1933 Act File No. 333-18571
1940 Act File No. 811-6158
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
THE VIRTUS FUNDS
(Exact Name of Registrant as Specified in Charter)
Pre-Effective Amendment No.
---
X Post-Effective Amendment No. 1
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Area Code and Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective immediately upon
filing pursuant to Rule 485(b).
An indefinite amount of the Registrant's securities has been registered
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. In reliance upon such Rule, no filing fee is being
paid at this time. A Rule 24f-2 notice of the Registrant for the year ended
September 30, 1996 was filed on November 15, 1996.
Copy To:
Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
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
Incorporate by reference pursuant to Rule 411 under the Securities Act of
1933, Parts A and B of Registrant's Definitive Registration Statement filed
on Form N-14 on February 24, 1997, in their entirety (File No. 333-18571
and 811-6158).
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 (8)
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)
12.1 Opinion of Dickstein Shapiro Morin & Oshinsky LLP regarding tax
consequences of Reorganization *
12.2 Opinion of Dickstein Shapiro Morin & Oshinsky LLP regarding tax
consequences of Blanchard Capital Growth Fund's withdrawal from Capital
Growth Portfolio *
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*
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 (8)
* 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)
(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)
(8) Response is incorporated by reference to Registrant's Definitive
Registration Statement on Form N-14 filed on February 24, 1997.
(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.
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
April 22, 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
April 22, 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
1* Such signature has been affixed pursuant to a Power of Attorney.
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 this Post-Effective
Amendment No. 1 to the 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
April 17, 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 this Post-Effective
Amendment No. 1 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
April 17, 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 Post-Effective
Amendment No. 1 to the 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 which is
also incorporated by reference into the Prospectus dated February 29, 1996.
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
April 17, 1997
Exhibit 13.2
WITHDRAWAL AGREEMENT
THIS AGREEMENT is made and entered into as of the 4th day of February,
1997, by and between Signet Financial Services, Inc. ("Signet"); Blanchard
Funds, a Massachusetts business trust ("Blanchard"); Capital Growth
Portfolio, a New York trust (the "Portfolio"); and The Chase Manhattan Bank
("Chase"), with respect to the proposed withdrawal of Blanchard Capital
Growth Fund (the "Fund"), a series of Blanchard, of its investment in the
Portfolio.
WITNESSETH
WHEREAS, the parties hereto are also parties to an Agreement dated
August 23, 1994 (together with Exhibit A thereto, the "SpokeSM Agreement"),
whereunder, among other matters, the Fund agreed to invest all its
investable assets in the Portfolio in exchange for a beneficial interest in
the Portfolio equal in the value to the net value of the assets of the Fund
conveyed to the Portfolio; and
WHEREAS, the Fund has, at all times since October 31, 1994, invested
all its investable assets in the Portfolio and has since that date owned a
beneficial interest in the Portfolio; and
WHEREAS, the Fund desires to withdraw its investment from the
Portfolio in exchange for securities owned by the Portfolio having a value
at the closing date provided herein (the "Closing Date") equal to the value
of the Fund's beneficial interest in the Portfolio as of 4:00 p.m. E.S.T.
on the Closing Date (the "Closing"), and to terminate the SpokeSM
Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
herein made and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The Closing Date shall be mutual selected by the Fund and the
Portfolio.
2. On the Closing Date, the Fund shall withdraw all its beneficial
interest in the Portfolio in exchange for certain securities owned by the
Portfolio at the Closing Date (the "Securities") and cash ("Cash"). The
Securities to be conveyed by the Portfolio to the Fund shall be mutually
selected by the Fund and the Portfolio at least five business days in
advance of the Closing Date (provided however, that, until the day
immediately preceding the Closing, the Fund shall have the right to change
the composition of the securities so selected to the extent of 20% of the
value thereof, such replacement securities to be mutually selected by the
Fund and the Portfolio), and need not mirror, security-for-security, the
composition of the Portfolio immediately prior to the Closing Date, but
will be composed of securities in number and identity which will enable the
Fund immediately following the Closing to comply with the portfolio
diversification tests (IRC Section368(a)(2)(F)(ii) and IRC
Section851(b)(4)) imposed by the Internal Revenue Code of 1986, as amended
(the "Code"). In addition, the amount of Cash to be conveyed by the
Portfolio to the Fund shall be mutually agreed upon by the Portfolio and
the Fund.
3. In addition, on the Closing Date: (a) the SpokeSM Agreement
shall terminate; and (b) Chase and the Portfolio, on the one hand, and
Blanchard, the Fund and Signet, on the other hand, shall release one
another from all potential claims relating to the SpokeSM Agreement and the
relationship created thereby.
2
4. The Portfolio represents and warrants to Blanchard and the Fund,
which representations and warranties shall survive the Closing, that at the
Closing:
a. The Portfolio will have been at all times since its formation a
partnership for federal income tax purposes under the Code, and will
have never been a publicly traded partnership under Section7704 of
the Code.
b. The Portfolio will be an "investment partnership" within the
meaning of Section731(c) of the Code.
c. The Portfolio will not own any "unrealized receivables" within
the meaning of Section751(c) of the Code.
d. The Portfolio will not, at the Closing Date, own any "inventory
items" within the meaning of Section751(d) of the Code.
5. The Portfolio agrees to determine the Fund's taxable income for
the taxable year of the Portfolio which includes the Closing Date by using
the interim closing of the partnership books methods.
6. This Agreement shall be terminated without liability to any party
in the event that the proposed withdrawal by the Fund of its ownership
interest in the Portfolio shall not have been approved by the shareholders
of the Fund on or before April 30, 1997.
7. This Agreement may be executed in two or more counterparts, each
of which shall be an original, but all of which together shall constitute
one and the same instrument.
3
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers, thereunto duly authorized, as of the
date first written above.
SIGNET FINANCIAL SERVICES, INC.
By: /s/ Tobin Kern
BLANCHARD FUNDS
on behalf of itself and the Blanchard
Capital Growth Fund
By: /s/ C. Grant Anderson
CAPITAL GROWTH PORTFOLIO
By: /s/ Martin R. Dean
THE CHASE MANHATTAN BANK
By: /s/ Richard W. McWalters
EXHIBIT 12.1
April 18, 1997
Blanchard Funds, on behalf of its portfolio,
Blanchard Capital Growth Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
The Virtus Funds, on behalf of its portfolio,
The Style Manager: Large Cap Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Ladies and Gentlemen:
You have requested our opinion concerning certain federal income tax
consequences of a transaction (the "Reorganization") in which all of the
assets of Blanchard Capital Growth Fund, (the "Acquired Fund"), a portfolio
of Blanchard Funds, a Massachusetts business trust ("Blanchard"), will be
acquired by The Virtus Funds, a Massachusetts business trust ("Virtus"), on
behalf of its portfolio, The Style Manager: Large Cap Fund (the "Acquiring
Fund"), in exchange solely for Investment Shares of the Acquiring Fund (the
"Acquiring Fund Shares") which shall thereafter be distributed to the
shareholders of the Acquired Fund (the "Acquired Fund Shareholders") in
liquidation of the Acquired Fund. The terms and conditions of this
transaction are set forth in an Agreement and Plan of Reorganization dated
December 20, 1996 between Virtus, on behalf of the Acquiring Fund, and
Blanchard, on behalf of the Acquired Fund (the "Agreement"). This opinion
is rendered to you pursuant to paragraph 8.5 of the Agreement.
Both Blanchard and Virtus are registered open-end management investment
companies which qualify as regulated investment companies described in
Section 851(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). The Acquired Fund and the Acquiring Fund are engaged in the
business of investing in professionally managed portfolios generally of
equity securities.
We have reviewed and relied upon the Registration Statement on Form N-14
(the "Registration Statement") filed with the Securities and Exchange
Commission (the "Commission") in connection with the Reorganization, the
certificates provided to us by Blanchard and Virtus in connection with the
rendering of this opinion, and such other documents and instruments as we
have deemed necessary for the purposes of this opinion.
Based upon and subject to the foregoing, and assuming that the
Reorganization will take place as described in the Agreement, we are of the
opinion that, for federal income tax purposes:
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;
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;
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;
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;
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;
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;
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
The holding period of the Acquiring Fund Shares received by each Acquired
Fund Shareholder will include the period during which the Acquired Fund
shares exchanged therefor were held by such shareholder (provided the
Acquired Fund shares were held as capital assets on the date of the
Reorganization).
This opinion is expressed as of the date hereof and is based upon the Code,
Treasury regulations promulgated thereunder, administrative positions of
the Internal Revenue Service (the "Service"), and judicial decisions, all
of which are subject to change either prospectively or retroactively.
There can be no assurance that changes in the law will not take place which
could affect the opinions expressed herein or that contrary positions may
not be taken by the Service. We disclaim any undertaking to advise you
with respect to any event subsequent to the date hereof.
The opinions contained herein are limited to those matters expressly
covered; no opinion is to be implied in respect of any other matter. This
opinion is addressed solely to you and may not be relied upon by any other
person without our prior written consent. We hereby consent to the filing
of a copy of this opinion with the Commission as an exhibit to the
Registration Statement, and to the references to this firm and this opinion
in the Prospectus/Proxy Statement which is contained in the Registration
Statement.
Very truly yours,
/s/ Dickstein Shapiro Morin & Oshinsky LLP
Dickstein Shapiro Morin & Oshinsky LLP
EXHIBIT 12.2
April 18, 1997
Blanchard Funds
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Ladies and Gentlemen:
You have requested our opinion concerning certain federal income tax
consequences of a transaction in which Blanchard Capital Growth Fund, (the
"Acquired Fund"), a portfolio of Blanchard Funds, a Massachusetts business
trust ("Blanchard"), will withdraw from Capital Growth Portfolio, a New
York trust (the "Portfolio") in exchange for the Securities and Cash. The
terms and conditions of this transaction are set forth in a Withdrawal
Agreement dated as of February 4, 1997 by and among Signet, Blanchard, the
Portfolio and Chase (the "Withdrawal Agreement"). Unless otherwise
indicated, all capitalized terms, not defined herein, are defined in the
Withdrawal Agreement.
The Acquired Fund is a registered open-end management investment company
which qualifies as a regulated investment company described in Section
851(a) of the Internal Revenue Code of 1986, as amended (the "Code"). The
Portfolio qualifies as a non-publicly traded partnership for federal income
tax purposes. The Acquired Fund and the Portfolio are parties to an
Agreement dated August 23, 1994, whereunder the Acquired Fund agreed to
invest all of its investable assets in the Portfolio in exchange for a
beneficial interest in the Portfolio. The Acquired Fund has, at all times
since October 31, 1994, invested all its investable assets in the
Portfolio. The Acquired Fund currently desires to withdraw its investment
in the Portfolio. On the Closing Date, the Acquired Fund will withdraw all
its ownership interests in the Portfolio in exchange for the Securities and
Cash (the "Restructuring").
The Restructuring will be followed by an acquisition of the Acquired Fund's
assets by The Virtus Funds, a Massachusetts business trust ("Virtus"), on
behalf of its portfolio The Virtus Style Manager: Large Cap Fund (the
"Acquiring Fund") in exchange solely for shares of the Acquiring Fund and
the distribution of such shares to the shareholders of the Fund in
liquidation of the Acquired Fund (the "Reorganization"). The
Reorganization will be undertaken pursuant to the terms and conditions of
the Agreement and Plan of Reorganization dated December 20, 1996 between
the Virtus Funds and Blanchard Funds.
We have reviewed and relied upon the Registration Statement on Form N-14
(the "Registration Statement") filed with the Securities and Exchange
Commission (the "Commission") in connection with the Reorganization and the
Restructuring, the certificate provided to us by the Acquired Fund in
connection with the rendering of this opinion, the representations and
warranties made by the Portfolio in the Withdrawal Agreement and such other
documents and instruments as we have deemed necessary for the purposes of
this opinion.
Based upon and subject to the foregoing, and assuming that the
Restructuring will take place as described in the Withdrawal Agreement, we
are of the opinion that, for federal income tax purposes, no gain or loss
(other than possible gain or loss under the mark-to-market provisions of
the Code) will be recognized by the Acquired Fund upon receipt of the
Securities and Cash in the Restructuring.
This opinion is expressed as of the date hereof and is based upon the Code,
Treasury regulations promulgated thereunder, administrative positions of
the Internal Revenue Service (the "Service"), and judicial decisions, all
of which are subject to change either prospectively or retroactively.
There can be no assurance that changes in the law will not take place which
could affect the opinions expressed herein or that contrary positions may
not be taken by the Service. We disclaim any undertaking to advise you
with respect to any event subsequent to the date hereof.
The opinions contained herein are limited to those matters expressly
covered; no opinion is to be implied in respect of any other matter. This
opinion is addressed solely to you and may not be relied upon by any other
person without our prior written consent. We hereby consent to the filing
of a copy of this opinion with the Commission as an exhibit to the
Registration Statement, and to the references to this firm and this opinion
in the Prospectus/Proxy Statement which is contained in the Registration
Statement.
Very truly yours,
/s/ Dickstein Shapiro Morin & Oshinsky LLP
Dickstein Shapiro Morin & Oshinsky LLP
