SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934 (Amendment No. )
------
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or
Sec. 240.14a-12
BLANCHARD FUNDS
(Name of Registrant as Specified In Its Charter)
Federated Investors
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ X ] Fee paid previously with preliminary proxy materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
[LOGO OF BLANCHARD FUNDS]
BLANCHARD CAPITAL GROWTH FUND
AND
BLANCHARD GROWTH & INCOME FUND
FEDERATED INVESTORS TOWERS
PITTSBURGH, PENNSYLVANIA 15222-3779
Dear Valued Shareholder:
As you may already know, The Chase Manhattan Bank, N.A., the adviser to the
Portfolios in which Blanchard Capital Growth Fund and Blanchard Growth &
Income Fund invest, has agreed to be acquired by Chemical Banking Corporation.
Although this change will not affect the portfolio management of the Funds
or the Portfolios, we are required to send you the enclosed proxy so that you
are aware of the change in ownership and may vote upon whether to have your
investment in either Fund managed by what is now Chemical Banking Corporation
and upon certain other matters described below.
The Board of Trustees of your Funds recommends that you vote "YES". Please
complete and return proxy ballot today.
The remainder of these materials further discuss these matters.
Sincerely,
THE BLANCHARD GROUP OF FUNDS
LOGO
BLANCHARD CAPITAL GROWTH FUND
AND
BLANCHARD GROWTH & INCOME FUND
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Dear Valued Shareholder:
Blanchard Capital Growth Fund and Blanchard Growth & Income Fund (each a
"Fund" and collectively, hereinafter referred to as the "Funds"), unlike many
other investment companies which directly acquire and manage their own
portfolio of securities, seek to achieve their investment objectives by
investing all of their investable assets in, respectively, Capital Growth
Portfolio and Growth & Income Portfolio, open-end management investment
companies managed by Chase Manhattan Bank, N.A. (the "Adviser"), with
investment objectives that are substantially identical to those of the
respective Funds (each a "Master Portfolio" and collectively, hereinafter
referred to as the "Master Portfolios"). In addition, other entities may
invest in each Master Portfolio (e.g., other investment companies, insurance
company separate accounts and common and commingled trust funds). Whenever
Blanchard Funds (the "Trust") is requested to vote on matters pertaining to a
Master Portfolio, the Trust will hold a meeting of its corresponding Fund's
shareholders and will cast its vote as instructed by Fund shareholders. At
this time, you are being asked to cast your vote on each proposal with respect
to your Fund and its Master Portfolio.
As you may be aware, The Chase Manhattan Corporation ("Chase") has entered
into an Agreement and Plan of Merger with Chemical Banking Corporation
("Chemical") pursuant to which Chase will merge with and into Chemical (the
"Holding Company Merger"). Pursuant to the Investment Company Act of 1940, as
amended, consummation of the Holding Company Merger will result in the
automatic termination of the investment advisory agreements between the Master
Portfolios and The Chase Manhattan Bank, N.A. ("the Adviser"). In addition,
subsequent to the Holding Company Merger, the Adviser will be merged with and
into Chemical Bank in a secondary merger of the principal operating entities
of Chase and Chemical (the "Bank Merger"). The Bank Merger may also be deemed
to result in the automatic termination of the investment advisory agreements
between the Adviser and the Master Portfolios. In anticipation of the
completion of the Holding Company Merger and the Bank Merger, and to provide
continuity in investment advisory
services to your Fund's Master Portfolio, we urge you to review the enclosed
proxy statement. In the proxy statement you are asked to vote on the approval
of an interim and a new advisory agreement between your Fund's Master
Portfolio and the Adviser, on the approval of certain changes to the
fundamental investment restrictions of your Fund and your Fund's Master
Portfolio, and on the approval of certain changes to your Fund's fundamental
investment objective to conform such objective to the investment objectives
and policies of its Master Portfolio.
The Board of Trustees of the Blanchard Group of Funds has voted unanimously
in favor of each proposal and recommends that you vote "FOR" them as well. You
will find more information on the proposals in the enclosed proxy statement.
Please be assured that there is no increase to the advisory fee rate in the
proposed advisory agreements for the Master Portfolios.
YOUR VOTE IS IMPORTANT. Please read the enclosed proxy statement and vote
now by completing, signing and returning the enclosed proxy ballot form(s) in
the pre-paid envelope. If you own shares in both Funds, you will receive a
separate proxy card for each of your Funds. Please note and return EACH proxy
card you receive. EVERY VOTE COUNTS. If you have any questions, please call
the Fund at 800-829-3863.
Very truly yours,
THE BLANCHARD GROUP OF FUNDS
[LOGO OF BLANCHARD FUNDS]
BLANCHARD CAPITAL GROWTH FUND
AND
BLANCHARD GROWTH & INCOME FUND
FEDERATED INVESTORS TOWERS
PITTSBURGH, PENNSYLVANIA 15222-3779
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
TO BE HELD APRIL 29, 1996
Special meetings of the shareholders of Blanchard Capital Growth Fund and
Blanchard Growth & Income Fund (each a "Fund" and collectively, hereinafter
referred to as the "Funds") will be held at 2:00 p.m. (Eastern time) with
respect to Blanchard Capital Growth Fund, and 2:30 p.m. (Eastern time) with
respect to Blanchard Growth & Income Fund, at Federated Investors Tower,
Pittsburgh, Pennsylvania, on April 29, 1996, for the purposes indicated below:
1. To approve or disapprove an interim investment advisory agreement
between each of the Master Portfolios and The Chase Manhattan
Bank, N.A. (and the successor entity thereto) (the "Adviser")
which will take effect upon the merger of The Chase Manhattan
Corporation (the parent company of the Adviser) and Chemical
Banking Corporation (to be voted on separately by the
shareholders of each Fund). No fee increase is proposed.
2. To approve or disapprove a new investment advisory agreement
between each of the Master Portfolios and the Adviser, and a sub-
advisory agreement between the Adviser and Chase Asset
Management, Inc. with respect to each of the Master Portfolios to
take effect as soon as practicable after approval by shareholders
(to be voted on separately by the shareholders of each Fund). No
fee increase is proposed.
3. To consider the following proposals pertaining to the fundamental
investment restrictions of each Fund's Master Portfolio and of
each Fund (to be voted on separately by shareholders of each
Fund):
a. To approve or disapprove an amendment to the Master
Portfolio's and the Fund's fundamental investment restriction
concerning borrowing;
b. To approve or disapprove an amendment to the Master
Portfolio's and the Fund's fundamental investment restriction
concerning investment for the purpose of exercising control;
c. To approve or disapprove an amendment to the Master
Portfolio's and the Fund's fundamental investment restriction
concerning the making of loans;
d. To approve or disapprove an amendment to the Master
Portfolio's and the Fund's fundamental investment restriction
concerning purchases of securities on margin;
e. To approve or disapprove an amendment to the Master
Portfolio's and the Fund's fundamental investment restriction
concerning concentration of investment;
f. To approve or disapprove an amendment to the Master
Portfolio's and the Fund's fundamental investment restriction
concerning commodities and real estate;
g. To approve or disapprove an amendment to the Master
Portfolio's and the Fund's fundamental investment restriction
regarding investments in restricted and illiquid securities;
h. To approve or disapprove of a reclassification, as non-
fundamental, of the Master Portfolio's and the Fund's
fundamental restriction concerning the use of options;
i. To approve or disapprove an amendment to the Master
Portfolio's and the Fund's fundamental investment restriction
concerning senior securities; and
j. To approve or disapprove an amendment to the Master
Portfolio's and the Fund's fundamental investment restriction
regarding short sales of securities.
4. To approve or disapprove an amendment to each Fund's fundamental
investment objective to conform such objective to the investment
objective and policies of the Master Portfolio in which such Fund
invests (to be voted on separately by shareholders of each Fund).
5. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
By Order of the Board of Trustees
John W. McGonigle
March 28, 1996 Secretary
YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS
TO ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. IF YOU ARE
UNABLE TO ATTEND THE MEETING OF YOUR FUND, PLEASE MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED
AT THE MEETING. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
PROXY STATEMENT
BLANCHARD CAPITAL GROWTH FUND AND BLANCHARD GROWTH & INCOME FUND
FEDERATED INVESTORS TOWERS PITTSBURGH, PENNSYLVANIA 15222-3779
The enclosed proxy is solicited on behalf of the Board of Trustees of
Blanchard Funds (the "Trust"). The proxy is revocable at any time before it is
voted by sending written notice of the revocation to the Trust or by appearing
personally at an April 29, 1996 special meeting of shareholders (the
"Meeting"). The cost of preparing and mailing the notice of meeting, the proxy
card, this proxy statement and any additional proxy material ("Meeting Cost")
has been or is to be borne by The Chase Manhattan Corporation, Chemical
Banking Corporation and/or their affiliates. The Chase Manhattan Bank, N.A.
(the "Adviser") is currently the investment adviser to each of the Master
Portfolios. Proxy solicitations will be made primarily by mail, but may also
be made by telephone, telegraph, facsimile or personal interview conducted by
certain officers or employees of the Trust, the Adviser or its affiliates, or,
if necessary, a commercial firm retained for this purpose. In the event that
the shareholder signs and returns the proxy ballot, but does not indicate a
choice as to any of the items on the proxy ballot, the persons named in the
accompanying proxy will vote those shares in favor of such proposal(s).
On March 18, 1996, the record date for determining shareholders entitled to
receive notice of and vote at the Meetings (the "Record Date"), each Fund had
the following number of shares of beneficial interest ("Shares") outstanding,
each Share being entitled to one vote:
FUND TOTAL SHARES OUTSTANDING
- ---- ------------------------
Blanchard Growth & Income Fund 1,238,968
Blanchard Capital Growth Fund 222,031
Each proposal and each item of other business which may properly come before
the Meetings will be voted on separately by the shareholders of each Fund. The
holders of shares of each Fund shall be entitled to one vote for each full
share and a fractional vote for each fractional share.
A copy of each Fund's Annual Report (which contains information pertaining
to the Fund) may be obtained, without charge, by calling the Fund, at (800)
829-3863.
This proxy statement and the enclosed notice of meeting and proxy card are
first being mailed to shareholders on or about March 28, 1996.
INTRODUCTION
The Meetings are being called for the following purposes.
With respect to each of the Funds: (1) to approve or disapprove an interim
investment advisory agreement (the "Interim Agreement") between each of the
Master Portfolios and the Adviser which will take effect upon the merger of
The Chase Manhattan Corporation and Chemical Banking Corporation; (2) to
approve or disapprove a new investment advisory agreement (the "New Advisory
Agreement") between each of the Master Portfolios and the Adviser (and its
successor in the Bank Merger) and a Sub-Advisory Agreement between the Adviser
and Chase Asset Management, Inc. to take effect as soon as practicable after
approval by shareholders; (3) to approve or disapprove amendments to each
Master Portfolio's and each Fund's fundamental investment restrictions; (4) to
approve or disapprove an amendment to each Fund's fundamental investment
objective to conform such objective to the investment objective and policies
of the Master Portfolio in which the Fund invests; and (5) to transact such
other business as may properly come before the Meetings or any adjournment
thereof.
All information with respect to each of the proposals was provided to the
Board of Trustees of Blanchard Funds by the Adviser.
PROPOSAL NUMBER
---------------
NAME OF FUND 1 2 3 4
- ------------ --- --- --- ---
Blanchard Growth & Income Fund.................................. x x x x
Blanchard Capital Growth Fund................................... x x x x
SUBCHART FOR PROPOSALS 3A-J
NAME OF FUND A B C D E F G H I J
- ------------ --- --- --- --- --- --- --- --- --- ---
Blanchard Growth & Income Fund......... x x x x x x x x x x
Blanchard Capital Growth Fund.......... x x x x x x x x x x
Approval of Proposals 1, 2 and 3 with respect to a Fund requires the vote of
a "majority of the outstanding voting securities," within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act"), of the Master
Portfolio in which that Fund invests and, in addition, approval of Proposal 3
with respect to a Fund requires the vote of a "majority of the outstanding
voting securities," within the meaning of the 1940 Act, of that Fund. Approval
of Proposal 4 with respect to a Fund requires the vote of a "majority of the
outstanding voting securities," within the meaning of the 1940 Act, of that
Fund. The term "majority of the outstanding voting securities" is defined
under the 1940 Act to mean: (a) 67% or more of the outstanding shares present
at a meeting of shareholders of a Master Portfolio or a Fund, as the case may
be, if the holders of more than 50% of the outstanding shares are present or
represented by proxy, or (b) more than 50% of the outstanding shares of a
Master Portfolio or a Fund, as the case may be, whichever is less.
For purposes of determining the presence of a quorum and counting votes on
the matters presented, Shares represented by abstentions and "broker non-
votes" will be counted as present, but not as votes cast, at the Meeting.
Under the 1940 Act, the affirmative vote necessary to approve a
matter under consideration may be determined with reference to a percentage of
votes present at a meeting of shareholders, which would have the effect of
treating abstentions and non-votes as if they were votes against the proposal.
If Proposal 1 is approved, it is anticipated that it will become effective
upon the occurrence of the Holding Company Merger (and remain effective after
the Bank Merger). If Proposal 2 is approved, it is anticipated that the New
Advisory Agreement and the CAM, Inc. Agreement will become effective as soon
as practicable after shareholder approval (and remain effective after the Bank
Merger.) If Proposals 3 and 4 are approved, it is anticipated that the changes
effected thereby will become effective as soon as practicable after
shareholder approval.
PROPOSAL 1 APPROVAL OR DISAPPROVAL OF AN INTERIM INVESTMENT ADVISORY AGREEMENT
BETWEEN EACH MASTER PORTFOLIO AND THE CHASE MANHATTAN BANK, N.A. (AND THE
SUCCESSOR ENTITY THERETO)
INTRODUCTION
The Chase Manhattan Bank, N.A. currently serves as each Master Portfolio's
investment adviser pursuant to a separate Investment Advisory Agreement (the
"Current Advisory Agreement") for each Master Portfolio. The Chase Manhattan
Bank, N.A. is a wholly owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company.
On August 27, 1995, The Chase Manhattan Corporation announced its entry into
an Agreement and Plan of Merger (the "Merger Agreement") with Chemical Banking
Corporation ("Chemical"), a bank holding company, pursuant to which The Chase
Manhattan Corporation will merge with and into Chemical (the "Holding Company
Merger"). Under the terms of the Merger Agreement, Chemical will be the
surviving corporation in the Holding Company Merger and will continue its
corporate existence under Delaware law under the name "The Chase Manhattan
Corporation" ("New Chase"). The board of directors and shareholders of each
holding company have approved the Holding Company Merger, which will create
the largest bank holding company in the United States based on assets. The
consummation of the Holding Company Merger is subject to certain closing
conditions. The Holding Company Merger is expected to be completed during the
first quarter of 1996.
Subsequent to the Holding Company Merger, it is expected that the adviser to
the Master Portfolios, The Chase Manhattan Bank, N.A., will be merged with and
into Chemical Bank, a New York State chartered bank ("Chemical Bank") (the
"Bank Merger" and together with the Holding Company Merger, the "Mergers").
The surviving bank will continue operations under the name The Chase Manhattan
Bank (as used herein, the term "Chase" refers to The Chase Manhattan Bank,
N.A. and its successor in the Bank Merger, and the term "Adviser" means Chase
(including its successor in the Bank Merger) in its capacity as investment
adviser to the Master Portfolios). The consummation of the Bank Merger is
subject to certain closing conditions, including the receipt of certain
regulatory approvals. The Bank Merger is expected to be completed on or about
July 31, 1996.
Chemical is a publicly owned bank holding company incorporated under
Delaware law and registered under the Federal Bank Holding Company Act of
1956, as amended. As of December 31, 1995, through its direct or indirect
subsidiaries, Chemical managed more than $57 billion in assets, including
approximately $6.9 billion in mutual fund assets in 11 mutual fund portfolios.
Chemical Bank is a wholly owned subsidiary of Chemical and is a New York State
chartered bank.
As required by the 1940 Act, each Current Advisory Agreement provides for
its automatic termination upon its "assignment" (as defined in the 1940 Act).
Consummation of the Holding Company Merger may be deemed to result in an
assignment of the Current Advisory Agreements and, consequently, to terminate
the Current Advisory Agreements in accordance with their terms. Similarly, the
consummation of the Bank Merger may also be deemed to result in an assignment
and consequently, terminate the then-existing investment advisory contract. In
anticipation of the consummation of the Mergers and to provide continuity in
investment advisory services, at a meeting held on December 14, 1995, the
Board of Trustees of each Master Portfolio, including a majority of the Board
members who are not "interested persons" (as defined in the 1940 Act) of the
Investment Company, approved an Interim Advisory Agreement between each Master
Portfolio and the Adviser to take effect upon the consummation of the Holding
Company Merger. The Board also directed that such agreement be submitted to
shareholders for approval. In addition, the Board of Trustees of each Master
Portfolio approved the continuation of the Interim Advisory Agreement after
the Bank Merger, on the same terms and conditions as in effect immediately
prior to the merger (except for effective and termination dates) in the event
the Interim Advisory Agreement is deemed to terminate as a result of the Bank
Merger. Approval of Proposal 1 will also be deemed approval of such
continuation of the Interim Advisory Agreement after the Bank Merger, if
applicable. EACH INTERIM ADVISORY AGREEMENT IS IDENTICAL TO THE CURRENT
ADVISORY AGREEMENT, EXCEPT FOR ITS EFFECTIVE AND TERMINATION DATES. THE
AGGREGATE CONTRACTUAL RATE CHARGEABLE FOR INVESTMENT ADVISORY SERVICES WILL
REMAIN THE SAME.
In connection with each Master Portfolio's approval of the Interim Advisory
Agreement, the Board of Trustees of each Master Portfolio considered that the
terms of the Mergers do not require any change in the Adviser's investment
management or operation of the Master Portfolios, the investment personnel
managing the Master Portfolios, the shareholder services or other business
activities of the Master Portfolios, or the investment objectives of the
Master Portfolios. Chemical and the Adviser have informed the Board of
Trustees of each Master Portfolio that the Mergers will not at this time
result in any such change, although no assurance can be given that such a
change will not occur. Each also has advised that, at present, neither plans
nor proposes to make any material changes in the business, corporate structure
or composition of senior management or personnel of the Adviser, or in the
manner in which the Adviser renders investment advisory services to each. If,
after the Mergers, changes in the Adviser are proposed that might materially
affect its services to the Master Portfolios, the Board of each Master
Portfolio will consider the effect of those changes and take such action as it
deems advisable under the circumstances.
The Adviser has informed each Master Portfolio that it proposes to comply
with Section 15(f) of the 1940 Act. Section 15(f) provides a non-exclusive
safe harbor for an investment adviser or any of its affiliated persons to
receive any amount or benefit in connection with a change in control of the
investment adviser as long as two conditions are met. First, for a period of
three years after the
transaction, at least 75% of the Board members of an investment company must
not be interested persons of such investment adviser. Second, an "unfair
burden" must not be imposed on an investment company as a result of such
transaction or any express or implied terms, conditions or understandings
applicable thereto. The term "unfair burden" is defined in Section 15(f) to
include any arrangement during the two-year period after the transaction
whereby the investment adviser, or any interested person of any such adviser,
receives or is entitled to receive any compensation, directly or indirectly,
from an investment company or its security holders (other than fees for bona
fide investment advisory or other services) or, with certain exceptions, from
any person in connection with the purchase or sale of securities or other
property to, from or on behalf of an investment company. The Adviser, after
due inquiry, is not aware of any express or implied term, condition,
arrangement or understanding which would impose an "unfair burden" on the
Master Portfolios as a result of the Mergers. New Chase, the Adviser and their
affiliates have agreed to take no action that would have the effect of
imposing an "unfair burden" on the Master Portfolios as a result of the
Mergers. Chase, Chemical and/or one or more of their affiliates have
undertaken to pay all costs relating to the Mergers, including the costs of
the shareholders' meetings.
THE INVESTMENT ADVISER
The Advisory Agreements. The Chase Manhattan Bank, N.A., One Chase Manhattan
Plaza, New York, New York 10081, currently serves as investment adviser to the
Master Portfolios pursuant to an investment advisory agreement between the
Adviser and each Master Portfolio (the "Current Advisory Agreement"). The
Adviser will serve as investment adviser to the Master Portfolios after the
Holding Company Merger under an investment advisory agreement with each Master
Portfolio (the "Interim Advisory Agreement") which is identical in all
material respects to the Current Advisory Agreement except for its effective
and termination dates. A copy of the form of the Interim Advisory Agreement is
attached hereto as Appendix A and should be read in conjunction with the
following.
The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A., a wholly
owned subsidiary of The Chase Manhattan Corporation, a registered bank holding
company, is a commercial bank offering a wide range of banking and investment
services to customers throughout the United States and around the world. Its
headquarters are at One Chase Manhattan Plaza, New York, New York 10081. As of
December 31, 1995, Chase was one of the largest commercial banks in the United
States, with assets of $100.2 billion. As of such date, The Chase Manhattan
Corporation was one of the largest bank holding companies in the United
States, having total assets of approximately $121.2 billion. As of September
30, 1995, The Chase Manhattan Corporation through various subsidiaries
provided personal, corporate and institutional investment management services
for approximately $57.9 billion in assets, of which Chase provided investment
management services to Vista portfolios containing approximately $10.4 billion
in assets. Included among Chase's accounts are commingled trust funds and a
broad spectrum of individual trust and investment management portfolios. These
accounts have varying investment objectives. Effective upon consummation of
the Holding Company Merger, The Chase Manhattan Bank, N.A. will be a wholly
owned subsidiary of New Chase. Upon consummation of the Bank Merger, The Chase
Manhattan Bank, a New York State chartered bank (the successor entity to The
Chase Manhattan Bank, N.A.) will continue to be a wholly owned subsidiary of
New Chase.
The other mutual funds for which the Adviser serves as investment adviser,
their assets as of December 31, 1995, and their annual advisory fees are:
TOTAL ASSETS
(IN MILLIONS)
MUTUAL FUND TRUST FEE AS OF 12/31/95
- ----------------- ---- --------------
Vista California Tax Free Money Market..................... 0.10% $ 42.822
Vista New York Tax Free Money Market....................... 0.10 438.386
Vista Tax Free Money Market................................ 0.10 430.000
Vista U.S. Government Money Market......................... 0.10 2263.872
Vista Global Money Market.................................. 0.10 1715.658
Vista Federal Money Market................................. 0.10 496.456
Vista Treasury Plus Money Market........................... 0.10 195.22
Vista Prime Money Market................................... 0.10 1198.243
Vista Tax Free Income...................................... 0.30 103.047
Vista New York Tax Free Income............................. 0.30 110.567
Vista California Intermediate Tax Free Income.............. 0.30 32.191
TOTAL ASSETS
(IN MILLIONS)
MUTUAL FUND GROUP FEE AS OF 12/31/95
- ----------------- ---- --------------
Vista Short Term Bond Fund................................. 0.25% $ 36.493
Vista U.S. Government Income Fund.......................... 0.30 114.170
Vista Bond Fund............................................ 0.30 59.191
Vista Equity Income Fund................................... 0.40 11.564
Vista Equity Fund.......................................... 0.40 49.847
Vista Balanced Fund........................................ 0.50 41.393
IEEE Balanced Fund......................................... 0.65 11.459
Vista Small Cap Equity Fund................................ 0.65 80.898
Vista Southeast Asian Fund................................. 1.00 4.724
Vista Japan Fund........................................... 1.00 3.620
Vista European Fund........................................ 1.00 4.518
TOTAL ASSETS
(IN MILLIONS)
MUTUAL FUND VARIABLE ANNUITY TRUST FEE AS OF 12/31/95
- ---------------------------------- ---- --------------
International Equity Portfolio............................. 0.80% $ 2.375
Capital Growth Portfolio................................... 0.60 4.273
Growth and Income Portfolio................................ 0.60 3.680
Asset Allocation Portfolio................................. 0.55 2.566
U.S. Treasury Income Portfolio............................. 0.50 2.320
Money Market Portfolio..................................... 0.25 2.292
The Adviser is currently a wholly-owned subsidiary of The Chase Manhattan
Corporation, a registered bank holding company, and is a commercial bank
offering a wide range of banking and investment services to customers
throughout the U.S. and around the world. Effective upon consummation of the
Holding Company Merger, the Adviser will be a wholly owned subsidiary of
New Chase. Upon consummation of the Bank Merger, the Adviser will continue to
be a wholly owned subsidiary of New Chase.
The principal executive officers and Directors of the Adviser are as
follows:
Thomas G. Labreque, Chairman of the Board, Chief Executive Officer and
Director.
Richard J. Boyle, Vice Chairman of the Board and Director.
Donald L. Boudreau, Vice Chairman of the Board and Director.
E. Michel Kruse, Vice Chairman of the Board and Director.
Susan V. Berresford, Director. Ms. Berresford is also an Executive Vice
President of The Ford Foundation.
M. Anthony Burns, Director. Mr. Burns is also Chairman of the Board,
President and Chief Executive Officer of Ryder System, Inc.
James L. Ferguson, Director. Mr. Ferguson is also a retired Chairman and
Chief Executive Officer of General Foods Corporation.
H. Laurance Fuller, Director. Mr. Fuller is also President and Chief
Executive Officer of the United Negro College Fund, Inc.
David T. Kearns, Director. Mr. Kearns is also a retired Chairman and Chief
Executive Officer of The Xerox Corporation.
Delano E. Lewis, Director. Mr. Lewis is also the President and Chief
Executive Officer of National Public Radio.
Paul W. MacAvoy, Director. Mr. MacAvoy is also the Williams Brothers
Professor of Management Studies at the Yale School of Management.
John H. McArthur, Director. Mr. McArthur is also a Professor of the Harvard
Graduate School of Business Administration.
David T. McLaughlin, Director. Mr. McLaughlin is also Chairman of the Board
and Chief Executive Officer of The Aspen Institute.
Edmund T. Pratt, Jr., Director. Mr. Pratt is also Chairman Emeritus of
Pfizer Inc.
Henry B. Schnacht, Director. Mr. Schnacht is also a Member of the Board of
Trustees of Cummins Engine Company, Inc.
Donald H. Trautlein, Director. Mr. Trautlein is also a retired Chairman and
Chief Executive Officer of Bethlehem Steel Corporation.
The business address of the above persons is One Chase Manhattan Plaza, New
York, New York 10081.
CURRENT AND INTERIM ADVISORY AGREEMENTS
The Current and Interim Advisory Agreements for each Master Portfolio are
identical, except for their effective and termination dates. The Current and
Interim Advisory Agreements provide for the
Adviser to render investment, supervisory and certain corporate administrative
services subject to the control of the Board of Trustees. The Current and
Interim Advisory Agreements state that the Adviser shall, at its expense,
provide to the particular Master Portfolio all office space and facilities,
equipment and clerical personnel necessary to carry out its duties under each
Advisory Agreement.
Under each of the Current and Interim Advisory Agreements, the Adviser pays
all compensation of those officers and employees of the Master Portfolios and
of those Trustees who are affiliated with the Adviser. Each Master Portfolio
bears the cost of the preparation and setting in type of its prospectuses and
reports to shareholders and the costs of printing and distributing those
copies of such prospectuses and reports as are sent to shareholders. Under the
Current and Interim Advisory Agreements all other expenses of the Master
Portfolios not expressly assumed by the Adviser are paid by the Master
Portfolios. Each Advisory Agreement lists examples of such expenses; the major
categories of such expenses relate to interest, taxes, legal and audit
expenses, custodian and transfer agent or shareholder servicing agency
expenses, stock issuance and redemption costs, certain printing costs,
registration costs of each Master Portfolio and its shares under federal and
state securities laws, and non-recurring expenses, including litigation.
For the services it provides under the terms of the Current and Interim
Advisory Agreement, each Master Portfolio pays the Adviser a monthly fee equal
to a specified percentage per annum of its average daily net assets computed
at the close of each business day. See "Fees and Fee Waivers" under Proposal 2
below which sets forth the applicable percentage for each Master Portfolio.
The Adviser may voluntarily agree to waive a portion of the fees payable to
it.
The Current Advisory Agreements are currently in effect until August 19,
1996 and continue from year to year thereafter, provided that each Agreement
is specifically approved in a manner consistent with the 1940 Act. However,
the Current Advisory Agreements may be deemed to terminate upon consummation
of the Holding Company Merger. The 1940 Act requires approval at least
annually by each Master Portfolio's Board of Trustees, including the vote of a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of any party to the Agreement cast in person at a meeting called for
the purpose of voting on approval, or by the vote of the holders of a
"majority" of the outstanding voting securities (as defined in the 1940 Act)
of the Master Portfolio. The Interim Agreement will terminate on May 30, 1996
with respect to a Master Portfolio, unless its shareholders approve the
Interim Agreement prior to such scheduled termination date (see "Additional
Information").
A Master Portfolio may terminate the Current and Interim Advisory Agreements
without penalty on not more than 60 days' nor less than 30 days' written
notice when authorized by either a vote of the shareholders of the Master
Portfolio or by a vote of a majority of the Master Portfolio's Board of
Trustees, including the vote of a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of any party to the
Agreement. The Adviser may terminate the Current and Interim Advisory
Agreements on not more than 60 days' nor less than 30 days' written notice. An
Advisory Agreement will automatically terminate in the event of its assignment
(as defined in the 1940 Act).
In addition, the Current and Interim Advisory Agreements provide that, in
the event the operating expenses of a Master Portfolio, including all
investment advisory and administration fees,
but excluding brokerage commissions and fees, distribution fees, taxes,
interest and extraordinary expenses such as litigation expenses, for any
fiscal year exceed the most restrictive expense limitation applicable to the
Master Portfolio imposed by the securities laws or regulations thereunder of
any state in which the shares of the Master Portfolio are qualified for a
sale, as such limitations may be raised or lowered from time to time, the
Adviser shall reduce its advisory fee described above to the extent of its
share of such excess expenses. The amount of any such reduction to be borne by
the Adviser will be deducted from the monthly fee otherwise payable to the
Adviser during such fiscal year; and if such amounts should exceed the monthly
fee, the Adviser will pay to the Master Portfolio its share of such excess
expenses no later than the last day of the first month of the next succeeding
fiscal year.
Certain Relationships and Activities. The Adviser and its affiliates may
have deposit, loan and other commercial banking relationships with the issuers
of securities purchased on behalf of any of the Master Portfolios, including
outstanding loans to such issuers which may be repaid in whole or in part with
the proceeds of securities so purchased. The Adviser and its affiliates deal,
trade and invest for their own accounts in U.S. Government obligations and
municipal obligations and are among the leading dealers of various types of
U.S. Government obligations and municipal obligations. The Adviser and its
affiliates may sell U.S. Government obligations and municipal obligations to
and purchase them from other investment companies distributed by Vista Broker
Dealer Services. The Adviser will not invest any Master Portfolio assets in
any U.S. Government obligations or municipal obligations purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which the Adviser
or an affiliate is a non-principal member. This restriction may limit the
amount or type of U.S. Government obligations or municipal obligations
available to be purchased on behalf of the Master Portfolios. The Adviser has
informed each Master Portfolio that in making its investment decisions it does
not obtain or use material inside information in the possession of any other
division or department of the Adviser or in the possession of any affiliate of
the Adviser.
Both the Current and Interim Advisory Agreements provide that, in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard for its obligations thereunder, the Adviser shall not be liable for
any act or omission in the course of or in connection with the rendering of
its services thereunder.
BOARD CONSIDERATION
In considering whether to approve the Interim Advisory Agreement and to
submit it to the shareholders for their approval, the Board of Trustees of
each Master Portfolio considered the following factors: (1) the representation
that there would be no diminution in the scope and quality of advisory and
other services provided by the Adviser under the Interim Advisory Agreement,
and (2) the identical nature of the terms and conditions, including
compensation payable, contained in the Interim Advisory Agreement as compared
to the Current Advisory Agreement. Additionally, each Board considered the
benefits that would be obtained by the Master Portfolio in maintaining
continuity in the advisory services provided to it, and determined that
continuity was advantageous to the Master Portfolio as it would serve to
minimize uncertainty and confusion, provide for the continued utilization of
the demonstrated skills and capability of the staff of the Adviser and its
familiarity with the operations of the Master Portfolio, and avoid the
possibility of disruptive effects
on the Master Portfolio that might otherwise result from a change in the
management and operations of the Master Portfolio.
ADDITIONAL INFORMATION
Chase also serves as each Master Portfolio's administrator pursuant to
separate Administration Agreements. Under each Administration Agreement, Chase
generally assists in all aspects of a Master Portfolio's operations, other
than providing investment advice, subject to the overall authority of the
Board of Trustees of the Master Portfolio in accordance with applicable state
law. Under the terms of the relevant Administration Agreement, Chase receives
a monthly fee at the annual rate of .10% of the value of each Master
Portfolio's average daily net assets. For each Master Portfolio, the
administration fee payable, the amount by which such fee was reduced pursuant
to a waiver by Chase, and the net administration fees paid by the Master
Portfolio under the Administration Agreement for the indicated period are set
forth below under "Fees and Fee Waivers."
Each Master Portfolio engaged Vista Broker-Dealer Services, Inc. (the "Sub-
Administrator"), a wholly owned subsidiary of BISYS Fund Services, Inc.,
located at 125 West 55th Street, New York, New York 10019, to assist it in
providing certain administrative services for each Master Portfolio pursuant
to a Sub-Administration Agreement between each Master Portfolio and the Sub-
Administrator. The Sub-Administrator receives an annual fee, payable monthly,
of .05% of the average daily net assets of each Master Portfolio.
On November 6, 1995, each Master Portfolio, other investment companies
advised by Chase, and Chase filed an application (the "Application") with the
Securities and Exchange Commission (the "Commission") requesting an order of
the Commission permitting implementation, without prior shareholder approval,
of the Interim Advisory Agreements during the interim period commencing on the
date of the closing on the Holding Company Merger and ending at the earlier of
such time as sufficient votes are cast by the applicable Master Portfolio's
shareholders to approve the Interim Agreement or May 30, 1996 (the "Interim
Period").
As a condition to the requested exemptive relief, the Master Portfolio has
undertaken in the Application that the advisory compensation payable by any
Master Portfolio during the Interim Period will be maintained in an interest-
bearing escrow account and, with respect to each Master Portfolio, amounts in
the account will be paid to Chase only upon approval by the shareholders of
the Master Portfolio of the applicable Interim Advisory Agreement and the
compensation payable thereunder. In addition, the Application contains
representations that Chase (and its successor, if applicable), will take all
appropriate steps to ensure that the scope and quality of its advisory and
other services provided to the Master Portfolios during the Interim Period
will be at least equivalent to the scope and quality of the services
previously provided; and that, in the event of any material change in the
personnel providing services pursuant to the Interim Advisory Agreements
during the Interim Period, the Board of each Master Portfolio will be apprised
and consulted to assure that they are satisfied that the services provided
will not be diminished in scope or quality.
The Board of Trustees of each Master Portfolio concluded that payment of the
investment advisory fee under the Interim Advisory Agreement, during the
Interim Period would be appropriate and fair considering that (1) the fee
would be paid at the same rate as was previously in effect under
the Current Advisory Agreement and services would be provided in the same
manner, (2) because of the relatively short time frame necessary to complete
the Holding Company Merger, there was a possibility that some or all of the
Master Portfolios would not obtain the requisite number of votes to approve
the Interim Advisory Agreement prior to the Holding Company Merger, and (3)
the non-payment of advisory fees during the Interim Period would be an unduly
harsh result in view of the services provided to each Master Portfolio under
the Interim Advisory Agreements.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
Approval of a Master Portfolio's Interim Advisory Agreement will require the
affirmative vote of a "majority of the outstanding voting securities" of such
Master Portfolio, which for this purpose means the affirmative vote of the
lesser of (1) more than 50% of the outstanding shares of such Master Portfolio
or (2) 67% or more of the shares of such Master Portfolio present at the
meeting if more than 50% of the outstanding shares of such Master Portfolio
are represented at the meeting in person or by proxy (a "Majority Vote"). If
the shareholders of a Master Portfolio do not approve the Interim Advisory
Agreement, the consummation of the Holding Company Merger will not be
affected, the Current Advisory Agreement for that Master Portfolio will have
terminated or will terminate upon the consummation of the Holding Company
Merger and the Interim Advisory Agreement for that Master Portfolio will
terminate on May 30, 1996. In that event, if the shareholders shall not have
approved new advisory arrangements in accordance with Proposal 2, the relevant
Board will take such further action as it may deem to be in the best interests
of the Master Portfolio's shareholders.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE FOREGOING PROPOSAL
PROPOSAL 2
APPROVAL OR DISAPPROVAL OF A NEW
INVESTMENT ADVISORY AGREEMENT BETWEEN
EACH MASTER PORTFOLIO AND THE CHASE MANHATTAN BANK, N.A.
(AND THE SUCCESSOR ENTITY THERETO), AND A SUB-ADVISORY
AGREEMENT BETWEEN THE CHASE MANHATTAN BANK, N.A. (AND
THE SUCCESSOR ENTITY THERETO) AND CHASE ASSET MANAGEMENT, INC.
INTRODUCTION
The Chase Manhattan Bank, N.A., the current investment adviser of the Master
Portfolios (as used herein, the term "Chase" refers to The Chase Manhattan
Bank, N.A. and its successor in the Bank Merger, and the term "Adviser" means
Chase (including its successor in the Bank Merger) in its capacity as Adviser
to the Master Portfolios) recommended to the Board of each Master Portfolio
that each Master Portfolio enter into a new Investment Advisory Agreement with
the Adviser (the "New Advisory Agreement") effective as soon as practicable
after the approval of shareholders. The Adviser also recommended to the Board
of each Master Portfolio that the Adviser be permitted to utilize the services
of its wholly owned subsidiary, Chase Asset Management, Inc. ("CAM Inc."), to
render advisory services to each Master Portfolio. CAM Inc. is a registered
investment adviser which was recently incorporated for the purpose of
rationalizing the delivery of investment advisory services by Chase to its
institutional clients. CAM Inc. will be retained pursuant to a proposed Sub-
Advisory Agreement (the "CAM Inc. Agreement"). The Board of each Master
Portfolio has approved, and recommends that the shareholders of the Master
Portfolio approve, the New Advisory Agreement and CAM Inc. Agreement
(collectively, the "Agreements"). In addition, the Board of Trustees of each
Master Portfolio approved the continuation of the Agreements after the Bank
Merger, on the same terms and conditions as in effect immediately prior to the
merger (except for effective and termination dates) in the event the
Agreements are deemed to terminate as a result of the Bank Merger. Approval of
Proposal 2 will be deemed approval of such continuation of the Agreements
after the Bank Merger. If approved, the Agreement will become effective as
soon as practicable after the approval of shareholders.
No increase is proposed to the contractual fee rates under the New Advisory
Agreement and the Adviser, and not the Master Portfolios, will compensate CAM
Inc. for its services as Sub-Adviser. THEREFORE, THE MASTER PORTFOLIOS WILL
NOT BEAR ANY INCREASE IN THE CONTRACTUAL ADVISORY FEE RATES RESULTING FROM THE
NEW ADVISORY AGREEMENTS OR THE CAM INC. AGREEMENT.
While the New Advisory Agreement is described below, the discussion is
qualified by the provisions of the complete agreement, a copy of which is
attached as Appendix B. If the shareholders of a Master Portfolio do not
approve this Proposal, then Chase will continue to act, commencing on the date
of the Holding Company Merger, as the adviser to such Master Portfolio under
the terms of the Interim Advisory Agreement, assuming Proposal 1 is approved.
If the Interim Advisory Agreement is not approved by shareholders, the
relevant Board will consider the appropriate course of action for the Master
Portfolio. The New Advisory Agreement should be read in conjunction with the
following.
Background. In connection with the Mergers, New Chase intends to rationalize
its corporate wide investment management operations in order to more fully
take advantage of portfolio management
skills that will exist within the various corporate entities controlled by New
Chase. As part of this structuring, New Chase would like to consolidate its
mutual fund supervisory functions within one entity (Chase), and its portfolio
management responsibilities within another entity (CAM Inc.). The Adviser also
seeks to retain the ability to utilize portfolio managers employed by the
various investment management entities affiliated with the Adviser through
common ownership by New Chase.
Thus, the New Advisory Agreement would provide the Adviser with the ability
to utilize the specialized portfolio skills of employees of all its various
affiliates, thereby providing the Master Portfolios with greater opportunities
and flexibility in accessing investment expertise. For the foreseeable future,
the Adviser would employ certain members of the Adviser's senior management.
SIMILARITIES BETWEEN THE CURRENT AND NEW ADVISORY AGREEMENTS:
The New Advisory Agreement is similar in many respects to the Current
Advisory Agreement and Interim Advisory Agreement. The New Advisory Agreement
contains the material terms of the Current Advisory Agreement, but reflects
the proposed change of the investment adviser from The Chase Manhattan Bank,
N.A. to its successor entity, and incorporates additional provisions designed
to clarify and supplement the rights and obligations of the parties.
MOST IMPORTANTLY, THE CONTRACTUAL RATE AT WHICH FEES ARE REQUIRED TO BE PAID
BY EACH FUND FOR INVESTMENT ADVISORY SERVICES, AS A PERCENTAGE OF AVERAGE
DAILY NET ASSETS, WILL REMAIN THE SAME. Under the provisions of both the
Current and the New Advisory Agreements, each Master Portfolio is required to
pay the Adviser a monthly fee equal to a stated percentage per annum of its
average daily net assets. These amounts are set forth below under "Fees and
Fee Waivers."
The following summarizes certain additional aspects of the Current and New
Advisory Agreements (collectively, the "Agreements") which are materially the
same in both Agreements:
In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the obligations or duties of the Adviser, the Adviser
shall not be liable to the Master Portfolios or to any shareholder for any
losses that may be sustained by the Master Portfolios in connection with its
performance of the Agreement.
The Adviser bears all expenses in connection with the performance of its
services under the Agreement. The Master Portfolios bear the expenses incurred
in their operations. Both agreements provide that the Adviser shall, at its
expense, provide the Master Portfolios with office space, furnishings and
equipment and personnel required by it to perform the services to be provided
by the Adviser and that the Master Portfolios shall be responsible for all of
their expenses and liabilities.
Under the Agreement, if the aggregate expenses incurred by a Master
Portfolio in any fiscal year is in excess of the lowest applicable expense
limitation imposed by state securities laws or regulations thereunder, the
Adviser shall reduce its investment advisory fee, but not below zero, to the
extent of its share of such excess expenses; provided, however, that certain
provided expenses are specifically excluded from such calculation. No such
reimbursement was required during either Master Portfolio's most recent fiscal
period.
A Master Portfolio may terminate the Agreement as to that Master Portfolio
without penalty on not more than 60 days' written notice when authorized by
either a vote of shareholders holding a "majority of the outstanding voting
securities" (within the meaning of the 1940 Act) of the Master Portfolio or by
a vote of a majority of the Master Portfolio's Board of Trustees. The Adviser
may terminate the Agreement on 60 days' written notice to the Master
Portfolio. The Agreement terminates in the event of its assignment (as defined
in the 1940 Act).
DIFFERENCES BETWEEN THE CURRENT AND NEW ADVISORY AGREEMENTS:
The following highlights summarize some of the additional provisions which
are included in the New Advisory Agreement:
After the Bank Merger, Chase Manhattan Bank, a New York State chartered
bank, the successor entity to The Chase Manhattan Bank, N.A., will be the
adviser to the Master Portfolios rather than The Chase Manhattan Bank, N.A.,
and will continuously supervise the investment and reinvestment of cash,
securities and other property comprising the assets of the Master Portfolios.
The Chase Manhattan Bank, N.A. will be the Adviser to the Master Portfolios
until the Bank Merger.
Details Regarding the Adviser's Duties. The New Advisory Agreement clearly
specifies the duties of the Adviser. For example, the Adviser will be required
to obtain and evaluate pertinent data and other significant events and
developments which affect the economy, the Master Portfolios' investment
programs, the issuers of securities and the industries in which they engage,
and furnish a continuous investment program for each Master Portfolio. The
Adviser will be obligated to furnish such reports, evaluations, information or
analyses to a Master Portfolio as its Board may request, make recommendations
to its Board with respect to trust policies, and carry out such policies as
are adopted by its Board.
Use of Affiliated Entities. The New Advisory Agreement clarifies that the
Adviser may render services through its own employees or the employees of one
or more affiliated companies that are qualified to act as an investment
adviser to the Master Portfolio under applicable laws and are under the common
control of New Chase as long as all such persons are functioning as part of an
organized group of persons, and such organized group of persons is managed at
all times by authorized officers of the Adviser. The Adviser will be as fully
responsible to the Master Portfolios for the acts and omissions of such
persons as it is for its own acts and omissions.
Use of a Sub-Adviser. The New Advisory Agreement clarifies that the Adviser
may from time to time employ or associate with such other entities or persons
(a "Sub-Adviser") as it believes appropriate to assist in the performance of
its obligations under of the New Advisory Agreement with respect to a
particular Master Portfolio. However, the Master Portfolios will not pay any
additional compensation for any Sub-Adviser, and the Adviser will be as fully
responsible to the Master Portfolios for the acts and omissions of the Sub-
Adviser as it is for its own acts and omissions, and the Adviser must review,
monitor and report to the Board of each Master Portfolio regarding the
performance and investment procedures of any Sub-Adviser. The proposed Sub-
Advisory agreement is discussed below under "Consideration and Proposal of the
CAM Inc. Agreement."
Execution of Portfolio Transactions. The New Advisory Agreement sets forth
specific terms as to brokerage transactions and the Adviser's use of broker-
dealers. For example, the Adviser will be
obligated to use its best efforts to seek to execute portfolio transactions at
prices which, under the circumstances, result in total costs or proceeds being
the most favorable to the Master Portfolios. In assessing the best overall
terms available for any transaction, the Adviser will consider all factors it
deems relevant, including the breadth of the market in the security, the price
of the security, the financial condition and execution capability of the
broker or dealer, research services provided and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis.
"Soft Dollars." A provision of the New Advisory Agreement explicitly allows
the Adviser to select brokers or dealers who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Adviser, the Master Portfolios and/or
the other accounts over which the Adviser exercises investment discretion, and
provides that, notwithstanding the above, the Adviser may pay a broker or
dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for a Master Portfolio which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction if the Adviser determines in good faith that the
total commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the overall responsibilities of the Adviser
with respect to accounts over which it exercises investment discretion.
Aggregation of Orders. There is also a clarification of the authority of the
Adviser to aggregate the securities to be sold or purchased with those of
other series of funds or its other clients if, in the Adviser's reasonable
judgment, such aggregation will result in an overall benefit to a Master
Portfolio, taking into consideration the advantageous selling or purchase
price, brokerage commission and other expenses, and trading requirements.
Other Clarifications. The New Advisory Agreement contains certain additional
provisions which are intended to clarify the status, rights or obligations of
the parties. For example, the Adviser is deemed to be an independent
contractor.
CONSIDERATION AND PROPOSAL OF THE CAM INC. AGREEMENT
It is being proposed that the Adviser be permitted to utilize the services
of CAM Inc. as a sub-adviser under a proposed Investment Sub-Advisory
Agreement (the "CAM Inc. Agreement") in order to enable the Adviser to more
efficiently render advisory services to each of the Master Portfolios.
The proposed form of the CAM Inc. Agreement is attached as Appendix C and
should be read in conjunction with the following.
The Adviser's decision to utilize the services of CAM Inc. in a sub-advisory
capacity was based on various considerations, including the Adviser's desire
to consolidate its asset management responsibilities in one entity, that the
portfolio managers which currently manage the assets of the Master Portfolios
for the Adviser will also manage the Master Portfolios as employees of CAM
Inc., that CAM Inc. provides a wide range of investment management
capabilities, including the ability to discriminate among a wide range of
potential investments as part of an investment program for each of the Master
Portfolios, that risk control is integral to its methodology, and the
attractiveness of the fee structure and estimated transaction costs that would
be incurred.
Based upon the foregoing, the Adviser recommended to the Board of Trustees
of each Master Portfolio that, subject to approval by such Boards and such
Master Portfolio's shareholders of the New Advisory Agreement and the CAM Inc.
Agreement, the Adviser enter into the CAM Inc. Agreement with CAM Inc. In
considering whether to recommend that the CAM Inc. Agreement be approved by
shareholders, the Board of each Master Portfolio requested and evaluated
various information from the Adviser and CAM Inc. relevant to the Adviser's
decision. In addition, the Board of each Master Portfolio considered various
other factors which it deemed to be relevant, including, but not limited to,
the fact that the managers of the Master Portfolios will continue to manage
the assets of the Master Portfolios as employees of CAM Inc., capabilities to
be provided by CAM Inc., the stability of its investment staff, the trading
systems to be utilized and the potential to minimize transaction costs, the
ability to customize the portfolio for the Master Portfolios, and the
Adviser's access to the various investment and research resources of CAM Inc.
DESCRIPTION OF THE PROPOSED CAM INC. AGREEMENT
The proposed arrangement between the Adviser and CAM Inc. under the CAM Inc.
Agreement would enable the Adviser to manage the investment activities of the
Master Portfolios covered in the CAM Inc. Agreement most effectively by
delegating to CAM Inc. portfolio management duties relating to transactions in
the securities held by such Master Portfolios. With respect to the day to day
management of the Master Portfolios under the CAM Inc. Agreement, CAM Inc.
would make decisions concerning, and place all orders for, purchases and sales
of securities and help maintain the records relating to such purchases and
sales. CAM Inc. may, in its discretion, provide such services through its own
employees or the employees of one or more affiliated companies that are
qualified to act as an investment adviser to the Master Portfolios under
applicable laws and are under the common control of New Chase; provided that
(i) all persons, when providing services under the CAM Inc. Agreement, are
functioning as part of an organized group of persons, and (ii) such organized
group of persons is managed at all times by authorized officers of CAM Inc.
The Adviser and CAM Inc. would bear all expenses in connection with the
performance of their respective services under the Agreement.
As investment adviser, the Adviser would oversee the management of the
Master Portfolios under the CAM Inc. Agreement, and, subject to the general
supervision of the Board of Trustees of each Master Portfolio, would make
recommendations and provide guidelines to CAM Inc. based on general economic
trends and macroeconomic factors. Among the recommendations which may be
provided by the Adviser to CAM Inc. would be guidelines and benchmarks against
which the Master Portfolios would be managed. From the fee paid by each Master
Portfolio under the New Advisory Agreement to the Adviser, the Adviser will
bear responsibility for payment of sub-advisory fees to CAM Inc. Therefore,
the Master Portfolios would not bear any increase in advisory fee rates
resulting from the New Advisory Agreement and the CAM Inc. Agreement.
The Board of Trustees of each Master Portfolio, including a majority of the
Trustees who are not interested persons of each Master Portfolio, the Adviser
or CAM Inc., unanimously approved the CAM Inc. Agreement at a meeting held on
December 14, 1995. If approved by shareholders, unless sooner terminated, the
CAM Inc. Agreement will remain in effect for two years and will thereafter
continue for successive one-year periods, provided that such continuation is
specifically approved at least
annually by the Board of Trustees of each Master Portfolio, or by the vote of
a "majority of the outstanding voting securities" of each Master Portfolio
under the CAM Inc. Agreement as defined under the 1940 Act and, in either
case, by a majority of the Disinterested Trustees of each Master Portfolio who
are not interested persons of the Adviser or CAM Inc., by votes cast in person
at a meeting called for such purpose. The CAM Inc. Agreement is terminable at
any time, without penalty, by vote of the Board of Trustees of a Master
Portfolio, by the Adviser, by the vote of "a majority of the outstanding
voting securities" of a Master Portfolio under the CAM Inc. Agreement, or by
CAM Inc., upon 60 days' written notice. The CAM Inc. Agreement will terminate
automatically in the event of its assignment, as defined under the 1940 Act.
In the event that both the New Advisory Agreement and the CAM Inc. Agreement
are not approved by shareholders of any Master Portfolio, neither the New
Advisory Agreement nor the CAM Inc. Agreement will be implemented for such
Master Portfolio, and the Interim Advisory Agreement between such Master
Portfolio and the Adviser will remain in effect. If the Interim Agreement is
not approved by shareholders, the Board of such Master Portfolio will consider
the appropriate course of action.
INFORMATION ABOUT CHASE ASSET MANAGEMENT, INC.
Chase Asset Management, Inc. was organized as a Delaware corporation on
September 1, 1995, and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended. CAM Inc. is a wholly owned
subsidiary of The Chase Manhattan Bank, N.A., which is a wholly owned
subsidiary of The Chase Manhattan Corporation. After the completion of the
mergers, CAM Inc. will continue to be a wholly owned subsidiary of the Adviser
which will be a wholly owned subsidiary of New Chase. CAM Inc. is registered
with the Commission as an investment adviser and was formed for the purpose of
providing discretionary investment advisory services to institutional clients
and to consolidate Chase's investment management function. Information about
the Adviser and its affiliates is set forth above.
The principal executive officers and directors of CAM Inc. are as follows:
James W. Zeigon, Director and Chairman of the Board. Mr. Zeigon is also an
Executive Vice President of The Chase Manhattan Bank, N.A.
Mark R. Richardson, Director, President and Chief Investment Officer. Mr.
Richardson is also a Managing Director of The Chase Manhattan Bank, N.A.
Stephen E. Prostano, Director, Executive Vice President and Chief Operating
Officer. Mr. Prostano is also a Managing Director of The Chase Manhattan Bank,
N.A.
The business address of each of the foregoing individuals is 1211 Avenue of
the Americas, New York, New York 10036.
BOARD CONSIDERATIONS
In considering whether to recommend that the New Advisory Agreement and CAM
Inc. Agreement be approved by shareholders, the Board of each Master Portfolio
considered the nature and quality of services to be provided by the Adviser
and CAM Inc. and comparative data as to advisory
fees and expenses, and the Board of each Master Portfolio requested and
evaluated such other information from Chase and Chemical which the Board
deemed to be relevant, including, but not limited to, the Adviser's ability to
select and utilize portfolio managers from its affiliates; that the rate at
which advisory fees will initially be paid to the Adviser would be identical
to the rate at which fees are now paid; and that the New Advisory Agreement
would include certain provisions designed to modernize the terms of the
agreement and reflect regulatory developments, such as those concerning "soft
dollars" and aggregation of orders under regulations and releases recently
issued by the Commission.
The Board of each Master Portfolio, including a majority of the Trustees who
are not interested persons of the Master Portfolio or the Adviser
("Disinterested Trustees"), unanimously approved the New Advisory Agreement
and CAM Inc. Agreement at a meeting held on December 14, 1995.
FEES AND FEE WAIVERS
Under the Current Advisory Agreement each Master Portfolio pays the Adviser
(and under the Interim and New Advisory Agreements, each Master Portfolio
would pay the Adviser) a fee, computed daily and paid monthly, at the annual
rate of 0.40% as a percentage of average daily net assets. Each Current
Advisory Agreement, dated August 19, 1987, was last approved by shareholders
on .
Under the Current Advisory Agreement, the Interim Advisory Agreement and New
Advisory Agreement, the Adviser may periodically reduce all or a portion of
its advisory fee with respect to a Master Portfolio. For the fiscal period
ended October 31, 1995, the Master Portfolios paid to the Adviser aggregate
investment advisory fees as follows:
NAME OF MASTER PORTFOLIO FEES PAID
- ------------------------ ----------
Growth & Income Portfolio............................................ $6,815,197
Capital Growth Portfolio............................................. 3,563,194
Chase also serves as the Administrator to each Master Portfolio. For the
fiscal period ended October 31, 1995, Chase received fees from each Master
Portfolio, as follows:
NAME OF MASTER PORTFOLIO FEES PAID
- ------------------------ ---------
Growth & Income Portfolio............................................. $851,900
Capital Growth Portfolio.............................................. 445,399
ADDITIONAL INFORMATION
Additional information concerning the Adviser, the Administrator and the
Sub-Administrator is set forth under "Additional Information" under Proposal
1.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
Approval of the Proposed Advisory Agreement and CAM Inc. Agreement will
require the affirmative vote of a "majority of the outstanding voting
securities" of the relevant Master Portfolio, which for this purpose means the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares
of such Master Portfolio or (2) 67% or more of the shares of such Master
Portfolio present at the meeting if more than 50% of the outstanding shares of
such Master Portfolio are represented at the meeting in person or by proxy (a
"Majority Vote"). If the shareholders of a Master Portfolio do not approve the
Proposed Advisory Agreement and CAM Inc. Agreement, the Adviser will continue
to manage the Master Portfolio's investments under the Interim Advisory
Agreement, assuming Proposal 1 is approved. If the Interim Agreement is not
approved by shareholders, the Board of the relevant Master Portfolio will take
such further action as it may deem to be in the best interests of such Master
Portfolio's shareholders.
THE BOARD OF TRUSTEES OF BLANCHARD FUNDS RECOMMENDS THAT
SHAREHOLDERS OF EACH FUND "VOTE IN FAVOR" OF PROPOSAL 2.
PROPOSALS 3A-J
APPROVAL OR DISAPPROVAL OF CERTAIN CHANGES TO
THE FUNDAMENTAL INVESTMENT RESTRICTIONS
OF THE MASTER PORTFOLIOS AND THE FUNDS
INTRODUCTION TO PROPOSALS 3A-J
Proposals 3a-j concern proposed changes to certain current fundamental
portfolio investment restrictions ("Restrictions") of the Master Portfolios
and the Funds. Each of these proposals relate to Restrictions of the Master
Portfolios (and Restrictions of the Funds which are substantially similar to
the Restrictions of the Master Portfolios) which are presently classified as
"fundamental," which means that they can only be changed by a vote of the
majority of (with respect to each Master Portfolio) each Master Portfolio's
shareholders and (with respect to each Fund) each Fund's shareholders. A
favorable vote on each of these Proposals constitutes a vote in favor of
making a change to the applicable Restriction both of the Master Portfolios
and of the Funds.
The Adviser recommended to the Trustees of each Master Portfolio that it be
authorized to analyze the Master Portfolios' current Restrictions and, where
practical and appropriate for the Master Portfolio's investment objective,
recommend to the Trustees of each Master Portfolios, subject to shareholder
approval, that certain changes be adopted. Based on the Adviser's review and
recommendations, the Trustees of each Master Portfolio believe that such
changes should be implemented for each Master Portfolio, and the Trustees of
each Fund believe that similar changes should be implemented for each Fund.
These changes fall within the following categories (the discussion set forth
below describes proposed changes to Master Portfolio Restrictions recommended
to the shareholders of the Master Portfolios by the Trustees of the Master
Portfolios, and applies, as well, to the parallel changes to the Restrictions
of the Funds as recommended to the shareholders of the Funds by the Trustees
of the Funds):
Modification. The proposal involves a modification of certain Restrictions
for reasons outlined below.
Elimination. The proposal involves an elimination of certain Restrictions,
for reasons outlined below.
Reclassification. The proposal involves a reclassification of certain
Restrictions as non-fundamental restrictions, which could thereafter be
changed with the approval of the Board of Trustees of each Master Portfolio,
without a shareholder vote.
Based on the recommendations of the Adviser, the Trustees of each Master
Portfolio have approved the proposed changes and believe that they are in the
best interests of each Master Portfolio and its shareholders for the following
reasons:
Standardization. Some of the Master Portfolios' Restrictions differ in form
and substance from similar restrictions of similar mutual funds currently
advised by the Adviser. Increased standardized restrictions among all of the
Adviser's mutual funds will help promote operational efficiencies and
facilitate the monitoring of portfolio compliance. In all cases, the adoption
of the new or revised restriction is not expected to have any impact on the
investment techniques employed by the Master Portfolios at this time.
Modernization. The Master Portfolios' Restrictions are derived from
restrictions which have been in effect, without changes, for many years. In
connection with the Mergers, the Adviser has recommended to all advised funds
(including the Master Portfolios) that their investment restrictions be
evaluated and amended as necessary. The Trustees of each Master Portfolio,
acting on the Adviser's recommendation, recommend that each Master Portfolio
modernize its Restrictions, where appropriate, to conform to current
regulation and authorize the use of currently available financial instruments
and investment techniques.
Clarification. Some of the Master Portfolios' Restrictions contain
ambiguities that, if interpreted in a narrow way, might prevent the Master
Portfolio from following the original intent of the Restriction. Accordingly,
the Trustees of each Master Portfolio, acting on the Adviser's recommendation,
recommend that each Master Portfolio change the Restriction, where
appropriate, to eliminate any ambiguities. Some of these proposals include the
proposed division of a Restriction which currently covers multiple topics into
two or more distinct restrictions.
Flexibility. Several of the Master Portfolios' Restrictions are proposed to
be changed so as to allow the Master Portfolios to respond to recent and
future regulatory developments and changes in the financial markets. In
addition, restrictions prohibiting certain transactions have been or may be
changed or eliminated by a federal or state securities regulator. In order to
take advantage of such changes, the Master Portfolios would need shareholder
approval, which is time consuming and costly to the Master Portfolios and
their shareholders. The Adviser believes that in most cases, the proposed
changes are not expected to have any immediate effect on a Master Portfolio's
investment strategy, since the Master Portfolios may not have a current
intention of changing their investment strategy. However, in order to give the
Master Portfolios more flexibility in responding to regulatory and market
developments, the Trustees of each Master Portfolio, acting on the Adviser's
recommendations, recommend changing, reclassifying or eliminating some of the
Restrictions described below so that they can be changed by the Trustees of
each Master Portfolio without a shareholder vote. In the future, when changes
to non-fundamental restrictions of the Master Portfolios are adopted, the
Fund's
prospectus and statement of additional information will be amended to reflect
the changes and shareholders will be notified thereof.
The proposals regarding the Restrictions are presented in the Proposals 3a-
j, below, categorized by topic (e.g., borrowing, concentration, etc.). In each
case, the Master Portfolios' current Restriction is set forth in the left hand
column under "Current" and the Restriction, as it is proposed to be restated,
eliminated, reclassified, or otherwise changed, is set forth in the right hand
column under "Proposed." In each case, the reason for, and an explanation of,
the proposed change, is set forth below the comparison.
PROPOSAL 3A
AMENDMENT TO EACH MASTER PORTFOLIO'S
(AND EACH FUND'S) FUNDAMENTAL
INVESTMENT RESTRICTION CONCERNING BORROWING
CURRENT:
The Portfolio may not borrow money or pledge, mortgage or hypothecate its
assets, except that, as a temporary measure for extraordinary or emergency
purposes, it may borrow in an amount not to exceed 1/3 of the current value of
its net assets, including the amount borrowed, and may pledge, mortgage or
hypothecate not more than 1/3 of such assets to secure such borrowings (it is
intended that money would be borrowed by the Portfolio only from banks and
only to accommodate requests for the repurchase of shares of the Portfolio
while effecting an orderly liquidation of portfolio securities), provided that
collateral arrangements with respect to the Portfolio's permissible futures
and options transactions, including initial and variation margin, are not
considered to be a pledge of assets for purposes of this restriction; the
Portfolio will not purchase investment securities if its outstanding
borrowing, including reverse repurchase agreements, exceeds 5% of the value of
the Portfolio's total assets.
PROPOSED:
FUNDAMENTAL RESTRICTION
The Portfolio may not borrow money, except that the Portfolio may borrow
money for temporary or emergency purposes, or by engaging in reverse
repurchase transactions, in an amount not exceeding 33 1/3% of the value of
its total assets at the time when the loan is made and may pledge, mortgage or
hypothecate no more than 1/3 of its net assets to secure such borrowings. Any
borrowings representing more than 5% of the Portfolio's total assets must be
repaid before the Portfolio may make additional investments.
Explanation of the proposed change: The proposed amendment clarifies and
modernizes the restriction on borrowing. The proposed restriction will treat
borrowings for temporary or emergency purposes separately from other
borrowings. Borrowing may be necessary to address excessive or unanticipated
liquidations of Master Portfolios shares that exceed available cash. The
proposed
amendment also would allow the Master Portfolios to enter into reverse
repurchase agreements, subject to a limitation of 33 1/3% of each Master
Portfolio's assets.
Reverse repurchase agreements involve the sale of securities by the Master
Portfolios with an agreement that the Master Portfolios will repurchase such
securities at an agreed upon price and date. The Master Portfolios may employ
reverse repurchase agreements when necessary to meet unanticipated net
redemptions so as to avoid liquidating portfolio investments during
unfavorable market conditions. At the time it enters into a reverse repurchase
agreement, a Master Portfolio will place in a segregated custodial account
high-quality liquid debt securities having a dollar value equal to the
repurchase price.
PROPOSAL 3B
AMENDMENT TO EACH MASTER PORTFOLIO'S
(AND EACH FUND'S) FUNDAMENTAL
INVESTMENT RESTRICTION CONCERNING INVESTMENT
FOR THE PURPOSE OF EXERCISING CONTROL
CURRENT:
The Portfolio may not purchase securities of any issuer if such purchase at
the time thereof would cause more than 10% of the voting securities of such
issuer to be held by the Portfolio.
PROPOSED:
NON-FUNDAMENTAL RESTRICTION
The Portfolio may not, with respect to 50% of its assets, hold more than 10%
of the outstanding voting securities of an issuer.
Explanation of the proposed change: The proposed amendment would clarify,
for the Master Portfolios, that the restriction involving a 10% limitation on
investments in an issuer is a limitation based upon the outstanding voting
securities of the issuer as provided for in Subchapter M of the Internal
Revenue Code and would not be applicable outside the diversification
requirements which are applicable only to 50% of a Master Portfolio's assets.
This restatement of the restriction would clarify and help standardize the
restriction and provide additional flexibility for the investment of the
Master Portfolios' assets. Although the restrictions as restated would allow
the non-diversified Master Portfolios to hold a larger portion of each its
assets in the outstanding voting securities of one issuer, there is no current
intention for any of the Master Portfolios to do so. The Master Portfolios
would still be required to meet the additional diversification requirements of
the 1940 Act. In addition, the reclassification as nonfundamental and
restatement of the restriction would clarify and help standardize the
restriction.
PROPOSAL 3C
AMENDMENT TO EACH MASTER PORTFOLIO'S (AND EACH
FUND'S) FUNDAMENTAL INVESTMENT RESTRICTION
CONCERNING THE MAKING OF LOANS
CURRENT:
The Portfolio is not permitted to make loans to other persons, except (i)
through the lending of its portfolio securities and provided that any such
loans not exceed 30% of the Portfolio's total assets (taken at market value),
(ii) through the use of repurchase agreements or the purchase of short-term
obligations and provided that not more than 10% of the Portfolio's total
assets will be invested in repurchase agreements maturing in more than seven
days, or (iii) by purchasing, subject to the limitation in paragraph 5 above
[referring to the current investment restriction under Proposal 3g below], a
portion of an issue of debt securities of types commonly distributed privately
to financial institutions, for which purposes the purchase of short-term
commercial paper or a portion of an issue of debt securities which are part of
an issue to the public shall not be considered the making of a loan.
PROPOSED:
FUNDAMENTAL RESTRICTION
The Portfolio may not make loans, except that the Portfolio may: (i)
purchase and hold debt instruments (including without limitation, bonds,
notes, debentures or other obligations and certificates of deposit, bankers'
acceptances and fixed time deposits) in accordance with its investment
objectives and policies; (ii) enter into repurchase agreements with respect to
portfolio securities; and (iii) lend portfolio securities with a value not in
excess of one-third of the value of its total assets.
Explanation of the proposed change: The proposed amendment is intended to
clarify the basic limitation on securities lending, and would also exclude
those transactions that current regulatory interpretations and policies allow.
The investment adviser will not make loans of a Master Portfolio's portfolio
securities (or enter into repurchase agreements) unless it receives collateral
that is at least 102% of the value of the loan, including accrued interest.
During the time portfolio securities are on loan, the borrower pays the Master
Portfolio any dividends or interest paid on such securities, and a Master
Portfolio may invest the cash collateral and earn additional income, or it may
receive an agreed-upon amount of interest income from the borrower who has
delivered equivalent collateral or a letter of credit. As with other
extensions of credit, there are risks of delay in recovery or even loss of
rights in the collateral should the borrower of any loaned securities fail
financially.
PROPOSAL 3D
RECLASSIFICATION OF EACH MASTER PORTFOLIO'S (AND EACH
FUND'S) FUNDAMENTAL INVESTMENT RESTRICTION
CONCERNING PURCHASES OF SECURITIES ON MARGIN
CURRENT:
The Portfolio may not purchase any security or evidence of interest therein
on margin, except that such short-term credit may be obtained as may be
necessary for the clearance of purchases and sales of securities and except
that, with respect to the Portfolio's permissible options and futures
transactions, deposits of initial and variation margin may be made in
connection with the purchase, ownership, holding or sale of futures or options
positions.
PROPOSED:
NON-FUNDAMENTAL RESTRICTION
The Portfolio may not make short sales of securities, other than short sales
"against the box," or purchase securities on margin except for short-term
credits necessary for clearance of portfolio transactions, provided that this
restriction will not be applied to limit the use of options, futures contracts
and related options, in the manner otherwise permitted by the investment
restrictions, policies and investment program of the Portfolio.
Explanation of the proposed change: The proposed change modernizes and
clarifies the circumstances under which the Master Portfolios may make
purchases on margin. The reclassification as non-fundamental could enable the
Master Portfolios to respond more quickly to changes in financial markets.
In a short sale, an investor sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. In an
investment technique known as a short sale "against the box," an investor
sells securities short while owning the same securities in the same amount, or
having the right to obtain equivalent securities. Certain state regulations
currently prohibit mutual funds from entering into any short sales, other than
short sales against the box. If the proposal is approved, however, each Board
of Trustees would be able to change the proposed non-fundamental restriction
in the future, without a vote of shareholders, if state regulations were to
change to permit other types of short sales, or if waivers from existing
requirements were available, subject to appropriate disclosure to investors.
Although elimination of each Master Portfolio's fundamental restriction on
short selling will not affect the Master Portfolio's investment techniques at
this time, in the event of a change in state regulatory requirements, a Master
Portfolio may alter its investment practices in the future.
PROPOSAL 3E
AMENDMENT TO EACH MASTER PORTFOLIO'S (AND EACH
FUND'S) FUNDAMENTAL INVESTMENT RESTRICTION
CONCERNING CONCENTRATION OF INVESTMENT
CURRENT:
The Portfolio may not concentrate its investments in any particular
industry, but if it is deemed appropriate for the achievement of the
Portfolio's investment objective, up to 25% of the assets of the Portfolio, at
market value at the time of each investment, may be invested in any one
industry, except that this restriction does not apply to U.S. government
securities (in addition, so long as a single foreign government or
supernational organization is considered to be an "industry" for purposes of
this 25% limitation, the Portfolio will comply therewith), and except that,
with respect to the Portfolio's permissible futures and options transaction,
positions in options and futures shall not be subject to this restriction.
For purposes of this restriction, industrial development bonds, where the
payment of principal and interest is the ultimate responsibility of companies
within the same industry, are grouped together as an "industry."
PROPOSED:
FUNDAMENTAL RESTRICTION
The Portfolio may not purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its agencies
or instrumentalities, or repurchase agreements secured thereby) if, as a
result, more than 25% of the Portfolio's total assets would be invested in the
securities of companies whose principal business activities are in the same
industry. Notwithstanding the foregoing, with respect to the Portfolio's
permissible futures and options transactions in U.S. government securities,
positions in such options and futures shall not be subject to this
restriction.
Explanation of the proposed change: The proposed amendment is intended to
clarify the basic limitation on concentration of investment and now would
specifically exclude government securities, repurchase agreements secured
thereby and positions in options and futures from the limitations imposed by
the restriction.
PROPOSAL 3F
AMENDMENT TO EACH MASTER PORTFOLIO'S (AND EACH
FUND'S) FUNDAMENTAL INVESTMENT RESTRICTION
CONCERNING COMMODITIES AND REAL ESTATE
CURRENT:
The Portfolio may not purchase or sell real estate (including limited
partnership interests but excluding securities secured by real estate or
interests therein), interests in oil, gas or mineral leases, commodities or
commodity contracts in the ordinary course of business, other than (i) with
respect to the Portfolio's permissible futures and options transactions or
(ii) forward purchases and sales of foreign currencies or securities (the
Portfolio reserves the freedom of action to hold and sell real estate acquired
as a result of its ownership of securities).
PROPOSED:
FUNDAMENTAL RESTRICTION
The Portfolio may not purchase or sell physical commodities unless acquired
as a result of ownership of securities or other instruments but this shall not
prevent the Portfolio from (i) purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities or (ii) engaging in forward purchases or sales of foreign
currencies or securities.
FUNDAMENTAL RESTRICTION
The Portfolio may not purchase or sell real estate unless acquired as a
result of ownership of securities or other instruments (but this shall not
prevent the Portfolio from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business). Investments by the Portfolio in securities backed by mortgages on
real estate or in marketable securities of companies engaged in such
activities are not hereby precluded.
NON-FUNDAMENTAL RESTRICTION
The Portfolio may not purchase or sell interests in oil, gas or mineral
leases.
Explanation of the proposed changes: The proposed changes conform the
application of the restrictions pertaining to commodities and real estate to
the current regulations of the 1940 Act by clarifying that certain real
estate-related financial instruments may be purchased by the Master
Portfolios. To a large extent, the proposed amendment would also standardize
the restrictions applicable to the Master Portfolios by allowing the Master
Portfolios to engage in certain transactions such as forward purchases when it
is consistent with a Master Portfolio's investment objectives and policies.
PROPOSAL 3G
AMENDMENT OF EACH MASTER PORTFOLIO'S (AND EACH
FUND'S) FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING INVESTMENTS IN RESTRICTED AND ILLIQUID
SECURITIES
CURRENT:
The Portfolio may not knowingly invest in securities which are subject to
legal or contractual restrictions on resale (including securities that are not
readily marketable, but not including repurchase agreements maturing in not
more than seven days) if, as a result thereof, more than 10% of the
Portfolio's total assets (taken at market value) would be so invested
(including repurchase agreements maturing in more than seven days). This
limitation may be subject to additional restrictions imposed by jurisdictions
in which the Portfolio's shares are offered for sale (currently 10%).
PROPOSED:
NON-FUNDAMENTAL RESTRICTION
The Portfolio may not invest more than 15% of its net assets in illiquid
securities.
Explanation of the proposed changes: The current fundamental restrictions
limit purchases of all securities that are subject to restrictions on resale,
including securities that are not readily marketable and repurchase agreements
maturing in more than seven days. These restrictions include securities
eligible for resale under Rule 144A and Section 4(2) commercial obligations.
The proposed non-fundamental restriction incorporates recent developments in
securities markets. Under the proposed restrictions, securities issued under
such exemptions from registration, although restricted, may still be
classified as liquid in accordance with procedures adopted by the Board of
Trustees. This investment practice could have the effect of increasing the
level of illiquidity in the Master Portfolios. Furthermore, to the extent that
a market fails to develop or ceases to exist with respect to these restricted
securities, illiquidity levels will increase.
When purchasing securities which could not be sold without registration
under the Securities Act of 1933, the Master Portfolios will endeavor to
obtain the right to registration at the expense of the issuer. Generally,
there will be a lapse of time between a Master Portfolio's decision to sell
any such security and the registration of the security permitting sale. During
any such period, the price of the securities will be subject to market
fluctuations.
The proposed changes would standardize the applicable investment
restriction, and would remove certain interpretations of what may constitute
illiquid securities. By doing this, the Master Portfolios would be subject to
the same current interpretations, from time to time, of what constitutes an
illiquid security, under Commission releases and other relevant authority. The
defundamentalization of this restriction would avoid the delay and expense of
a shareholder vote in the event that the permissible guidelines for
investments in illiquid securities changes at some time in
the future. This limitation may be subject to additional restrictions imposed
by jurisdictions in which the Master Portfolios' shares are offered for sale.
PROPOSAL 3H
RECLASSIFICATION OF EACH MASTER PORTFOLIO'S (AND EACH
FUND'S) FUNDAMENTAL RESTRICTION CONCERNING
THE USE OF OPTIONS
CURRENT:
The Portfolio may not write, purchase or sell any put or call option or any
combination thereof, provided that this shall not prevent (i) the purchase,
ownership, holding or sale of warrants where the grantor of the warrants is
the issuer of the underlying securities, (ii) the writing, purchasing or
selling of puts, calls or combinations thereof with respect to U.S. Government
securities or (iii) with respect to the Portfolio's permissible futures and
options transactions, the writing, purchasing, ownership, holding or selling
of futures and options positions or of puts, calls or combinations thereof
with respect to futures.
PROPOSED:
NON-FUNDAMENTAL RESTRICTION
The Portfolio may not write, purchase or sell any put or call option or any
combination thereof, provided that this shall not prevent (i) the purchase,
ownership, holding or sale of warrants where the grantor of the warrants is
the issuer of the underlying securities, (ii) the writing, purchasing or
selling of puts, calls or combinations thereof with respect to portfolio
securities or (iii) with respect to the Portfolio's permissible futures and
options transactions, the writing, purchasing, ownership, holding or selling
of futures and options positions or of puts, calls or combinations thereof
with respect to futures.
Explanation of the proposed change: The proposed reclassification of this
restriction as non-fundamental would avoid the delay and expense of a
shareholder vote in the event that the permissible guidelines for such
investments changes at some time in the future. The terms of this restriction
are consistent with general restrictions, including limitations on liquidity
and portfolio diversification. Therefore, no foreseeable impact on the Master
Portfolios is anticipated by the proposed reclassification.
PROPOSAL 3I
AMENDMENT TO EACH MASTER PORTFOLIO'S (AND EACH
FUND'S) FUNDAMENTAL INVESTMENT RESTRICTION
CONCERNING SENIOR SECURITIES
CURRENT:
The Portfolio may not issue any senior security (as that term is defined in
the 1940 Act) if such issuance is specifically prohibited by the 1940 Act or
the rules and regulations promulgated thereunder, provided that collateral
arrangements with respect to the Portfolio's permissible options and futures
transactions, including deposits of initial and variation margin, are not
considered to be the issuance of a senior security for purposes of this
restriction.
PROPOSED:
FUNDAMENTAL RESTRICTION
The Portfolio may not issue any senior security (as defined in the 1940
Act), except that (a) the Portfolio may engage in transactions that may result
in the issuance of senior securities to the extent permitted under applicable
regulations and interpretations of the 1940 Act or an exemptive order; (b) the
Portfolio may acquire other securities, the acquisition of which may result in
the issuance of a senior security, to the extent permitted under applicable
regulations or interpretations of the 1940 Act; and (c) subject to the
restrictions set forth above, the Portfolio may borrow money as authorized by
the 1940 Act. For purposes of this restriction, collateral arrangements with
respect to the Portfolio's permissible options and futures transactions,
including deposits of initial and variation margin, are not considered to be
the issuance of a senior security.
Explanation of proposed change: Under the 1940 Act, an open-end investment
company (such as the Master Portfolios) cannot issue senior securities except
under certain very limited conditions. The proposed amendment clarifies and
modernizes the language concerning senior securities to conform to provisions
of the 1940 Act. It is proposed that this restriction exclude those
transactions which are allowed by current regulatory interpretations and
policies, and which are consistent with current investment marketplace
practices. Therefore, the proposed fundamental restrictions will allow, for
example, the following investments even though they may result in the issuance
of senior securities: the Master Portfolios could, to the extent permitted by
applicable law or exemptive order (a) enter into commitments, including
reverse repurchase agreements and delayed delivery and when-issued securities;
(b) engage in transactions that may result in the issuance of a senior
security; (c) engage in short sales of securities; (d) purchase and sell
futures contracts and related options; (e) borrow money; and (f) issue
multiple classes of securities in each case subject to any other applicable
restrictions.
PROPOSAL 3J
AMENDMENT TO EACH MASTER PORTFOLIO'S
(AND EACH FUND'S) FUNDAMENTAL INVESTMENT
RESTRICTION REGARDING SHORT SALES OF SECURITIES
CURRENT:
The Portfolio may not make short sales of securities or maintain a short
position; except that the Portfolio may only make such short sales of
securities or maintain a short position if when a short position is open the
Portfolio owns an equal amount of such securities or securities convertible
into or exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities sold
short, and not more than 10% of the Portfolio's net assets (taken at market
value) is held as collateral for such sales at any one time (it is the present
intention of management to make such sales only for the purpose of deferring
realization of gain or loss for federal income tax purposes; such sales would
not be made of securities subject to outstanding options).
PROPOSED:
It is proposed that this restriction be eliminated, as it has been combined
with a non-fundamental restriction concerning purchases of securities on
margin. (See Proposal 3d above.)
Explanation of the proposed change: The proposed change modernizes and
clarifies the circumstances under which the Master Portfolios may make short
sales of securities. The reclassification as non-fundamental could enable the
Master Portfolios to respond more quickly to changes in financial markets.
ADDITIONAL INFORMATION REGARDING PROPOSALS 3A-J
Unless otherwise noted, whenever an amended or restated investment policy or
limitation states a maximum percentage of a Master Portfolio's assets that may
be invested, such percentage limitation will be determined immediately after
and as a result of the acquisition of such security or other asset, except in
the case of borrowing (or other activities that may be deemed to result in the
issuance of a "senior security" under the 1940 Act) or illiquid securities.
Any subsequent change in values, assets, or other circumstances will not be
considered when determining whether the investment complies with such Master
Portfolio's investment policies and limitations. If any of Proposals 3a-j are
not approved by shareholders of a Master Portfolio, the current restriction
will remain unchanged, both with respect to such Master Portfolio and with
respect to the Fund which invests in such Master Portfolio.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
Each of the above proposals to change a Master Portfolio's restrictions
requires the approval of a "majority of the outstanding voting securities" of
such Master Portfolio, which for this purpose means the affirmative vote of
the lesser of (1) more than 50% of the outstanding shares of such Master
Portfolio or (2) 67% or more of the shares of such Master Portfolio present at
a meeting of shareholders if more than 50% of the outstanding shares of such
Master Portfolio are represented at a meeting in person or by proxy.
Similarly, each of the above proposals to change a Fund's Restrictions
requires the approval of a "majority of the outstanding voting securities" of
such Fund which for this purpose means the affirmative vote of the lesser of
(1) more than 50% of the outstanding shares of such Fund or (2) 67% or more of
the shares of such Fund present at a meeting of shareholders if more than 50%
of the outstanding shares of such Fund are represented at a meeting, in person
or by proxy.
THE BOARD OF TRUSTEES OF BLANCHARD FUNDS RECOMMENDS THAT
SHAREHOLDERS VOTE "IN FAVOR OF" THE FOREGOING PROPOSALS.
PROPOSAL 4
APPROVAL OR DISAPPROVAL OF AMENDMENTS TO THE
FUNDS' FUNDAMENTAL INVESTMENT OBJECTIVES
TO CONFORM SUCH OBJECTIVES TO THE
INVESTMENT OBJECTIVES AND POLICIES OF
THE MASTER PORTFOLIOS IN WHICH THE FUNDS INVEST
At a Meeting of the Board of Trustees of Blanchard Funds held on February
28, 1996, the Trustees of Blanchard Funds, including each of the Disinterested
Trustees (who are not "interested persons," within the meaning of the 1940
Act, of the Company or the adviser), on the recommendation of the Adviser to
the Master Portfolios, considered and unanimously approved changes to the
investment objective of the Funds, subject to approval by each Fund's
shareholders.
The Adviser has evaluated the various types of portfolios that it acts as
investment adviser to and recommended to the Trustees of each Master Portfolio
that it would be appropriate to clarify the investment objectives, policies
and restrictions, and implement certain changes that would provide greater
flexibility and uniformity in managing the investment portfolios, including
the Master Portfolios. The Trustees of each Master Portfolio determined that
many of the portfolios' investment objectives should be restated so as to be
less restrictive.
The Trustees of each Master Portfolio also approved amendments to the non-
fundamental investment objectives of the Master Portfolios. These changes (at
the Master Portfolio level) do not require approval by Fund shareholders.
CURRENT MASTER PORTFOLIO INVESTMENT OBJECTIVE:
CAPITAL GROWTH PORTFOLIO
"to provide its shareholders with as long-term capital growth primarily
through a broad portfolio (i.e., at least 80% of its assets under normal
circumstances) of common stocks."
GROWTH & INCOME PORTFOLIO
"to provide its shareholders with long-term capital appreciation and to
provide dividend income primarily through a broad portfolio (i.e., at least
80% of its assets under normal circumstances) of common stocks."
PROPOSED MASTER PORTFOLIO INVESTMENT OBJECTIVE:
"to provide its shareholders with long-term capital growth." As a non-
fundamental policy, the Portfolio will seek to achieve its objective
"primarily through investment in a broad portfolio (i.e., at least 80% of its
assets under normal circumstances) of common stocks."
Reasons for the proposal: standardization/ clarification, flexibility.
"to provide its shareholders with long-term capital appreciation and to
provide dividend income."
As a non-fundamental policy, the Portfolio will seek to achieve its
objective "primarily through investment in a broad portfolio (i.e., at least
80% of its assets under normal circumstances) of common stock."
Reasons for the proposal: standardization/ clarification, flexibility.
In addition, the Trustees of each Master Portfolio, based on representations
from the Adviser, believe that the risks inherent in investing in each of the
respective Master Portfolio should not change from those inherent at the
present time under each Master Portfolio's current investment objective and
policies, since the Adviser has represented that none of the proposed changes
is intended or anticipated to have an immediate impact on the day to day
investment program utilized by a Master Portfolio.
In the table below, the current investment objective of each Fund is set
forth in quotations in the left hand column. In each case, it is proposed that
the investment objective be amended to read as indicated in quotations in the
right hand column to conform such investment objective to the investment
objective of the Master Portfolio in which your Fund owns shares.
OBJECTIVES
CURRENT FUND INVESTMENT OBJECTIVE
BLANCHARD CAPITAL GROWTH FUND
"to provide long-term capital growth through a broad portfolio of common
stocks."
BLANCHARD GROWTH & INCOME FUND
"to provide long-term capital appreciation and to provide dividend income
through a broad portfolio of common stocks."
PROPOSED FUND INVESTMENT OBJECTIVE
"to provide its shareholders with long-term capital growth."
"to provide its shareholders with long-term capital appreciation and to
provide dividend income."
REASONS FOR THE PROPOSALS REGARDING THE INVESTMENT OBJECTIVES
IT IS IMPORTANT TO BEAR IN MIND THAT THE PROPOSED CHANGES TO EACH FUND'S
(MASTER PORTFOLIO'S) INVESTMENT OBJECTIVES GENERALLY INVOLVE A JUDGMENT ONLY
AS TO WHAT SHOULD MAKE UP EACH FUND'S (MASTER PORTFOLIO'S) FUNDAMENTAL
INVESTMENT OBJECTIVE, NOT A JUDGMENT AS TO WHAT INVESTMENT STRATEGIES,
POLICIES OR RESTRICTIONS SHOULD BE FOLLOWED IN PURSUING THAT OBJECTIVE. IF
THIS PROPOSAL IS APPROVED, THE ADVISER TO THE MASTER PORTFOLIOS BELIEVES THAT
THE CHANGES WILL HAVE NO IMMEDIATE MATERIAL EFFECT ON THE WAY IN WHICH THE
MASTER PORTFOLIOS ARE MANAGED.
Each of Master Portfolio's proposals has been made for the following
reasons: flexibility and clarification/standardization. The following
discussion provides greater detail as to what is meant, in each case, by
flexibility and clarification/standardization.
Flexibility. If a Master Portfolio's stated investment objective contains
details as to an investment strategy to be pursued or an investment policy to
be followed, or is otherwise more restrictive than necessary, it may impose an
unnecessarily rigid restraint on management's ability to respond to certain
regulatory developments or changes in the financial markets. In order to make
any changes to a strategy or policy included as part of a Master Portfolio's
investment objective, the Master Portfolio may need shareholder approval,
which is time consuming and potentially costly to the Master Portfolio and its
shareholders. The Adviser does not anticipate that the proposed change to each
Fund's investment objective will have an immediate effect on the related
Master Portfolio's investment strategy, since there is no current intention of
changing stated strategy or policy. However, the Master Portfolios will have
greater flexibility to respond to future regulatory and market developments.
If changes to a Master Portfolio's non-fundamental investment objective,
policies or restrictions are adopted by the Trustees of such Master Portfolio
in the future, the applicable Fund's prospectus and statement of additional
information will be amended to reflect any such changes and notice thereof
will be provided to shareholders.
Clarification/standardization. Some of the portfolios' investment objectives
contain descriptive terms that are superfluous or ambiguous. In addition, the
terms used in some of the portfolio's investment objectives differ from the
description of the terms used in the stated investment objective of a similar
portfolio. The Adviser has recommended the standardization, to the extent
possible, of the
description of an investment objective, or an aspect thereof, as between
portfolios for which the investment objective or aspect thereof is not
intended to differ. By doing so, potential investors may be expected to have a
clearer understanding of the similarities or differences in the investment
objectives of the respective portfolios.
Risk Factors: Because each of the proposals involve only a change to the
stated investment objective and are not expected to alter the fundamental
character of any Fund (Master Portfolio) or any of their operations for the
foreseeable future, for each Fund, the adoption of the proposal is not
expected to have any effect on the risk factors to be considered in making or
continuing an investment in a Fund. In the future, however, each Board of
Trustees may, without shareholder approval, change a non-fundamental
investment objective, policy or restriction in a way that may create more
risk. Each Fund will notify shareholders of such changes.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
The restatement of the fundamental investment objective of a Fund requires
the approval of a "majority of the outstanding voting securities" of such
Fund, which for this purpose means the affirmative vote of the lesser of (1)
more than 50% of the outstanding shares of such Fund or (2) 67% or more of the
shares of such Fund present at the Meeting if more than 50% of the outstanding
shares of such Fund are represented at the Meeting in person or by proxy.
THE BOARD OF TRUSTEES OF BLANCHARD FUNDS RECOMMENDS THAT
SHAREHOLDERS OF EACH FUND VOTE "IN FAVOR OF" PROPOSAL 4.
In addition, for shareholders of each Fund, to transact such other business
as may properly come before the meeting or any adjournment thereof.
OTHER INFORMATION
The Master Portfolios' present Sub-Administrator is Vista Broker Dealer
Services, Inc. ("VBDS"), a wholly owned subsidiary of BISYS Funds Services,
Inc. See "Administrator" under Proposal 1. [The following are officers of the
Master Portfolios who may be deemed to have an interest in VBDS by virtue of
their status as employees and/or executive officers of VBDS:]
OFFICER OF MASTER
NAME POSITION WITH MASTER PORTFOLIO AGE PORTFOLIO SINCE
- ---- --------------------------------- --- -----------------
Ann Bergin Secretary and Assistant Treasurer 35 1995
Martin R. Dean Treasurer and Assistant Secretary 31 1995
Substantial Shareholders. As of the Record Date, the Company believed that
the following persons beneficially owned more than 5% of each Fund: Fairfield
Tire Center, Inc. Money Purchase Pension Trust, Fairfield, California, owned
approximately 20,510 Shares (9.24%) of Blanchard Capital Growth Fund; and
Stephens, Inc., Little Rock, Arkansas, owned approximately 334,189 Shares
(26.97%) of Blanchard Growth & Income Fund (Stephens Inc. acts as shareholder
for the exclusive benefit of its customers).
Voting Information and Discretion of the Persons Named as Proxies. While the
Meeting is called to act upon any other business that may properly come before
it, at the date of this proxy statement the only business which the management
intends to present or knows that others will present is the business mentioned
in the Notice of Meeting. If any other matters lawfully come before the
Meeting, and in all procedural matters at the Meeting, it is the intention
that the enclosed proxy shall be voted in accordance with the best judgment of
the persons named as proxies therein, or their substitutes, present and acting
at the Meeting.
If at the time any session of the Meeting is called to order a quorum is not
present, in person or by proxy, the persons named as proxies may vote those
proxies which have been received to adjourn the Meeting to a later date. In
the event that a quorum is present but sufficient votes in favor of one or
more of the proposals have not been received, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further solicitation
of proxies with respect to any such proposal. All such adjournments will
require the affirmative vote of a majority of the Shares present in person or
by proxy at the session of the Meeting to be adjourned. The persons named as
proxies will vote those proxies which they are entitled to vote in favor of
the proposal, in favor of such an adjournment, and will vote those proxies
required to be voted against the proposal, against any such adjournment. A
vote may be taken on one or more of the proposals in this proxy statement
prior to any such adjournment if sufficient votes for its approval have been
received and it is otherwise appropriate.
Submission of Proposals for the Next Annual Meeting of Blanchard
Funds. Under the Trust's Declaration of Trust and By-Laws, annual meetings of
shareholders are not required to be held unless necessary under the 1940 Act
(for example, when fewer than a majority of the Trustees have been elected by
shareholders). Therefore, the Trust does not hold shareholder meetings on an
annual basis. A shareholder proposal intended to be presented at any meeting
hereafter called should be sent to the Trust at Federated Investors Towers,
Pittsburgh, Pennsylvania 15222-3779, and must be received by the Trust within
a reasonable time before the solicitation relating thereto is made in order to
be included in the notice or proxy statement related to such meeting. The
submission by a shareholder of a proposal for inclusion in a proxy statement
does not guarantee that it will be included. Shareholder proposals are subject
to certain regulations under federal securities law.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. IF YOU DO NOT EXPECT TO
ATTEND THE MEETING, PLEASE SIGN YOUR PROXY CARD PROMPTLY AND RETURN IT IN THE
ENCLOSED ENVELOPE TO AVOID UNNECESSARY EXPENSE AND DELAY. NO POSTAGE IS
NECESSARY.
March 28, 1996
BY ORDER OF THE BOARD OF TRUSTEES OF
BLANCHARD FUNDS
John W. McGonigle Secretary
APPENDIX A
FORM OF INTERIM INVESTMENT ADVISORY AGREEMENT
BETWEEN MUTUAL FUND GROUP AND
THE CHASE MANHATTAN BANK, N.A.
AGREEMENT made this day of , by and between MUTUAL FUND GROUP (the
"Trust") on behalf of the series of the Trust (the "Fund") and THE CHASE
MANHATTAN BANK, N.A. (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Trust is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as amended (the
"Act"); and
WHEREAS, the Trust and the Adviser desire to enter into an agreement to
provide advisory services for the Fund on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of
which is hereby acknowledged, it is hereby agreed by and between the parties
hereto as follows:
1. APPOINTMENT.
The Adviser agrees, all as more fully set forth herein, to act as
investment adviser to the Fund with respect to the investment of its assets
and to supervise and arrange the purchase of securities for and the sale of
securities held in the portfolio of the Fund.
2. DUTIES AND OBLIGATIONS OF THE ADVISER WITH RESPECT TO INVESTMENT OF
ASSETS OF THE FUND.
(a) Subject to the succeeding provisions of this section and subject to
the direction and control of the Board of Trustees of the Trust, the
Adviser shall:
(i) supervise continuously the investment program of the Fund and the
composition of its portfolio;
(ii) determine what securities shall be purchased or sold by the
Fund; and
(iii) arrange for the purchase and the sale of securities held in the
portfolio of the Fund.
(b) Any investment program furnished by the Adviser under this section
shall at all times conform to, and be in accordance with, any requirements
imposed by:
(i) the provisions of the Act and of any rules or regulations in
force thereunder;
(ii) any other applicable provisions of state and federal law;
(iii) the provisions of the Declaration of Trust and By-Laws of the
Trust, as amended from time to time;
(iv) any policies and determinations of the Board of Trustees of the
Trust; and
(v) the fundamental policies of the Fund, as reflected in its
Registration Statement under the Act, as amended from time to time.
(c) In making recommendations for the Fund, Trust Division personnel of
the Adviser will not inquire or take into consideration whether the issuer
of securities proposed for purchase or sale for the Fund's account are
customers of the Commercial Division of the Adviser. In dealing with
commercial customers, the Commercial Division will not inquire or take into
consideration whether securities of those customers are held by the Fund.
(d) The Adviser shall give the Fund the benefit of its best judgment and
effort in rendering services hereunder, but the Adviser shall not be liable
for any loss sustained by the Fund in connection with the matters to which
this Agreement relates, including specifically but not limited to, the
calculation of net asset value and the adoption of any investment policy or
the purchase, sale or retention of any security, whether or not such
purchase, sale or retention shall have been based upon its own
investigation and research or upon investigation and research made by any
other individual, firm or corporation, if such purchase, sale or retention
shall have been made and such other individual, firm or corporation shall
have been selected in good faith. Nothing herein contained shall, however,
be construed to protect the Adviser against any liability to the Fund or
its security holders by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
(e) Nothing in this Agreement shall prevent the Adviser or any affiliated
person (as defined in the Act) of the Adviser from acting as investment
adviser or manager for any other person, firm or corporation (including
other investment companies) and shall not in any way limit or restrict the
Adviser or any such affiliated person from buying, selling or trading any
securities for its or their own accounts or for the accounts of others for
whom it or they may be acting; provided, however, that the Adviser
expressly represents that it will undertake no activities which, in its
judgment, will adversely affect the performance of its obligations to the
Fund under this Agreement.
(f) The Fund will supply the Adviser with certified copies of the
following documents: (i) the Trust's Declaration of Trust and By-Laws, as
amended; (ii) resolutions of the Trust's Board of Trustees and shareholders
authorizing the appointment of the Adviser and approving this Agreement;
(iii) the Trust's Registration Statement, as filed with the SEC; and (iv)
the Fund's most recent prospectus and statement of additional information.
The Fund will furnish the Adviser from time to time with copies of all
amendments or supplements to the foregoing, if any, and all documents,
notices and reports filed with the SEC.
(g) The Fund will supply, or cause its custodian bank to supply, to the
Adviser such financial information as is necessary or desirable for the
functions of the Adviser hereunder.
3.BROKER-DEALER RELATIONSHIPS.
The Adviser is responsible for decisions to buy and sell securities for
the Fund, broker-dealer selection and negotiation of its brokerage
commission rates. The Adviser's primary consideration in effecting a
security transaction will be execution at the most favorable price. The
Fund understands that a substantial majority of the Fund's portfolio
transactions will be transacted with primary market makers acting as
principal on a net basis, with no brokerage commissions being paid by the
Fund. Such principal transactions may, however, result in a profit to the
market makers. In certain instances the Adviser may make purchases of
underwritten issues at prices which include underwriting fees. In selecting
a broker or dealer to execute each particular transaction, the Adviser will
take the following into consideration; the best price available; the
reliability, integrity and financial condition of the broker or dealer; the
size of and difficulty in executing the order; and the value of the
expected contribution of the broker or dealer to the investment performance
of the Fund on a continuing basis. Accordingly, the price to the Fund in
any transaction may be less favorable than that available from another
broker or dealer if the difference is reasonably justified by other aspects
of the portfolio execution services offered. Subject to such policies as
the Board of Trustees may determine, the Adviser shall not be deemed to
have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of its having caused the Fund to
pay a broker or dealer that provides brokerage and research services to the
Adviser an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction, if the Adviser
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by
such broker or dealer, viewed in terms of either that particular
transaction or the Adviser's overall responsibilities with respect to the
Fund. The Adviser is further authorized to allocate the orders placed by it
on behalf of the Fund to such brokers and dealers who also provide research
or statistical material, or other services to the Fund (which material or
services may also assist the Adviser in rendering services to other
clients). Such allocation shall be in such amounts and proportions as the
Adviser shall determine and the Adviser will report on said allocations
regularly to the Board of Trustees indicating the brokers to whom such
allocations have been made and the basis therefor.
4.ALLOCATION OF EXPENSES.
The Adviser agrees that it will furnish the Fund, at its expense, all
office space and facilities, equipment and clerical personnel necessary for
carrying out its duties under this Agreement and the keeping of certain
accounting records of the Fund. The Adviser agrees that it will supply to
any sub-adviser or administrator (the "Administrator") of the Fund all
necessary financial information in connection with the Administrator's
duties under any Agreement between the Administrator and the Trust. The
Adviser will also pay all compensation of all Trustees, officers and
employees of the Fund who are "affiliated persons" of the Adviser as
defined in the Act. All
costs and expenses not expressly assumed by the Adviser under this
Agreement or by the Administrator under the administration agreement
between it and the Trust shall be paid by the Fund, including, but not
limited to (i) fees paid to the Adviser and the Administrator; (ii)
interest and taxes; (iii) brokerage commissions; (iv) insurance premiums;
(v) compensation and expenses of its Trustees other than those affiliated
with the Adviser or the Administrator; (vi) legal, accounting and audit
expenses; (vii) custodian and transfer agent, or shareholder servicing
agent, fees and expenses; (viii) expenses, including clerical expenses,
incident to the issuance, redemption or repurchase of shares, including
issuance on the payment of, or reinvestment of, dividends; (ix) fees and
expenses incident to the registration under Federal or state securities
laws of the Fund or its shares; (x) expenses of preparing, setting in type,
printing and mailing prospectuses, statements of additional information,
reports and notices and proxy material to shareholders of the Fund; (xi)
all other expenses incidental to holding meetings of the Fund's
shareholders; and (xii) such extraordinary expenses as may arise, including
litigation affecting the Fund and the legal obligations which the Trust may
have to indemnify its officers and Trustees with respect thereto.
5 COMPENSATION OF THE ADVISER.
(a) For the services to be rendered and the expenses assumed by the
Adviser, the Fund shall pay to the Adviser monthly compensation at an
annual rate of % [see attached Schedule] of the Fund's average daily net
assets. Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If the Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall
be prorated in a manner consistent with the calculation of the fees as set
forth above. Subject to the provisions of subsection (b) hereof, payment of
the Adviser's compensation for the preceding month shall be made as
promptly as possible after completion of the computations contemplated by
subsection (b) hereof.
(b) In the event the operating expenses of the Fund including all
investment advisory, sub-advisory and administration fees, for any fiscal
year ending on a date on which this Agreement is in effect exceed the
expense limitations applicable to the Fund imposed by the securities laws
or regulations thereunder of any state in which the Fund's shares are
qualified for sale, as such limitations may be raised or lowered from time
to time, the Adviser shall reduce its investment advisory fee, but not
below zero, to the extent of its share of such excess expenses; provided,
however, there shall be excluded from such expenses the amount of any
interest, taxes, brokerage commissions and extraordinary expenses
(including but not limited to legal claims and liabilities and litigation
costs and any indemnification related thereto) paid or payable by the Fund.
Such reduction, if any, shall be computed and accrued daily, shall be
settled on a monthly basis and shall be based upon the expense limitation
applicable to the Fund as at the end of the last business day of the month.
Should two or more of such expense limitations be applicable as at the end
of the last business day of the month, that expense limitation which
results in the largest reduction in the Adviser's fee shall be applicable.
For the purposes of this paragraph, the Adviser's share of any excess
expenses shall be computed by multiplying such excess expenses by a
fraction, the
numerator of which is the amount of the investment advisory fee which would
otherwise be payable to the Adviser for such fiscal year were it not for
this subsection 5(b) and the denominator of which is the sum of all
investment advisory and administrative fees which would otherwise be
payable by the Fund were it not for the expense limitation provisions of
any investment advisory or administrative agreement to which the Fund is a
party.
6. DURATION, AMENDMENT AND TERMINATION.
(a) This Agreement shall go into effect as to the Fund on the date set
forth above (the "Effective Date") and shall, unless terminated as
hereinafter provided, continue in effect until May 30, 1996, unless the
Fund's shareholders approve the Agreement prior to such date. Upon approval
by shareholders, this agreement shall, unless terminated as hereinafter
provided, continue in effect for two years from the date of such approval
and shall continue from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the Board of
Trustees of the Trust, including the vote of a majority of the Trustees who
are not parties to this Agreement or "interested persons" (as defined in
the Act) of any such party cast in person at a meeting called for the
purpose of voting on such approval, or by the vote of the holders of a
"majority" (as so defined) of the outstanding voting securities of the Fund
and by such a vote of the Trustees.
(b) This Agreement may not be amended except in accordance with the
provisions of the Act, including specifically, the provisions of the Act
and the rules and regulations thereunder regarding series votes by
shareholders of the Fund.
(c) This Agreement may be terminated by the Adviser at any time without
penalty upon giving the Fund sixty (60) days' written notice (which notice
may be waived by the Fund) and may be terminated by the Fund at any time
without penalty upon giving the Adviser sixty (60) days' written notice
(which notice may be waived by the Adviser), provided that such termination
by the Fund shall be approved by the vote of a majority of all the Trustees
in office at the time or by the vote of the holders of a majority (as
defined in the Act) of the voting securities of the Fund at the time
outstanding and entitled to vote. This Agreement may only be terminated in
accordance with the provisions of the Act, and shall automatically
terminate in the event of its assignment (as defined in the Act).
7. BOARD OF TRUSTEES MEETING.
The Fund agrees that notice of each meeting of the Board of Trustees of
the Trust will be sent to the Adviser and that the Fund will make
appropriate arrangements for the attendance (as persons present by
invitation) of such person or persons as the Adviser may designate.
8. NOTICES.
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further
notice to the other party, it is agreed that the address of the Fund for
this purpose shall be 125 West 55th Street, New York, New York 10019, and
that of the Adviser shall be One Chase Manhattan Plaza, New York, New York
10081.
9. QUESTIONS OF INTERPRETATION.
Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of
the Act, as amended, shall be resolved by reference to such term or
provision of the Act and to interpretations thereof, if any, by the United
States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said Act. In addition, where the effect of a
requirement of the Act, reflected in any provision of this Agreement is
revised by rule, regulation or order of the Securities and Exchange
Commission, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by their duly authorized officers and their seals to be
hereunder affixed, all as of the day and year first above written.
MUTUAL FUND GROUP
By:
-----------------------------
Name:
Title:
ATTEST:
THE CHASE MANHATTAN BANK, N.A.
By:
-----------------------------
Name:
Title:
ATTEST:
SCHEDULE A
MUTUAL FUND GROUP FEE
----------------- ----
Vista Short Term Bond Fund................................................ 0.25%
Vista U.S. Treasury Income Fund........................................... 0.30
Vista Bond Fund........................................................... 0.30
Vista Equity Income Fund.................................................. 0.40
Vista Equity Fund......................................................... 0.40
Vista Balanced Fund....................................................... 0.50
IEEE Balanced Fund........................................................ 0.60
Vista Small Cap Equity Fund............................................... 0.65
Vista Southeast Asian Fund................................................ 0.65
Vista Japan Fund.......................................................... 1.00
Vista European Fund....................................................... 1.00
MASTER PORTFOLIOS:
------------------
Vista Capital Growth Portfolio............................................ 0.40%
Vista Growth and Income Portfolio......................................... 0.40
Vista International Equity Portfolio...................................... 1.00
Vista Global Fixed Income Portfolio....................................... 0.75
APPENDIX B
FORM OF NEW
INVESTMENT ADVISORY AGREEMENT
BETWEEN
MUTUAL FUND GROUP
AND
THE CHASE MANHATTAN BANK, N.A.
AND ITS SUCCESSOR
AGREEMENT made this day of , 1996, by and between Mutual Fund Group, a
Massachusetts business trust which may issue one or more series of shares
(hereinafter the "Trust"), and The Chase Manhattan Bank, N.A., a national
banking association, and its successor, The Chase Manhattan Bank, a New York
State chartered bank (hereinafter the "Adviser").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services in connection with the series of the Trust listed on
Schedule A (each, a "Fund" and collectively, the "Funds"), and the Adviser
represents that it is willing and possesses legal authority to so furnish such
services;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. STRUCTURE OF AGREEMENT.
The Trust is entering into this Agreement on behalf of the Funds severally
and not jointly. The responsibilities and benefits set forth in this Agreement
shall refer to each Fund severally and not jointly. No individual Fund shall
have any responsibility for any obligation with respect to any other Fund
arising out of this Agreement. Without otherwise limiting the generality of
the foregoing,
(a) any breach of any term of this Agreement regarding the Trust with
respect to any one Fund shall not create a right or obligation with respect
to any other Fund;
(b) under no circumstances shall the Adviser have the right to set off
claims relating to a Fund by applying property of any other Fund; and
(c) the business and contractual relationships created by this Agreement,
the consideration for entering into this Agreement, and the consequences of
such relationships and consideration relate solely to the Trust and the
particular Fund to which such relationship and consideration applies.
2. DELIVERY OF DOCUMENTS.
The Trust has delivered to the Adviser copies of each of the following
documents and will deliver to it all future amendments and supplements
thereto, if any:
(a) The Trust's Declaration of Trust;
(b) The By-Laws of the Trust;
(c) Resolutions of the Board of Trustees of the Trust authorizing the
execution and delivery of this Agreement;
(d) The most recent Post-Effective Registration Statement under the
Securities Act of 1933, as amended (the "1933 Act"), and the Investment
Company Act of 1940, as amended (the "1940 Act"), on Form N-1A as filed
with the Securities and Exchange Commission (the "Commission") (the
"Registration Statement");
(e) Notification of Registration of the Trust under the 1940 Act on Form
N-8A as filed with the Commission; and
(f) Prospectuses and Statements of Additional Information of the Funds
(collectively, the "Prospectuses").
3. APPOINTMENT.
(a) General. The Trust hereby appoints the Adviser to act as investment
adviser to the Funds for the period and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
(b) Employees of Affiliates. The Adviser may, in its discretion, provide
such services through its own employees or the employees of one or more
affiliated companies that are qualified to act as an investment adviser to
the Trust under applicable laws and are under the control of The Chase
Manhattan Corporation, the parent of the Adviser; provided that (i) all
persons, when providing services hereunder, are functioning as part of an
organized group of persons, and (ii) such organized group of persons is
managed at all times by authorized officers of the Adviser.
(c) Sub-Advisers. It is understood and agreed that the Adviser may from
time to time employ or associate with such other entities or persons as the
Adviser believes appropriate to assist in the performance of this Agreement
with respect to a particular Fund or Funds (each a "Sub-Adviser"), and that
any such Sub-Adviser shall have all of the rights and powers of the Adviser
set forth in this Agreement; provided that a Fund shall not pay any
additional compensation for any Sub-Adviser and the Adviser shall be as
fully responsible to the Trust for the acts and omissions of the Sub-
Adviser as it is for its own acts and omissions; and provided further that
the retention of any Sub-Adviser shall be approved in advance by (i) the
Board of Trustees of the Trust and (ii) the shareholders of the relevant
Fund if required under any applicable provisions of the 1940 Act. The
Adviser will review, monitor and report to the Trust's Board of Trustees
regarding the performance and investment procedures of any Sub-Adviser. In
the event that the services of any Sub-Adviser are terminated, the Adviser
may provide investment advisory
services pursuant to this Agreement to the Fund without a Sub-Adviser and
without further shareholder approval, to the extent consistent with the
1940 Act. A Sub-Adviser may be an affiliate of the Adviser.
4. INVESTMENT ADVISORY SERVICES.
(a) Management of the Funds. The Adviser hereby undertakes to act as
investment adviser to the Funds. The Adviser shall regularly provide
investment advice to the Funds and continuously supervise the investment
and reinvestment of cash, securities and other property composing the
assets of the Funds and, in furtherance thereof, shall:
(i) supervise all aspects of the operations of the Trust and each
Fund;
(ii) obtain and evaluate pertinent economic, statistical and
financial data, as well as other significant events and developments,
which affect the economy generally, the Funds' investment programs, and
the issuers of securities included in the Funds' portfolios and the
industries in which they engage, or which may relate to securities or
other investments which the Adviser may deem desirable for inclusion in
a Fund's portfolio;
(iii) determine which issuers and securities shall be included in the
portfolio of each Fund;
(iv) furnish a continuous investment program for each Fund;
(v) in its discretion and without prior consultation with the Trust,
buy, sell, lend and otherwise trade any stocks, bonds and other
securities and investment instruments on behalf of each Fund; and
(vi) take, on behalf of each Fund, all actions the Adviser may deem
necessary in order to carry into effect such investment program and the
Adviser's functions as provided above, including the making of
appropriate periodic reports to the Trust's Board of Trustees.
(b) Covenants. The Adviser shall carry out its investment advisory and
supervisory responsibilities in a manner consistent with the investment
objectives, policies, and restrictions provided in: (i) each Fund's
Prospectus and Statement of Additional Information as revised and in effect
from time to time; (ii) the Company's Trust Instrument, By-Laws or other
governing instruments, as amended from time to time; (iii) the 1940 Act;
(iv) other applicable laws; and (v) such other investment policies,
procedures and/or limitations as may be adopted by the Company with respect
to a Fund and provided to the Adviser in writing. The Adviser agrees to use
reasonable efforts to manage each Fund so that it will qualify, and
continue to qualify, as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986, as amended, and regulations issued
thereunder (the "Code"), except as may be authorized to the contrary by the
Company's Board of Trustees. The management of the Funds by the Adviser
shall at all times be subject to the review of the Company's Board of
Trustees.
(c) Books and Records. The Adviser shall keep each Fund's books and
records required by applicable law to be maintained by the Funds with
respect to advisory services. The Adviser agrees that all records which it
maintains for a Fund are the property of the Fund and it will
promptly surrender any of such records to the Fund upon the Fund's request.
The Adviser further agrees to preserve for the periods prescribed by the
1940 Act any such records of the Fund required to be preserved by such
Rule.
(d) Reports, Evaluations and Other Services. The Adviser shall furnish
reports, evaluations, information or analyses to the Trust with respect to
the Funds and in connection with the Adviser's services hereunder as the
Trust's Board of Trustees may request from time to time or as the Adviser
may otherwise deem to be desirable. The Adviser shall make recommendations
to the Trust's Board of Trustees with respect to Trust policies, and shall
carry out such policies as are adopted by the Board of Trustees. The
Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Agreement.
(e) Purchase and Sale of Securities. The Adviser shall place all orders
for the purchase and sale of portfolio securities for each Fund with
brokers or dealers selected by the Adviser, which may include brokers or
dealers affiliated with the Adviser to the extent permitted by the 1940 Act
and the Trust's policies and procedures applicable to the Funds. The
Adviser shall use its best efforts to seek to execute portfolio
transactions at prices which, under the circumstances, result in total
costs or proceeds being the most favorable to the Funds. In assessing the
best overall terms available for any transaction, the Adviser shall
consider all factors it deems relevant, including the breadth of the market
in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, research services provided to
the Adviser, and the reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In no event shall the
Adviser be under any duty to obtain the lowest commission or the best net
price for any Fund on any particular transaction, nor shall the Adviser be
under any duty to execute any order in a fashion either preferential to any
Fund relative to other accounts managed by the Adviser or otherwise
materially adverse to such other accounts.
(f) Selection of Brokers or Dealers. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers may be
selected who also provide brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934) to the
Adviser, the Funds and/or the other accounts over which the Adviser
exercises investment discretion. The Adviser is authorized to pay a broker
or dealer who provides such brokerage and research services a commission
for executing a portfolio transaction for a Fund which is in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction if the Adviser determines in good faith that the
total commission is reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall responsibilities of the
Adviser with respect to accounts over which it exercises investment
discretion. The Adviser shall report to the Board of Trustees of the Trust
regarding overall commissions paid by the Funds and their reasonableness in
relation to the benefits to the Funds.
(g) Aggregation of Securities Transactions. In executing portfolio
transactions for a Fund, the Adviser may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the securities to be sold or purchased with those of other Funds or its
other clients if, in the Adviser's reasonable judgment, such aggregation
(i) will result in an overall
economic benefit to the Fund, taking into consideration the advantageous
selling or purchase price, brokerage commission and other expenses, and
trading requirements, and (ii) is not inconsistent with the policies set
forth in the Trust's registration statement and the Fund's Prospectus and
Statement of Additional Information. In such event, the Adviser will
allocate the securities so purchased or sold, and the expenses incurred in
the transaction, in an equitable manner, consistent with its fiduciary
obligations to the Fund and such other clients.
5. EXPENSES.
(a) The Adviser shall, at its expense, provide the Funds with office
space, furnishings and equipment and personnel required by it to perform
the services to be provided by the Adviser pursuant to this Agreement. The
Adviser also hereby agrees that it will supply to any sub-adviser or
administrator (the "Administrator") of a Fund all necessary financial
information in connection with the Administrator's duties under any
Agreement between the Administrator and the Trust.
(b) Except as provided in subparagraph (a), the Trust shall be
responsible for all of the Funds' expenses and liabilities, including, but
not limited to, taxes; interest; fees (including fees paid to its trustees
who are not affiliated with the Adviser or any of its affiliates); fees
payable to the Securities and Exchange Commission; state securities
qualification fees; association membership dues; costs of preparing and
printing Prospectuses for regulatory purposes and for distribution to
existing shareholders; advisory and administration fees; charges of the
custodian and transfer agent; insurance premiums; auditing and legal
expenses; costs of shareholders' reports and shareholders' meetings; any
extraordinary expenses; and brokerage fees and commissions, if any, in
connection with the purchase or sale of portfolio securities.
6. COMPENSATION.
(a) In consideration of the services to be rendered by the Adviser under
this Agreement, the Trust shall pay the Adviser monthly fees on the first
Business Day (as defined in the Prospectuses) of each month based upon the
average daily net assets of each Fund during the preceding month (as
determined on the days and at the time set forth in the Prospectuses for
determining net asset value per share) at the annual rate set forth
opposite the Fund's name on Schedule A attached hereto. If the fees payable
to the Adviser pursuant to this paragraph begin to accrue before the end of
any month or if this Agreement terminates before the end of any month, the
fees for the period from such date to the end of such month or from the
beginning of such month to the date of termination, as the case may be,
shall be prorated according to the proportion which such period bears to
the full month in which such effectiveness or termination occurs. For
purposes of calculating each such monthly fee, the value of the Funds' net
assets shall be computed in the manner specified in the Prospectuses and
the Articles for the computation of the value of the Funds' net assets in
connection with the determination of the net asset value of shares of the
Funds' capital stock.
(b) If the aggregate expenses incurred by, or allocated to, each Fund in
any fiscal year shall exceed the lowest expense limitation, if applicable
to such Fund, imposed by state securities laws or regulations thereunder,
as such limitations may be raised or lowered from time to time, the Adviser
shall reduce its investment advisory fee, but not below zero, to the extent
of its share of
such excess expenses; provided, however, there shall be excluded from such
expenses the amount of any interest, taxes, brokerage commissions and
extraordinary expenses (including but not limited to legal claims and
liabilities and litigation costs and any indemnification related thereto)
paid or payable by the Fund. Such reduction, if any, shall be computed and
accrued daily, shall be settled on a monthly basis and shall be based upon
the expense limitation applicable to the Fund as at the end of the last
business day of the month. Should two or more of such expense limitations
be applicable at the end of the last business day of the month, that
expense limitation which results in the largest reduction in the Adviser's
fee shall be applicable. For the purposes of this paragraph, the Adviser's
share of any excess expenses shall be computed by multiplying such excess
expenses by a fraction, the numerator of which is the amount of the
investment advisory fee which would otherwise be payable to the Adviser for
such fiscal year were it not for this subsection 6(b) and the denominator
of which is the sum of all investment advisory and administrative fees
which would otherwise be payable by the Fund were it not for the expense
limitation provisions of any investment advisory or administrative
agreement to which the Fund is a party.
(c) In consideration of the Adviser's undertaking to render the services
described in this Agreement, the Trust agrees that the Adviser shall not be
liable under this Agreement for any error of judgment or mistake of law or
for any act or omission or loss suffered by the Trust in connection with
the performance of this Agreement, provided that nothing in this Agreement
shall be deemed to protect or purport to protect the Investment Adviser
against any liability to the Trust or its stockholders to which the Adviser
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of the Adviser's duties under this
Agreement or by reason of the Adviser's reckless disregard of its
obligations and duties hereunder or breach of fiduciary duty with respect
to receipt of compensation.
7. NON-EXCLUSIVE SERVICES.
Except to the extent necessary to perform the Investment Adviser's
obligations under this Agreement, nothing herein shall be deemed to limit or
restrict the right of the Adviser, or any affiliate of the Adviser, including
any employee of the Adviser, to engage in any other business or to devote time
and attention to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services of any kind
to any other corporation, firm, individual or association.
8. EFFECTIVE DATE; MODIFICATIONS; TERMINATION.
This Agreement shall become effective on the date hereof (the "Effective
Date"), provided that it shall have been approved by a majority of the
outstanding voting securities of each Fund, in accordance with the
requirements of the 1940 Act, or such later date as may be agreed by the
parties following such shareholder approval.
(a) Subject to prior termination as provided in sub-paragraph (d) of this
paragraph, this Agreement shall continue in force for two years from the
date hereof and shall continue in effect from year to year thereafter, but
only so long as the continuance after such date shall be
specifically approved at least annually by vote of the Trustees of the
Trust or by vote of a majority of the outstanding voting securities of each
Fund.
(b) This Agreement may be modified by mutual consent, such consent on the
part of the Trust to be authorized by vote of a majority of the outstanding
voting securities of each Fund.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph, the terms of any continuance or modification of this Agreement
must have been approved by the vote of a majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either party hereto may, at any time on sixty (60) days prior written
notice to the other, terminate this Agreement, without payment of any
penalty, by action of its Trustees or Board of Trustees, as the case may
be, or by action of its authorized officers or, with respect to a Fund, by
vote of a majority of the outstanding voting securities of that Fund. This
Agreement may remain in effect with respect to a Fund even if it has been
terminated in accordance with this paragraph with respect to the other
Funds. This Agreement shall terminate automatically in the event of its
assignment as that term is defined under the 1940 Act.
9. BOARD OF TRUSTEES MEETINGS.
The Trust agrees that notice of each meeting of the Board of Trustees of the
Trust will be sent to the Adviser and that the Trust will make appropriate
arrangements for the attendance (as persons present by invitation) of such
person or persons as the Adviser may designate.
10. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized, and their respective
seals to be hereunto affixed, all as of the date written above.
MUTUAL FUND GROUP THE CHASE MANHATTAN BANK, N.A.
By: By:
Name: Name:
Title: Title:
SCHEDULE A
MUTUAL FUND GROUP FEE
----------------- ----
Vista Short Term Bond Fund................................................ 0.25%
Vista U.S. Treasury Income Fund........................................... 0.30
Vista Bond Fund........................................................... 0.30
Vista Equity Income Fund.................................................. 0.40
Vista Equity Fund......................................................... 0.40
Vista Balanced Fund....................................................... 0.50
IEEE Balanced Fund........................................................ 0.60
Vista Small Cap Equity Fund............................................... 0.65
Vista Southeast Asian Fund................................................ 0.65
Vista Japan Fund.......................................................... 1.00
Vista European Fund....................................................... 1.00
MASTER PORTFOLIOS:
------------------
Vista Capital Growth Portfolio............................................ 0.40%
Vista Growth and Income Portfolio......................................... 0.40
Vista International Equity Portfolio...................................... 1.00
Vista Global Fixed Income Portfolio....................................... 0.75
APPENDIX C
FORM OF PROPOSED
INVESTMENT SUBADVISORY AGREEMENT
BETWEEN
THE CHASE MANHATTAN BANK, N.A.
AND ITS SUCCESSOR
AND
CHASE ASSET MANAGEMENT, INC.
AGREEMENT made as of the day of , 1996, by and between The Chase
Manhattan Bank, N.A., a national banking association, and its successor, The
Chase Manhattan Bank, a New York State chartered bank (the "Adviser"), and
Chase Asset Management, Inc., a Delaware corporation (the "Sub-Adviser").
WHEREAS, the Adviser is a registered investment adviser under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Adviser provides investment advisory services to the series of
Mutual Fund Group, a Massachusetts business trust (the "Trust"), an open-end,
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act") pursuant to an Investment Advisory Agreement
dated , 1996 (the "Advisory Agreement"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish investment
subadvisory services in connection with the series of the Trust listed on
Schedule A (each, a "Fund" and collectively, the "Funds"), and the Sub-Adviser
represents that it is willing and possesses legal authority to so furnish such
services;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT.
(a) General. The Adviser hereby appoints the Sub-Adviser to act as
investment subadviser to the Funds for the period and on the terms set
forth in this Agreement. The Sub-Adviser accepts such appointment and
agrees to furnish the services herein set forth for the compensation herein
provided.
(b) Employees of Affiliates. The Sub-Adviser may, in its discretion,
provide such services through its own employees or the employees of one or
more affiliated companies that are qualified to act as an investment
subadviser to the Funds under applicable laws and are under the control of
New Chase, the parent of the Sub-Adviser; provided that (i) all persons,
when providing services hereunder, are functioning as part of an organized
group of persons, and (ii) such organized group of persons is managed at
all times by authorized officers of the Sub-Adviser.
2. DELIVERY OF DOCUMENTS.
The Adviser has delivered to the Sub-Adviser copies of each of the
following documents along with all amendments thereto through the date
hereof, and will promptly deliver to it all future amendments and
supplements thereto, if any:
(a) the Trust's Declaration of Trust;
(b) the By-Laws of the Trust;
(c) resolutions of the Board of Trustees of the Trust authorizing the
execution and delivery of the Advisory Agreement and this Agreement;
(d) the most recent Post-Effective Amendment to the Trust's Registration
Statement under the Securities Act of 1933, as amended (the "1933 Act"),
and the 1940 Act, on Form N-1A as filed with the Securities and Exchange
Commission (the "Commission");
(e) Notification of Registration of the Trust under the 1940 Act on Form
N-8A as filed with the Commission; and
(f) the currently effective Prospectuses and Statements of Additional
Information of the Funds.
3. INVESTMENT ADVISORY SERVICES.
(a) Management of the Portfolios. The Sub-Adviser hereby undertakes to
act as investment subadviser to the Funds. The Sub-Adviser shall regularly
provide investment advice to the Funds and continuously supervise the
investment and reinvestment of cash, securities and other property
composing the assets of the Portfolios and, in furtherance thereof, shall:
(i) obtain and evaluate pertinent economic, statistical and financial
data, as well as other significant events and developments, which
affect the economy generally, the Funds' investment programs, and the
issuers of securities included in the portfolio of each Fund and the
industries in which they engage, or which may relate to securities or
other investments which the Sub-Adviser may deem desirable for
inclusion in a Fund's portfolio;
(ii) determine which issuers and securities shall be included in the
portfolio of each Fund;
(iii) furnish a continuous investment program for each Fund;
(iv) in its discretion, and without prior consultation, buy, sell,
lend and otherwise trade any stocks, bonds and other securities and
investment instruments on behalf of each Fund; and
(v) take, on behalf of each Fund, all actions the Sub-Adviser may
deem necessary in order to carry into effect such investment program
and the Sub-Adviser's functions as provided
above, including the making of appropriate periodic reports to the
Adviser and the Trust's Board of Trustees.
(b) Covenants. The Sub-Adviser shall carry out its investment subadvisory
responsibilities in a manner consistent with the investment objectives,
policies, and restrictions provided in: (i) each Fund's Prospectus and
Statement of Additional Information as revised and in effect from time to
time; (ii) the Trust's Declaration of Trust, By-Laws or other governing
instruments, as amended from time to time; (iii) the 1940 Act; (iv) the
provisions of the Internal Revenue Code of 1986, as amended. (v) other
applicable laws; and (vi) such other investment policies, procedures and/or
limitations as may be adopted by the Trust with respect to a Fund and
provided to the Adviser in writing. The management of the Funds by the
Adviser shall at all times be subject to the review of the Trust's Board of
Trustees.
(c) Books and Records. Pursuant to applicable law, the Sub-Adviser shall
keep each Fund's books and records required to be maintained by, or on
behalf of, the Funds with respect to subadvisory services rendered
hereunder. The Sub-Adviser agrees that all records which it maintains for a
Fund are the property of the Fund and it will promptly surrender any of
such records to the Fund upon the Fund's request. The Sub-Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940
Act any such records of the Portfolio required to be preserved by such
Rule.
(d) Reports, Evaluations and Other Services. The Sub-Adviser shall
furnish reports, evaluations, information or analyses to the Adviser and
the Trust with respect to the Funds and in connection with the Sub-
Adviser's services hereunder as the Adviser and/or the Trust's Board of
Trustees may request from time to time or as the Sub-Adviser may otherwise
deem to be desirable. The Sub-Adviser shall make recommendations to the
Adviser and the Trust's Board of Trustees with respect to the Trust's
policies, and shall carry out such policies as are adopted by the Board of
Trustees. The Sub-Adviser may, subject to review by the Adviser, furnish
such other services as the Sub-Adviser shall from time to time determine to
be necessary or useful to perform its obligations under this Agreement.
(e) Purchase and Sale of Securities. The Sub-Adviser shall place all
orders for the purchase and sale of portfolio securities for each Fund with
brokers or dealers selected by the Sub-Adviser, which may include brokers
or dealers affiliated with the Adviser or the Sub-Adviser to the extent
permitted by the 1940 Act and the Trust's policies and procedures
applicable to the Funds. The Sub-Adviser shall use its best efforts to seek
to execute portfolio transactions at prices which, under the circumstances,
result in total costs or proceeds being the most favorable to the Funds. In
assessing the best overall terms available for any transaction, the Sub-
Adviser shall consider all factors it deems relevant, including the breadth
of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, research
services provided to the Sub-Adviser, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. In no event shall the Sub-Adviser be under any duty to obtain the
lowest commission or the best net price for any Fund on any particular
transaction, nor shall the Sub-Adviser be under any duty to execute any
order in a fashion either
preferential to any Fund relative to other accounts managed by the Sub-
Adviser or otherwise materially adverse to such other accounts.
(f) Selection of Brokers or Dealers. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers may be
selected who also provide brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934) to the
Sub-Adviser, the Funds, and/or the other accounts over which the Sub-
Adviser exercises investment discretion. The Sub-Adviser is authorized to
pay a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for a Fund which is in
excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in
good faith that the total commission is reasonable in relation to the value
of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to accounts over which it
exercises investment discretion. The Sub-Adviser shall report to the Board
of Trustees of the Trust regarding overall commissions paid by the Funds
and their reasonableness in relation to their benefits to the Funds.
(g) Aggregation of Securities Transactions. In executing portfolio
transactions for a Fund, the Sub-Adviser may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the securities to be sold or purchased with those of other Funds or its
other clients if, in the Sub-Adviser's reasonable judgment, such
aggregation (i) will result in an overall economic benefit to the Fund,
taking into consideration the advantageous selling or purchase price,
brokerage commission and other expenses, and trading requirements, and (ii)
is not inconsistent with the policies set forth in the Trust's registration
statement and the Fund's Prospectus and Statement of Additional
Information. In such event, the Sub-Adviser will allocate the securities so
purchased or sold, and the expenses incurred in the transaction, in an
equitable manner, consistent with its fiduciary obligations to the Fund and
such other clients.
4. REPRESENTATIONS AND WARRANTIES.
(a) The Sub-Adviser hereby represents and warrants to the Adviser as
follows:
(i) The Sub-Adviser is a corporation duly organized and in good
standing under the laws of the State of Delaware and is fully
authorized to enter into this Agreement and carry out its duties and
obligations hereunder.
(ii) The Sub-Adviser is registered as an investment adviser with the
Commission under the Advisers Act, and is registered or licensed as an
investment adviser under the laws of all applicable jurisdictions. The
Sub-Adviser shall maintain such registrations or licenses in effect at
all times during the term of this Agreement.
(iii) The Sub-Adviser at all times shall provide its best judgment
and effort to the Adviser in carrying out the Sub-Adviser's obligations
hereunder.
(b) The Adviser hereby represents and warrants to the Sub-Adviser as
follows:
(i) The Adviser is a state chartered bank duly organized and in good
standing under the laws of the State of New York and is fully
authorized to enter into this Agreement and carry out its duties and
obligations hereunder.
(ii) The Trust has been duly organized as a business trust under the
laws of the State of Massachusetts.
(iii) The Trust is registered as an investment company with the
Commission under the 1940 Act, and shares of each Fund are registered
for offer and sale to the public under the 1933 Act and all applicable
state securities laws where currently sold. Such registrations will be
kept in effect during the term of this Agreement.
5. COMPENSATION.
(a) As compensation for the services which the Sub-Adviser is to provide
or cause to be provided pursuant to Paragraph 3, with respect to each Fund,
the Adviser shall pay to the Sub-Adviser (or cause to be paid by the Trust
directly to the Sub-Adviser) a fee, which shall be accrued daily and paid
in arrears on the first business day of each month, at an annual rate to be
determined between the parties hereto from time to time, as a percentage of
the average daily net assets of the Fund during the preceding month
(computed in the manner set forth in the Fund's most recent Prospectus and
Statement of Additional Information). Average daily net assets shall be
based upon determinations of net assets made as of the close of business on
each business day throughout such month. The fee for any partial month
shall be calculated on a proportionate basis, based upon average daily net
assets for such partial month, as a percentage of average daily net assets.
(b) The Sub-Adviser shall have the right, but not the obligation, to
voluntarily waive any portion of the sub-advisory fee from time to time.
Any such voluntary waiver will be irrevocable and determined in advance of
rendering sub-investment advisory services by the Sub-Adviser, and shall be
in writing and signed by the parties hereto.
(c) If the aggregate expenses incurred by, or allocated to, each Fund in
any fiscal year shall exceed the lowest expense limitation, if applicable
to such Fund, imposed by state securities laws or regulations thereunder,
as such limitations may be raised or lowered from time to time, the Sub-
Adviser shall reduce its investment advisory fee, but not below zero, to
the extent of its share of such excess expenses; provided, however, there
shall be excluded from such expenses the amount of any interest, taxes,
brokerage commissions and extraordinary expenses (including but not limited
to legal claims and liabilities and litigation costs and any
indemnification related thereto) paid or payable by the Fund. Such
reduction, if any, shall be computed and accrued daily, shall be settled on
a monthly basis and shall be based upon the expense limitation applicable
to the Fund as at the end of the last business day of the month. Should two
or more of such expense limitations be applicable at the end of the last
business day of the month, that expense limitation which results in the
largest reduction in the Sub-Adviser's fee shall be applicable. For the
purposes of this paragraph, the Sub-Adviser's share of any excess expenses
shall be computed by
multiplying such excess expenses by a fraction, the numerator of which is
the amount of the investment advisory fee which would otherwise be payable
to the Sub-Adviser for such fiscal year were it not for this subsection
5(b) and the denominator of which is the sum of all investment advisory and
administrative fees which would otherwise be payable by the Fund were it
not for the expense limitation provisions of any investment advisory or
administrative agreement to which the Fund is a party.
6. INTERESTED PERSONS.
It is understood that, to the extent consistent with applicable laws, the
Trustees, officers and shareholders of the Trust or the Adviser are or may
be or become interested in the Sub-Adviser as directors, officers or
otherwise and that directors, officers and shareholders of the Sub-Adviser
are or may be or become similarly interested in the Trust or the Adviser.
7. EXPENSES.
The Sub-Adviser will pay all expenses incurred by it in connection with
its activities under this Agreement other than the cost of securities
(including brokerage commissions) purchased for or sold by the Funds.
8. NON-EXCLUSIVE SERVICES; LIMITATION OF SUB-ADVISER'S LIABILITY.
The services of the Sub-Adviser hereunder are not to be deemed exclusive,
and the Sub-Adviser may render similar services to others and engage in
other activities. The Sub-Adviser and its affiliates may enter into other
agreements with the Funds, the Trust or the Adviser for providing
additional services to the Funds, the Trust or the Adviser which are not
covered by this Agreement, and to receive additional compensation for such
services. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the
part of the Sub-Adviser, or a breach of fiduciary duty with respect to
receipt of compensation, neither the Sub-Adviser nor any of its directors,
officers, shareholders, agents, or employees shall be liable or responsible
to the Adviser, the Trust, the Funds or to any shareholder of the Funds for
any error of judgment or mistake of law or for any act or omission in the
course of, or connected with, rendering services hereunder or for any loss
suffered by the Adviser, the Trust, a Fund, or any shareholder of a Fund in
connection with the performance of this Agreement.
9. EFFECTIVE DATE; MODIFICATIONS; TERMINATION.
This Agreement shall become effective on the date hereof (the "Effective
Date") provided that it shall have been approved by a majority of the
outstanding voting securities of each Portfolio, in accordance with the
requirements of the 1940 Act, or such later date as may be agreed by the
parties following such shareholder approval.
(a) This Agreement shall continue in force for two years from the
Effective Date. Thereafter, this Agreement shall continue in effect as to
each Fund for successive annual periods, provided
such continuance is specifically approved at least annually (i) by a vote
of the majority of the Trustees of the Trust who are not parties to this
Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval, and (ii) by a
vote of the Board of Trustees of the Trust or a majority of the outstanding
voting securities of the Fund.
(b) The modification of any of the non-material terms of this Agreement
may be approved by a vote of a majority of those Trustees of the Trust who
are not interested persons of any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval.
(c) Notwithstanding the foregoing provisions of this Paragraph 9, either
party hereto may terminate this Agreement as to any Fund(s) at any time on
sixty (60) days' prior written notice to the other, without payment of any
penalty. A termination of the Sub-Adviser may be effected as to any
particular Fund by the Adviser, by a vote of the Trust's Board of Trustees,
by vote of a majority of the outstanding voting securities of the Fund.
This Agreement shall terminate automatically in the event of its
assignment.
10. LIMITATION OF LIABILITY OF TRUSTEES AND SHAREHOLDERS.
The Sub-Adviser acknowledges the following limitation of liability:
The terms "Mutual Fund Group"and "Trustees of Mutual Fund Group" refer,
respectively, to the trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Declaration
of Trust, to which reference is hereby made and a copy of which is on file
at the office of the Secretary of State of the State of Massachusetts, such
reference being inclusive of any and all amendments thereto so filed or
hereafter filed. The obligations of "Mutual Fund Group" entered into in the
name or on behalf thereof by any of the Trustees, representatives or agents
are made not individually, but in such capacities and are not binding upon
any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Trust, and all persons dealing
with the Trust or a Fund must look solely to the assets of the Trust or
Fund for the enforcement of any claims against the Trust or Fund.
11. CERTAIN DEFINITIONS.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "control," and "interested persons," when used herein, shall
have the respective meanings specified in the 1940 Act. References in this
Agreement to the 1940 Act and the Advisers Act shall be construed as
references to such laws as now in effect or as hereafter amended, and shall
be understood as inclusive of any applicable rules, interpretations and/or
orders adopted or issued thereunder by the Commission.
12. INDEPENDENT CONTRACTOR.
The Sub-Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided
herein or authorized by the Board of Trustees of the
Trust from time to time, have no authority to act for or represent a Fund
in any way or otherwise be deemed an agent of a Fund.
13. STRUCTURE OF AGREEMENT.
The Adviser and Sub-Adviser are entering into this Agreement with regard
to the respective Funds severally and not jointly. The responsibilities and
benefits set forth in this Agreement shall be deemed to be effective as
between the Adviser and Sub-Adviser in connection with each Fund severally
and not jointly. This Agreement is intended to govern only the
relationships between the Adviser, on the one hand, and the Sub-Adviser, on
the other hand, and is not intended to and shall not govern (i) the
relationship between the Adviser or Sub-Adviser and any Fund, or (ii) the
relationships among the respective Funds.
14. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New York,
provided that nothing herein shall be construed in a manner inconsistent
with the 1940 Act or the Advisers Act.
15. SEVERABILITY.
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
16. NOTICES.
Notices of any kind to be given to the Adviser hereunder by the Sub-
Adviser shall be in writing and shall be duly given if mailed or delivered
to the Adviser at or at such other address or to such individual as shall
be so specified by the Adviser to the Sub-Adviser. Notices of any kind to
be given to the Sub-Adviser hereunder by the Adviser shall be in writing
and shall be duly given if mailed or delivered to the Sub-Adviser at or at
such other address or to such individual as shall be so specified by the
Sub-Adviser to the Adviser. Notices shall be effective upon delivery.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized as of the date written
above.
CHASE ASSET MANAGEMENT, INC. THE CHASE MANHATTAN BANK, N.A.
By: By:
------------------------------ ---------------------------------
Name: Name:
Title: Title:
SCHEDULE A
FUND:
-----
Vista Short Term Bond Fund
Vista U.S. Treasury Income Fund
Vista Bond Fund
Vista Equity Income Fund
Vista Equity Fund
Vista Balanced Fund
IEEE Balanced Fund
Vista Small Cap Equity Fund
Vista Southeast Asian Fund
Vista Japan Fund
Vista European Fund
MASTER PORTFOLIO:
-----------------
Vista Capital Growth Portfolio
Vista Growth and Income Portfolio
Vista International Equity Portfolio
Vista Global Fixed Income Portfolio
Cusip 093265403
Cusip 093265304
G01479-06 (3/96)
BLANCHARD CAPITAL GROWTH FUND
FOR SPECIAL MEETING OF SHAREHOLDERS APRIL 29, 1996
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned shareholders of
BLANCHARD CAPITAL GROWTH FUND hereby appoint Patricia F. Conner, Patricia
Godlewski, Gia Albanowski, Suzanne Land, and C. Grant Anderson, or any one of
them true and lawful attorneys, with power of substitution of each, to vote
all shares of BLANCHARD CAPITAL GROWTH FUND, which the undersigned is
entitled to vote, at the Special Meeting of Shareholders to be held on April
29, 1996, at Federated Investors Tower, Pittsburgh, Pennsylvania, at 2:00
p.m., and at any adjournment thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
BLANCHARD CAPITAL GROWTH FUND KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
FOR AGAINST ABSTAIN 1. Approve an interim investment advisory
agreement between
Captial Growth Porfolio (the "Master
- --- --- ---
Portfolio") and The Chase Manhattan Bank, N.A. (and the successor entity
thereto) (the "Adviser") which will take effect upon the merger of The Chase
Manhattan Corporation (the parent company of the Adviser) and Chemical
Banking Corporation. No fee increase is proposed.
FOR AGAINST ABSTAIN 2. Approve a new investment advisory agreement
between
the Master Portfolio and the Adviser, and a
- --- --- ---
sub-advisory agreement between the Adviser and Chase Asset Management, Inc.
with respect to the Master Portfolio to take effect as soon as practicable
after approval by shareholders. No fee increase is proposed.
3. Vote on proposals to approve of changes to fundamental investment
restrictions of the Master Portfolio and of the Fund. The lettering of the
boxes match the lettering of the Proposals.
FOR AGAINST ABSTAIN 3a. Approve an amendment to the Master Portfolio's
and the
Fund's fundamental investment restriction
- --- --- ---
concerning borrowing;
FOR AGAINST ABSTAIN 3b. Approve an amendment to the Master Portfolio's
and the
Fund's fundamental investment restriction
- --- --- ---
concerning investment for the purpose of exercising control;
FOR AGAINST ABSTAIN 3c. Approve an amendment to the Master Portfolio's
and the
Fund's fundamental investment restriction
- --- --- ---
concerning the making of loans;
FOR AGAINST ABSTAIN 3d. Approve an amendment to the Master Portfolio's
and the
Fund's fundamental investment restriction
- --- --- ---
concerning purchases of securities on margin;
FOR AGAINST ABSTAIN 3e. Approve an amendment to the Master Portfolio's
and the
Fund's fundamental investment restriction
- --- --- ---
concerning concentration of investment;
FOR AGAINST ABSTAIN 3f. Approve an amendment to the Master Portfolio's
and the
Fund's fundamental investment restriction
- --- --- ---
concerning commodities and real estate;
FOR AGAINST ABSTAIN 3g. Approve an amendment to the Master Portfolio's
and the
Fund's fundamental investment restriction
- --- --- ---
regarding investments in restricted and illiquid securities;
FOR AGAINST ABSTAIN 3h. Approve of a reclassification, as non-
fundamental, of the
Master Portfolio's and the Fund's fundamental
- --- --- ---
restriction concerning the use of options;
FOR AGAINST ABSTAIN 3i. Approve an amendment to the Master Portfolio's
and the
Fund's fundamental investment restriction
- --- --- ---
concerning senior securities; and
FOR AGAINST ABSTAIN 3j. Approve an amendment to the Master Portfolio's
and the
Fund's fundamental investment restriction
- --- --- ---
regarding short sales of securities.
FOR AGAINST ABSTAIN 4. Approve an amendment to the Fund's fundamental
investment objective to conform such objective
- --- --- ---
to the investment objective and policies of the Master Portfolio.
FOR AGAINST ABSTAIN 5. To transact such other business as may properly
come before the Meeting or any adjournment
- --- --- ---
thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The attorneys
named will vote the shares represented by this proxy in accordance with the
choice made on this card. IF NO CHOICE IS INDICATED FOR ANY MATTER, THIS
PROXY WILL BE VOTED AFFIRMATIVELY ON THE MATTER PRESENTED.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND
RETAIN THE TOP PORTION.
Please sign EXACTLY as your name(s) appear below. When signing as attorney,
executor, administrator, guardian, trustee, custodian, etc., please give full
title as such. If a corporation or partnership, please sign the full name by
an authorized officer or partner. If stock is owned jointly, all parties
should sign.
SIGNATURE SIGNATURE (JOINT OWNERS) DATE
BLANCHARD GROWTH & INCOME FUND
FOR SPECIAL MEETING OF SHAREHOLDERS APRIL 29, 1996
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned shareholders of
BLANCHARD GROWTH & INCOME FUND hereby appoint Patricia F. Conner, Patricia
Godlewski, Gia Albanowski, Suzanne Land, and C. Grant Anderson, or any one of
them true and lawful attorneys, with power of substitution of each, to vote
all shares of BLANCHARD GROWTH & INCOME FUND, which the undersigned is
entitled to vote, at the Special Meeting of Shareholders to be held on April
29, 1996, at Federated Investors Tower, Pittsburgh, Pennsylvania, at 2:30
p.m., and at any adjournment thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
BLANCHARD GROWTH & INCOME FUND KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
FOR AGAINST ABSTAIN 1. Approve an interim investment advisory
agreement between
Growth & Income Porfolio (the "Master
- --- --- ---
Portfolio") and The Chase Manhattan Bank, N.A. (and the successor entity
thereto) (the "Adviser") which will take effect upon the merger of The Chase
Manhattan Corporation (the parent company of the Adviser) and Chemical
Banking Corporation. No fee increase is proposed.
FOR AGAINST ABSTAIN 2. Approve a new investment advisory agreement
between
the Master Portfolio and the Adviser, and a
- --- --- ---
sub-advisory agreement between the Adviser and Chase Asset Management, Inc.
with respect to the Master Portfolio to take effect as soon as practicable
after approval by shareholders. No fee increase is proposed.
3. Vote on proposals to approve of changes to fundamental investment
restrictions of the Master Portfolio and of the Fund. The lettering of the
boxes match the lettering of the Proposals.
FOR AGAINST ABSTAIN 3a. Approve an amendment to the Master Portfolio's
and the
Fund's fundamental investment restriction
- --- --- ---
concerning borrowing;
FOR AGAINST ABSTAIN 3b. Approve an amendment to the Master Portfolio's
and
the Fund's fundamental investment restriction
- --- --- ---
concerning investment for the purpose of exercising control;
FOR AGAINST ABSTAIN 3c. Approve an amendment to the Master Portfolio's
and
the Fund's fundamental investment restriction
- --- --- ---
concerning the making of loans;
FOR AGAINST ABSTAIN 3d. Approve an amendment to the Master Portfolio's
and
the Fund's fundamental investment restriction
- --- --- ---
concerning purchases of securities on margin;
FOR AGAINST ABSTAIN 3e. Approve an amendment to the Master Portfolio's
and
the Fund's fundamental investment restriction
- --- --- ---
concerning concentration of investment;
FOR AGAINST ABSTAIN 3f. Approve an amendment to the Master Portfolio's
and the
Fund's fundamental investment restriction
- --- --- ---
concerning commodities and real estate;
FOR AGAINST ABSTAIN 3g. Approve an amendment to the Master Portfolio's
and the
Fund's fundamental investment restriction
- --- --- ---
regarding investments in restricted and illiquid securities;
FOR AGAINST ABSTAIN 3h. Approve of a reclassification, as non-
fundamental, of the
Master Portfolio's and the Fund's fundamental
- --- --- ---
restriction concerning the use of options;
FOR AGAINST ABSTAIN 3i. Approve an amendment to the Master Portfolio's
and the
Fund's fundamental investment restriction
- --- --- ---
concerning senior securities; and
FOR AGAINST ABSTAIN 3j. Approve an amendment to the Master Portfolio's
and the
Fund's fundamental investment restriction
- --- --- ---
regarding short sales of securities.
FOR AGAINST ABSTAIN 4. Approve an amendment to the Fund's fundamental
investment objective to conform such objective
- --- --- ---
to the investment objective and policies of the Master Portfolio.
FOR AGAINST ABSTAIN 5. To transact such other business as may properly
come before the Meeting or any adjournment
- --- --- ---
thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The attorneys
named will vote the shares represented by this proxy in accordance with the
choice made on this card. IF NO CHOICE IS INDICATED FOR ANY MATTER, THIS
PROXY WILL BE VOTED AFFIRMATIVELY ON THE MATTER PRESENTED.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND
RETAIN THE TOP PORTION
Please sign EXACTLY as your name(s) appear below. When signing as attorney,
executor, administrator, guardian, trustee, custodian, etc., please give full
title as such. If a corporation or partnership, please sign the full name by
an authorized officer or partner. If stock is owned jointly, all parties
should sign.
SIGNATURE SIGNATURE (JOINT OWNERS) DATE