury
and Combined Virtus Treasury/Blanchard Treasury.
(3) The maximum 12b-1 fee is 0.35%.
(4) The Total Investment Shares 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.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS
AND EXPENSES, SEE "THE VIRTUS FUNDS INFORMATION" AND "INVESTING IN SHARES."
WIRE-TRANSFERRED REDEMPTIONS MAY BE SUBJECT TO ADDITIONAL FEES.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS
- ------- ------ ------- -------
<S> <C> <C> <C>
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return
and (2) redemption at the end of each time period. The
Fund charges no redemption fees.
Virtus Treasury.................................... $ 9 $27 $47
Blanchard Treasury................................. $10 $32 $55
Combined Virtus Treasury/Blanchard Treasury........ $ 8 $26 $46
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. 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.
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.
(Repurchase agreements providing for settlement in more than seven days after
notice are subject to Virtus Treasury's 10% limitation on investment in
illiquid securities. 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 in amounts up to one-third of the value of its net assets,
including the amount borrowed, as a temporary measure to meet redemption
requests, and may purchase securities on a when-issued or delayed delivery
basis to an extent that would cause the segregation of an amount up to 20% of
the total value of its assets.
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 of
Virtus Treasury, dated November 30, 1995 (revised December 29, 1995), and
Statement of Additional Information of Virtus Treasury, dated November 30,
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 0.99 of 1% of average daily net assets. The total annual operating expenses
for Virtus Treasury are expected to be 0.85 of 1% of average daily net assets
and would be 1.05 of 1% of average daily net assets absent the voluntary
waivers of management fees and 12b-1 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 November 30, 1995 (revised December 29, 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 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 may exchange shares of Blanchard Treasury
for shares of another Blanchard Fund or for Investment Shares of any Virtus
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.
In addition, Virtus Treasury may enter into repurchase agreements and reverse
repurchase agreements, and may purchase securities on a when-issued and
delayed delivery basis, whereas Blanchard Treasury may not; and Virtus
Treasury may borrow amounts up to one-third of its assets while Blanchard
Treasury may borrow amounts only up to 10% of its assets. See "Summary--
Investment Objectives, Policies, and Limitations."
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
(but will not necessarily) 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 February 16, 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
November 30, 1995 (revised December 29, 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:
<TABLE>
<CAPTION>
BLANCHARD VIRTUS PRO FORMA
TREASURY TREASURY COMBINED
------------ ------------ ------------
<S> <C> <C> <C>
Net Assets............................... $140,910,811 $288,290,495 $429,201,306
Shares Outstanding....................... 140,986,906 288,290,495 429,201,306
Price Per Share.......................... $1.00 $1.00 $1.00
</TABLE>
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) November 30, 1995 (revised
December 29, 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 November 30, 1995 (relating to
the Prospectus of Virtus Treasury of the same date), and December 9, 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 9, 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 February
12, 1996 and at any adjournment thereof. The proxy confers discretionary
authority on the persons designated therein to vote on other business not
currently contemplated which may properly come before the Meeting. A proxy, if
properly executed, duly returned and not revoked, will be voted in accordance
with the specifications thereon; if no instructions are given, such proxy will
be voted in favor of the Plan. A shareholder may revoke a proxy at any time
prior to use by filing with the Secretary of Blanchard Funds an instrument
revoking the proxy, by submitting a proxy bearing a later date or by attending
and voting at the Meeting.
The cost of the solicitation, including the printing and mailing of proxy
materials, will be borne by VCM. In addition to solicitations through the
mails, proxies may be solicited by officers, employees and agents of Blanchard
Funds and VCM at no additional cost to Blanchard Funds. Such solicitations may
be made by telephone. VCM will reimburse custodians, nominees and fiduciaries
for the reasonable costs incurred by them in connection with forwarding
solicitation materials to the beneficial owners of shares held of record by
such persons.
OUTSTANDING SHARES AND VOTING REQUIREMENTS
The Board of Trustees has fixed the close of business on December 14, 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 133,730,210.375 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, no
shareholder or 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 39,923,639.71 Investment
Shares and 266,661,742.35 Trust Shares of Virtus Treasury outstanding. On the
record date, Stephens, Inc., Little Rock, Arkansas, owned of record
approximately 20,771,495.86 (52.03%) and ICI Mutual Insurance Brokers,
Washington, D.C. owned of record approximately 2,485,887.70 (6.23%) of the
outstanding Investment Shares of Virtus Treasury, and BOVA & Co., Richmond,
Virginia owned of record approximately 265,884,665.71 (99.71%) of the
outstanding Trust Shares of Virtus Treasury. 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 Trust or Investment 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:
/s/ C. Grant Anderson By: /s/ Joseph S. Machi
...................................... ...................................
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:
/s/ C. Grant Anderson By: /s/ Joseph S. Machi
...................................... .................................
Assistant Secretary
Name: Joseph S. Machi
..............................
Title: Vice President
...............................
Cusip 09321501
G01479-03 (12/95)
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
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information dated December 9, 1995 is not
a prospectus. A Prospectus/Proxy Statement dated December 9, 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.
FEDERATED INVESTORS TOWER PITTSBURGH, PA 15222-3779
Statement dated December 9, 1995
FEDERATED SECURITIES CORP.
--------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
G01479-04
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
1. Statement of Additional Information of The Treasury Money Market Fund, dated
November 30, 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,
1995
4. Financial Statements of Blanchard 100% Treasury Money Market Fund, dated
April 30, 1995
5. Pro Forma Financial Statements
The Statement of Additional Information of The Treasury Money Market Fund dated
November 30, 1995, is incorporated herein by reference to Post-Effective
Amendment No. 13 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 November 29, 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, 1995 are incorporated herein by reference to the Annual Report
dated September 30, 1995, 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 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
September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
Principal Amount Value
--------------------------------------- ---------------------------------------
The Blanchard The Blanchard
100% Treasury The Treasury 100% Treasury The Treasury
Money Market Money Market Pro Forma Money Market Money Market Pro Forma
Fund Fund Combined Fund Fund Combined
------------- ------------ ------------ ------------- ------------ ------------
U.S. TREASURY BILLS - 33.8%
<C> <C> <C> <S> <C> <C> <C>
$132,268,000 $ $132,268,000 10/5/1995 - 12/7/1995 $131,538,640 $ -- $131,538,640
------------ ------------ ------------
<CAPTION>
U.S. TREASURY NOTES - 32.3%
<C> <C> <C> <S> <C> <C> <C>
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%, 115,521,383 115,521,383
10/15/1995 - 7/15/1996
------------ ------------ ------------
TOTAL U.S. TREASURY 9,961,781
NOTES 115,521,383 125,483,164
------------ ------------ ------------
<CAPTION>
*REPURCHASE AGREEMENTS - 33.9%
<C> <C> <C> <S> <C> <C> <C>
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
($388,904,180) at September 30, 1995.
(See Notes to Pro Forma Financial Statements)
The Blanchard 100% Treasury Money Market Fund
The Treasury Money Market Fund
Pro Forma Combining Statement of Assets and Liabilities
September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
The Blanchard
100% Treasury The Treasury
Money Market Money Market Pro Forma
Fund Fund Combined
------------- ------------ ------------
<S> <C> <C> <C>
ASSETS:
Repurchase agreements, at amortized $ -- $131,747,139 $131,747,139
cost
Investments in securities, at 141,500,421 115,521,383 257,021,804
amortized cost and value
Cash 137,294 -- 137,294
Receivables for:
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:
Payables for:
Shares of beneficial interest 786,380 -- 786,380
repurchased
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
Year Ended September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
The Blanchard
100% Treasury The Treasury
Money Market Money Market Pro Forma Pro Forma
Fund Fund Adjustments Combined
------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $9,246,150 $27,060,335 $ $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)
(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 (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.
J) All merger related costs will be borne by the adviser, Virtus Capital
Management, Inc.
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.
Cusip 093215101
G01479-04
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 FEBRUARY 12, 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 February 12, 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 A PROPOSED AGREEMENT AND PLAN OF REORGANIZATION
PURSUANT TO WHICH THE TREASURY MONEY MARKET FUND, A PORTFOLIO OF THE
VIRTUS FUNDS ("VIRTUS TREASURY"), WOULD ACQUIRE ALL OF BLANCHARD 100%
TREASURY MONEY MARKET FUND'S ASSETS IN EXCHANGE FOR INVESTMENT SHARES OF
VIRTUS TREASURY.
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
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