Reg. No.333-18571
811-6158
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
PRE-EFFECTIVE AMENDMENT NO. 2 TO
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
The Virtus Funds
(Exact Name of Registrant as Specified in Charter)
(412) 288-1900
(Area Code and Telephone Number)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
JOHN W. MCGONIGLE, ESQUIRE
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Copies to:
C. Grant Anderson, Esquire Matthew G. Maloney, Esquire
Corporate Counsel Dickstein Shapiro
Morin &
Federated Investors
Oshinsky, LLP
Federated Investors Tower 2101 L
Street, N.W.
Pittsburgh, PA 15222-3779 Washington, D.C.
20037
It is proposed that this filing will become effective on March 15, 1997
pursuant to Rule 488. (Approximate Date of Proposed Public Offering).
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, as amended, that it elects to register an indefinite amount of
securities under the Securities Act of 1933, as amended, and filed the
Notice required by that Rule for Registrant's fiscal year ended September
30, 1996 on November 15, 1996. Accordingly, no filing fee is submitted
herewith.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 1(A) OF FORM N-14 SHOWING LOCATION IN
PROSPECTUS OF INFORMATION REQUIRED BY FORM N-14
Item of Part A of Form N-14 and Caption Caption or Location
in Prospectus
1.Beginning of Registration
Statement and Outside Front Cross Reference
of Prospectus Cover Page Sheet; Cover Page
2.Beginning and Outside Back
Cover Page of Prospectus Table of Contents
3.Fee Table, Synopsis Information Summary of Fund
and Risk Factors Expenses;
Summary;
Risk Factors
4.Information About the Information About
the Transaction Proposal
5.Information About the Information About
Registrant Blanchard Funds,
The Virtus Funds,
Capital Growth and
Large Cap
6.Information About the Information About
Company Being Acquired Blanchard Funds,
The Virtus Funds,
Capital Growth and
Large Cap
7.Voting Information Voting Information
8.Interest of Certain Persons
and Experts Not Applicable
9.Additional Information
Required for Reoffering by
Persons Deemed to be
Underwriters Not Applicable
[LOGO OF BLANCHARD GROUP OF FUNDS]
BLANCHARD GROUP OF FUNDS
VERY IMPORTANT
Enclosed is an important proxy statement and proxy vote card.
They concern the pending transfer of the Blanchard Capital Growth Fund
into The
Virtus Style Manager: Large Cap 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 over the past year and a half. 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 mutual fund shareholders.
We're writing you today to inform you of a recommended change which affects
your Blanchard Capital Growth Fund.
. Namely, the Board of Trustees has unanimously recommended a tax-free
transfer of the BLANCHARD CAPITAL GROWTH FUND into THE VIRTUS STYLE
MANAGER: LARGE CAP FUND.
POTENTIALLY LOWER EXPENSES, SIMILAR INVESTMENT OBJECTIVE
In recommending this transfer, the Board of Trustees has come to the
conclusion that the low asset level and high expenses of the Blanchard Capital
Growth Fund make its long-term viability questionable. The Board believes that
shareholders would benefit from potentially lower expenses and economies of
scale that could result from this transfer.
The Board further considered the fact that the investment objectives of The
Virtus Style Manager: Large Cap Fund and the Blanchard Capital Growth Fund are
similar, in that each seeks to provide long-term capital growth, although,
additionally, The Virtus Style Manager: Large Cap Fund seeks to provide
dividend income, whereas dividend income, if any, is an incidental objective
of the Blanchard Capital Growth Fund.
SAME SHAREHOLDER PRIVILEGES
You'll continue to enjoy all of the same shareholder privileges
that you do now. These include free telephone exchanges between any Blanchard
and Virtus mutual fund, as well as free telephone redemptions. In addition, you
will not be subject to any contingent deferred sales charge upon your redemption
of any shares of The Virtus Style Manager: Large Cap Fund acquired by you in the
transfer or thereafter.
PLEASE VOTE TODAY!
Because shareholder approval is required for this fund transfer to take place,
your individual vote is of critical importance. It 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.
The Board of Trustees has unanimously voted to recommend that you vote "FOR"
this transfer. And if the proxy is approved, the transfer of the Blanchard
Capital Growth Fund into The Virtus Style Manager: Large Cap Fund is scheduled
to be completed March 21 , 1997.
If a majority of shareholders do not return their votes, additional proxy
statements must be sent out, costing money, as well as valuable time. So
please, take a few moments now to fill out and return the enclosed proxy
voting card, while the material is at hand.
Before voting, please refer to the enclosed prospectus of The Virtus Style
Manager: Large Cap Fund for more complete details on investment objectives,
management fees, risks and expenses.
If you have additional questions on the voting process, or on the Fund,
please call 1-800-829-3863. A friendly and experienced shareholders' services
representative will be standing by between 8:30 a.m. and 5:30 p.m., EST.
Thank you for your continued confidence in the Blanchard Group of Funds.
Sincerely,
The Blanchard Group of Funds.
The Blanchard Group of Funds and The VirtusSM Funds are distributed by
Federated Securities Corp. and are advised by Virtus Capital Management, Inc.
THE BLANCHARD GROUP OF FUNDS AND THE VIRTUS 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 INVESTORS]
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and a subsidiary of Federated Investors.
[LOGO OF BLANCHARD GROUP OF FUNDS]
BLANCHARD FUNDS
FEDERATED INVESTORS TOWER PITTSBURGH, PENNSYLVANIA 15222-3779
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS TO SHAREHOLDERS OF BLANCHARD
CAPITAL GROWTH FUND:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Blanchard
Capital Growth Fund ("Capital Growth"), a portfolio of Blanchard Funds, will
be held at 2:00 p.m. on March 21, 1997 at Federated Investors Tower, 19th
Floor, Pittsburgh, Pennsylvania 15222-3779 for the following purposes:
1. To approve or disapprove a proposal whereby Capital Growth would
(a) withdraw its investment in Capital Growth Portfolio, in
order to permit the current two-tier structure of Capital Growth
to be replaced, temporarily, by a one-tier structure common to
most mutual funds; and (b) enter into a proposed agreement
pursuant to which The Style Manager: Large Cap Fund ("Large
Cap"), a portfolio of The Virtus Funds, would acquire all of
Capital Growth's assets in exchange for Investment Shares of
Large Cap. Capital Growth would then distribute the shares of
Large Cap 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: February 5, 1997 Secretary
Shareholders of record at the close of business on January 27, 1997 are
entitled to vote at the meeting. Whether or not you plan to attend the
meeting, please sign and return the enclosed proxy card or call 1-800-829-
3863. 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
, 1997
-----------
ACQUISITION OF THE ASSETS OF BLANCHARD CAPITAL GROWTH FUND ("CAPITAL GROWTH"),
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 STYLE MANAGER: LARGE CAP FUND
("LARGE CAP"), A PORTFOLIO OF THE VIRTUS FUNDS FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779 TELEPHONE NUMBER: 1-800-829-3863
Unlike many other mutual funds, including Large Cap, which directly acquire
and manage their own portfolios of securities, Capital Growth seeks to achieve
its investment objective by investing all its assets in Capital Growth
Portfolio, which is a separate registered investment company with an identical
investment objective to that of Capital Growth.
This Prospectus/Proxy Statement describes the proposal whereby Capital
Growth would (i) withdraw its investment in Capital Growth Portfolio,
thereby replacing Capital Growth's current two-tier structure with a one-tier
structure currently used by Large Cap (the "Restructuring"); and (ii) enter
into an Agreement and Plan of Reorganization (the "Plan") whereby Large Cap
would acquire all of the assets of Capital Growth, in exchange for Investment
Shares of Large Cap. These shares would then be distributed pro rata by
Capital Growth to its shareholders, and, as a result, each Capital Growth
shareholder will own Investment Shares of Large Cap having a total net asset
value equal to the total net asset value of his or her holdings in Capital
Growth (the "Reorganization"). The Reorganization would result in the complete
liquidation and termination of Capital Growth.
Blanchard 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 Capital Growth is long-term capital appreciation.
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 Large Cap is to provide growth of capital and
income. 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 The Virtus Funds and Large Cap that
a prospective investor should know before investing in Large Cap. This
Prospectus/Proxy Statement is accompanied by the Prospectus of Large
Cap dated January 31, 1997, which is incorporated herein by reference. The
Prospectus of Capital Growth dated February 29, 1996 (supplemented May 17,
1996); the Statements of Additional Information for Large Cap and Capital
Growth, dated January 31, 1997 and February 29, 1996 (revised October 7,
1996), respectively (relating to the Prospectuses of Large Cap and Capital
Growth, respectively, of the same date), and the Statement of Additional
Information of Large Cap dated , 1997 (relating to this
----------
Prospectus/Proxy Statement), all containing additional information; and the
Annual Reports of Cap Growth and Large Cap dated October 31, 1996 and
September 30, 1996, respectively, have been filed with the Securities and
Exchange Commission and are incorporated herein by reference. Copies of the
Prospectuses, Statements of Additional Information and Annual Reports may be
obtained without charge by calling Signet Financial Services at 1-800-829-
3863.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF SIGNET BANK OR ANY OF ITS AFFILIATES, OR OF ANY BANK, ARE NOT
ENDORSED OR GUARANTEED BY SIGNET BANK OR ANY OF ITS AFFILIATES, OR BY ANY
BANK, AND ARE NOT OBLIGATIONS OF, GUARANTEED BY OR INSURED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE 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
Management's Discussion of Fund Performance (The Style Manager: Large Cap
Fund-Investment Shares)................................................... 7
Information About the Proposal............................................. 9
Information About the Blanchard Group of Funds, The Virtus Funds,
Capital Growth, and Large Cap............................................. 12
Voting Information......................................................... 13
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 Capital Growth the approval of a proposal (the "Proposal")
whereby Capital Growth would (i) withdraw its investment in Capital Growth
Portfolio in order to permit the current two-tier structure of Capital Growth
to be replaced, temporarily, by a one-tier structure currently used by Large
Cap (the "Restructuring") and (ii) enter into a proposed Plan pursuant to
which Large Cap would acquire all of the assets of Capital Growth in exchange
for Investment Shares of Large Cap. These shares would thereupon be
distributed pro rata by Capital Growth to its shareholders and, as a result,
each shareholder of Capital Growth would become the owner of Investment Shares
of Large Cap having a total net asset value equal to the total net asset value
of his or her holdings in Capital Growth (the "Reorganization").
As a condition to the Proposal, Blanchard Funds will receive an opinion of
counsel that the Restructuring will not cause Capital Growth or its
shareholders to recognize any gain or loss under the Internal Revenue Code of
1986, as amended (the "Code") (other than possible gain or loss under the
mark-to-market provisions of the Code), and 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
Code so that no gain or loss will be recognized by either Large Cap or
Capital Growth or their shareholders.
In recommending the Proposal, 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 of
the low asset and high expense levels of Capital Growth, Capital Growth's
long-term viability is questionable, and have concluded that economies of
scale, and potentially lower expense ratios, could be realized by transferring
the assets of Capital Growth into Large Cap.
The following discussion compares certain key aspects of Capital Growth and
Large Cap (collectively, the "Funds").
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
COMBINED STYLE
MANAGER
VIRTUS STYLE BLANCHARD LARGE CAP/
MANAGER CAPITAL CAPITAL
LARGE CAP GROWTH GROWTH
------------ --------- ---------------
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 None None None
offering price)............................................................
Contingent Deferred Sales Charge (as a percentage of original purchase price 2.00% None 2.00%
or redemption proceeds, as applicable)(1)..................................
Redemption Fees (as a percentage of amount redeemed, if applicable)......... None None None
Exchange Fee................................................................ None None None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C> <C>
Management Fees............................................................. 0.75% 0.40%(2) 0.75%
12b-1 Fees.................................................................. 0.25% 0.00%(3) 0.25%
Other Expenses.............................................................. 0.36% 6.13%(4) 0.36%
Total Fund Operating Expenses (after waivers)........................... 1.36% 6.53%(5) 1.36%
</TABLE>
(1) 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. A contingent deferred sales charge will not
be imposed on the redemption of Large Cap shares held by current
shareholders of Capital Growth. See "Summary--Purchase and Redemption
Procedures."
(2) The management fee has been reduced to reflect the voluntary waiver by the
Manager. The Manager may terminate this voluntary waiver at any time at
its sole discretion. The maximum management fee is 1.10%.
(3) Under the Fund's Rule 12b-1 Distribution Plan, the Fund can pay up to
0.50% of its daily average net assets as a 12b-1 fee. The 12b-1 fee has
been reduced to reflect the voluntary waiver by the Distributor. The
Distributor may terminate this voluntary waiver at any time at its sole
discretion
(4) Other Expenses would have been 12.86% absent the voluntary waiver of a
portion of the administrative fees and the assumption of other operating
expenses by the adviser. The administrator can terminate this voluntary
waiver at any time at its sole discretion
(5) Total Fund Operating Expenses would have been 14.46% absent the voluntary
waivers and assumptions described in notes (2), (3) and (4) above.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER WILL BEAR, EITHER DIRECTLY OR
INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS CO
AND EXPENSES, SEE "MANAGEMENT OF THE FUND" IN EACH FUND'S PROSPECTUS.
Wire-transferred redemptions may be subject to an additional fee.
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MAXIMUM FRONT-END SALES CHARGE PERMITTED BY THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
<TABLE>
<CAPTION>
COMBINED STYLE
MANAGER
VIRTUS STYLE BLANCHARD LARGE CAP/
MANAGER CAPITAL CAPITAL
EXAMPLE LARGE CAP GROWTH GROWTH
- ------- ------------ --------- ---------------
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.
<S> <C> <C> <C>
1 year................................. $ 35 $ 65 $ 35
3 years................................ $ 65 $191 $ 65
5 years................................ $ 74+ $314 $ 74+
10 years............................... $164+ $605 $164+
</TABLE>
+ Reflects expenses on the same investment, assuming no redemption.
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
INVESTMENT OBJECTIVES, POLICIES, AND LIMITATIONS
The investment objectives of Capital Growth and Large Cap are similar in
that they both seek to provide capital growth, although, additionally, Large
Cap seeks to provide dividend income, whereas dividend income, if any, is an
incidental objective of the Blanchard Capital Growth Fund.
Large Cap pursues its investment objective by investing primarily (i.e., at
least 65% of its assets under normal conditions) in common stocks, and may
also invest in corporate preferred stocks, bonds, notes, warrants, rights and
convertible securities, in American Depositary Receipts ("ADRs") and in high-
quality, short-term money market instruments such as commercial paper of
domestic and foreign issuers and obligations of domestic and foreign banks.
Capital Growth invests all its investable assets in Capital Growth Portfolio.
Capital Growth Portfolio pursues its investment objective by investing at
least 80% of its assets under normal
market conditions in common stocks and it may also invest up to 20% of its
assets in convertible securities and in separately traded principal and
interest components of securities backed by the full faith and credit of the
U.S. government. Capital Growth Portfolio may also invest in U.S. government
securities, Depositary Receipts, and high quality short-term money market
instruments such as commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks.
The debt securities (including convertible securities) in which Large Cap
may invest must be rated, at the time of purchase, BBB or higher by Standard &
Poor's Ratings Group ("S&P") or Fitch Investor Services, Inc. ("Fitch") or Baa
or higher by Moody's Investor's Service Inc. ("Moody's") or, if unrated, be of
comparable quality as determined by the Fund's adviser. (If a security's
rating is reduced below the required minimum after Large Cap has purchased it,
Large Cap is not required to sell the security but may consider doing so.
Bonds rated BBB by S&P or Fitch or Baa by Moody's have speculative
characteristics. Changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than higher rated bonds). There are no rating limitations
applicable to the convertible securities in which Capital Growth
Portfolio may invest.
Large Cap will invest in securities of large capitalization companies, with
a market capitalization of at least $1 billion at the time of investment, and
which are listed either on the New York or American Stock Exchange or traded
in the over-the-counter markets. Capital Growth Portfolio will invest in
stocks of companies with capitalizations of $750 million to $4 billion.
Large Cap is managed to take advantage of trends in the stock market that
favor different styles of stock selection (value or growth). The value style
seeks stocks that, in the opinion of the adviser, are undervalued and are or
will be worth more than their current price. The growth style seeks stocks
with higher earnings growth which, in the opinion of the adviser, will lead to
appreciation in stock price. Capital Growth Portfolio utilizes both
quantitative and fundamental research to identify undervalued stocks with a
catalyst for positive changes.
Capital Growth Portfolio may invest up to 20% of its total assets in foreign
securities, including Depositary Receipts. Large Cap may invest in ADRs, which
are typically issued by an American bank or trust company and evidence
ownership of underlying securities issued by a foreign issuer. Large Cap has
no present intention of investing more than 5% of its total assets in ADRs. Both
Large Cap and Capital Growth Portfolio may enter into repurchase agreements,
put and call options contracts and futures contracts. With respect to puts and
calls, Large Cap currently limits the value of the assets
underlying such options to not more than 25% of net assets, and will limit the
premiums paid for options to 20% of net assets, while Capital Growth Portfolio
has no comparable limitations. Both Large Cap and Capital Growth will limit
the margin deposits entered into by such Fund to 5% of its net assets. Capital
Growth Portfolio may enter into reverse repurchase agreements and forward
currency contracts and may purchase and sell structured products.
Large Cap and Capital Growth Portfolio are subject to certain investment
limitations. The investment limitations of the two funds are substantially
similar. These limitations include provisions that, in effect, prohibit either
fund from: selling any securities short (except, with respect to Capital
Growth Portfolio, short sales "against the box") or purchasing securities on
margin; issuing senior securities, except that both Funds may borrow up to
one-third of the value of their 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 15% of their respective
net assets in illiquid securities.
Reference is hereby made to the Prospectus, dated February 29, 1996
(supplemented May 17, 1996) of Capital Growth and Statement of Additional
Information dated February 29, 1996 (revised October 7, 1996) of Capital
Growth, and the Prospectus and Statement of Additional Information of Large
Cap, dated January 31, 1997, 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"), Large
Cap (with respect to Investment Shares), and Capital Growth may pay to
Federated Securities Corp. an amount computed at an annual rate of .25% and
.50% of each respective Fund's average daily net assets to finance any
activity which is principally intended to result in the sale of shares subject
to the 12b-1 Plan. Currently, Large Cap (with respect to Investment Shares)
incurs fees under the 12b-1 Plan at an annual rate of .25% of its average
daily net assets, while Capital Growth , as a result of waivers, does not
incur any fees under the 12b-1 Plan. Large Cap will not, as a result of the
Reorganization, assume any liabilities or make any voluntary reimbursements on
account of Capital Growth's 12b-1 Plan.
ADVISORY ARRANGEMENTS AND FEES
Virtus Capital Management, Inc. ("VCM"), a Maryland corporation and a
wholly-owned subsidiary of Signet Banking Corporation, provides investment
advisory services for The Virtus Funds, including Large Cap. VCM is entitled
to receive an annual management fee equal to .75% of Capital Growth's average
daily net assets. Currently, Large Cap incurs advisory fees of .75% of its
average daily net assets, of which amount VCM pays to Trend Capital
Management, Inc. a sub-advisory fee equal to .15% of the first $100 million
of Large Cap's average daily net assets, and .331/3% of Large Cap's average
daily net assets in excess of $100 million.
VCM provides overall management services for Blanchard Funds, including
Capital Growth, and The Chase Manhattan Bank, N.A. ("Chase") provides
investment advisory services for Capital Growth Portfolio. VCM is entitled to
receive an annual management fee equal to .70% of Capital Growth's average
daily net assets, and Chase is entitled to receive an annual advisory fee of
.40% of Capital
Growth Portfolio's average daily net assets. Accordingly, the maximum
aggregate annual management and advisory fees incurrable by Capital Growth is
1.10% of Capital Growth's average daily net assets. See also the "Summary of
Fund Expenses." Capital Growth currently incurs aggregate management and
advisory fees of .40%, due to the current waiver by VCM of its entire
management fee. VCM may voluntarily waive a portion of its fee or reimburse
either Large Cap or Capital Growth for certain operating expenses. This
agreement to waive fees or reimburse expenses may be terminated by VCM at any
time in its discretion.
ADMINISTRATIVE SERVICES ARRANGEMENTS
Federated Administrative Services, a subsidiary of Federated Investors,
provides Large Cap and Capital Growth with certain administrative personnel
and services necessary to their operation. The rate charged for such
administrative services is .15% of the first $250 million of average aggregate
daily net assets of The Virtus Funds and Blanchard Funds combined, .125 % on
the next $250 million, .10% on the next $250 million and .075% of assets in
excess of $750 million. The administrative fee received during any fiscal year
shall be at least $75,000 per fund. Capital Growth estimates that its
administrative fee expense for the current fiscal year will be .07% of its
average aggregate daily net assets. Large Cap estimates that its
administrative fee expense for the current fiscal year will be .10% of its
average aggregate daily net assets.
TOTAL ANNUAL OPERATING EXPENSES
The total annual operating expenses for Capital Growth are expected to be
6.53% of average daily net assets, and would be 14.46% of average daily net
assets absent voluntary fee waivers and expense reimbursements. The total
annual operating expenses for Large Cap are expected to be 1.36% of average
daily net assets.
PURCHASE AND REDEMPTION PROCEDURES
Procedures for the purchase and redemption of Investment Shares of Large Cap
are similar to procedures applicable to the purchase and redemption of Capital
Growth shares. For a complete description of the purchase and redemption
procedures applicable to purchases and redemptions of shares, refer to the
Prospectus of Capital Growth dated February 29, 1996, and the Prospectus of
The Virtus Funds dated January 31, 1997, 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 Large Cap are sold on all business days on which the
New York Stock Exchange is open for business, except on Lee-Jackson King Day,
Columbus Day and Veterans' Day. 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 Large Cap or Capital Growth 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 Large Cap is $1,000.
Redemption requests cannot be executed on days on which the New York Stock
Exchange is closed and on federal or state holidays restricting wire transfers.
Shares of Capital Growth are redeemed at their net asset value next determined
after the redemption request is received. Shares of Large Cap are redeemed at
their net asset value next determined after the redemption request is
received, except that a contingent deferred sales charge ("CDSC") will be
imposed in certain instances. A CDSC will not be charged on the redemption of
shares of Large Cap (i) to be received by current shareholders of Capital
Growth pursuant to the Reorganization (the "Reorganization Shares"); (ii) to
be received by current shareholders of Capital Growth pursuant to reinvestment
of dividends or capital gains distributions made in respect of Reorganization
Shares or (iii) purchased by current shareholders of Capital Growth at any
time after the date of the Reorganization. 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 Large Cap may exchange Investment
Shares of Large Cap 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
Large Cap may exchange such Large Cap 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 Capital Growth may exchange shares of Capital Growth 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 fund must be at least $1,000.
TAX CONSEQUENCES
As a condition to the Proposal, Blanchard Funds will receive an opinion of
counsel that the Restructuring will not cause Capital Growth or its
shareholders to recognize any gain or loss under the Code (other than possible
gain or loss under the mark-to-market provisions of the Code), and 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 Code so that no gain or loss will be recognized by either
Large Cap or Capital Growth or their respective shareholders.
RISK FACTORS
Investment in Large Cap is subject to certain risks that are set forth in
its Prospectus and Statement of Additional Information dated January 31, 1997
which are incorporated herein by reference thereto. Briefly, these risks
include, but are not limited to, fluctuation of the value of shares of Large
Cap; uncertainty that a secondary market for options or for positions in
futures contracts will exist at all times; imperfect correlation between the
prices of financial futures and options on financial
futures, on the one hand, and prices of the securities subject to the options
and futures contracts, on the other hand, which could cause a futures contract
and any related options to react differently than the underlying portfolio
securities to market changes; with respect to foreign securities, the risks of
currency fluctuation and imposition of currency exchange regulation, the lack
of information available concerning foreign issuers, the fact that foreign
issuers are not subject to financial reporting standards comparable to those
in the U.S. and the possibility of expropriation of assets and political
instability. Investment in Capital Growth carries risks of a substantially
similar nature, as more fully described in its Prospectus dated February 29,
1996 (supplemented May 17, 1996) and its Statement of Additional Information
dated February 29, 1996 (revised October 7, 1996).
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE THE STYLE MANAGER: LARGE CAP
FUND--INVESTMENT SHARES
The following information was included in Large Cap's Annual Report for the
fiscal year ended September 30, 1996. The Management's Discussion contained in
the Annual Report in its entirety, is as follows:
MANAGEMENT DISCUSSION AND ANALYSIS
Under the direction of Garry M. Allen, Chief Investment Officer, Virtus
Capital Management Inc. has implemented a new style of equity management. The
new method of investment is called "Style Management." Style Management is a
unique method of investing.
Academic research shows that style determines 80-90% of investment return.
Virtus seeks to capture the predominant investment style to take greater
advantage of market trends. This involves opportunistic positioning defined by
style and size. "Style" refers to two widely accepted descriptions of stocks
known as growth and value. Growth stocks are those companies with above-
average earnings expectations. Value stocks are those companies selling at a
low price relative to the actual value of their underlying assets. "Size"
refers to the division between large and small companies based upon market
value.
Style movements typically occur every one to three years (there have been
sixteen intermediate style changes since 1968), while size movements generally
occur every five to seven years (there have been four size changes since
1968). This type of shifting between style and size has been occuring ever
since the stock market has existed.
Style management identifies and pursues greater rewards from active
management. Style (value vs. growth) and size (small vs. large-cap) represent
the two major components of systematic risk and return in the market. Style
dominates even the most skillful manager's returns. Active style management
reduces the level of risk in a portfolio and thus improves the risk/reward
trade-off.
The market for U.S. large company stocks is represented by the total return
on the S&P 500*. For the twelve months ended September 30, 1996, the S&P 500
returned 20.3%. On a long-term "calendar" year basis, the S&P 500 has managed
a return of 10.5% from 1926--1995. Therefore, the twelve month period ended
September 30, 1996, represents substantial above-average performance relative
to the long-term history of the U.S. Large Cap Equity market.
This twelve month period favored growth stocks largely due to the strong
growth stock performance over the last six months. In general a stronger than
expected economy created an environment favorable to growth stocks at the
large cap end of the U.S. Equity market.
Virtus Capital Management anticipates that 1997 will increasingly reward
value stock investors as the overall market climate could shift to a theme of
capital preservation and safety. Value stocks are well positioned to benefit
from a slow-down in business cycle conditions in 1997.
- --------
*The S&P 500 is an unmanaged index comprised of common stocks in industry,
transportation, and financial and public utility companies. Investments cannot
be made in an index.
GROWTH OF $10,000 INVESTED IN THE STYLE MANAGER: LARGE CAP FUND--INVESTMENT
SHARES
The graph below illustrates the hypothetical investment of $10,000 in The
Style Manager: Large Cap Fund (the "Fund") from October 16, 1990 (start of
performance) to September 30, 1996, compared to the Standard & Poor's 500
Index ("S&P 500").+
[GRAPH TO BE INSERTED UPON PRINTING]*
*The graphic presentation that will be displayed above consists of a legend,
below the graph, indicating the components of the corresponding chart. The line
graph chart is a visual representation of the narrative text around it, which
shows that an initial investment of $10,000 in The Style Manager: Large Cap
Fund- Investment Shares on October 16, 1990, would have grown to $18,199
by September 30, 1996, as compared to the Standard & Poor's 500 Index, which
would have grown to $26,619.
The "x" axis reflects the cost of investment, the "y" axis reflects computation
periods from 1990 to 1996, and the right margin reflects a total investment
range from $0 to $30,000. The chart further indicates the ending market value
attributable
to principal, as well as the ending market value attributable to capital gains
and reinvested dividends.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED SEPTEMBER 30, 1996
<TABLE>
<S> <C>
1 Year................................................................... 9.08%
5 Year................................................................... 8.21%
Start of Performance (10/16/90).......................................... 10.57%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY
MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS
OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Reflects operations of the Fund from the start of performance 10/16/90
through 9/30/96, on a cumulative basis.
** Represents a hypothetical investment of $10,000 in the Fund. Certain
investors are subject to a 2.00% contingent deferred sales charge on shares
redeemed within five years of purchase date. The Fund's performance assumes
the reinvestment of all dividends and distributions.
+ The S&P 500 is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. The
S&P 500 has been adjusted to reflect reinvestment of dividends on securities
in the index. This index is unmanaged.
INFORMATION ABOUT THE PROPOSAL
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 has conducted an
ongoing review and evaluation of the investment objectives and strategies of
the Blanchard Funds. As a result of this review, VCM determined that, because
of the low asset and high expense levels of Capital Growth, Capital Growth's
long-term viability is questionable, and that Capital Growth would potentially
benefit from economies of scale and potentially lower expense ratios that
should be realized by the transfer of Capital Growth's assets to Large Cap.
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 Capital Growth and Large Cap and that the
interests of Capital Growth and Large Cap shareholders would not be diluted as
a result of effecting the Reorganization and have unanimously approved the
Proposal.
DESCRIPTION OF THE RESTURCTURING
Unlike other mutual funds such as Large Cap, which directly acquire and
manage their own portfolios of securities, Capital Growth currently seeks to
achieve its investment objective by investing all its assets in Capital Growth
Portfolio, which is a separate registered investment company with identical
investment objectives as Capital Growth. Since the Trustees of Blanchard Funds
have proposed that Capital Growth enter into the Reorganization, it will be
necessary for Capital Growth to require Capital Growth Portfolio to distribute
to Capital Growth a portion of Capital Growth Portfolio's assets for transfer
to Large Cap in satisfaction of Capital Growth's obligations under the Plan.
To accomplish the Restructuring, Large Cap and Capital Growth Portfolio have
entered into a Withdrawal Agreement, dated , 1997, pursuant to which
---------
Capital Growth Portfolio will distribute to Large Cap on the Closing Date of
the Reorganization, portfolio securities mutually acceptable to Capital Growth
and Capital Growth Portfolio, having an aggregate value equal to the net asset
value of Capital Growth's share interest in Capital Growth Portfolio as of the
Closing Date. The securities so distributed to Large Cap will conform to those
permitted to be held by Large Cap.
The Proposal is subject to the receipt by Blanchard Funds of an opinion of
Dickstein Shapiro Morin and Oshinsky LLP, that the withdrawal by Capital
Growth of its investment in Capital Growth Portfolio will not cause Capital
Growth or its shareholders to recognize any gain or loss under the Code
(other than possible gain or loss under the mark-to-market provisions
of the Code).
DESCRIPTION OF THE REORGANIZATION
The Plan provides that on or about March 21, 1997 (the "Closing Date"),
Large Cap will acquire all of the assets of Capital Growth in exchange for
Investment Shares of Large Cap to be distributed pro rata by Capital Growth to
its shareholders in complete liquidation and termination of Capital Growth.
Shareholders of Capital Growth will become shareholders of Large Cap as of
4:00 p.m. (Eastern time) on the Closing Date and will begin accruing dividends
on the next day. Shares of Large
Cap received by Capital Growth shareholders in connection with the acquisition
of the assets of Capital Growth will not be subject to a sales load.
Shareholders of Capital Growth will earn their last dividend from Capital
Growth 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 Capital Growth 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 Capital Growth or
Large Cap.
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 Capital Growth and the costs of holding the Special Meeting of
Shareholders.
The foregoing brief summary of the Plan entered into between Capital Growth
and Large Cap 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 LARGE CAP
Investment Shares of Large Cap to be issued to shareholders of Capital
Growth under the Plan will be fully paid and non assessable when issued and
transferable without restriction and will have no preemptive or conversion
rights. Large Cap offers two classes of shares. Trust Shares, the other class
offered by Large Cap, 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 in respect of
Trust Shares will exceed those payable in respect of 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 Large Cap dated January
31, 1997 provided herewith for additional information about Investment Shares
of Large Cap.
FEDERAL INCOME TAX CONSEQUENCES
As a condition to the Reorganization, Blanchard Funds and The Virtus Funds
will receive an opinion from Dickstein Shapiro Morin & Oshinsky LLP, 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 Large Cap upon its receipt of Capital Growth's
assets solely in exchange for Investment Shares of Large Cap; (3) no gain or
loss will be recognized by Capital Growth upon the transfer of its assets to
Large Cap solely in exchange for Investment Shares of Large Cap or upon the
distribution (whether actual or constructive) of
Investment Shares of Large Cap to Capital Growth shareholders solely in
exchange for their shares of Capital Growth; (4) no gain or loss will be
recognized by shareholders of Capital Growth upon the exchange of their
Capital Growth shares for Investment Shares of Large Cap; (5) the tax basis of
Capital Growth's assets acquired by Large Cap will be the same as the tax
basis of such assets to Capital Growth immediately prior to the
Reorganization; (6) the tax basis of Investment Shares of Large Cap received
by each shareholder of Capital Growth pursuant to the Plan will be the same as
the tax basis of Capital Growth shares held by such shareholder immediately
prior to the Reorganization; (7) the holding period of the assets of Capital
Growth in the hands of Large Cap will include the period during which those
assets were held by Capital Growth; and (8) the holding period of Investment
Shares of Large Cap received by each shareholder of Capital Growth will
include the period during which the Capital Growth shares exchanged therefor
were held by such shareholder, provided the Capital Growth 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 Capital Growth and Large Cap 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 Capital Growth and Large Cap (individually a "Fund").
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 Capital Growth, Large Cap, 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 Capital Growth and
Large Cap as of November 30, 1996 and on a pro forma basis as of that date:
<TABLE>
<S> <C> <C> <C> <C>
LARGE CAP
INVESTMENT CAPITAL PRO FORMA PRO FORMA
SHARES GROWTH ADJUSTMENT COMBINED
----------- ---------- ---------- -----------
Net Assets...................... $66,597,160 $1,704,292 -- $68,301,452
Net Asset Value Per Share....... $ 15.22 $ 9.22 -- $ 15.22
Shares Outstanding.............. 4,376,708 184,750 (72,745)(a) 4,488,713
</TABLE>
- --------
(a) Adjustment to reflect share balance as a result of the combination based
on an exchange ratio of .606251691475 for Capital Growth.
TRUSTEES' RECOMMENDATION
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF CAPITAL GROWTH
APPROVE THE PROPOSAL.
If the shareholders of Capital Growth do not approve the Proposal, Capital
Growth will continue to operate in its existing structure, and the Trustees
will consider what future action to take.
INFORMATION ABOUT BLANCHARD FUNDS, THE VIRTUS FUNDS, CAPITAL GROWTH, AND LARGE
CAP
Information about Blanchard Funds, The Virtus Funds, Capital Growth, and
Large Cap is contained in their respective Prospectuses dated (in the case of
Blanchard Funds and Capital Growth) February 29, 1996 (supplemented May 17,
1996) and (in the case of The Virtus Funds and Large Cap) January 31, 1997,
which are incorporated herein by reference. A copy of the Prospectus for Large
Cap is included herewith. Additional information about The Virtus Funds and
Large Cap is included in the Statement of Additional Information of Large Cap
dated January 31, 1997 (relating to the Prospectus of Large Cap of the same
date), and , 1997 (relating to this Prospectus/Proxy Statement) and
--------
Large Cap's Annual Report to Shareholders dated September 30, 1996, which are
incorporated herein by reference. Additional information about Capital Growth
is included in the Statement of Additional Information of Capital Growth dated
February 29, 1996 (revised October 7, 1996) (relating to the Prospectus of
Capital Growth of February 29, 1996), and Capital Growth's Annual Report dated
October 31, 1996, which are incorporated herein by reference. Copies of the
Statements of Additional Information of Capital Growth and Large Cap, which
have been filed with the Securities and Exchange Commission (the "SEC"), may
be obtained without charge by contacting Blanchard Group of 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 are each 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 Capital Growth of proxies for use at
the Special Meeting of Shareholders (the "Meeting") to be held on March 21,
1997 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 Restructuring and the Reorganization. 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 January 27, 1997 as
the record date for the determination of shareholders entitled to notice of,
and to vote at, the Special Meeting of Shareholders and any adjournment
thereof. As of the record date, there were shares of Capital Growth
outstanding. Each Capital Growth 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 Capital Growth'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 Capital
Growth.
The votes of the shareholders of Large Cap are not being solicited, since
their approval or consent is not necessary for approval of the Proposal. As of
the record date, there were Investment Shares and Trust Shares of Large
Cap outstanding. On the record date, Stephens Inc., owned of record
approximately ( %) of the outstanding Investment Shares of Large Cap, and
BOVA & CO. owned of record approximately ( %) of the outstanding Trust
Shares of Large Cap. On such date, no other person owned of record, or to the
knowledge of VCM, beneficially owned, 5% or more of Large Cap's outstanding
Trust or Investment Shares.
A majority of the outstanding shares of Capital Growth, represented in
person or by proxy, will be required to constitute a quorum at the Special
Meeting for the purpose of voting on the Proposal. 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. Approval of the Proposal requires the
affirmative vote of the majority of Capital Growth's outstanding shares.
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 Capital Growth objecting to the Proposal have no appraisal
or dissenter's rights under the Declaration of Trust or Massachusetts law.
Under the Plan, if approved by Capital Growth shareholders, each Capital
Growth shareholder will become the owner of Investment Shares of Large Cap
having a total net asset value equal to the total net asset value of his or
her holdings in Capital Growth at the Closing Date.
OTHER MATTERS
Management of Capital Growth 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 December 20, 1996 (the
"Agreement"), between THE VIRTUS FUNDS, a Massachusetts business trust
("Virtus"), on behalf of its portfolio, The Style Manager: Large Cap Fund
(hereinafter called the "Acquiring Fund"), and BLANCHARD FUNDS, a
Massachusetts business trust ("Blanchard"), on behalf of its portfolio,
Blanchard Capital Growth 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 shareholder 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 Paragraph 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 March 28, 1997 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 Shareholder 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 or 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
October 31, 1996 have been audited by Deloitte & Touche 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 date not disclosed therein.
(h) Since October 31, 1996, 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 Statements of Assets and Liabilities of the Acquiring Fund at
September 30, 1995 and 1996, 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, and there are no known contingent liabilities of the Acquiring
Fund as of such date not disclosed therein.
(g) Since September 30, 1996, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness,
except as otherwise disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns and reports
of the Acquiring Fund required by law then to be filed shall have been
filed, and all Federal and other taxes shown as due on said returns and
reports shall have been paid or provision shall have been made for the
payment thereof.
(i) For each fiscal year of its operation, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(j) All issued and outstanding shares of the Acquiring Fund are, and
at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquiring Fund Shares, nor is there outstanding any
security convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this Agreement 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).
(l) The Prospectus/Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund) will, on
the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under which
Virtus Capital Management, Inc. will assume the expenses of the
reorganization including accountants' fees, legal fees, registration
fees, transfer taxes (if any), the fees of banks and transfer agents and
the costs of preparing, printing, copying and mailing proxy solicitation
materials to the Acquired Fund's shareholders and the costs of holding
the Special Meeting of Shareholders.
5.COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing
Date, it being understood that such ordinary course of business will
include customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated
herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or advisable
to consummate and make effective the transactions contemplated by this
Agreement.
5.4 As promptly as practicable, but in any case within sixty days after
the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in
such form as is reasonably satisfactory to the Acquiring Fund, a statement
of the earnings and profits of the Acquired Fund for Federal income tax
purposes which will be carried over to the Acquiring Fund as a result of
Section 381 of the Code and which will be certified by the Acquired Fund's
President and its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(o),
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, plus the excess of its interest income, if any,
excludable from gross income under Code section 103 (a) over its deductions
disallowed under
Code sections 265 and 171 (a)(2) for the taxable periods or years ended on
or before October 31, 1996 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 October 31, 1996 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 Blanchard 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 basis of such
securities by lot and the holding periods of such securities, as of the
Closing Date, certified by the Treasurer of Blanchard.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by Blanchard's President or
Vice President and Blanchard's Treasurer or Assistant Treasurer, in form
and substance satisfactory to the Acquiring Fund, to the effect that the
representations and warranties of Blanchard 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 Virtus 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 Virtus' President or
Vice President and Virtus' Treasurer or Assistant Treasurer, in form and
substance reasonably satisfactory to the Acquired Fund, to the
effect that the representations and warranties of Virtus 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 Boards of Trustees of Blanchard and Virtus and 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 & Oshinsky LLP 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 Acquired Fund Shareholders in liquidation of the Acquired
Fund will constitute a "reorganization" within the meaning of Section
368(a)(1)(C) of the Code; (b) No gain or loss will be recognized by the
Acquiring Fund upon the receipt of the assets of the Acquired Fund
solely in exchange for the Acquiring Fund Shares; (c) No gain or loss
will be recognized by the Acquired Fund upon the transfer of the
Acquired Fund assets to the Acquiring Fund in exchange for the
Acquiring Fund Shares or upon the distribution (whether actual or
constructive) of the Acquiring Fund Shares to
Acquired Fund Shareholders in exchange for their shares of the Acquired
Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares; (e) The tax basis of the Acquired Fund assets
acquired by the Acquiring Fund will be the same as the tax basis of
such assets to the Acquired Fund immediately prior to the
Reorganization; (f) The tax basis of the Acquiring Fund Shares received
by each of the Acquired Fund Shareholders pursuant to the
Reorganization will be the same as the tax basis of the Acquired Fund
shares held by such shareholder immediately prior to the
Reorganization; (g) The holding period of the assets of the Acquired
Fund in the hands of the Acquiring Fund will include the period during
which those assets were held by the Acquired Fund; and (h) The holding
period of the Acquiring Fund Shares 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
Blanchard or Virtus at any time prior to the Closing Date (and
notwithstanding any vote of the Board of Trustees of Blanchard) 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 Virtus or of
Blanchard, 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 Virtus or of Blanchard, 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 CAPITAL GROWTH
FUND
Attest:
/s/C. Grant Anderson By: /s/ Joseph S. Machi
C. Grant Anderson
- ------------------------------------- -------------------------------------
Assistant Secretary Name: Joseph S. Machi
--------------------------------
Title: Vice President
--------------------------------
Acquiring Fund:
THE VIRTUS FUNDS, on behalf of its
Portfolio, THE STYLE MANAGER: LARGE
CAP FUND
Attest:
/s/C. Grant Anderson By: /s/ Joseph S. Machi
C. Grant Anderson
- ------------------------------------- -------------------------------------
Assistant Secretary Name: Joseph S. Machi
--------------------------------
Title: Vice President
--------------------------------
Cusip G01686-08 (2/97)
STATEMENT OF ADDITIONAL INFORMATION
, 1997
-----------
ACQUISITION OF THE ASSETS OF
BLANCHARD CAPITAL GROWTH 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 STYLE MANAGER: LARGE CAP FUND
A PORTFOLIO OF
THE VIRTUS FUNDS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER: 1-800-829-3863
This Statement of Additional Information dated , 1997 is
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not a prospectus. A Prospectus/Proxy Statement dated , 1997
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related to the above-referenced matter may be obtained from The Virtus
Funds, Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779.
This Statement of Additional Information should be read in conjunction with
such Prospectus/Proxy Statement.
TABLE OF CONTENTS
1. Statement of Additional Information of The Style Manger: Large Cap
Fund, a portfolio of The Virtus Funds, dated January 31, 1997.
2. Statement of Additional Information of Blanchard Capital Growth Fund,
a portfolio of Blanchard Funds, dated February 29, 1996 (revised October 7,
1996).
3. Financial Statements of The Style Manager: Large Cap Fund, a portfolio
of The Virtus Funds, dated September 30, 1996.
4. Financial Statements of Blanchard Capital Growth Fund, a portfolio of
Blanchard Funds, dated October 31, 1996.
The Statement of Additional Information of The Style Manager: Large
Cap Fund (`Large Cap''), a portfolio of The Virtus Funds, dated January
31, 1997, is incorporated herein by reference to Post-Effective Amendment
No. 15 to The Virtus Fund's Registration Statement on Form N-1A (File Nos.
33-36451 and 811-6158 ) which was filed with the Securities and Exchange
Commission on or about January 21, 1997. A copy may be obtained, upon
request and without charge, from Large Cap at Federated Investors Tower,
Pittsburgh, PA 15222-3779; telephone number: 1-800-829-3863.
The Statement of Additional Information of Blanchard Capital Growth
Fund ("Capital Growth"), a portfolio of Blanchard Funds, dated February 29,
1996, is incorporated herein by reference to Post-Effective Amendment No.
39 to the Blanchard Fund's Registration Statement on Form N-1A (File Nos.
33-3165 and 811-4579) which was filed with the Securities and Exchange
Commission on or about November 27, 1996. A copy may be obtained, upon
request and without charge, from Capital Growth at Federated Investors
Tower, Pittsburgh, PA 15222-3779; telephone number: 1-800-829-3863.
The audited financial statements of Large Cap, dated September 30, 1996,
are incorporated herein by reference to Large Cap's Annual Report to
Shareholders dated September 30, 1996, which was filed with the Securities
and Exchange Commission. A copy may be obtained, upon request and without
charge, from Large Cap at Federated Investors Tower, Pittsburgh, PA 15222-
3779; telephone number 1-800-829-3863.
The audited financial statements of Capital Growth, dated October
31, 1996, are incorporated herein by reference to Capital Growth's Annual
Report to Shareholders dated October 31, 1996 which was filed with the
Securities and Exchange Commission. A copy may be obtained, upon request
and without charge, from Capital Growth at Federated Investors Tower,
Pittsburgh, PA 15222-3779; telephone number: 1-800-829-3863.
Pro forma financial statements are not included herein as the total
net assets of Capital Growth do not exceed 10% of the total assets of Large
Cap. At November 30, 1996, the total net assets of Capital Growth were,
$1,704,292 and the total net assets of Large Cap were $103,627,013.
G01686-09
SBM Financial Services
Proxy Services
P. O. Box 9156
Farmingdale, New York 11735
BLANCHARD CAPITAL GROWTH FUND,
a Portfolio of
BLANCHARD FUNDS
SPECIAL MEETING OF SHAREHOLDERS
March 21, 1997
BLANCHARD CAPITAL GROWTH FUND,
a Portfolio of
BLANCHARD FUNDS
The undersigned shareholder(s) of Blanchard Capital Growth Fund, a
portfolio of Blanchard Funds, (`Capital Growth''), hereby appoint(s) Gia
C. Albanowski, C. Grant Anderson, Patricia F. Conner, and Jody L. Petras,
or any of them true and lawful attorneys, with power of substitution of
each, to vote all shares of Capital Growth which the undersigned is
entitled to vote, at the Special Meeting of Shareholders to be held on
March 21, 1997, at Federated Investors Tower, 19th Floor, Pittsburgh,
Pennsylvania 15222-3779, at 2:00 p.m. (local time) and at any adjournment
thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The attorneys
named will vote the shares represented by this proxy in accordance with the
choice made on this ballot. IF NO CHOICE IS INDICATED AS TO ANY ITEM, THIS
PROXY WILL BE VOTED AFFIRMATIVELY ON THAT MATTER.
Please sign EXACTLY as your name(s)
appear(s) 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 owners should sign.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND
RETAIN THE TOP PORTION.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: X
KEEP THIS PORTION FOR YOUR RECORDS.
DETACH AND RETURN THIS PORTION ONLY.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
BLANCHARD CAPITAL GROWTH FUND,
RECORD DATE SHARES:
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Vote On Proposal(s)
1. To approve or disapprove a proposal whereby Capital Growth would (a)
withdraw its investment in Capital Growth Portfolio, in order to permit the
current two-tier structure of Capital Growth to be replaced, temporarily,
by a one-tier structure common to most mutual funds; and (b) enter into a
proposed agreement pursuant to which The Style Manager: Large Cap Fund
(''Large Cap''), a portfolio of The Virtus Funds, would acquire all of
Capital Growth's assets in exchange for Investment Shares of Large Cap.
Capital Growth would then distribute the shares of Large Cap so received
pro rata to its shareholders and would liquidate and terminate its
existence.
FOR AGAINST ABSTAIN
- -----------------------------------
Signature
Signature (Joint Owners)
Date:
---------------------------------
PART C - OTHER INFORMATION
Item 15. Indemnification
Indemnification is provided to trustees and officers of the
Registrant pursuant to the Registrant's Declaration of Trust, except where
such indemnification is not permitted by law. However, the Declaration of
Trust does not protect the trustees or officers from liability based on
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of their office.
Trustees and officers of the Registrant are insured against certain
liabilities, including liabilities arising under the Securities Act of 1933
(the "Act").
Insofar as indemnification for liabilities arising under the Act
may be permitted to trustees, officers, and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of Trust or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by trustees,
officers, or controlling persons of the Registrant in connection with the
successful defense of any act, suit, or proceeding) is asserted by such
trustees, officers, or controlling persons in connection with the shares
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940 for trustees,
officers, or controlling persons of the Registrant by the Registrant
pursuant to the Declaration of Trust or otherwise, the Registrant is aware
of the position of the Securities and Exchange Commission as set forth in
Investment Company Act Release No. IC-11330. Therefore, the Registrant
undertakes that in addition to complying with the applicable provisions of
the Declaration of Trust or otherwise, in the absence of a final decision
on the merits by a court or other body before which the proceeding was
brought, that an indemnification payment will not be made unless in the
absence of such a decision, a reasonable determination based upon factual
review has been made (i) by a majority vote of a quorum of non-party
trustees who are not interested persons of the Registrant or (ii) by
independent legal counsel in a written opinion that the indemnitee was not
liable for an act of willful misfeasance, bad faith, gross negligence, or
reckless disregard of duties. The Registrant further undertakes that
advancement of expenses incurred in the defense of a proceeding (upon
undertaking for repayment unless it is ultimately determined that
indemnification is appropriate) against an officer, trustee, or controlling
person of the Registrant will not be made absent the fulfillment of at
least one of the following conditions: (i) the indemnitee provides
security for his undertaking; (ii) the Registrant is insured against losses
arising by reason of any lawful advances; or (iii) a majority of a quorum
of disinterested non-party trustees or independent legal counsel in a
written opinion makes a factual determination that there is reason to
believe the indemnitee will be entitled to indemnification.
Item 16. Exhibits
1.1 Conformed Copy of Declaration of Trust of the Registrant, as restated
(5)
2.1 Bylaws of the Registrant (1)
3 Not Applicable
4 Agreement and Plan of Reorganization dated December 20, 1996, between
Blanchard Funds, a Massachusetts business trust, on behalf of its
portfolio, Blanchard Capital Growth Fund, and The Virtus Funds, a
Massachusetts business trust, on behalf of its portfolio, The Style
Manager: Large Cap Fund (7)
5 Copy of Specimen Certificate for Shares of Beneficial Interest of the
Registrant (2)
6.1 Conformed Copy of Investment Advisory Contract of the Registrant, and
Amendment No. 1 thereto (6)
6.2 Conformed Copy of Sub-Advisory Contract of the Registrant (9)
7.1 Conformed Copy of Distributor's Contract of the Registrant (5)
7.2 Conformed Copy of Exhibits E and F to the Distributor's Contract of
the Registrant (6)
8 Not Applicable
9 Conformed Copy of Custodian Agreement of the Registrant (3)
9.1 Conformed Copy of Amendment No. 1 to Custodian Agreement of the
Registrant (6)
10.1 Conformed Copy of Distribution Plan of the Registrant, as amended (5)
10.2 Copy of Rule 12b-1 Agreement of the Registrant and Amendment Nos. 1
and 2 thereto (6)
10.3 Conformed Copy of Administrative Services Agreement of the Registrant
(6)
10.4 Conformed Copy of Previous Administrative Services Agreement of the
Registrant (6)
10.5 Conformed Copy of Multiple Class Plan of the Registrant (6)
11 Opinion of S. Elliott Cohan, Deputy General Counsel, Federated
Investors regarding legality of shares being issued (7)
12 Opinion of Dickstein Shapiro Morin & Oshinsky LLP regarding tax
consequences of Reorganization (4)
13.1 Conformed Copy of Agreement for Fund Accounting Services,
Administrative Services, Shareholder Recordkeeping Services and Custody
Services Procurement (3)
13.2 Conformed Copy of Withdrawal Agreement between The Blanchard Funds, on
behalf of Blanchard Capital Growth Fund, and Capital Growth Portfolio (to
be filed by Amendment)
14.1 Conformed Copy of Consent of Independent Auditors of The Virtus
Funds., Deloitte & Touche LLP *
14.2 Conformed Copy of Consent of Independent Auditors of The Blanchard
Funds., Deloitte & Touche LLP *
14.3 Conformed Copy of Consent of Independent Auditors of The Blanchard
Funds., Price Waterhouse LLP *
15 Not Applicable
16 Conformed Copy of Power of Attorney (7)
17.1 Declaration under Rule 24f-2 (7)
17.2 Form of Proxy of The Virtus Funds (7)
* Filed electronically.
(1) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed on August 24, 1990. (File
Nos. 33-36451 and 811-6158)
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed November 24, 1993. (File Nos. 33-36451
and 811-6158)
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed June 20, 1994. (File Nos. 33-36451 and
811-6158)
(4) To be filed by Post-Effective Amendment pursuant to `Dear
Registrant''letter dated February 15, 1996.
(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed December 21, 1994. (File Nos. 33-36451
and 811-6158)
(6) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed November 22, 1996. (File Nos. 33-36451
and 811-6158)
(7) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-14 filed on December 23, 1996. (File
Nos. 333-18571 and 811-6158)
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus
which is a part of this Registration Statement by any person or party who
is deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, the reoffering prospectus will contain the
information called for by the applicable registration form for reofferings
by persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as a part of an amendment
to the Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act
of 1933, each post-effective amendment shall be deemed to be a new
Registration Statement for the securities offered therein, and the offering
of the securities at that time shall be deemed to be the initial bona fide
offering of them.
3) The undersigned Registrant agrees to file by Post-Effective
Amendment the opinion of counsel regarding the tax consequences of the
proposed reorganization required by Item 16(12) of Form N-14 within a
reasonable time after receipt of such opinion.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, The Virtus Funds, has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Pittsburgh, Commonwealth of Pennsylvania on February 13,
1997.
THE VIRTUS FUNDS
(Registrant)
By: *
Edward C. Gonzales
President and Treasurer
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities indicated on
February 13, 1997:
* Chairman and Trustee
John F. Donahue
(Chief Executive Officer)
* President, Treasurer and Trustee
Edward C. Gonzales
(Principal Financial and Accounting
Officer)
* Trustee
Thomas G. Bigley
* Trustee
John T. Conroy, Jr.
* Trustee
William J. Copeland
* Trustee
James E. Dowd
* Trustee
Lawrence D. Ellis, M.D.
* Trustee
Edward L. Flaherty, Jr.
* Trustee
Peter E. Madden
* Trustee
Gregor F. Meyer
* Trustee
John E. Murray, Jr., J.D., S.J.D.
* Trustee
Wesley W. Posvar
* Trustee
Marjorie P. Smuts
1* By: /s/ S. Elliott Cohan
Attorney in Fact
FEDERATED SERVICES COMPANY
Federated Investors Tower
Pittsburgh, PA 15222-3779
February 13, 1997
Via EDGAR
EDGAR Operations Branch
Division of Investment Management
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: THE VIRTUS FUNDS
1* Such signature has been affixed pursuant to a Power of Attorney.
Pre-Effetive Amendment No. 2 to the
Registration Statement on Form N-14 (File No. 333-18571)
Ladies and Gentlemen:
Pursuant to the Securities Act of 1933, as amended, and the General Rules
and Regulations thereunder, enclosed for filing electronically is Pre-
Effective Amendment No. 1 to the Registration Statement on Form N-14 of The
Style Manager: Large Cap Fund (the `Large Cap''), a portfolio of The
Virtus Funds, relating to the acquisition of the assets of Blanchard
Capital Growth Fund (`Capital Growth''), a portfolio of Blanchard Funds,
by and in exchange for Investment Shares of Large Cap Fund. The Virtus
Funds has filed the notices required by Rule 24f-2; accordingly no fee is
payable with this filing.
This filing is being made to update certain exhibits in Part C of the
Registrant's Registration Statement on Form N-14; to incorporate the
Registrant's responses to comments received from Bruce MacNeil on January
22, 1997; and to add language to the effect that the Reorganization
referred to therein could possibly result in taxable income to Capital
Growth shareholders. This filing has been redlined to show changes that
have been made to the Registrant's Prospectus/Proxy Statement and Statement
of Additional Information since the Registrant's filing of Pre-effective
Amendment No. 1 on January 21, 1997.
We are also transmitting a request for accelerated effectiveness of the
Form N-14 requesting acceleration for February 18, 1997 or as soon as
practicable thereafter.
Any questions or comments with respect to this filing may be directed to
the undersigned at (412) 288-4827.
Very truly yours,
/s/ Jody L. Petras
Jody L. Petras
Senior Compliance Analyst
Enclosures
CC: C. Grant Anderson, Esq.
Matthew G. Maloney, Esq.
Exhibit 14.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Shareholders
of THE STYLE MANAGER: LARGE CAP FUND (a portfolio of The Virtus Funds)
We consent to the incorporation by reference in Pre-Effective Amendment No.
2 to this Registration Statement on Form N-14 (No. 333-18571) of The Style
Manager: Large Cap Fund of our report dated November 8, 1996, appearing in
the Combined Annual Report to Shareholders of The Virtus Funds for the year
ended September 30, 1996, and to the incorporation by reference of the
above mentioned report in the Combined Prospectus and Combined Statement of
Additional Information of The Virtus Funds, for the year ended September
30, 1996, both dated January 31, 1997, and to the references to us within
this Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
February 12, 1997
Exhibit 14.2
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees and Shareholders
of BLANCHARD CAPITAL GROWTH FUND
We consent to the incorporation by reference in Pre-Effective Amendment No.
2 to the Registration Statement on Form N-14 (No. 333-18571) of The Style
Manager: Large Cap Fund (a portfolio of The Virtus Funds), of our report
dated December 20, 1996 on the Blanchard Capital Growth Fund, appearing in
the Annual Report of Blanchard Capital Growth Fund for the year ended
October 31, 1996, and to the references to us within this Registration
Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
February 12, 1997
Exhibit 14.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
the use in the Statement of Additional Information of the Blanchard Capital
Growth Fund (one of the portfolios of the Blanchard Group of Funds,
hereafter referred to as the `Fund'') dated February 29, 1996, which
Prospectus and Statement of Additional Information are incorporated by
reference in the Combined Proxy Statement/Prospectus and related Statement
of Additional Information constituting parts of this registration statement
on Form N-14 (the `Registration Statement''), of our report dated December
22, 1995, relating to the financial statements and financial highlights
appearing in the October 31, 1995 Annual Reports to Shareholders of the
Fund. We also consent to the references to us under the headings
`Financial Highlights'' and ``Independent Accountants'' in the Prospectus
dated February 29, 1996.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
New York, New York
February 12, 1997
