As filed via EDGAR with the Securities and Exchange Commission on October 2,
1996.
File No.
Registration No.
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. | |
Post-Effective Amendment No. | |
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. | |
-------------------------------
MUTUAL FUND SELECT GROUP
(Exact Name of Registrant as Specified in Charter)
101 Park Avenue
New York, New York 10178
--------------------------------------------------
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: (212) 492-1600
Copies to:
George Martinez, Esq. Niall L. O'Toole, Esq. Gary S. Schpero, Esq.
BISYS Fund Services, Inc. Chase Manhattan Bank Simpson Thacher & Bartlett
3435 Stelzer Road 270 Park Avenue 425 Lexington Avenue
Columbus, Ohio 43219 New York, New York 10017 New York, New York 10017
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended, the
Registrant hereby elects to register an indefinite number of shares of common
stock, $.001 par value per share, of all series of the Registrant, now existing
or hereafter created. The amount of the registration fee required by Rule 24f-2
is $500.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
MUTUAL FUND SELECT GROUP
Registration Statement on Form N-1A
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a) Under the Securities Act of 1933
VISTA(SM) SELECT BALANCED FUND
VISTA(SM) SELECT EQUITY INCOME FUND
VISTA(SM) SELECT LARGE CAP EQUITY FUND
VISTA(SM) SELECT LARGE CAP GROWTH FUND
VISTA(SM) SELECT EMERGING GROWTH FUND
VISTA(SM) SELECT SMALL CAP VALUE FUND
VISTA(SM) SELECT INTERNATIONAL EQUITY FUND
VISTA(SM) SELECT SHORT-TERM BOND FUND
VISTA(SM) SELECT INTERMEDIATE BOND FUND
VISTA(SM) SELECT BOND FUND
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
Captions apply to all Prospectuses.
1 Front Cover Page *
2(a) Expense Summary *
(b) Not Applicable *
3(a) Not Applicable *
(b) Not Applicable *
(c) Performance Information *
4(a)(b) Other Information *
Concerning the Fund;
Fund Objective; Investment
Policies
(c) Fund Objective; Investment *
Policies
(d) Not Applicable *
5(a) Management *
(b) Management *
(c)(d) Management; Other Information Concerning the Fund *
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
(e) Other Information Concerning *
the Fund; Back Cover Page
(f) Other Information Concerning *
the Fund
(g) Not Applicable *
5A Not Applicable *
6(a) Other Information Concerning *
the Fund
(b) Not Applicable *
(c) Not Applicable *
(d) Not Applicable *
(e)(f) About Your Investment; How to Purchase and Redeem *
Shares; How Distributions Are Made; Tax Information;
Other Information Concerning the Fund
(f) How Distributions are Made; *
Tax Information
(g) How Distributions are Made; *
Tax Information
(h) About Your Investment; How to *
Purchase and Redeem Shares;
Other Information Concerning the Fund
7(a) How to Purchase and Redeem Shares *
(b) How the Fund Values its Shares; *
How to Purchase and Redeem Shares
(c) Not Applicable *
(d) How to Purchase and Redeem Shares *
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
(e) Management; Other Information *
Concerning the Fund
(f) Other Information Concerning the *
Fund
8(a) How to Purchase and Redeem Shares *
(b) How to Purchase and Redeem Shares *
(c) How to Purchase and Redeem Shares *
(d) How to Purchase and Redeem Shares *
9 Not Applicable *
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part B Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
10 * Front Cover Page
11 * Front Cover Page
12 * Not Applicable
13(a)(b) Fund Objective; Investment Investment Policies
Policies and Restrictions
14(c) * Management of the Trust and
Funds
(b) * Not Applicable
(c) * Management of the Trust and
Funds
15(a) * Not Applicable
(b) * General Information
(c) * General Information
16(a) Management Management of the Trust and
Funds
(b) Management Management of the Trust and
Funds
(c) Other Information Concerning Management of the Trust and
the Fund Funds
(d) Management Management of the Trust and
Funds
(e) * Not Applicable
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part B Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
(f) How to Purchase and Redeem Shares; Management of the Trust and
Other Information Concerning the Fund Funds
(g) * Not Applicable
(h) * Management of the Trust and
Funds
Independent Accountants
(i) * Not Applicable
17 Investment Policies Investment Policies and Restrictions
18(a) Other Information Concerning the Fund; General Information
How to Purchase and Redeem Shares
(b) * Not Applicable
19(a) How to Purchase and Redeem Shares Purchases and Redemptions
(b) How the Fund Values its Shares; How to Determination of Net Asset Value
Purchase and Redeem Shares
(c) * Purchases and Redemptions
20 How Distributions are Made; Tax Information Tax Matters
21(a) * Management of the Trust and Funds
(b) * Management of the Trust and Funds
(c) * Not Applicable
22 * Performance Information
23 * Not Applicable
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
-v-
<PAGE>
Subject to Completion--Dated October 2, 1996
[VISTA LOGO]
PROSPECTUS
VISTA(SM) SELECT EQUITY FUNDS
INVESTMENT STRATEGIES:
BALANCED FUND: Total Return
EQUITY INCOME FUND: Income
LARGE CAP EQUITY FUND: Capital Growth
LARGE CAP GROWTH FUND: Capital Growth
EMERGING GROWTH FUND: Capital Growth
SMALL CAP VALUE FUND: Capital Growth
INTERNATIONAL EQUITY FUND: Total Return
_____, 1996
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Funds in their ____, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Select Service Center at 1-800-622-4273. The SAI
has been filed with the Securities and Exchange Commission and is
incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUNDS ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUNDS ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
<PAGE>
TABLE OF CONTENTS
EXPENSE SUMMARY ....................................... 4
FUND OBJECTIVES AND INVESTMENT APPROACH ............... 6
COMMON INVESTMENT POLICIES ............................ 9
MANAGEMENT ............................................ 18
HOW TO PURCHASE AND REDEEM SHARES ..................... 20
HOW THE FUNDS VALUE THEIR SHARES ...................... 21
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION ........... 21
OTHER INFORMATION CONCERNING THE FUNDS ................ 22
PERFORMANCE INFORMATION ............................... 26
2
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Funds based on estimated
expenses for the current fiscal year. The example shows the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
Vista Select
Vista Select Equity Income
Balanced Fund Fund
---- ----
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee .......................... 0.50% 0.40%
---- ----
12b-1 Fee ........................................ None None
Shareholder Servicing Fee ........................ None None
Other Expenses (after reimbursements)* ........... 0.24% 0.19%
---- ----
Total Fund Operating Expenses
(after reimbursements )* ......................... 0.74% 0.59%
---- ----
EXAMPLE
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return:
1 Year ........................................... $ 8 $ 7
--- ---
3 Years .......................................... $24 $21
--- ---
4
<PAGE>
Vista Select Vista Select Vista Select Vista Select Vista Select
Large Cap Large Cap Emerging Small Cap International
Equity Fund Growth Fund Growth Fund Value Fund Equity Fund
- ----------- ----------- ----------- ---------- -------------
0.40% 0.40% 0.65% 0.65% 1.00%
---- ---- ---- ---- ----
None None None None None
None None None None None
0.26% 0.18% 0.21% 0.18% 0.40%
---- ---- ---- ---- ----
0.66% 0.58% 0.86% 0.83% 1.40%
---- ---- ---- ---- ----
$ 7 $ 6 $ 9 $ 8 $14
--- --- ---- --- ---
$21 $19 $ 27 $26 $44
--- --- ---- --- ---
* Reflects the agreement by Chase voluntarily to reimburse certain expenses
for a period of at least one year from the date of this Prospectus. Absent
such reimbursements, Total Fund Operating Expenses for Vista Select Balanced
Fund, Vista Select Equity Income Fund, Vista Select Large Cap Equity Fund,
Vista Select Large Cap Growth Fund, Vista Select Emerging Growth Fund, Vista
Select Small Cap Value Fund and Vista Select International Equity Fund would
be 0.77%, 0.63%, 0.70%, 0.65%, 0.97%, 0.90% and 1.43%, respectively.
The table is provided to help you understand the expenses of investing in the
Funds and your share of the operating expenses that the Funds incur. The
example should not be considered a representation of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Funds.
5
<PAGE>
FUND OBJECTIVES AND
INVESTMENT APPROACH
- -------------------
VISTA SELECT BALANCED FUND
The Fund's objective is to maximize total return through long-term capital
growth and current income.
The Fund will invest in equity and debt securities. Under normal market
conditions, 35% to 70% of the Fund's total assets will be invested in equity
securities. The majority of the Fund's equity investments will be in
well-known, established companies with market capitalizations of at least
$200 million which are traded on established securities markets or
over-the-counter. The equity securities in which the Fund may invest include
common stocks, preferred stocks, securities convertible into common and
preferred stocks and warrants to purchase common stocks.
Under normal market conditions, at least 25% of the Fund's total assets will
be invested in investment grade fixed-income securities. The fixed income
securities in which the Fund may invest include non-convertible corporate
debt securities and U.S. Government obligations. Corporate debt securities in
which the Fund invests will be rated at the time of purchase in the category
Baa or higher by Moody's Investor Service, Inc. ("Moody's"), or BBB or higher
by Standard & Poor's Corporation ("S&P") or the equivalent by another
national rating organization, or, if unrated, determined by the Fund's
advisers to be of comparable quality.
The Fund's advisers may alter the relative portion of the Fund's assets
invested in equity and fixed income securities depending on their judgment as
to general market and economic conditions and trends, yields and interest
rates and changes in monetary policies. The average maturity of the Fund's
fixed income investments will vary based upon the advisers' assessment of the
relative yields available on securities of different maturities.
VISTA SELECT EQUITY INCOME FUND
The Fund's objective is to obtain an above-average rate of income consistent
with long-term capital appreciation. The Fund pursues this objective
primarily by investing in income-producing equity securities.
Under normal market conditions, the Fund will invest at least 65% of its
total assets in income-producing equity securities. The income- producing
equity securities in which the Fund invests include common stocks, preferred
stocks and convertible securities. The Fund attempts to achieve a yield which
exceeds the composite yield on the securities comprising the Standard and
Poor's 500 Stock Price Index.
It is anticipated that the major portion of the Fund's assets will be
invested in common stocks traded on a national securities exchange or on
NASDAQ. A significant portion of the Fund's assets may be invested in
convertible bonds or convertible preferred stock.
6
<PAGE>
VISTA SELECT LARGE CAP
EQUITY FUND
The Fund's objective is long-term capital growth.
Under normal market conditions, the Fund will invest at least 80% of its
total assets in equity securities and at least 65% of its total assets in
equity securities of established companies with market capitalizations in
excess of $1 billion. Such companies typically have a large number of
publicly held shares and high trading volume, resulting in a high degree of
liquidity.
The Fund's advisers intend to utilize both quantitative and fundamental
research to identify undervalued stocks with a catalyst for positive change.
The Fund's advisers will evaluate companies by assessing the strongest
sectors of the market over the economic cycle, identifying those companies
with favorable earnings prospects, and then selecting the most attractive
values. The Fund's advisers will consider industry diversification as an
important factor and will try to maintain representation in a variety of
market sectors, although sector emphasis will shift as a result of changes in
the outlook for earnings among market sectors.
VISTA SELECT LARGE CAP
GROWTH FUND
The Fund's objective is long-term capital growth.
Under normal market conditions, the Fund will invest at least 80% of its
total assets in equity securities and at least 65% of its total assets in
equity securities of established companies with market capitalizations in
excess of $1 billion. Such companies typically have a large number of
publicly held shares and high trading volume, resulting in a high degree of
liquidity.
To pursue the Fund's objective the advisers will utilize a disciplined
valuation process which seeks to identify high-quality, large and
medium-sized companies which have strong balance sheets, above- average
historical earnings growth, favorable earnings prospects and leadership
positions in their industries.
VISTA SELECT EMERGING
GROWTH FUND
The Fund's objective is long-term capital growth.
Under normal market conditions, the Fund will invest at least 80% of its
total assets in equity securities and at least 65% of its total assets in
equity securities of small to mid cap companies. The Fund's advisers classify
small to mid cap companies as those with market capitalizations of $300
million to $4 billion at the time of purchase by the Fund.
To pursue the Fund's objective the advisers will seek to invest in companies
with consistent, accelerating earnings and attractive stock valuations. The
Fund's advisers utilize a disciplined process involving quantitative
pre-screening techniques, fundamental company research, and a proprietary
company earnings model which identifies the potential for positive earnings.
Current income is an incidental consideration to the Fund's objective. You
should be aware that an investment in small to mid cap companies may be more
volatile
7
<PAGE>
than investments in companies with greater capitalization, as described under
"Risk Factors" below.
VISTA SELECT SMALL CAP
VALUE FUND
The Fund's objective is long-term capital growth.
Under normal market conditions, the Fund will invest at least 80% of its
total assets in equity securities and at least 65% of its total assets in
equity securities of smaller companies (i.e., those with market
capitalizations of $750 million or less at the time of purchase). The Fund's
advisers intend to utilize fundamental research to identify undervalued
stocks of financially sound companies with seasoned products and/or services,
competitive advantages and market leadership positions. The Fund's advisers
will consider industry diversification as an important factor and will try to
maintain representation in a variety of market sectors, although sector
emphasis will shift as a result of changes in the outlook for earnings among
market sectors. Current income is an incidental consideration to the Fund's
objective. You should be aware that an investment in smaller companies may be
more volatile than investments in companies with greater capitalization, as
described under "Risk Factors" below.
VISTA SELECT INTERNATIONAL
EQUITY FUND
The Fund's objective is total return from long-term capital growth and
income.
The Fund will invest principally in a broad portfolio of marketable equity
securities of established foreign companies organized in countries other than
the U.S. and foreign subsidiaries of U.S. companies participating in foreign
economies. Under normal market conditions, the Fund will invest at least 65%
of its total assets in equity securities, including common stocks, preferred
stocks, securities convertible into common stocks, and warrants to purchase
common stocks.
The Fund's advisers seek to identify those countries and industries where
economic and political factors, including currency movements, are likely to
produce above-average growth rates. The Fund's advisers attempt to identify
those companies in such countries and industries that are best positioned and
managed to take advantage of these economic and political factors. The Fund
will seek to diversify investments broadly among issuers in various countries
and normally to have represented in the Fund business activities of not less
than three different countries other than the U.S. The Fund may invest a
substantial portion of its assets in one or more of such countries.
The Fund intends to invest in companies based in (or governments located in)
the Far East (including Japan, Hong Kong, Singapore and Malaysia), Western
Europe (including United Kingdom, Germany, Netherlands, France, Switzerland,
Italy and Spain), Scandinavia, Australia, Canada and such other areas and
countries as the Fund's advisers may determine from time to time. Because the
Fund invests a large portion of its assets in countries
8
<PAGE>
comprising the Morgan Stanley Capital International Europe, Australia and the
Far East Index, which is heavily weighted towards companies based in Japan
and the United Kingdom, a substantial portion of the Funds' assets may be
invested in companies based in Japan, the United Kingdom and/or other
countries represented in the Index. However, investments may be made from
time to time in companies in, or governments of, developing countries as well
as developed countries.
The Fund's advisers will allocate the Fund's investments among securities
denominated in the U.S. dollar and currencies of foreign countries. The
advisers may adjust the Fund's exposure to each currency based on their
perception of the most favorable markets and issuers. The percentage of the
Fund's assets invested in securities of a particular country or denominated
in a particular currency will vary in accordance with the advisers'
assessment of the relative yield and appreciation potential of such
securities and the current and anticipated relationship of a country's
currency to the U.S. dollar. Fundamental economic strength, earnings growth,
quality of management, industry growth, credit quality and interest rate
trends are some of the principal factors which may be considered by the
Fund's advisers in determining whether to increase or decrease the emphasis
placed upon a particular type of security, industry sector, country or
currency within the Fund's investment portfolio. Securities purchased by the
Fund may be denominated in a currency other than that of the country in which
the issuer is domiciled.
Primary emphasis will be placed on equity securities and securities with
equity features. However, the Fund may invest in any type of investment grade
debt security including, but not limited to, other convertible securities,
bonds, notes and other debt securities of foreign governmental and private
issuers, and various derivative securities.
The Fund will neither invest more than 25% of its net assets in debt
securities denominated in a single currency other than the U.S. dollar, nor
invest more than 25% of its net assets in debt securities issued by a single
foreign government or supranational organization.
The Fund may invest in securities of companies of various sizes, including
smaller companies whose securities may be more volatile and less liquid than
securities of larger companies. With respect to certain countries in which
capital markets are either less developed or not easily accessed, investments
by the Fund may be made through investment in closed-end investment companies
that in turn are authorized to invest in the securities of such countries.
You should be aware that an investment in foreign securities involves a
higher degree of risk than investments in U.S. securities, as described under
"Risk Factors" below.
COMMON INVESTMENT
POLICIES
- --------
Each Fund may invest any portion of its assets not invested as described
above in high quality money market
9
<PAGE>
instruments and repurchase agreements. For temporary defensive purposes, a
Fund may invest without limitation in these instruments and, in the case of
Equity Income Fund, in investment grade debt securities. At times when a
Fund's advisers deem it advisable to limit the Fund's exposure to the equity
markets, each Fund may invest up to 20% of its total assets in U.S.
Government obligations (exclusive of any investments in money market
instruments). To the extent that a Fund departs from its investment policies
during temporary defensive periods, its investment objective may not be
achieved.
In lieu of investing directly, each Fund is authorized to seek to achieve its
objective by investing all of its investable assets in an investment company
having substantially the same investment objective and policies as such Fund.
It is anticipated that certain Funds will adopt this approach during 1997.
See "Unique Characteristics of Master/Feeder Fund Structure."
The Emerging Growth Fund and International Equity Fund are classified as
"non-diversified" funds under federal securities laws. These Funds' assets
may be more concentrated in the securities of any single issuer or group of
issuers than if the Funds were diversified. The other Funds are classified as
a "diversified" funds under federal securities law.
No Fund is intended to be a complete investment program, and there is no
assurance that any Fund will achieve its investment objective.
OTHER INVESTMENT PRACTICES
Each Fund may also engage in the following investment practices, when
consistent with its overall objective and policies. These practices, and
certain associated risks, are more fully described in the SAI.
FOREIGN SECURITIES. Each Fund other than the International Equity Fund may
invest up to 20% of its total assets in foreign securities, including
Depositary Receipts. The International Equity Fund may invest without
limitation in foreign securities. Since foreign securities are normally
denominated and traded in foreign currencies, the values of a Fund's foreign
investments may be affected favorably or unfavorably by currency exchange
rates and exchange control regulations. There may be less information
publicly available about foreign companies than U.S. companies, and they are
not generally subject to accounting, auditing and financial reporting
standards and practices comparable to those in the U.S. The securities of
foreign companies may be less liquid and more volatile than the securities of
comparable U.S. companies. Foreign settlement procedures and trade
regulations may involve certain risks (such as delay in payment or delivery
of securities or in the recovery of a Fund's assets held abroad) and
expenses. It is possible that nationalization or expropriation of assets,
imposition of currency exchange controls, confiscatory taxation, political or
financial instability and diplomatic developments could affect the value of a
Fund's investments in certain
10
<PAGE>
foreign countries. Foreign laws may restrict the ability to invest in certain
countries or issuers and special tax considerations will apply to foreign
securities. The risks can increase if a Fund invests in securities of issuers
in emerging markets.
Each Fund may invest its assets in securities of foreign issuers in the form
of American Depositary Receipts, European Depositary Receipts, Global
Depositary Receipts or other similar securities representing securities of
foreign issuers (collectively, "Depositary Receipts"). Each Fund treats
Depositary Receipts as interests in the underlying securities for purposes of
its investment policies. Each Fund will limit its investment in Depositary
Receipts not sponsored by the issuer of the underlying securities to no more
than 5% of the value of its net assets (at the time of investment).
SUPRANATIONAL AND ECU OBLIGATIONS. The Balanced Fund, Equity Income Fund and
International Equity Fund may invest in securities issued by supranational
organizations, which include organizations such as The World Bank, the
European Community, the European Coal and Steel Community and the Asian
Development Bank. Each such Fund may also invest in securities denominated in
the ECU, which is a "basket" consisting of specified amounts of the
currencies of certain member states of the European Community. These
securities are typically issued by European governments and supranational
organizations.
U.S. GOVERNMENT OBLIGATIONS. U.S. Government obligations include obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
MONEY MARKET INSTRUMENTS. Each Fund may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. Each Fund may
enter into agreements to purchase and resell securities at an agreed-upon price
and time. Each Fund also has the ability to lend portfolio securities in an
amount equal to not more than 30% of its total assets to generate additional
income. These transactions must be fully collateralized at all times. Each Fund
may purchase securities for delivery at a future date, which may increase its
overall investment exposure and involves a risk of loss if the value of the
securities declines prior to the settlement date. These transactions involve
some risk to a Fund if the other party should default on its obligation and the
Fund is delayed or prevented from recovering the collateral or completing the
transaction.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. Each Fund may borrow money from
banks for temporary or
11
<PAGE>
short-term purposes, but will not borrow for leveraging purposes. Each Fund
may also sell and simultaneously commit to repurchase a portfolio security at
an agreed-upon price and time, to avoid selling securities during unfavorable
market conditions in order to meet redemptions. Whenever a Fund enters into a
reverse repurchase agreement, it will establish a segregated account in which
it will maintain liquid assets on a daily basis in an amount at least equal
to the repurchase price (including accrued interest). Each Fund would be
required to pay interest on amounts obtained through reverse repurchase
agreements, which are considered borrowings under federal securities laws.
STAND-BY COMMITMENTS. The Funds may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities in their portfolios. In these transactions, a Fund would acquire the
right to sell a security at an agreed upon price within a specified period prior
to its maturity date. These transactions involve some risk to the Fund if the
other party should default on its obligation and the Fund is delayed or
prevented from recovering the collateral or completing the transaction.
Acquisition of puts will have the effect of increasing the cost of the
securities subject to the put and thereby reducing the yields otherwise
available from such securities.
CONVERTIBLE SECURITIES. Each Fund may invest in convertible securities, which
are securities generally offering fixed interest or dividend yields which may be
converted either at a stated price or stated rate for common or preferred stock.
Each of the Large Cap Equity Fund, Large Cap Growth Fund, Emerging Growth Fund
and Small Cap Value Fund limit its investments in convertible securities to 20%
of its net assets. Although to a lesser extent than with fixed-income securities
generally, the market value of convertible securities tends to decline as
interest rates increase, and increase as interest rates decline. Because of the
conversion feature, the market value of convertible securities also tends to
vary with fluctuations in the market value of the underlying common or preferred
stock.
OTHER INVESTMENT COMPANIES. Each Fund may invest up to 10% of its total
assets in shares of other investment companies when consistent with its
investment objectives and policies, subject to applicable regulatory
limitations. Additional fees may be charged by other investment companies.
STRIPPED OBLIGATIONS. The Balanced Fund may invest without limitation in
stripped obligations, which are separately traded principal and interest
components of an underlying obligation. Each other Fund may invest up to 20%
of its total assets in stripped obligations backed by the full faith and
credit of the U.S. Government, including instruments known as "STRIPS". The
value of stripped obligations tends to fluctuate more in response to changes
in interest rates than the value of ordinary
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interest-paying debt securities with similar maturities. The risk is greater
when the period to maturity is longer.
INVESTMENT GRADE DEBT SECURITIES. The Balanced Fund, Equity Income Fund and
International Equity Fund may invest in investment grade debt securities.
Investment grade debt securities are securities rated in the category BBB or
higher by Standard & Poor's Corporation ("S&P"), or Baa or higher by Moody's
Investors Services, Inc. ("Moody's") or the equivalent by another national
rating organization, or, if unrated, determined by the advisers to be of
comparable quality.
INDEXED INVESTMENTS. The International Equity Fund may invest in instruments
which are indexed to certain specific foreign currency exchange rates. The
terms of such instruments may provide that their principal amounts or just
their coupon interest rates are adjusted upwards or downwards (but not below
zero) at maturity or on established coupon payment dates to reflect changes
in the exchange rate between two or more currencies while the obligation is
outstanding. Such indexed investments entail the risk of loss of principal
and/or interest payments from currency movements in addition to principal
risk, but offer the potential for realizing gains as a result of changes in
foreign currency exchange rates.
REAL ESTATE INVESTMENT TRUSTS. Each Fund's equity securities may include
shares of real estate investment trusts ("REITs"). REITs are pooled
investment vehicles which invest primarily in income-producing real estate
("equity trusts") or real estate related loans or interests ("mortgage
trusts"). The value of equity trusts will depend upon the value of the
underlying properties, and the value of mortgage trusts will be sensitive to
the value of the underlying loans or interests. See "Mortgage-Backed
Securities."
DERIVATIVES AND RELATED INSTRUMENTS. Each Fund may invest its assets in
derivative and related instruments to hedge various market risks or to
increase the Fund's income or gain. Some of these instruments will be subject
to asset segregation requirements to cover the Fund's obligations. Each Fund
may (i) purchase, write and exercise call and put options on securities and
securities indexes (including using options in combination with securities,
other options or derivative instruments); (ii) enter into swaps, futures
contracts and options on futures contracts; (iii) employ forward currency
contracts; and (iv) purchase and sell structured products, which are
instruments designed to restructure or reflect the characteristics of certain
other investments. In addition, the Balanced Fund and International Equity
Fund may employ forward interest rate contracts.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which a
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The
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ability of a Fund to successfully utilize these instruments may depend in
part upon the ability of the Fund's advisers to forecast these factors
correctly. Inaccurate forecasts could expose a Fund to a risk of loss. There
can be no guarantee that there will be a correlation between price movements
in a hedging instrument and in the portfolio assets being hedged. The Funds
are not required to use any hedging strategies. Hedging strategies, while
reducing risk of loss, can also reduce the opportunity for gain. Derivatives
transactions not involving hedging may have speculative characteristics,
involve leverage and result in more risk to a Fund than hedging strategies
using the same instruments. There can be no assurance that a liquid market
will exist at a time when a Fund seeks to close out a derivatives position.
Activities of large traders in the futures and securities markets involving
arbitrage, "program trading," and other investment strategies may cause price
distortions in derivatives markets. In certain instances, particularly those
involving over-the-counter transactions or forward contracts, there is a
greater potential that a counterparty or broker may default. In the event of
a default, a Fund may experience a loss. For additional information
concerning derivatives, related instruments and the associated risks, see the
SAI.
PORTFOLIO TURNOVER. The frequency of a Fund's portfolio transactions will
vary from year to year. A Fund's investment policies may lead to frequent
changes in investments, particularly in periods of rapidly changing market
conditions. High portfolio turnover rates would generally result in higher
transaction costs, including brokerage commissions or dealer mark-ups, and
would make it more difficult for a Fund to qualify as a registered investment
company under federal tax law. See "How Distributions are Made; Tax
Information" and "Other Information Concerning the Fund--Certain Regulatory
Matters."
ADDITIONAL INVESTMENT POLICIES OF THE BALANCED FUND
ZERO COUPON SECURITIES AND PAYMENT-IN-KIND OBLIGATIONS. The Fund may invest in
zero coupon securities issued by governmental and private issuers. Zero coupon
securities are debt securities that do not pay regular interest payments, and
instead are sold at substantial discounts from their value at maturity.
Payment-in-kind obligations are obligations on which the interest is payable in
additional securities rather than cash. The value of these instruments tends to
fluctuate more in response to changes in interest rates than the value of
ordinary interest-paying debt securities with similar maturities. The risk is
greater when the period to maturity is longer.
INVERSE FLOATERS AND INTEREST RATE CAPS. The Fund may invest in inverse floaters
and in securities with interest rate caps. Inverse floaters are instruments
whose interest rates bear an inverse relationship to the interest rate on
another security or the value of an index, and their price may be considerably
more volatile than a
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fixed-rate security. Interest rate caps are financial instruments under which
payments occur if an interest rate index exceeds a certain predetermined
interest rate level, known as the cap rate, which is tied to a specific
index. These financial products will be more volatile in price than
securities which do not include such a structure.
MORTGAGE-RELATED SECURITIES. The Fund may invest in mortgage-related securities.
Mortgage pass-through securities are securities representing interests in
"pools" of mortgages in which payments of both interest and principal on the
securities are made monthly, in effect "passing through" monthly payments made
by the individual borrowers on the residential mortgage loans which underlie the
securities. Early repayment of principal on mortgage pass-through securities
held by the Fund (due to prepayments of principal on the underlying mortgage
loans) may result in a lower rate of return when the Fund reinvests such
principal. In addition, as with callable fixed-income securities generally, if
the Fund purchased the securities at a premium, sustained early repayment would
limit the value of the premium. Like other fixed-income securities, when
interest rates rise the value of a mortgage-related security generally will
decline; however, when interest rates decline, the value of mortgage-related
securities with prepayment features may not increase as much as other
fixed-income, fixed-maturity securities which have no prepayment or call
features.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by
the U.S. Government, or by agencies or instrumentalities of the U.S.
Government (which guarantees are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations).
Certain mortgage pass-through securities created by nongovernmental issuers
may be supported by various forms of insurance or guarantees, while other
such securities may be backed only by the underlying mortgage collateral.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of
both mortgage-backed bonds and mortgage pass-through securities. Similar to
a bond, interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole residential or commercial
mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by the U.S. Government or its
agencies or instrumentalities. CMOs are structured into multiple classes,
with each class having a different expected average life and/or stated
maturity. Monthly payments of principal, including prepayments, are allocated
to different classes in accordance with the terms of the instruments, and
changes in prepayment rates or assumptions may significantly affect the
expected average life and value of a particular class.
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The Fund expects that governmental, government-related or private entities
may create other mortgage-related securities in addition to those described
above. As new types of mortgage-related securities are developed and offered
to investors, the Fund will consider making investments in such securities.
DOLLAR ROLLS. The Fund may enter into mortgage "dollar rolls" in which the
Fund sells mortgage- backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type,
coupon and maturity) securities on a specified future date. These
transactions involve some risk to the Fund if the other party should default
on its obligation and the Fund is delayed or prevented from completing the
transaction.
ASSET-BACKED SECURITIES. The Fund may invest in asset-backed securities,
which represent a participation in, or are secured by and payable from, a
stream of payments generated by particular assets, most often a pool of
assets similar to one another, such as motor vehicle receivables or credit
card receivables.
LIMITING INVESTMENT RISKS
Specific investment restrictions help the Funds limit investment risks for
their shareholders. These restrictions prohibit each Fund from: (a) investing
more than 15% of its net assets in illiquid securities (which include
securities restricted as to resale unless they are determined to be readily
marketable in accordance with procedures established by the Board of
Trustees) or (b) investing more than 25% of its total assets in any one
industry. These restrictions also prohibit each of the Balanced Fund, Equity
Income Fund, Large Cap Equity Fund and Large Cap Growth Fund from (c) with
respect to 75% of its total assets, holding more than 10% of the voting
securities of any issuer or investing more than 5% of its total assets in the
securities of any one issuer (other than U.S. Government obligations). A
complete description of these and other investment policies is included in
the SAI. Except for restrictions (b) and (c) above and investment policies
designated as fundamental in the SAI, the Funds' investment policies
(including their investment objectives) are not fundamental. The Trustees may
change any non-fundamental investment policy without shareholder approval.
However, in the event of a change in any such Fund's investment objectives,
shareholders will be given at least 30 days' prior written notice.
RISK FACTORS
No Fund constitutes a complete investment program, and an investment in
certain funds may not be appropriate for all investors. The net asset value
of the shares of each Fund can be expected to fluctuate based on the value of
the securities in the Fund's portfolio. Each Fund is subject to the general
risks and considerations associated with equity investing, as well as the
risks discussed herein. The Balanced Fund is also subject to the general
risks and considerations associated with fixed income investing.
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The performance of the Balanced Fund, Equity Income Fund, Emerging Growth
Fund and International Equity Fund, to the extent they invest in convertible
and/or fixed income securities, as applicable, will depend in part on
interest rate changes. As interest rates increase, the value of the fixed
income securities held by such Funds tends to decrease. To the extent a Fund
invests in fixed income securities with longer maturities, the volatility of
the Fund in response to changes in interest rates can be expected to be
greater than if such Funds had invested in comparable securities with shorter
maturities. The performance of these Funds will also depend on the quality of
these investments. While securities issued or guaranteed by the U.S.
Government generally are of high quality, the other fixed income securities
in which such Funds may invest, while of investment-grade quality, may be of
lesser credit quality. Securities rated in the category Baa by Moody's or BBB
by S&P lack certain investment characteristics and may have speculative
characteristics. In addition, with respect to each Fund's investments in
convertible securities, the market value of convertible securities tends to
vary with fluctuations in the market value of the underlying common or
preferred stock.
To the extent permitted by its investment objective and policies, a Fund may
invest in the securities of small or mid cap companies. The securities of
small to mid cap companies often trade less frequently and in more limited
volume, and may be subject to more abrupt or erratic price movements, than
securities of larger, more established companies. Such companies may have
limited product lines, markets or financial resources, or may depend on a
limited management group.
The Emerging Growth Fund and Small Cap Value Fund are aggressively managed
and, therefore, the value of the shares of these Funds is subject to greater
fluctuation and an investment in these Funds' shares involves a higher degree
of risk than an investment in a conservative equity fund or a growth fund
investing entirely in proven growth equities.
As the International Equity Fund invests primarily in equity securities of
companies outside the U.S., an investment in the Fund's shares involves a
higher degree of risk than an investment in a U.S. equity fund. See "Common
Investment Policies-Other Investment Practices-Foreign Securities" above.
Investments in securities of issuers based in developing countries entails
certain additional risks, including greater risks of expropriation,
confiscatory taxation, nationalization, and less social, political and
economic stability. The small size of markets for securities of issuers based
in such countries and the low or non-existent volume of trading may result
in a lack of liquidity and in price volatility. Certain national policies may
restrict the investment opportunities, including restrictions on investing in
issuers or industries deemed sensitive to relevant national interests. There
may be an absence of developed legal structures governing private or foreign
investment and private property.
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Because the Emerging Growth Fund and International Equity Fund are
"non-diversified," the value of such Funds' shares is more susceptible to
developments affecting issuers in which such Funds invest.
For a discussion of certain other risks associated with each Fund's
additional investment activities, see "Common Investment Policies--Other
Investment Practices" above.
MANAGEMENT
- ----------
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase") acts as investment adviser to the Funds
pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Funds subject to the oversight of the Board
of Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan
Corporation, a bank holding company. Chase and its predecessors have over 100
years of money management experience. For its investment advisory services to
the Funds, Chase is entitled to receive an annual fee computed daily and paid
monthly based at an annual rate equal to 0.50%, 0.40%, 0.40%, 0.40%, 0.65%,
0.65% and 1.00% of the average daily net assets of the Balanced Fund, Equity
Income Fund, Large Cap Equity Fund, Large Cap Growth Fund, Emerging Growth
Fund, Small Cap Value Fund and International Equity Fund, respectively. Chase
is located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
sub-investment adviser to each of the Funds other than International Equity
Fund pursuant to a Sub-Investment Advisory Agreement between CAM and Chase.
CAM is a wholly-owned operating subsidiary of Chase. CAM makes investment
decisions for the Funds on a day-to-day basis. For these services, CAM is
entitled to receive a fee, payable by Chase from its advisory fee, at an
annual rate equal to 0.25%, 0.20%, 0.20%, 0.20%, 0.30% and 0.30% of the
average daily net assets of the Balanced Fund, Equity Income Fund, Large Cap
Equity Fund, Large Cap Growth Fund, Emerging Growth Fund and Small Cap Value
Fund, respectively. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
Chase Asset Management (London) Limited ("CAM London"), a registered
investment adviser, is the sub-investment adviser to the International Equity
Fund pursuant to a Sub-Investment Advisory Agreement between CAM London and
Chase. CAM London is a wholly-owned operating subsidiary of Chase. CAM London
makes investment decisions for the Fund on a day-to-day basis. For these
services, CAM London is entitled to receive a fee, payable by Chase from its
advisory fee, at an annual rate equal to 0.50% of the average daily net
assets of the Fund. CAM
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London was recently formed for the purpose of providing discretionary
investment advisory services to institutional clients and to consolidate
Chase's investment management function. The same individuals who serve as
portfolio managers for Chase with respect to the International Equity Fund
also serve as portfolio managers for CAM London. CAM London is located at
Colvile House, 32 Curzon Street, London W1Y 8AL.
PORTFOLIO MANAGERS. Greg Adams and Stephen Humphrey, Vice Presidents of
Chase, and Susan Huang, Vice President and Director of Fixed Income
Management of Chase, are responsible for the management of the Balanced
Fund's portfolio. Mr. Adams joined Chase in 1987 and has been responsible for
overseeing the proprietary computer model program used in the U.S. equity
selection process. Mr. Adams manages a number of mutual funds at Chase. Mr.
Humphrey has been employed at Chase (including its predecessors) since 1976
and has managed pooled investment funds and private accounts at Chemical Bank
since 1985. Ms. Huang is responsible for developing the allocation and risk
management strategy for U.S. fixed income portfolios, and managing the
institutional U.S. fixed income assets under management. Prior to joining
Chase in June of 1995, Ms. Huang was Director of the Insurance Asset
Management Group at Hyperion Capital Management, Inc. Prior to joining
Hyperion, Ms. Huang was a senior portfolio manager with CS First Boston
Investment Management Inc.
Tony Gleason, Vice President of Chase, and Mr. Humphrey are responsible for
the management of the Equity Income Fund's portfolio. Mr. Gleason joined
Chase in 1995 with 10 years of investment experience. Prior to joining Chase,
Mr. Gleason spent nine years as a Vice President and Portfolio Manager with
Prudential Equity Management.
Mr. Adams is responsible for the day-to-day management of the Large Cap
Equity Fund's portfolio.
A committee composed of Chase investment professionals is responsible for the
management of the Large Cap Growth Fund's portfolio.
Mehda Vora, a Senior Portfolio Manager at Chase, is responsible for the
day-to-day management for the Emerging Growth Fund's portfolio. Ms. Vora
joined Chase in 1996. Prior to joining Chase, Ms. Vora was a Senior Vice
President and Associate Portfolio Manager at Trust Company of the West,
specializing in small to mid cap issues.
Richard Rolle and Judith Havard, Vice Presidents of Chase, are responsible
for the day-to-day management of the Small Cap Value Fund. Mr. Rolle has been
with Chase (including its predecessors) since 1982, serving as trust
portfolio manager, securities analyst and fund manager. Prior to joining
Chase in 1994, Ms. Havard was an associate director at the Massachusetts
Mutual Life Insurance Company, where she served as portfolio manager of the
company's convertible stock and bond portfolio.
Michael Browne and David Webb, Vice Presidents of Chase, are responsible for
the day-to-day management for the International
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Equity Fund. Mr. Browne is responsible for investment management and equity
research in for European equities. Mr. Browne joined Chase in 1994. Prior to
joining Chase, Mr. Browne was Assistant Director of European equity fund
management at BZW Investment Management in London. Mr. Webb is responsible
for investment management and equity research in the Asia region. Mr. Webb
joined Chase in 1992. Prior to joining Chase, Mr. Webb was with Hambros Bank
Limited where he was responsible for the management of the Hambros Equus
Pacific Japan and Hambros Japan Trust.
HOW TO PURCHASE AND REDEEM SHARES
HOW TO PURCHASE SHARES
Shares of the Funds may be purchased through Chase and other selected
financial institutions that have entered into an agreement with the Funds
(such institutions are referred to herein as "Financial Institutions") on
each business day during which Chase and the New York Stock Exchange are open
("Fund Business Day"). Qualified investors are defined as institutions,
trusts, partnerships, corporations, qualified and other retirement plans and
fiduciary accounts. The Funds reserve the right to reject any purchase order
or cease offering shares for purchase at any time.
Shares are sold at their public offering price, which is their next
determined net asset value. Orders received by the account administrator at
your Financial Institution in proper form prior to the New York Stock
Exchange closing time (or such earlier cut-off time as may be established by
your Financial Institution) are confirmed at that day's net asset value,
provided the order is received by the relevant Fund prior to its close of
business. Financial Institutions are responsible for forwarding orders for
the purchase of shares on a timely basis. Shares will be maintained in book
entry form and share certificates will not be issued. Management reserves the
right to refuse to sell shares of any Fund to any institution.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening an account.
MINIMUM INVESTMENTS
Financial Institutions are required to maintain at least $5,000,000 in an
omnibus account with one or more of the Vista Select Funds.
HOW TO REDEEM SHARES
You may redeem all or any portion of the shares in your account at any time
at the net asset value next determined after a redemption request in proper
form is furnished by you to the account administrator at your Financial
Institution and transmitted to and received by the relevant Fund.
In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied. The price you will
receive is the next net asset value calculated after the relevant Fund
receives your request in proper form. In order to receive that day's net
asset value, the Fund must receive your request before the close
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of regular trading on the New York Stock Exchange. Your Financial Institution
will be responsible for furnishing all necessary documentation to the Funds,
and may charge you for its services.
A Fund generally sends your Financial Institution payment for your shares in
federal funds on the business day after your request is received in proper
form. Under unusual circumstances, the Funds may suspend redemptions, or
postpone payment for more than seven days, as permitted by federal securities
law.
If a Financial Institution is authorized to act upon redemption and transfer
instructions received by telephone from an investor and the Financial
Institution fails to employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, it may be liable for any
losses due to unauthorized or fraudulent instructions. An investor agrees,
however, that to the extent permitted by applicable law, neither the Funds
nor the investor's Financial Institution nor any of their agents will be
liable for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. For information,
consult your account administrator.
HOW THE FUNDS
VALUE THEIR SHARES
- ------------------
The net asset value of each Fund's shares is determined once daily based upon
prices determined as of the close of regular trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern time, however, options are priced at
4:15 p.m., Eastern time), on each Fund Business Day, by dividing the net
assets of a Fund by the total number of outstanding shares of that Fund.
Values of assets held by the Funds are determined on the basis of their
market or other fair value, as described in the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Balanced Fund, Equity Income Fund, Large Cap Equity Fund and Large Cap
Growth Fund distribute any net investment income other than short term capital
gains at least monthly. The Emerging Growth Fund, Small Cap Value Fund and
International Equity Fund distribute any net investment income other than short
term capital gains at least quarterly. Each Fund distributes any net realized
short term and long term capital gains at least annually. Distributions from
capital gains are made after applying any available capital loss carryovers.
You can choose from three distribution options if made available by your
Financial Institution: (1) reinvest all distributions in additional Fund
shares; (2) receive distributions from net investment income in cash while
reinvesting capital gains distributions in additional shares; or (3) receive
all distributions in cash. You can change your distribution option by
notifying your account administrator in writing. If your Financial
Institution does not offer distribution reinvestment or if you do not select
an option when you open your account, all distributions will be made in cash.
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Each Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for
it to be relieved of federal taxes on income and gains it distributes to
shareholders. Each Fund intends to distribute substantially all of its
ordinary income and capital gain net income on a current basis. If a Fund
does not qualify as a regulated investment company for any taxable year or
does not make such distributions, such Fund will be subject to tax on all of
its income and gains.
All Fund distributions will be taxable to you as ordinary income, except that
any distributions of net long-term capital gains will be taxable as such,
regardless of how long you have held the shares. Distributions will be
taxable as described above whether received in cash or in shares through the
reinvestment of distributions.
A portion of the ordinary income dividends paid by each Fund other than the
International Equity Fund may qualify for the 70% dividends- received
deduction for corporate shareholders.
Investment income received by the International Equity Fund from sources
within foreign countries may be subject to foreign taxes withheld at the
source. Since more than 50% of the value of the total assets of the Fund at
the close of the Fund's taxable year is anticipated to be stock or securities
of foreign corporations, the Fund may elect to "pass through" to its
shareholders the amount of foreign taxes paid by the Fund.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date
of such purchase reflected the amount of such distribution.
Early in each calendar year the Funds will notify your Financial Institution
of the amount and tax status of distributions paid for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Funds. You should consult your tax adviser to determine the
precise effect of an investment in the Funds on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION
CONCERNING THE FUNDS
- --------------------
Your Financial Institution may offer additional services to its customers,
including specialized procedures for the purchase and redemption of Fund
shares, such as pre-authorized or systematic purchase and redemption plans.
Each Financial Institution may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect
to such services. Certain Financial Institutions may (although they are not
required by the Trust to do so) credit to the accounts of their customers
from whom they are
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already receiving other fees an amount not exceeding such other fees.
ADMINISTRATOR
Chase acts as the Funds' administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of each
Fund's average daily net assets.
SUB-ADMINISTRATOR
AND DISTRIBUTOR
Vista Fund Distributors, Inc. ("VFD") acts as the Funds' sub-administrator
and distributor. VFD is a subsidiary of The BISYS Group, Inc. and is
unaffiliated with Chase. For the sub-administrative services it performs, VFD
is entitled to receive a fee from each Fund at an annual rate equal to 0.05%
of the Fund's average daily net assets. VFD has agreed to use a portion of
this fee to pay for certain expenses incurred in connection with organizing
new series of the Trust and certain other ongoing expenses of the Trust. VFD
is located at 101 Park Avenue, New York, New York 10178.
CUSTODIAN
Chase acts as custodian for the Funds and receives compensation under an
agreement with the Trust. Chase may sub-contract for the provision of certain
services to be provided under the custody agreement. Fund securities and cash
may be held by sub-custodian banks if such arrangements are reviewed and
approved by the Trustees.
EXPENSES
Each Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees;
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and
expenses of the Funds' custodian for all services to the Funds, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net
income on, shares of the Funds. In addition, each Fund may allocate transfer
agency and certain other expenses by class if additional classes of such Fund
are established in the future. Service providers to a Fund may, from time to
time, voluntarily waive all or a portion of any fees to which they are
entitled.
ORGANIZATION AND
DESCRIPTION OF SHARES
The Funds are portfolios of Mutual Fund Select Group, an open-end management
investment company organized as a Massachusetts business trust in 1996 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or
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class represents an equal proportionate interest in that series or class with
each other share of that series or class. The shares of each series or class
participate equally in the earnings, dividends and assets of the particular
series or class. Shares have no pre-emptive or conversion rights. Shares when
issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each whole share held, and each
fractional share shall be entitled to a proportionate fractional vote, except
that Trust shares held in the treasury of the Trust shall not be voted.
Each Fund currently issues a single class of shares but may, in the future,
offer other classes of shares. The categories of investors that are eligible
to purchase shares may differ for each class of Fund shares. In addition,
other classes of Fund shares may be subject to differences in sales charge
arrangements, ongoing distribution and service fee levels, and levels of
certain other expenses, which will affect the relative performance of the
different classes. Investors may call 1-800-622-4273 to obtain additional
information about other classes of shares of the Funds that may be offered in
the future. Any person entitled to receive compensation for selling or
servicing shares of a Fund may receive different levels of compensation with
respect to one class of shares over another. Shares of each class of a Fund
would generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required
to hold annual meetings of shareholders but will hold special meetings of
shareholders of all series or classes when in the judgment of the Trustees it
is necessary or desirable to submit matters for a shareholder vote. The
Trustees will promptly call a meeting of shareholders to remove a trustee(s)
when requested to do so in writing by record holders of not less than 10% of
all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
UNIQUE CHARACTERISTICS OF
MASTER/FEEDER FUND STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, each Fund is permitted to invest all of its investable
assets in a separate registered investment company (a "Portfolio"). In that
event, a shareholder's interest in a Fund's underlying investment securities
would be indirect. In addition to selling a beneficial interest to a Fund, a
Portfolio could also sell beneficial interests to other mutual funds or
institutional investors. Such investors would invest in such Portfolio on the
same terms and
24
<PAGE>
conditions and would pay a proportionate share of such Portfolio's expenses.
However, other investors in a Portfolio would not be required to sell their
shares at the same public offering price as a Fund, and might bear different
levels of ongoing expenses than the Fund. Shareholders of the Funds should be
aware that these differences may result in differences in returns experienced
in the different funds that invest in a Portfolio. Such differences in return
are also present in other mutual fund structures.
Smaller funds investing in a Portfolio could be materially affected by the
actions of larger funds investing the Portfolio. For example, if a large fund
were to withdraw from a Portfolio, the remaining funds might experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio could become less diverse, resulting in increased
portfolio risk. However, this possibility also exists for traditionally
structured funds which have large or institutional investors. Funds with a
greater pro rata ownership in a Portfolio could have effective voting control
of such Portfolio. Under this master/feeder investment approach, whenever the
Trust was requested to vote on matters pertaining to a Portfolio, the Trust
would hold a meeting of shareholders of the relevant Fund and would cast all
of its votes in the same proportion as did such Fund's shareholders. Shares
of a Fund for which no voting instructions had been received would be voted
in the same proportion as those shares for which voting instructions had been
received. Certain changes in a Portfolio's objective, policies or
restrictions might require the Trust to withdraw the relevant Fund's interest
in such Portfolio. Any such withdrawal could result in a distribution in kind
of portfolio securities (as opposed to a cash distribution from such
Portfolio). A Fund could incur brokerage fees or other transaction costs in
converting such securities to cash. In addition, a distribution in kind could
result in a less diversified portfolio of investments or adversely affect the
liquidity of the relevant Fund.
State securities regulations generally would not permit the same individuals
who are disinterested Trustees of the Trust to be Trustees of a Portfolio
absent the adoption of procedures by a majority of the disinterested Trustees
of the Trust reasonably appropriate to deal with potential conflicts of
interest up to and including creating a separate Board of Trustees. A Fund
will not adopt a master/feeder structure under which the disinterested
Trustees of the Trust are Trustees of the Portfolio unless the Trustees of
the Trust, including a majority of the disinterested Trustees, adopt
procedures they believed to be reasonably appropriate to deal with any
conflict of interest up to and including creating a separate Board of
Trustees.
If a Fund invests all of its investable assets in a Portfolio, investors in
such Fund will be able to obtain information about whether investment in the
Portfolio might be available through other funds by contacting the Fund at
1-800-622-4273.
25
<PAGE>
CERTAIN REGULATORY MATTERS
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting
as investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws.
If future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial banking
relationships with the issuers of securities purchased on behalf of any of
the Funds, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations
and municipal obligations to, and purchase them from, other investment
companies sponsored by the Funds' distributor or affiliates of the
distributor. Chase will not invest any Fund assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which Chase or
an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be purchased by any Fund. Chase has informed the Funds
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
Chase, including the division that performs services for the Trust as
custodian, or in the possession of any affiliate of Chase. Shareholders of
the Funds should be aware that, subject to applicable legal or regulatory
restrictions, Chase and its affiliates may exchange among themselves certain
information about the shareholder and his account. Transactions with
affiliated broker-dealers will only be executed on an agency basis in
accordance with applicable federal regulations.
26
<PAGE>
PERFORMANCE
INFORMATION
- -----------
Each Fund's investment performance may from time to time be included in
advertisements about the Fund. "Yield" is calculated by dividing the
annualized net investment income per share during a recent 30-day period by
the maximum public offering price per share on the last day of that period.
"Total return" for the one-, five- and ten-year periods (or for the life of a
class, if shorter) through the most recent calendar quarter represents the
average annual compounded rate of return on an investment of $1,000 in a Fund
invested at the public offering price. Total return may also be presented for
other periods.
All performance data is based on each Fund's past investment results and does
not predict future performance. The performance data for each Fund prior to
January 1, 1997 includes the historical performance of a predecessor common
trust fund, adjusted to reflect historical expenses at the levels indicated
(absent reimbursements) in the Expense Summary for that Fund. These predecessor
common trust funds were not registered under the Investment Company Act of 1940
(the "1940 Act") and thus were not subject to certain investment restrictions
that are imposed by the 1940 Act. If the common trust funds had been registered
under the 1940 Act, their performance might have been adversely affected.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of a Fund's portfolio and a Fund's operating
expenses. Investment performance also often reflects the risks associated with a
Fund's investment objectives and policies.
These factors should be considered when comparing a Fund's investment results
to those of other mutual funds and other investment vehicles. Quotation of
investment performance for any period when a fee waiver or expense limitation
was in effect will be greater than if the waiver or limitation had not been
in effect. Each Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
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<PAGE>
TRANSFER AGENT AND DIVIDEND PAYING AGENT
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
[Vista Logo]
101 Park Avenue
New York, NY 10178
INLC-1-796CX
<PAGE>
Subject to Completion--Dated October 2, 1996
[VISTA LOGO]
PROSPECTUS
VISTA SELECT FIXED INCOME FUNDS
SHORT-TERM BOND FUND
INTERMEDIATE BOND FUND
BOND FUND
INVESTMENT STRATEGY: Income
_____, 1996
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Funds in their ____, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Select Service Center at 1-800-622-4273. The SAI
has been filed with the Securities and Exchange Commission and is
incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUNDS ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUNDS ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
<PAGE>
TABLE OF CONTENTS
EXPENSE SUMMARY .......................................... 3
FUND OBJECTIVES AND INVESTMENT APPROACH .................. 4
COMMON INVESTMENT POLICIES ............................... 4
MANAGEMENT ............................................... 10
HOW TO PURCHASE AND REDEEM SHARES ........................ 11
HOW THE FUNDS VALUE THEIR SHARES ......................... 13
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION .............. 13
OTHER INFORMATION CONCERNING THE FUNDS ................... 14
PERFORMANCE INFORMATION .................................. 18
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Funds based on estimated
expenses for the current fiscal year. The example shows the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Vista Select Vista Select
Short-Term Bond Intermediate Bond Vista Select
Fund Fund Bond Fund
-------------- ---------------- -------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee 0.25% 0.30% 0.30%
---- ---- ----
12b-1 Fee None None None
Shareholder Servicing Fee None None None
Other Expenses (after reimbursements)* 0.30% 0.21% 0.19%
---- ---- ----
Total Fund Operating Expenses (after
reimbursements)* 0.55% 0.51% 0.49%
---- ---- ----
EXAMPLE
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return:
1 Year $6 $5 $5
-- -- --
3 Years 18 16 16
-- -- --
</TABLE>
* Reflects the agreement by Chase voluntarily to reimburse certain expenses
for a period of at least one year after the date of this Prospectus. Absent
such reimbursements, Total Fund Operating Expenses for Vista Select
Short-Term Bond Fund, Vista Select Intermediate Bond Fund and Vista Select
Bond Fund would be 0.91%, 0.59% and 0.49%, respectively.
The table is provided to help you understand the expenses of investing in the
Funds and your share of the operating expenses that the Funds incur. The
example should not be considered a representation of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Funds.
3
<PAGE>
FUND OBJECTIVES AND
INVESTMENT APPROACH
- -------------------
VISTA SELECT SHORT-TERM
BOND FUND
The Fund's objective is a high level of current income, consistent with
preservation of capital.
The Fund will invest at least 65% of its total assets in bonds which have a
maturity of three years or less, and the dollar weighted average maturity of
its portfolio will not exceed three years. The Fund normally will invest
substantially all of its assets in investment-grade fixed-income securities
of all types. Investment-grade fixed-income securities are securities rated
in the category BBB or higher by Standard & Poor's Corporation ("S&P"), or
Baa or higher by Moody's Investors Services, Inc. ("Moody's") or the
equivalent by another national rating organization, and unrated securities
determined by the Funds' advisers to be of comparable quality.
VISTA SELECT
INTERMEDIATE BOND FUND
The Fund's objective is as high a level of income as is consistent with
reasonable risk.
The Fund invests primarily in a broad range of investment-grade corporate
bonds as well as other fixed-income securities. Under normal market
conditions, the Fund invests at least 65% of its total assets in debt
obligations of the U.S. Government, its agencies and instrumentalities, and
investment- grade fixed income securities (as described above).
The dollar weighted average maturity of the Fund's portfolio will not exceed
ten years. For temporary defensive purposes, the Fund may invest without
limitation in high quality money market instruments and repurchase
agreements, which generally carry lower yields than longer-term securities.
VISTA SELECT BOND FUND
The Fund's objective is as high a level of income as is consistent with
reasonable risk.
The Fund invests primarily in a broad range of investment-grade corporate
bonds as well as other fixed-income securities. Under normal market
conditions, the Fund invests at least 65% of its total assets in debt
obligations of the U.S. Government, its agencies and instrumentalities, and
investment- grade fixed income securities (as described above).
There is no restriction on the maturity of the Fund's portfolio or any
individual portfolio security. For temporary defensive purposes, the Fund may
invest without limitation in high quality money market instruments and
repurchase agreements, which generally carry lower yields than longer-term
securities.
COMMON INVESTMENT
POLICIES
- --------
In making investment decisions for the Funds, each Fund's advisers consider
many factors in addition to current yield, including preservation of capital,
maturity and yield to maturity. Each Fund's advisers will adjust such Fund's
investments in particular securities or types of securities based upon their
appraisal of changing economic conditions and trends.
4
<PAGE>
Each Fund's advisers may sell one security and purchase another security of
comparable quality and maturity in order to take advantage of what they
believe to be short- term differentials in market values or yield
disparities.
Fixed-income securities in each Fund's portfolio may include, in any
proportion, bonds, notes, mortgage-backed securities, asset- backed
securities, government and government agency and instrumentality obligations,
zero coupon securities, convertible securities and money market instruments,
as discussed below.
Each Fund's advisers may adjust the average maturity of the Fund's portfolio
based upon their assessment of the relative yields available on securities of
different maturities and their expectations of future changes in interest
rates. Each Fund is classified as a "diversified" fund under federal
securities laws.
In lieu of investing directly, each Fund is authorized to seek to achieve its
objective by investing all of its investable assets in an investment company
having substantially the same investment objective and policies as such Fund.
It is anticipated that certain Funds will adopt this approach during 1997.
See "Unique Characteristics of Master/Feeder Fund Structure."
The maturity of securities with put features will be measured based on the
next put date, and the maturity of mortgage-and asset-backed securities will
be measured based upon their weighted average lives.
No Fund is intended to be a complete investment program, and there is no
assurance that any Fund will achieve its investment objective.
OTHER INVESTMENT PRACTICES
Each Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
MONEY MARKET INSTRUMENTS. Each Fund may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. Each Fund may
enter into agreements to purchase and resell securities at an agreed-upon price
and time. Each Fund also has the ability to lend portfolio securities in an
amount equal to not more than 30% of its total assets to generate additional
income. These transactions must be fully collateralized at all times. Each Fund
may purchase securities for delivery at a future date, which may increase its
overall investment exposure and involves a risk of loss if the value of the
securities declines prior to the settlement date. These transactions involve
some risk to a Fund if the other party should default on its obligation and the
Fund is delayed or prevented from recovering the collateral or completing the
transaction.
5
<PAGE>
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. Each Fund may borrow money from
banks for temporary or short-term purposes, but will not borrow for leveraging
purposes. Each Fund may also sell and simultaneously commit to repurchase a
portfolio security at an agreed-upon price and time, to avoid selling securities
during unfavorable market conditions in order to meet redemptions. Whenever a
Fund enters into a reverse repurchase agreement, it will establish a segregated
account in which it will maintain liquid assets on a daily basis in an amount at
least equal to the repurchase price (including accrued interest). A Fund would
be required to pay interest on amounts obtained through reverse repurchase
agreements, which are considered borrowings under federal securities laws.
STAND-BY COMMITMENTS. Each Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities in its portfolio. In these transactions, a Fund would acquire the
right to sell a security at an agreed upon price within a specified period prior
to its maturity date. These transactions involve some risk to a Fund if the
other party should default on its obligation and the Fund is delayed or
prevented from recovering the collateral or completing the transaction.
Acquisition of puts will have the effect of increasing the cost of the
securities subject to the put and thereby reducing the yields otherwise
available from such securities.
ZERO COUPON SECURITIES, PAYMENT-IN-KIND OBLIGATIONS AND STRIPPED OBLIGATIONS.
Each Fund may invest in zero coupon securities issued by governmental and
private issuers. Zero coupon securities are debt securities that do not pay
regular interest payments, and instead are sold at substantial discounts from
their value at maturity. Payment-in- kind obligations are obligations on which
the interest is payable in additional securities rather than cash. Each Fund may
also invest in stripped obligations, which are separately traded principal and
interest components of an underlying obligation. The value of these instruments
tends to fluctuate more in response to changes in interest rates than the value
of ordinary interest-paying debt securities with similar maturities. The risk is
greater when the period to maturity is longer.
FLOATING AND VARIABLE RATE SECURITIES; PARTICIPATION CERTIFICATES. Each Fund may
invest in floating rate securities, whose interest rates adjust automatically
whenever a specified interest rate changes, and variable rate securities, whose
interest rates are periodically adjusted. Certain of these instruments permit
the holder to demand payment of principal and accrued interest upon a specified
number of days' notice from either the issuer or a third party. The securities
in which a Fund may invest include participation certificates and certificates
of indebtedness or safekeeping. Participation certificates are pro rata
interests in securities held by others; certificates of indebtedness or
safekeeping are
6
<PAGE>
documentary receipts for such original securities held in custody by others.
As a result of the floating or variable rate nature of these investments, a
Fund's yield may decline and it may forego the opportunity for capital
appreciation during periods when interest rates decline; however, during
periods when interest rates increase, the Fund's yield may increase and it
may have reduced risk of capital depreciation. Demand features on certain
floating or variable rate securities may obligate a Fund to pay a "tender
fee" to a third party. Demand features provided by foreign banks involve
certain risks associated with foreign investments.
INVERSE FLOATERS AND INTEREST RATE CAPS. Each Fund may invest in inverse
floaters and in securities with interest rate caps. Inverse floaters are
instruments whose interest rates bear an inverse relationship to the interest
rate on another security or the value of an index, and their price may be
considerably more volatile than a fixed-rate security. Interest rate caps are
financial instruments under which payments occur if an interest rate index
exceeds a certain predetermined interest rate level, known as the cap rate,
which is tied to a specific index. These financial products will be more
volatile in price than municipal securities which do not include such a
structure.
MORTGAGE-RELATED SECURITIES. Each Fund may invest in mortgage-related
securities. Mortgage pass-through securities are securities representing
interests in "pools" of mortgages in which payments of both interest and
principal on the securities are made monthly, in effect "passing through"
monthly payments made by the individual borrowers on the residential mortgage
loans which underlie the securities. Early repayment of principal on mortgage
pass-through securities held by a Fund (due to prepayments of principal on the
underlying mortgage loans) may result in a lower rate of return when the Fund
reinvests such principal. In addition, as with callable fixed- income securities
generally, if a Fund purchased the securities at a premium, sustained early
repayment would limit the value of the premium. Like other fixed- income
securities, when interest rates rise the value of a mortgage- related security
generally will decline; however, when interest rates decline, the value of
mortgage- related securities with prepayment features may not increase as much
as other fixed-maturity, fixed-income securities which have no prepayment or
call features.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by
the U.S. Government, or by agencies or instrumentalities of the U.S.
Government (which guarantees are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations).
Certain mortgage pass-through securities created by nongovernmental issuers
may be supported by various forms of insurance or guarantees, while other
such securities may be backed only by the underlying mortgage collateral.
7
<PAGE>
Each Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of
both mortgage-backed bonds and mortgage pass- through securities. Similar to
a bond, interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole residential or commercial
mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by the U.S. Government or its
agencies or instrumentalities. CMOs are structured into multiple classes,
with each class having a different expected average life and/or stated
maturity. Monthly payments of principal, including prepayments, are allocated
to different classes in accordance with the terms of the instruments, and
changes in prepayment rates or assumptions may significantly affect the
expected average life and value of a particular class.
The Funds expect that governmental, government-related or private entities
may create other mortgage-related securities in addition to those described
above. As new types of mortgage-related securities are developed and offered
to investors, the Funds will consider making investments in such securities.
DOLLAR ROLLS. The Funds may enter into mortgage "dollar rolls" in which a
Fund sells mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type,
coupon and maturity) securities on a specified future date. These
transactions involve some risk to a Fund if the other party should default on
its obligation and the Fund is delayed or prevented from completing the
transaction.
ASSET-BACKED SECURITIES. Each Fund may invest in asset-backed securities, which
represent a participation in, or are secured by and payable from, a stream of
payments generated by particular assets, most often a pool of assets similar to
one another, such as motor vehicle receivables or credit card receivables.
OTHER INVESTMENT COMPANIES. Each Fund may invest up to 10% of its total assets
in shares of other investment companies when consistent with its investment
objective and policies, subject to applicable regulatory limitations. Additional
fees may be charged by other investment companies.
DERIVATIVES AND RELATED INSTRUMENTS. Each Fund may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover the Fund's obligations. Each Fund may (i)
purchase, write and exercise call and put options on securities and securities
indexes (including using options in combination with securities, other options
or derivative instruments); (ii) enter into swaps, futures contracts and options
on futures contracts; (iii) employ forward interest rate contracts; (iv)
purchase and sell mortgage-backed and asset-backed securities; and (v)
8
<PAGE>
purchase and sell structured products, which are instruments designed to
restructure or reflect the characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which a
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of a Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers
to forecast these factors correctly. Inaccurate forecasts could expose a Fund
to a risk of loss. There can be no guarantee that there will be a correlation
between price movements in a hedging instrument and in the portfolio assets
being hedged. The Funds are not required to use any hedging strategies.
Hedging strategies, while reducing risk of loss, can also reduce the
opportunity for gain. Derivatives transactions not involving hedging may have
speculative characteristics, involve leverage and result in more risk to a
Fund than hedging strategies using the same instruments. There can be no
assurance that a liquid market will exist at a time when a Fund seeks to
close out a derivatives position. Activities of large traders in the futures
and securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in derivatives markets. In
certain instances, particularly those involving over-the-counter transactions
or forward contracts, there is a greater potential that a counterparty or
broker may default. In the event of a default, the Fund may experience a
loss. For additional information concerning derivatives, related instruments
and the associated risks, see the SAI.
PORTFOLIO TURNOVER. The frequency of a Fund's portfolio transactions will
vary from year to year. Each Fund's investment policies may lead to frequent
changes in investments, particularly in periods of rapidly changing market
conditions. High portfolio turnover rates would generally result in higher
transaction costs, including dealer mark-ups, and would make it more
difficult for a Fund to qualify as a registered investment company under
federal tax law. See "How Distributions are Made; Tax Information" and "Other
Information Concerning the Fund Certain Regulatory Matters."
LIMITING INVESTMENT RISKS
Specific investment restrictions help the Funds limit investment risks for
their shareholders. These restrictions prohibit each Fund from: (a) with
respect to 75% of its total assets, holding more than 10% of the voting
securities of any issuer or investing more than 5% of its total assets in the
securities of any one issuer (other than U.S. Government obligations), (b)
investing more than 15% of its net assets in illiquid securities (which
include securities restricted as to resale unless they are determined to be
readily marketable in accordance with procedures established by the Board of
Trustees); or (c) investing
9
<PAGE>
more than 25% of its total assets in any one industry (this would apply to
municipal obligations backed only by the assets and revenues of
nongovernmental users, but excludes obligations of states, cities,
municipalities or other public authorities). A complete description of these
and other investment policies is included in the SAI. Except for restriction
(c) above and investment policies designated as fundamental above or in the
SAI, the Funds' investment policies (including their investment objectives)
are not fundamental. The Trustees may change any non-fundamental investment
policy without shareholder approval. However, in the event of a change in one
of such Funds' investment objective, shareholders must be given at least 30
days' prior written notice.
RISK FACTORS
No Fund constitutes a balanced or complete investment program, and the net
asset value of the shares of each Fund can be expected to fluctuate based on
the value of the securities in such Fund's portfolio. Each Fund is subject to
the general risks and considerations associated with the types of investments
it may make, as described above, as well as the risks discussed herein.
The performance of each Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to decrease. This effect will be more pronounced with respect to
investments by a Fund in mortgage-related securities, the value of which are
more sensitive to interest rate changes. Although the Short-Term Bond Fund
invests at least 65% of its assets in bonds which have a maturity of less
than three years and the Intermediate Bond Fund has a maximum weighted
average maturity of ten years, both Funds are permitted to invest in
securities with longer maturities. In addition, there is no restriction on
the maturity of Bond Fund's portfolio or any individual portfolio security.
To the extent that a Fund invests in securities with longer maturities, the
volatility of the Fund in response to changes in interest rates can be
expected to be greater than if the Fund had invested in comparable securities
with shorter maturities. The performance of each Fund will also depend on the
quality of its investments. While U.S. Government securities generally are of
high quality, government securities that are not backed by the full faith and
credit of the U.S. Treasury may be affected by changes in the
creditworthiness of the agency that issued them and the non-U.S. Government
securities held by a Fund, while of investment-grade quality, may be of
lesser credit quality. Securities rated in the category Baa by Moody's or BBB
by S&P lack certain investment characteristics and may have speculative
characteristics.
For a discussion of certain other risks associated with the Funds' additional
investment activities, see "Common Investment Policies - Other Investment
Practices" above.
MANAGEMENT
- ----------
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase") acts as investment adviser
10
<PAGE>
to the Funds pursuant to an Investment Advisory Agreement and has overall
responsibility for investment decisions of the Funds, subject to the
oversight of the Board of Trustees. Chase is a wholly-owned subsidiary of
The Chase Manhattan Corporation, a bank holding company. Chase and its
predecessors have over 100 years of money management experience. For its
investment advisory services to the Funds, Chase is entitled to receive an
annual fee computed daily and paid monthly at an annual rate equal to 0.25%,
0.30%, and 0.30% of the average daily net assets of the Short-Term Bond Fund,
Intermediate Bond Fund and Bond Fund, respectively. Chase is located at 270
Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
sub-investment adviser to the Fund pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary
of Chase. CAM makes investment decisions for the Fund on a day-to-day basis.
For these services, CAM is entitled to receive a fee, payable by Chase from
its advisory fee, at an annual rate equal to 0.10%, 0.15%, and 0.15% of the
average daily net assets of the Short-Term Bond Fund, Intermediate Bond Fund
and Bond Fund, respectively. CAM was recently formed for the purpose of
providing discretionary investment advisory services to institutional clients
and to consolidate Chase's investment management function. The same
individuals who serve as portfolio managers for Chase also serve as portfolio
managers for CAM. CAM is located at 1211 Avenue of the Americas, New York,
New York 10036.
PORTFOLIO MANAGER. Susan Huang, Vice President and Director of Fixed Income
Management of Chase, is responsible for the day-to-day management of the
Funds. Ms. Huang is responsible for developing the allocation and risk
management strategy for U.S fixed income portfolios, and managing the
institutional U.S. fixed income assets under management. Prior to joining
Chase in June of 1995, Ms. Huang was Director of the Insurance Asset
Management Group at Hyperion Capital Management Inc. Prior to joining
Hyperion, Ms. Huang was a senior portfolio manager with CS First Boston
Investment Management Inc. Prior to joining CS First Boston in 1992, Ms.
Huang spent 14 years at The Equitable, where she worked in the pension
consulting group and the U.S. Fixed Income Management Group.
HOW TO PURCHASE AND REDEEM SHARES
- -------------------
HOW TO PURCHASE SHARES
Shares of the Funds may be purchased through Chase and other selected
financial institutions that have entered into an agreement with the Funds
(such institutions are referred to herein as "Financial Institutions") on
each business day during which Chase and the New York Stock Exchange are open
("Fund Business Day"). Qualified investors are defined as institutions,
trusts, partnerships, corporations, qualified and other retirement plans and
fiduciary accounts. The Funds
11
<PAGE>
reserve the right to reject any purchase order or cease offering shares for
purchase at any time.
Shares are sold at their public offering price, which is their next
determined net asset value. Orders received by the account administrator at
your Financial Institution in proper form prior to the New York Stock
Exchange closing time (or such earlier cut-off time as may be established by
your Financial Institution) are confirmed at that day's net asset value,
provided the order is received by the relevant Fund prior to its close of
business. Financial Institutions are responsible for forwarding orders for
the purchase of shares on a timely basis. Shares will be maintained in book
entry form and share certificates will not be issued. Management reserves the
right to refuse to sell shares of any Fund to any institution.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening an account.
MINIMUM INVESTMENTS
Financial Institutions are required to maintain at least $5,000,000 in an
omnibus account with one or more of the Vista Select Funds.
HOW TO REDEEM SHARES
You may redeem all or any portion of the shares in your account at any time
at the net asset value next determined after a redemption request in proper
form is furnished by you to the account administrator at your Financial
Institution and transmitted to and received by the relevant Fund.
In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied. The price you will
receive is the next net asset value calculated after the relevant Fund
receives your request in proper form. In order to receive that day's net
asset value, the Fund must receive your request before the close of regular
trading on the New York Stock Exchange. Your Financial Institution will be
responsible for furnishing all necessary documentation to the Funds, and may
charge you for its services.
A Fund generally sends your Financial Institution payment for your shares in
federal funds on the business day after your request is received in proper
form. Under unusual circumstances, the Funds may suspend redemptions, or
postpone payment for more than seven days, as permitted by federal securities
law.
If a Financial Institution is authorized to act upon redemption and transfer
instructions received by telephone from an investor and the Financial
Institution fails to employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, it may be liable for any
losses due to unauthorized or fraudulent instructions. An investor agrees,
however, that to the extent permitted by applicable law, neither the Funds
nor the investor's Financial Institution nor any of their agents will be
liable for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. For information,
consult your account administrator.
12
<PAGE>
HOW THE FUNDS
VALUE THEIR SHARES
- ------------------
The net asset value of each Fund's shares is determined once daily based upon
prices determined as of the close of regular trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern time, however, options are priced at
4:15 p.m., Eastern time), on each Fund Business Day, by dividing the net
assets of a Fund by the total number of outstanding shares of that Fund.
Values of assets held by the Funds are determined on the basis of their
market or other fair value, as described in the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Funds declare dividends daily and distribute any net investment income other
than short term capital gains at least monthly and any net realized short term
and long term capital gains at least annually. Distributions from capital gains
are made after applying any available capital loss carryovers.
You can choose from three distribution options if made available by your
Financial Institution: (1) reinvest all distributions in additional Fund
shares; (2) receive distributions from net investment income in cash while
reinvesting capital gains distributions in additional shares; or (3) receive
all distributions in cash. You can change your distribution option by
notifying your account administrator in writing. If your Financial
Institution does not offer distribution reinvestment or if you do not select
an option when you open your account, all distributions will be made in cash.
Each Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for
it to be relieved of federal taxes on income and gains it distributes to
shareholders. Each Fund intends to distribute substantially all of its
ordinary income and capital gain net income on a current basis. If a Fund
does not qualify as a regulated investment company for any taxable year or
does not make such distributions, such Fund will be subject to tax on all of
its income and gains.
All Fund distributions will be taxable to you as ordinary income, except that
any distributions of net long-term capital gains will be taxable as such,
regardless of how long you have held the shares. Distributions will be
taxable as described above whether received in cash or in shares through the
reinvestment of distributions.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next capital gains distribution date. Those
investors purchasing shares just prior to a distribution will be taxed on the
entire amount of the distribution received, even though the net asset value
per share on the date of such purchase reflected the amount of such
distribution.
Early in each calendar year the Funds will notify your Financial Institution
of the amount and tax status of distributions paid for the preceding year.
The foregoing is a summary of certain federal income tax
13
<PAGE>
consequences of investing in the Funds. You should consult your tax adviser
to determine the precise effect of an investment in the Funds on your
particular tax situation (including possible liability for state and local
taxes and, for foreign shareholders, U.S. withholding taxes).
OTHER INFORMATION
CONCERNING THE FUNDS
- --------------------
Your Financial Institution may offer additional services to its customers,
including specialized procedures for the purchase and redemption of Fund shares,
such as pre-authorized or systematic purchase and redemption plans. Each
Financial Institution may establish its own terms and conditions, including
limitations on the amounts of subsequent transactions, with respect to such
services. Certain Financial Institutions may (although they are not required by
the Trust to do so) credit to the accounts of their customers from whom they are
already receiving other fees an amount not exceeding such other fees.
ADMINISTRATOR
Chase acts as the Funds' administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of each
Fund's average daily net assets.
SUB-ADMINISTRATOR
AND DISTRIBUTOR
Vista Fund Distributors, Inc. ("VFD") acts as the Funds' sub-administrator
and distributor. VFD is a subsidiary of The BISYS Group, Inc. and is
unaffiliated with Chase. For the sub-administrative services it performs, VFD
is entitled to receive a fee from each Fund at an annual rate equal to 0.05%
of the Fund's average daily net assets. VFD has agreed to use a portion of
this fee to pay for certain expenses incurred in connection with organizing
new series of the Trust and certain other ongoing expenses of the Trust. VFD
is located at 101 Park Avenue, New York, New York 10178.
CUSTODIAN
Chase acts as custodian for the Funds and receives compensation under an
agreement with the Trust. Chase may sub-contract for the provision of certain
services to be provided under the custody agreement. Fund securities and cash
may be held by sub-custodian banks if such arrangements are reviewed and
approved by the Trustees.
EXPENSES
Each Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees;
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and
expenses of the Funds' custodian for all services to the Funds, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of
14
<PAGE>
independent accountants, of legal counsel and of any transfer agent,
registrar or dividend disbursing agent of the Trust; insurance premiums; and
expenses of calculating the net asset value of, and the net income on, shares
of the Funds. In addition, each Fund may allocate transfer agency and certain
other expenses by class if additional classes of such Fund are established in
the future. Service providers to a Fund may, from time to time, voluntarily
waive all or a portion of any fees to which they are entitled.
ORGANIZATION AND
DESCRIPTION OF SHARES
The Funds are portfolios of Mutual Fund Select Group, an open-end management
investment company organized as a Massachusetts business trust in 1996 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no pre-emptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted.
Each Fund currently issues a single class of shares but may, in the future,
offer other classes of shares. The categories of investors that are eligible
to purchase shares may differ for each class of Fund shares. In addition,
other classes of Fund shares may be subject to differences in sales charge
arrangements, ongoing distribution and service fee levels, and levels of
certain other expenses, which will affect the relative performance of the
different classes. Investors may call 1-800-622-4273 to obtain additional
information about other classes of shares of the Funds that may be offered in
the future. Any person entitled to receive compensation for selling or
servicing shares of a Fund may receive different levels of compensation with
respect to one class of shares over another. Shares of each class of a Fund
would generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required
to hold annual meetings of shareholders but will hold special meetings of
shareholders of all series or classes when in the judgment of the Trustees it
is necessary or desirable to submit matters for a shareholder vote. The
Trustees will promptly call a meeting of shareholders to remove a trustee(s)
when requested to do so in writing by record holders of not less than 10% of
all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners
<PAGE>
for its obligations. However, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
both inadequate insurance existed and the Trust itself was unable to meet its
obligations.
UNIQUE CHARACTERISTICS OF
MASTER/FEEDER FUND STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, each Fund is permitted to invest all of its investable
assets in a separate registered investment company (a "Portfolio"). In that
event, a shareholder's interest in a Fund's underlying investment securities
would be indirect. In addition to selling a beneficial interest to a Fund, a
Portfolio could also sell beneficial interests to other mutual funds or
institutional investors. Such investors would invest in such Portfolio on the
same terms and conditions and would pay a proportionate share of such
Portfolio's expenses. However, other investors in a Portfolio would not be
required to sell their shares at the same public offering price as a Fund,
and might bear different levels of ongoing expenses than the Fund.
Shareholders of the Funds should be aware that these differences may result
in differences in returns experienced in the different funds that invest in a
Portfolio. Such differences in return are also present in other mutual fund
structures.
Smaller funds investing in a Portfolio could be materially affected by the
actions of larger funds investing the Portfolio. For example, if a large fund
were to withdraw from a Portfolio, the remaining funds might experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio could become less diverse, resulting in increased
portfolio risk. However, this possibility also exists for traditionally
structured funds which have large or institutional investors. Funds with a
greater pro rata ownership in a Portfolio could have effective voting control
of such Portfolio. Under this master/feeder investment approach, whenever the
Trust was requested to vote on matters pertaining to a Portfolio, the Trust
would hold a meeting of shareholders of the relevant Fund and would cast all
of its votes in the same proportion as did such Fund's shareholders. Shares
of a Fund for which no voting instructions had been received would be voted
in the same proportion as those shares for which voting instructions had been
received. Certain changes in a Portfolio's objective, policies or
restrictions might require the Trust to withdraw the relevant Fund's interest
in such Portfolio. Any such withdrawal could result in a distribution in kind
of portfolio securities (as opposed to a cash distribution from such
Portfolio). A Fund could incur brokerage fees or other transaction costs in
converting such securities to cash. In addition, a distribution in kind could
result in a less diversified portfolio of investments or adversely affect the
liquidity of the relevant Fund.
State securities regulations generally would not permit the same individuals
who are disinterested Trustees of the Trust to be Trustees of a Portfolio
absent the adoption of
16
<PAGE>
procedures by a majority of the disinterested Trustees of the Trust
reasonably appropriate to deal with potential conflicts of interest up to and
including creating a separate Board of Trustees. A Fund will not adopt a
master/feeder structure under which the disinterested Trustees of the Trust
are Trustees of the Portfolio unless the Trustees of the Trust, including a
majority of the disinterested Trustees, adopt procedures they believed to be
reasonably appropriate to deal with any conflict of interest up to and
including creating a separate Board of Trustees.
If a Fund invests all of its investable assets in a Portfolio, investors in
such Fund will be able to obtain information about whether investment in the
Portfolio might be available through other funds by contacting the Fund at
1-800-622-4273.
CERTAIN REGULATORY MATTERS
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting
as investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws.
If future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial banking
relationships with the issuers of securities purchased on behalf of any of
the Funds, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations
and municipal obligations to, and purchase them from, other investment
companies sponsored by the Funds' distributor or affiliates of the
distributor. Chase will not invest any Fund assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which Chase or
an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government
17
<PAGE>
obligations, municipal obligations or commercial paper available to be
purchased by any Fund. Chase has informed the Funds 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 Chase, including the
division that performs services for the Trust as custodian, or in the
possession of any affiliate of Chase. Shareholders of the Funds should be
aware that, subject to applicable legal or regulatory restrictions, Chase and
its affiliates may exchange among themselves certain information about the
shareholder and his account. Transactions with affiliated broker-dealers will
only be executed on an agency basis in accordance with applicable federal
regulations.
PERFORMANCE
INFORMATION
- -----------
Each Fund's investment performance may from time to time be included in
advertisements about the Fund. "Yield" is calculated by dividing the
annualized net investment income per share during a recent 30-day period by
the maximum public offering price per share on the last day of that period.
"Total return" for the one-, five- and ten-year periods (or for the life of a
class, if shorter) through the most recent calendar quarter represents the
average annual compounded rate of return on an investment of $1,000 in a Fund
invested at the public offering price. Total return may also be presented for
other periods.
All performance data is based on each Fund's past investment results and does
not predict future performance. The performance data for each Fund prior to
January 1, 1997 includes the historical performance of a predecessor common
trust fund, adjusted to reflect historical expenses at the levels indicated
(absent reimbursements) in the Expense Summary for that Fund. These predecessor
common trust funds were not registered under the Investment Company Act of 1940
(the "1940 Act") and thus were not subject to certain investment restrictions
that are imposed by the 1940 Act. If the common trust funds had been registered
under the 1940 Act, their performance might have been adversely affected.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of a Fund's portfolio and a Fund's operating
expenses. Investment performance also often reflects the risks associated with a
Fund's investment objectives and policies.
These factors should be considered when comparing a Fund's investment results
to those of other mutual funds and other investment vehicles. Quotation of
investment performance for any period when a fee waiver or expense limitation
was in effect will be greater than if the waiver or limitation had not been
in effect. Each Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
18
<PAGE>
TRANSFER AGENT AND DIVIDEND PAYING AGENT
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
[Vista Logo]
101 Park Avenue
New York, NY 10178
INLC-1-796CX
<PAGE>
Subject to Completion--Dated October 2, 1996
STATEMENT OF
ADDITIONAL INFORMATION
, 1996
VISTA(SM) SELECT BALANCED FUND
VISTA(SM) SELECT BOND FUND
VISTA(SM) SELECT EMERGING GROWTH FUND
VISTA(SM) SELECT EQUITY INCOME FUND
VISTA(SM) SELECT INTERMEDIATE BOND FUND
VISTA(SM) SELECT INTERNATIONAL EQUITY FUND
VISTA(SM) SELECT LARGE CAP GROWTH FUND
VISTA(SM) SELECT LARGE CAP EQUITY FUND
VISTA(SM) SELECT SHORT-TERM BOND FUND
VISTA(SM) SELECT SMALL CAP VALUE FUND
101 Park Avenue, New York, New York 10178
This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the
Prospectuses offering shares of the Funds. This Statement of Additional
Information should be read in conjunction with the Prospectuses offering
shares of Vista Select Bond Fund, Vista Select Intermediate Bond Fund and
Vista Select Short-Term Bond Fund (collectively the "Income Funds"), and
Vista Select Balanced Fund, Vista Select Emerging Growth Fund, Vista Select
Equity Income Fund, Vista Select International Equity Fund, Vista Select
Large Cap Growth Fund, Vista Select Large Cap Equity Fund and Vista Select
Small Cap Value Fund (collectively the "Equity Funds"). Any references to a
"Prospectus" in this Statement of Additional Information is a reference to
one or more of the foregoing Prospectuses, as the context requires. Copies of
each Prospectus may be obtained by an investor without charge by contacting
Vista Fund Distributors, Inc.("VFD"), the Funds' distributor (the
"Distributor"), at the above-listed address.
This Statement of Additional Information is NOT a prospectus and is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective prospectus.
For more information about the Funds, simply call or write the Vista Select
Service Center at:
1-800-34-VISTA
Vista Select Service Center
P.O. Box 419392
Kansas City, MO 64141
MFG-SAI
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This statement of additional information shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be any sale
of these securities in any state in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws of
any such state.
<PAGE>
Table of Contents Page
- --------------------------------------------------------------------------------
The Funds ................................................................. 3
Investment Policies and Restrictions ...................................... 3
Performance Information ................................................... 20
Determination of Net Asset Value .......................................... 23
Purchases and Redemptions ................................................. 24
Tax Matters ............................................................... 24
Management of the Trust and the Funds or Portfolios ....................... 31
Independent Accountants ................................................... 37
General Information ....................................................... 37
Appendix A--Description of Certain Obligations Issued or Guaranteed by
U.S. Government Agencies or Instrumentalities ........................... A-1
Appendix B--Description of Ratings ........................................ B-1
2
<PAGE>
THE FUNDS
Mutual Fund Select Group (the "Trust") is an open-end management
investment company which was organized as a business trust under the laws of
the Commonwealth of Massachusetts on October 1, 1996. The Trust presently
consists of 10 separate series (the "Funds"). Certain of the Funds are
diversified and other Funds are non-diversified, as such term is defined in
the Investment Company Act of 1940, as amended (the "1940 Act"). The shares
of the Funds are collectively referred to in this Statement of Additional
Information as the "Shares."
The Board of Trustees of the Trust provides broad supervision over the
affairs of the Trust including the Funds. The Chase Manhattan Bank ("Chase")
is the investment adviser for the Funds. Chase also serves as the Trust's
administrator (the "Administrator") and supervises the overall administration
of the Trust, including the Funds. A majority of the Trustees of the Trust
are not affiliated with the investment adviser or sub- advisers.
INVESTMENT POLICIES AND RESTRICTIONS
Investment Policies
The Prospectuses set forth the various investment policies of each Fund.
The following information supplements and should be read in conjunction with
the related sections of each Prospectus. For descriptions of the securities
ratings of Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Corporation ("S&P") and Fitch Investors Service, Inc. ("Fitch"), see Appendix
B.
U.S. Government Securities. U.S. Government Securities include (1) U.S.
Treasury obligations, which generally differ only in their interest rates,
maturities and times of issuance, including: U.S. Treasury bills (maturities
of one year or less), U.S. Treasury notes (maturities of one to ten years)
and U.S. Treasury bonds (generally maturities of greater than ten years); and
(2) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow
any amount listed to a specific line of credit from the U.S. Treasury, (c)
discretionary authority of the U.S. Government to purchase certain
obligations of the U.S. Government agency or instrumentality or (d) the
credit of the agency or instrumentality. Agencies and instrumentalities of
the U.S. Government include but are not limited to: Federal Land Banks,
Federal Financing Banks, Banks for Cooperatives, Federal Intermediate Credit
Banks, Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association, Student Loan Marketing
Association, United States Postal Service, Chrysler Corporate Loan Guarantee
Board, Small Business Administration, Tennessee Valley Authority and any
other enterprise established or sponsored by the U.S. Government. Certain
U.S. Government Securities, including U.S. Treasury bills, notes and bonds,
Government National Mortgage Association certificates and Federal Housing
Administration debentures, are supported by the full faith and credit of the
United States. Other U.S. Government Securities are issued or guaranteed by
federal agencies or government sponsored enterprises and are not supported by
the full faith and credit of the United States. These securities include
obligations that are supported by the right of the issuer to borrow from the
U.S. Treasury, such as obligations of the Federal Home Loan Banks, and
obligations that are supported by the creditworthiness of the particular
instrumentality, such as obligations of the Federal National Mortgage
Association or Federal Home Loan Mortgage Corporation. For a description of
certain obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, see Appendix A.
In addition, certain U.S. Government agencies and instrumentalities issue
specialized types of securities, such as guaranteed notes of the Small
Business Administration, Federal Aviation Administration, Department of
Defense, Bureau of Indian Affairs and Private Export Funding Corporation,
which often provide higher yields than are available from the more common
types of government-backed instruments. However, such specialized instruments
may only be available from a few sources, in limited amounts, or only in very
3
<PAGE>
large denominations; they may also require specialized capability in
portfolio servicing and in legal matters related to government guarantees.
While they may frequently offer attractive yields, the limited-activity
markets of many of these securities means that, if a Fund were required to
liquidate any of them, it might not be able to do so advantageously;
accordingly, each Fund investing in such securities normally to hold such
securities to maturity or pursuant to repurchase agreements, and would treat
such securities (including repurchase agreements maturing in more than seven
days) as illiquid for purposes of its limitation on investment in illiquid
securities.
Bank Obligations. Investments in bank obligations are limited to those of
U.S. banks (including their foreign branches) which have total assets at the
time of purchase in excess of $1 billion and the deposits of which are
insured by either the Bank Insurance Fund or the Savings Association
Insurance Fund of the Federal Deposit Insurance Corporation, and foreign
banks (including their U.S. branches) having total assets in excess of $10
billion (or the equivalent in other currencies), and such other U.S. and
foreign commercial banks which are judged by the advisers to meet comparable
credit standing criteria.
Bank obligations include negotiable certificates of deposit, bankers'
acceptances, fixed time deposits and deposit notes. A certificate of deposit
is a short-term negotiable certificate issued by a commercial bank against
funds deposited in the bank and is either interest-bearing or purchased on a
discount basis. A bankers' acceptance is a short-term draft drawn on a
commercial bank by a borrower, usually in connection with an international
commercial transaction. The borrower is liable for payment as is the bank,
which unconditionally guarantees to pay the draft at its face amount on the
maturity date. Fixed time deposits are obligations of branches of United
States banks or foreign banks which are payable at a stated maturity date and
bear a fixed rate of interest. Although fixed time deposits do not have a
market, there are no contractual restrictions on the right to transfer a
beneficial interest in the deposit to a third party. Fixed time deposits
subject to withdrawal penalties and with respect to which a Fund cannot
realize the proceeds thereon within seven days are deemed "illiquid" for the
purposes of its restriction on investments in illiquid securities. Deposit
notes are notes issued by commercial banks which generally bear fixed rates
of interest and typically have original maturities ranging from eighteen
months to five years.
Banks are subject to extensive governmental regulations that may limit
both the amounts and types of loans and other financial commitments that may
be made and the interest rates and fees that may be charged. The
profitability of this industry is largely dependent upon the availability and
cost of capital funds for the purpose of financing lending operations under
prevailing money market conditions. Also, general economic conditions play an
important part in the operations of this industry and exposure to credit
losses arising from possible financial difficulties of borrowers might affect
a bank's ability to meet its obligations. Bank obligations may be general
obligations of the parent bank or may be limited to the issuing branch by the
terms of the specific obligations or by government regulation. Investors
should also be aware that securities of foreign banks and foreign branches of
United States banks may involve foreign investment risks in addition to those
relating to domestic bank obligations.
Depositary Receipts. A Fund will limit its investment in Depository
Receipts not sponsored by the issuer of the underlying security to no more
than 5% of the value of its net assets (at the time of investment). A
purchaser of an unsponsored Depositary Receipt may not have unlimited voting
rights and may not receive as much information about the issuer of the
underlying securities as with a sponsored Depositary Receipt.
ECU Obligations. The specific amounts of currencies comprising the ECU may
be adjusted by the Council of Ministers of the European Community to reflect
changes in relative values of the underlying currencies. The Trustees do not
believe that such adjustments will adversely affect holders of
ECU-denominated securities or the marketability of such securities.
Supranational Obligations. Supranational organizations, include
organizations such as The World Bank, which was chartered to finance
development projects in developing member countries; the European Community,
which is a twelve-nation organization engaged in cooperative economic
activities; the European Coal and Steel Community, which is an economic union
of various European nations steel and coal indus-
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tries; and the Asian Development Bank, which is an international development
bank established to lend funds, promote investment and provide technical
assistance to member nations of the Asian and Pacific regions.
Corporate Reorganizations. In general, securities that are the subject of
a tender or exchange offer or proposal sell at a premium to their historic
market price immediately prior to the announcement of the offer or proposal.
The increased market price of these securities may also discount what the
stated or appraised value of the security would be if the contemplated action
were approved or consummated. These investments may be advantageous when the
discount significantly overstates the risk of the contingencies involved;
significantly undervalues the securities, assets or cash to be received by
shareholders of the prospective portfolio company as a result of the
contemplated transaction; or fails adequately to recognize the possibility
that the offer or proposal may be replaced or superseded by an offer or
proposal of greater value. The evaluation of these contingencies requires
unusually broad knowledge and experience on the part of the advisers that
must appraise not only the value of the issuer and its component businesses
as well as the assets or securities to be received as a result of the
contemplated transaction, but also the financial resources and business
motivation of the offeror as well as the dynamics of the business climate
when the offer or proposal is in progress. Investments in reorganization
securities may tend to increase the turnover ratio of a Fund and increase its
brokerage and other transaction expenses.
Warrants and Rights. Warrants basically are options to purchase equity
securities at a specified price for a specific period of time. Their prices
do not necessarily move parallel to the prices of the underlying securities.
Rights are similar to warrants but normally have a shorter duration and are
distributed directly by the issuer to shareholders. Rights and warrants have
no voting rights, receive no dividends and have no rights with respect to the
assets of the issuer.
Commercial Paper. Commercial paper consists of short-term (usually from 1
to 270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. A variable amount master demand note (which
is a type of commercial paper) represents a direct borrowing arrangement
involving periodically fluctuating rates of interest under a letter agreement
between a commercial paper issuer and an institutional lender pursuant to
which the lender may determine to invest varying amounts.
Repurchase Agreements. A Fund will enter into repurchase agreements only
with member banks of the Federal Reserve System and securities dealers
believed creditworthy, and only if fully collateralized by securities in
which such Fund is permitted to invest. Under the terms of a typical
repurchase agreement, a Fund would acquire an underlying instrument for a
relatively short period (usually not more than one week) subject to an
obligation of the seller to repurchase the instrument and the Fund to resell
the instrument at a fixed price and time, thereby determining the yield
during the Fund's holding period. This procedure results in a fixed rate of
return insulated from market fluctuations during such period. A repurchase
agreement is subject to the risk that the seller may fail to repurchase the
security. Repurchase agreements are considered under the 1940 Act to be loans
collateralized by the underlying securities. All repurchase agreements
entered into by a Fund will be fully collateralized at all times during the
period of the agreement in that the value of the underlying security will be
at least equal to 102% of the amount of the loan, including the accrued
interest thereon, and the Fund or its custodian or sub-custodian will have
possession of the collateral, which the Board of Trustees believes will give
it a valid, perfected security interest in the collateral. Whether a
repurchase agreement is the purchase and sale of a security or a
collateralized loan has not been conclusively established. This might become
an issue in the event of the bankruptcy of the other party to the
transaction. In the event of default by the seller under a repurchase
agreement construed to be a collateralized loan, the underlying securities
would not be owned by the Fund, but would only constitute collateral for the
seller's obligation to pay the repurchase price. Therefore, a Fund may suffer
time delays and incur costs in connection with the disposition of the
collateral. The Board of Trustees believes that the collateral underlying
repurchase agreements may be more susceptible to claims of the seller's
creditors than would be the case with securities owned by a Fund. Repurchase
agreements maturing in more than seven days are treated as illiquid for
purposes of the Funds' restrictions on purchases of illiquid securities.
Repurchase agreements are also subject to the risks described below with
respect to stand-by commitments.
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Forward Commitments. In order to invest a Fund's assets immediately, while
awaiting delivery of securities purchased on a forward commitment basis,
short-term obligations that offer same-day settlement and earnings will
normally be purchased. When a commitment to purchase a security on a forward
commitment basis is made, procedures are established consistent with the
General Statement of Policy of the Securities and Exchange Commission
concerning such purchases. Since that policy currently recommends that an
amount of the respective Fund's assets equal to the amount of the purchase be
held aside or segregated to be used to pay for the commitment, a separate
account of such Fund consisting of cash, cash equivalents or high quality
debt securities equal to the amount of such Fund's commitments securities
will be established at such Fund's custodian bank. For the purpose of
determining the adequacy of the securities in the account, the deposited
securities will be valued at market value. If the market value of such
securities declines, additional cash, cash equivalents or highly liquid
securities will be placed in the account daily so that the value of the
account will equal the amount of such commitments by the respective.
Although it is not intended that such purchases would be made for
speculative purposes, purchases of securities on a forward commitment basis
may involve more risk than other types of purchases. Securities purchased on
a forward commitment basis and the securities held in the respective Fund's
portfolio are subject to changes in value based upon the public's perception
of the issuer and changes, real or anticipated, in the level of interest
rates. Purchasing securities on a forward commitment basis can involve the
risk that the yields available in the market when the delivery takes place
may actually be higher or lower than those obtained in the transaction
itself. On the settlement date of the forward commitment transaction, the
respective Fund will meet its obligations from then available cash flow, sale
of securities held in the separate account, sale of other securities or,
although it would not normally expect to do so, from sale of the forward
commitment securities themselves (which may have a value greater or lesser
than such Fund's payment obligations). The sale of securities to meet such
obligations may result in the realization of capital gains or losses.
To the extent a Fund engages in forward commitment transactions, it will
do so for the purpose of acquiring securities consistent with its investment
objective and policies and not for the purpose of investment leverage, and
settlement of such transactions will be within 90 days from the trade date.
Floating and Variable Rate Securities; Participation Certificates. The
securities in which certain Funds may be invested include participation
certificates issued by a bank, insurance company or other financial
institution in securities owned by such institutions or affiliated
organizations ("Participation Certificates"). A Participation Certificate
gives a Fund an undivided interest in the security in the proportion that the
Fund's participation interest bears to the total principal amount of the
security and generally provides the demand feature described below. Each
Participation Certificate is backed by an irrevocable letter of credit or
guaranty of a bank (which may be the bank issuing the Participation
Certificate, a bank issuing a confirming letter of credit to that of the
issuing bank, or a bank serving as agent of the issuing bank with respect to
the possible repurchase of the Participation Certificate) or insurance policy
of an insurance company that the Board of Trustees of the Trust has
determined meets the prescribed quality standards for a particular Fund.
A Fund may have the right to sell the Participation Certificate back to
the institution and draw on the letter of credit or insurance on demand after
the prescribed notice period, for all or any part of the full principal
amount of the Fund's participation interest in the security, plus accrued
interest. The institutions issuing the Participation Certificates would
retain a service and letter of credit fee and a fee for providing the demand
feature, in an amount equal to the excess of the interest paid on the
instruments over the negotiated yield at which the Participation Certificates
were purchased by a Fund. The total fees would generally range from 5% to 15%
of the applicable prime rate or other short-term rate index. With respect to
insurance, a Fund will attempt to have the issuer of the participation
certificate bear the cost of any such insurance, although the Funds retain
the option to purchase insurance if deemed appropriate. Obligations that have
a demand feature permitting a Fund to tender the obligation to a foreign bank
may involve certain risks associated with foreign investment. A Fund's
ability to receive payment in such circumstances under the demand feature
from such foreign banks may involve certain risks such as future political
and economic developments, the pos-
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sible establishments of laws or restrictions that might adversely affect the
payment of the bank's obligations under the demand feature and the difficulty
of obtaining or enforcing a judgment against the bank.
The advisers have been instructed by the Board of Trustees to monitor on
an ongoing basis the pricing, quality and liquidity of the floating and
variable rate securities held by the Funds, including Participation
Certificates, on the basis of published financial information and reports of
the rating agencies and other bank analytical services to which the Funds may
subscribe. Although these instruments may be sold by a Fund, it is intended
that they be held until maturity.
Past periods of high inflation, together with the fiscal measures adopted
to attempt to deal with it, have seen wide fluctuations in interest rates,
particularly "prime rates" charged by banks. While the value of the
underlying floating or variable rate securities may change with changes in
interest rates generally, the floating or variable rate nature of the
underlying floating or variable rate securities should minimize changes in
value of the instruments. Accordingly, as interest rates decrease or
increase, the potential for capital appreciation and the risk of potential
capital depreciation is less than would be the case with a portfolio of fixed
rate securities. A Fund's portfolio may contain floating or variable rate
securities on which stated minimum or maximum rates, or maximum rates set by
state law, limit the degree to which interest on such floating or variable
rate securities may fluctuate; to the extent it does, increases or decreases
in value may be somewhat greater than would be the case without such limits.
Because the adjustment of interest rates on the floating or variable rate
securities is made in relation to movements of the applicable banks' "prime
rates" or other short-term rate adjustment indices, the floating or variable
rate securities are not comparable to long-term fixed rate securities.
Accordingly, interest rates on the floating or variable rate securities may
be higher or lower than current market rates for fixed rate obligations of
comparable quality with similar maturities.
The maturity of variable rate securities is deemed to be the longer of (i)
the notice period required before a Fund is entitled to receive payment of
the principal amount of the security upon demand or (ii) the period remaining
until the security's next interest rate adjustment.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the
sale of securities held by a Fund with an agreement to repurchase the
securities at an agreed upon price and date. The repurchase price is
generally equal to the original sales price plus interest. Reverse repurchase
agreements are usually for seven days or less and cannot be repaid prior to
their expiration dates. Reverse repurchase agreements involve the risk that
the market value of the portfolio securities transferred may decline below
the price at which the Fund is obliged to purchase the securities.
Zero Coupon, Payment-in-Kind and Stripped Obligations. The principal and
interest components of United States Treasury bonds with remaining maturities
of longer than ten years are eligible to be traded independently under the
Separate Trading of Registered Interest and Principal of Securities
("STRIPS") program. Under the STRIPS program, the principal and interest
components are separately issued by the United States Treasury at the request
of depository financial institutions, which then trade the component parts
separately. The interest component of STRIPS may be more volatile than that
of United States Treasury bills with comparable maturities.
Zero coupon obligations are sold at a substantial discount from their
value at maturity and, when held to maturity, their entire return, which
consists of the amortization of discount, comes from the difference between
their purchase price and maturity value. Because interest on a zero coupon
obligation is not distributed on a current basis, the obligation tends to be
subject to greater price fluctuations in response to changes in interest
rates than are ordinary interest-paying securities with similar maturities.
The value of zero coupon obligations appreciates more than such ordinary
interest-paying securities during periods of declining interest rates and
depreciates more than such ordinary interest-paying securities during periods
of rising interest rates. Under the stripped bond rules of the Internal
Revenue Code of 1986, as amended, investments by a Fund in zero coupon
obligations will result in the accrual of interest income on such investments
in advance of the receipt of the cash corresponding to such income.
Zero coupon securities may be created when a dealer deposits a U.S.
Treasury or federal agency security with a custodian and then sells the
coupon payments and principal payment that will be generated
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by this security separately. Proprietary receipts, such as Certificates of
Accrual on Treasury Securities, Treasury Investment Growth Receipts and
generic Treasury Receipts, are examples of stripped U.S. Treasury securities
separated into their component parts through such custodial arrangements.
Payment-in-kind ("PIK") bonds are debt obligations which provide that the
issuer thereof may, at its option, pay interest on such bonds in cash or in
the form of additional debt obligations. Such investments benefit the issuer
by mitigating its need for cash to meet debt service, but also require a
higher rate of return to attract investors who are willing to defer receipt
of such cash. Such investments experience greater volatility in market value
due to changes in interest rates than debt obligations which provide for
regular payments of interest. A Fund will accrue income on such investments
for tax and accounting purposes, as required, which is distributable to
shareholders and which, because no cash is received at the time of accrual,
may require the liquidation of other portfolio securities to satisfy the
Fund's distribution obligations.
Illiquid Securities. For purposes of its limitation on investments in
illiquid securities, each Fund, may elect to treat as liquid, in accordance
with procedures established by the Board of Trustees, certain investments in
restricted securities for which there may be a secondary market of qualified
institutional buyers as contemplated by Rule 144A under the Securities Act of
1933, as amended (the "Securities Act") and commercial obligations issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act ("Section 4(2) paper"). Rule
144A provides an exemption from the registration requirements of the
Securities Act for the resale of certain restricted securities to qualified
institutional buyers. Section 4(2) paper is restricted as to disposition
under the federal securities laws, and generally is sold to institutional
investors such as a Fund who agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale of Section
4(2) paper by the purchaser must be in an exempt transaction.
One effect of Rule 144A and Section 4(2) is that certain restricted
securities may now be liquid, though there is no assurance that a liquid
market for Rule 144A securities or Section 4(2) paper will develop or be
maintained. The Trustees have adopted policies and procedures for the purpose
of determining whether securities that are eligible for resale under Rule
144A and Section 4(2) paper are liquid or illiquid for purposes of the
limitation on investment in illiquid securities. Pursuant to those policies
and procedures, the Trustees have delegated to the advisers the determination
as to whether a particular instrument is liquid or illiquid, requiring that
consideration be given to, among other things, the frequency of trades and
quotes for the security, the number of dealers willing to sell the security
and the number of potential purchasers, dealer undertakings to make a market
in the security, the nature of the security and the time needed to dispose of
the security. The Trustees will periodically review the Funds' and
Portfolios' purchases and sales of Rule 144A securities and Section 4(2)
paper.
Stand-By Commitments. In a put transaction, a Fund acquires the right to
sell a security at an agreed upon price within a specified period prior to
its maturity date, and a stand-by commitment entitles a Fund to same-day
settlement and to receive an exercise price equal to the amortized cost of
the underlying security plus accrued interest, if any, at the time of
exercise. Stand-by commitments are subject to certain risks, which include
the inability of the issuer of the commitment to pay for the securities at
the time the commitment is exercised, the fact that the commitment is not
marketable by a Fund, and that the maturity of the underlying security will
generally be different from that of the commitment.
Securities Loans. To the extent specified in its Prospectus, each Fund is
permitted to lend its securities to broker-dealers and other institutional
investors in order to generate additional income. Such loans of portfolio
securities may not exceed 30% of the value of a Fund's total assets. In
connection with such loans, a Fund will receive collateral consisting of
cash, cash equivalents, U.S. Government securities or irrevocable letters of
credit issued by financial institutions. Such collateral will be maintained
at all times in an amount equal to at least 102% of the current market value
plus accrued interest of the securities loaned. A Fund can increase its
income through the investment of such collateral. A Fund continues to be
entitled to the interest payable or any dividend-equivalent payments received
on a loaned security and, in addition, to receive inter-
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est on the amount of the loan. However, the receipt of any
dividend-equivalent payments by a Fund on a loaned security from the borrower
will not qualify for the dividends-received deduction. Such loans will be
terminable at any time upon specified notice. A Fund might experience risk of
loss if the institutions with which it has engaged in portfolio loan
transactions breach their agreements with such Fund. The risks in lending
portfolio securities, as with other extensions of secured credit, consist of
possible delays in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should the borrower
experience financial difficulty. Loans will be made only to firms deemed by
the advisers to be of good standing and will not be made unless, in the
judgment of the advisers, the consideration to be earned from such loans
justifies the risk.
Real Estate Investment Trusts. Each Fund may invest in shares of real
estate investment trusts ("REITs"), which are pooled investment vehicles
which invest primarily in income-producing real estate or real estate related
loans or interests. REITs are generally classified as equity REITS or
mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents.
Equity REITs can also realize capital gains by selling properties that have
appreciated in value. Mortgage REITs invest the majority of their assets in
real estate mortgages and derive income from the collection of interest
payments. The value of equity trusts will depend upon the value of the
underlying properties, and the value of mortgage trusts will be sensitive to the
value of the underlying loans or interests.
Additional Policies Regarding Derivative and Related Transactions
Introduction. As explained more fully below, the Funds may employ
derivative and related instruments as tools in the management of portfolio
assets. Put briefly, a "derivative" instrument may be considered a security
or other instrument which derives its value from the value or performance of
other instruments or assets, interest or currency exchange rates, or indexes.
For instance, derivatives include futures, options, forward contracts,
structured notes and various over-the-counter instruments.
Like other investment tools or techniques, the impact of using derivatives
strategies or similar instruments depends to a great extent on how they are
used. Derivatives are generally used by portfolio managers in three ways:
First, to reduce risk by hedging (offsetting) an investment position. Second,
to substitute for another security particularly where it is quicker, easier
and less expensive to invest in derivatives. Lastly, to speculate or enhance
portfolio performance. When used prudently, derivatives can offer several
benefits, including easier and more effective hedging, lower transaction
costs, quicker investment and more profitable use of portfolio assets.
However, derivatives also have the potential to significantly magnify risks,
thereby leading to potentially greater losses for a Fund.
Each Fund may invest its assets in derivative and related instruments
subject only to the Fund's investment objective and policies and the
requirement that the Fund maintain segregated accounts consisting of liquid
assets, such as cash, U.S. Government securities, or other high-grade debt
obligations (or, as permitted by applicable regulation, enter into certain
offsetting positions) to cover its obligations under such instruments with
respect to positions where there is no underlying portfolio asset so as to
avoid leveraging the Fund.
The value of some derivative or similar instruments in which the Funds may
invest may be particularly sensitive to changes in prevailing interest rates
or other economic factors, and--like other investments of the Funds--the
ability of a Fund to successfully utilize these instruments may depend in
part upon the ability of the advisers to forecast interest rates and other
economic factors correctly. If the advisers inaccurately forecast such
factors and have taken positions in derivative or similar instruments
contrary to prevailing market trends, a Fund could be exposed to the risk of
a loss. The Funds might not employ any or all of the strategies described
herein, and no assurance can be given that any strategy used will succeed.
Set forth below is an explanation of the various derivatives strategies
and related instruments the Funds may employ along with risks or special
attributes associated with them. This discussion is intended to supplement
the Funds' current prospectuses as well as provide useful information to
prospective investors.
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Risk Factors. As explained more fully below and in the discussions of
particular strategies or instruments, there are a number of risks associated
with the use of derivatives and related instruments. There can be no
guarantee that there will be a correlation between price movements in a
hedging vehicle and in the portfolio assets being hedged. An incorrect
correlation could result in a loss on both the hedged assets in a Fund and
the hedging vehicle so that the portfolio return might have been greater had
hedging not been attempted. This risk is particularly acute in the case of
"cross-hedges" between currencies. The advisers may inaccurately forecast
interest rates, market values or other economic factors in utilizing a
derivatives strategy. In such a case, a Fund may have been in a better
position had it not entered into such strategy. Hedging strategies, while
reducing risk of loss, can also reduce the opportunity for gain. In other
words, hedging usually limits both potential losses as well as potential
gains. Strategies not involving hedging may increase the risk to a Fund.
Certain strategies, such as yield enhancement, can have speculative
characteristics and may result in more risk to a Fund than hedging strategies
using the same instruments. There can be no assurance that a liquid market
will exist at a time when a Fund seeks to close out an option, futures
contract or other derivative or related position. Many exchanges and boards
of trade limit the amount of fluctuation permitted in option or futures
contract prices during a single day; once the daily limit has been reached on
particular contract, no trades may be made that day at a price beyond that
limit. In addition, certain instruments are relatively new and without a
significant trading history. As a result, there is no assurance that an
active secondary market will develop or continue to exist. Finally,
over-the-counter instruments typically do not have a liquid market. Lack of a
liquid market for any reason may prevent a Fund from liquidating an
unfavorable position. Activities of large traders in the futures and
securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in these markets. In
certain instances, particularly those involving over-the-counter
transactions, forward contracts there is a greater potential that a
counterparty or broker may default or be unable to perform on its
commitments. In the event of such a default, a Fund may experience a loss. In
transactions involving currencies, the value of the currency underlying an
instrument may fluctuate due to many factors, including economic conditions,
interest rates, governmental policies and market forces.
Specific Uses and Strategies. Set forth below are explanations of various
strategies involving derivatives and related instruments which may be used by
a Fund.
Options on Securities, Securities Indexes and Debt Instruments. A Fund may
PURCHASE, SELL or EXERCISE call and put options on (i) securities, (ii)
securities indexes, and (iii) debt instruments.
Although in most cases these options will be exchange-traded, the Funds
may also purchase, sell or exercise over-the-counter options.
Over-the-counter options differ from exchange-traded options in that they are
two-party contracts with price and other terms negotiated between buyer and
seller. As such, over- the-counter options generally have much less market
liquidity and carry the risk of default or nonperformance by the other party.
One purpose of purchasing put options is to protect holdings in an
underlying or related security against a substantial decline in market value.
One purpose of purchasing call options is to protect against substantial
increases in prices of securities the Fund intends to purchase pending its
ability to invest in such securities in an orderly manner. A Fund may also
use combinations of options to minimize costs, gain exposure to markets or
take advantage of price disparities or market movements. For example, a Fund
may sell put or call options it has previously purchased or purchase put or
call options it has previously sold. These transactions may result in a net
gain or loss depending on whether the amount realized on the sale is more or
less than the premium and other transaction costs paid on the put or call
option which is sold. A Fund may write a call or put option in order to earn
the related premium from such transactions. Prior to exercise or expiration,
an option may be closed out by an offsetting purchase or sale of a similar
option. The Funds will not write uncovered options.
In addition to the general risk factors noted above, the purchase and
writing of options involve certain special risks. During the option period, a
Fund writing a covered call (i.e., where the underlying securities
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are held by the Fund) has, in return for the premium on the option, given up
the opportunity to profit from a price increase in the underlying securities
above the exercise price, but has retained the risk of loss should the price
of the underlying securities decline. The writer of an option has no control
over the time when it may be required to fulfill its obligation as a writer
of the option. Once an option writer has received an exercise notice, it
cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver the underlying securities at the
exercise price.
If a put or call option purchased by a Fund is not sold when it has
remaining value, and if the market price of the underlying security, in the
case of a put, remains equal to or greater than the exercise price or, in the
case of a call, remains less than or equal to the exercise price, such Fund
will lose its entire investment in the option. Also, where a put or call
option on a particular security is purchased to hedge against price movements
in a related security, the price of the put or call option may move more or
less than the price of the related security. There can be no assurance that a
liquid market will exist when a Fund seeks to close out an option position.
Furthermore, if trading restrictions or suspensions are imposed on the
options markets, a Fund may be unable to close out a position.
Futures Contracts and Options on Futures Contracts. A Fund may purchase or
sell (i) interest- rate futures contracts, (ii) futures contracts on
specified instruments or indices, and (iii) options on these futures
contracts ("futures options").
The futures contracts and futures options may be based on various
instruments or indices in which the Funds may invest such as foreign
currencies, certificates of deposit, Eurodollar time deposits, securities
indices, economic indices (such as the Consumer Price Indices compiled by the
U.S. Department of Labor).
Futures contracts and futures options may be used to hedge portfolio
positions and transactions as well as to gain exposure to markets. For
example, a Fund may sell a futures contract--or buy a futures option--to
protect against a decline in value, or reduce the duration, of portfolio
holdings. Likewise, these instruments may be used where a Fund intends to
acquire an instrument or enter into a position. For example, a Fund may
purchase a futures contract--or buy a futures option--to gain immediate
exposure in a market or otherwise offset increases in the purchase price of
securities or currencies to be acquired in the future. Futures options may
also be written to earn the related premiums.
When writing or purchasing options, the Funds may simultaneously enter
into other transactions involving futures contracts or futures options in
order to minimize costs, gain exposure to markets, or take advantage of price
disparities or market movements. Such strategies may entail additional risks
in certain instances. The Funds may engage in cross-hedging by purchasing or
selling futures or options on a security or currency different from the
security or currency position being hedged to take advantage of relationships
between the two securities or currencies.
Investments in futures contracts and options thereon involve risks similar
to those associated with options transactions discussed above. The Funds will
only enter into futures contracts or options on futures contracts which are
traded on a U.S. or foreign exchange or board of trade, or similar entity, or
quoted on an automated quotation system.
Forward Contracts. A Fund may use foreign currency and interest-rate
forward contracts for various purposes as described below.
Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments
in different countries, actual or perceived changes in interest rates and
other complex factors, as seen from an international perspective. A Fund that
may invest in securities denominated in foreign currencies may, in addition
to buying and selling foreign currency futures contracts and options on
foreign currencies and foreign currency futures, enter into forward foreign
currency exchange contracts to reduce the risks or otherwise take a position
in anticipation of changes in foreign exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date, which
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may be a fixed number of days from the date of the contract agreed upon by
the parties, at a price set at the time of the contract. By entering into a
forward foreign currency contract, a Fund "locks in" the exchange rate
between the currency it will deliver and the currency it will receive for the
duration of the contract. As a result, a Fund reduces its exposure to changes
in the value of the currency it will deliver and increases its exposure to
changes in the value of the currency it will exchange into. The effect on the
value of a Fund is similar to selling securities denominated in one currency
and purchasing securities denominated in another. Transactions that use two
foreign currencies are sometimes referred to as "cross-hedges."
A Fund may enter into these contracts for the purpose of hedging against
foreign exchange risk arising from the Fund's investments or anticipated
investments in securities denominated in foreign currencies. A Fund may also
enter into these contracts for purposes of increasing exposure to a foreign
currency or to shift exposure to foreign currency fluctuations from one
country to another.
A Fund may also use forward contracts to hedge against changes in interest
rates, increase exposure to a market or otherwise take advantage of such
changes. An interest-rate forward contract involves the obligation to
purchase or sell a specific debt instrument at a fixed price at a future
date.
Interest Rate and Currency Transactions. A Fund may employ currency and
interest rate management techniques, including transactions in options
(including yield curve options), futures, options on futures, forward foreign
currency exchange contracts, currency options and futures and currency and
interest rate swaps. The aggregate amount of a Fund's net currency exposure
will not exceed the total net asset value of its portfolio. However, to the
extent that a Fund is fully invested while also maintaining currency
positions, it may be exposed to greater combined risk.
The Funds will only enter into interest rate and currency swaps on a net
basis, i.e., the two payment streams are netted out, with the Fund receiving
or paying, as the case may be, only the net amount of the two payments.
Interest rate and currency swaps do not involve the delivery of securities,
the underlying currency, other underlying assets or principal. Accordingly,
the risk of loss with respect to interest rate and currency swaps is limited
to the net amount of interest or currency payments that a Fund is
contractually obligated to make. If the other party to an interest rate or
currency swap defaults, a Fund's risk of loss consists of the net amount of
interest or currency payments that the Fund is contractually entitled to
receive. Since interest rate and currency swaps are individually negotiated,
the Funds expect to achieve an acceptable degree of correlation between their
portfolio investments and their interest rate or currency swap positions.
A Fund may hold foreign currency received in connection with investments
in foreign securities when it would be beneficial to convert such currency
into U.S. dollars at a later date, based on anticipated changes in the
relevant exchange rate.
A Fund may purchase or sell without limitation as to a percentage of its
assets forward foreign currency exchange contracts when the advisers
anticipate that the foreign currency will appreciate or depreciate in value,
but securities denominated in that currency do not present attractive
investment opportunities and are not held by such Fund. In addition, a Fund
may enter into forward foreign currency exchange contracts in order to
protect against adverse changes in future foreign currency exchange rates. A
Fund may engage in cross-hedging by using forward contracts in one currency
to hedge against fluctuations in the value of securities denominated in a
different currency if its advisers believe that there is a pattern of
correlation between the two currencies. Forward contracts may reduce the
potential gain from a positive change in the relationship between the U.S.
Dollar and foreign currencies. Unanticipated changes in currency prices may
result in poorer overall performance for a Fund than if it had not entered
into such contracts. The use of foreign currency forward contracts will not
eliminate fluctuations in the underlying U.S. dollar equivalent value of the
prices of or rates of return on a Fund's foreign currency denominated
portfolio securities and the use of such techniques will subject the Fund to
certain risks.
The matching of the increase in value of a forward contract and the
decline in the U.S. dollar equivalent value of the foreign currency
denominated asset that is the subject of the hedge generally will not be
precise.
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In addition, a Fund may not always be able to enter into foreign currency
forward contracts at attractive prices, and this will limit a Fund's ability
to use such contract to hedge or cross-hedge its assets. Also, with regard to
a Fund's use of cross-hedges, there can be no assurance that historical
correlations between the movement of certain foreign currencies relative to
the U.S. dollar will continue. Thus, at any time poor correlation may exist
between movements in the exchange rates of the foreign currencies underlying
a Fund's cross- hedges and the movements in the exchange rates of the foreign
currencies in which the Fund's assets that are the subject of such
cross-hedges are denominated.
A Fund may enter into interest rate and currency swaps to the maximum
allowed limits under applicable law. A Fund will typically use interest rate
swaps to shorten the effective duration of its portfolio. Interest rate swaps
involve the exchange by a Fund with another party of their respective
commitments to pay or receive interest, such as an exchange of fixed rate
payments for floating rate payments. Currency swaps involve the exchange of
their respective rights to make or receive payments in specified currencies.
Mortgage-Related Securities. A Fund may purchase mortgage-backed
securities--i.e., securities representing an ownership interest in a pool of
mortgage loans issued by lenders such as mortgage bankers, commercial banks
and savings and loan associations. Mortgage loans included in the pool--but
not the security itself--may be insured by the Government National Mortgage
Association or the Federal Housing Administration or guaranteed by the
Federal National Mortgage Association, the Federal Home Loan Mortgage
Corporation or the Veterans Administration. Mortgage-backed securities
provide investors with payments consisting of both interest and principal as
the mortgages in the underlying mortgage pools are paid off. Although
providing the potential for enhanced returns, mortgage-backed securities can
also be volatile and result in unanticipated losses.
The average life of a mortgage-backed security is likely to be
substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors and
mortgage foreclosures will usually result in the return of the greater part
of the principal invested far in advance of the maturity of the mortgages in
the pool. The actual rate of return of a mortgage-backed security may be
adversely affected by the prepayment of mortgages included in the mortgage
pool underlying the security.
A Fund may also invest in securities representing interests in
collateralized mortgage obligations ("CMOs"), real estate mortgage investment
conduits ("REMICs") and in pools of certain other asset-backed bonds and
mortgage pass-through securities. Like a bond, interest and prepaid principal
are paid, in most cases, monthly. CMOs may be collateralized by whole
mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by the U.S. Government, or U.S.
Government- related entities, and their income streams.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. Monthly payment of principal received from the
pool of underlying mortgages, including prepayments, are allocated to
different classes in accordance with the terms of the instruments, and
changes in prepayment rates or assumptions may significantly affect the
expected average life and value of a particular class.
REMICs include governmental and/or private entities that issue a fixed
pool of mortgages secured by an interest in real property. REMICs are similar
to CMOs in that they issue multiple classes of securities. REMICs issued by
private entities are not U.S. Government securities and are not directly
guaranteed by any government agency. They are secured by the underlying
collateral of the private issuer.
The advisers expect that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage- collateralized investments in
addition to those described above. The mortgages underlying these securities
may include alternative mortgage instruments, that is, mortgage instruments
whose principal or interest payments may vary or whose terms to maturity may
differ from customary long-term fixed-rate mortgages. A Fund may also invest
in debentures and other securities of real estate investment trusts. As new
types of
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mortgage-related securities are developed and offered to investors, the Funds
may consider making investments in such new types of mortgage-related
securities.
Dollar Rolls. Under a mortgage "dollar roll," a Fund sells mortgage-backed
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity) securities
on a specified future date. During the roll period, a Fund forgoes principal
and interest paid on the mortgage-backed securities. A Fund is compensated by
the difference between the current sales price and the lower forward price
for the future purchase (often referred to as the "drop") as well as by the
interest earned on the cash proceeds of the initial sale. A Fund may only
enter into covered rolls. A "covered roll" is a specific type of dollar roll
for which there is an offsetting cash position which matures on or before the
forward settlement date of the dollar roll transaction. At the time a Fund
enters into a mortgage "dollar roll", it will establish a segregated account
with its custodian bank in which it will maintain cash, U.S. government
securities or other liquid high grade debt obligations equal in value to its
obligations in respect of dollar rolls, and accordingly, such dollar rolls
will not be considered borrowings. Mortgage dollar rolls involve the risk
that the market value of the securities the Fund is obligated to repurchase
under the agreement may decline below the repurchase price. In the event the
buyer of securities under a mortgage dollar roll files for bankruptcy or
becomes insolvent, the Fund's use of proceeds of the dollar roll may be
restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the
securities.
Asset-Backed Securities. A Fund may invest in asset-backed securities,
including conditional sales contracts, equipment lease certificates and
equipment trust certificates. The advisers expect that other asset-backed
securities (unrelated to mortgage loans) will be offered to investors in the
future. Several types of asset-backed securities already exist, including,
for example, "Certificates for Automobile ReceivablesSM" or "CARSSM"
("CARS"). CARS represent undivided fractional interests in a trust whose
assets consist of a pool of motor vehicle retail installment sales contracts
and security interests in the vehicles securing the contracts. Payments of
principal and interest on CARS are passed-through monthly to certificate
holders, and are guaranteed up to certain amounts and for a certain time
period by a letter of credit issued by a financial institution unaffiliated
with the trustee or originator of the CARS trust. An investor's return on
CARS may be affected by early prepayment of principal on the underlying
vehicle sales contracts. If the letter of credit is exhausted, the CARS trust
may be prevented from realizing the full amount due on a sales contract
because of state law requirements and restrictions relating to foreclosure
sales of vehicles and the obtaining of deficiency judgments following such
sales or because of depreciation, damage or loss of a vehicle, the
application of federal and state bankruptcy and insolvency laws, the failure
of servicers to take appropriate steps to perfect the CARS trust's rights in
the underlying loans and the servicer's sale of such loans to bona fide
purchasers, giving rise to interests in such loans superior to those of the
CARS trust, or other factors. As a result, certificate holders may experience
delays in payments or losses if the letter of credit is exhausted. A Fund
also may invest in other types of asset-backed securities. In the selection
of other asset-backed securities, the advisers will attempt to assess the
liquidity of the security giving consideration to the nature of the security,
the frequency of trading in the security, the number of dealers making a
market in the security and the overall nature of the marketplace for the
security.
Structured Products. A Fund may invest in interests in entities organized
and operated solely for the purpose of restructuring the investment
characteristics of certain other investments. This type of restructuring
involves the deposit with or purchase by an entity, such as a corporation or
trust, or specified instruments (such as commercial bank loans) and the
issuance by that entity of one or more classes of securities ("structured
products") backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments may be apportioned
among the newly issued structured products to create securities with
different investment characteristics such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to structured products is dependent on the extent of the cash
flow on the underlying instruments. A Fund may invest in structured products
which represent derived investment positions based on relationships among
different markets or asset classes.
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A Fund may also invest in other types of structured products, including,
among others, inverse floaters, spread trades and notes linked by a formula
to the price of an underlying instrument. Inverse floaters have coupon rates
that vary inversely at a multiple of a designated floating rate (which
typically is determined by reference to an index rate, but may also be
determined through a dutch auction or a remarketing agent or by reference to
another security) (the "reference rate"). As an example, inverse floaters may
constitute a class of CMOs with a coupon rate that moves inversely to a
designated index, such as LIBOR (London Interbank Offered Rate) or the Cost
of Funds Index. Any rise in the reference rate of an inverse floater (as a
consequence of an increase in interest rates) causes a drop in the coupon
rate while any drop in the reference rate of an inverse floater causes an
increase in the coupon rate. A spread trade is an investment position
relating to a difference in the prices or interest rates of two securities
where the value of the investment position is determined by movements in the
difference between the prices or interest rates, as the case may be, of the
respective securities. When a Fund invests in notes linked to the price of an
underlying instrument, the price of the underlying security is determined by
a multiple (based on a formula) of the price of such underlying security. A
structured product may be considered to be leveraged to the extent its
interest rate varies by a magnitude that exceeds the magnitude of the change
in the index rate of interest. Because they are linked to their underlying
markets or securities, investments in structured products generally are
subject to greater volatility than an investment directly in the underlying
market or security. Total return on the structured product is derived by
linking return to one or more characteristics of the underlying instrument.
Because certain structured products of the type in which a Fund may invest
may involve no credit enhancement, the credit risk of those structured
products generally would be equivalent to that of the underlying instruments.
A Fund may invest in a class of structured products that is either
subordinated or unsubordinated to the right of payment of another class.
Subordinated structured products typically have higher yields and present
greater risks than unsubordinated structured products. Although a Fund's
purchase of subordinated structured products would have similar economic
effect to that of borrowing against the underlying securities, the purchase
will not be deemed to be leverage for purposes of a Fund's fundamental
investment limitation related to borrowing and leverage.
Certain issuers of structured products may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, a Fund's investments in
these structured products may be limited by the restrictions contained in the
1940 Act. Structured products are typically sold in private placement
transactions, and there currently is no active trading market for structured
products. As a result, certain structured products in which a Fund invests
may be deemed illiquid and subject to its limitation on illiquid investments.
Investments in structured products generally are subject to greater
volatility than an investment directly in the underlying market or security.
In addition, because structured products are typically sold in private
placement transactions, there currently is no active trading market for
structured products.
Additional Restrictions on the Use of Futures and Option Contracts. None
of the Funds is a "commodity pool" (i.e., a pooled investment vehicle which
trades in commodity futures contracts and options thereon and the operator of
which is registered with the CFTC and futures contracts and futures options
will be purchased, sold or entered into only for bona fide hedging purposes,
provided that a Fund may enter into such transactions for purposes other than
bona fide hedging if, immediately thereafter, the sum of the amount of its
initial margin and premiums on open contracts and options would not exceed 5%
of the liquidation value of the Fund's portfolio, provided, further, that, in
the case of an option that is in-the-money, the in-the-money amount may be
excluded in calculating the 5% limitation.
When a Fund purchases a futures contract, an amount of cash or cash
equivalents or high quality debt securities will be deposited in a segregated
account with such Fund's custodian or sub-custodian so that the amount so
segregated, plus the initial deposit and variation margin held in the account
of its broker, will at all times equal the value of the futures contract,
thereby insuring that the use of such futures is unleveraged.
A Fund's ability to engage in the transactions described herein may be
limited by the current federal income tax requirement that a Fund derive less
than 30% of its gross income from the sale or other disposition of stock or
securities held for less than three months.
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Investment Restrictions
The Funds have adopted the following investment restrictions which may not
be changed without approval by a "majority of the outstanding shares" of a
Fund which, as used in this Statement of Additional Information, means the
vote of the lesser of (i) 67% or more of the shares of a Fund present at a
meeting, if the holders of more than 50% of the outstanding shares of a Fund
are present or represented by proxy, or (ii) more than 50% of the outstanding
shares of a Fund.
Each Fund may not:
(1) borrow money, except that each Fund 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 a Fund's total assets must be repaid before the Fund may make
additional investments;
(2) make loans, except that each Fund 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;
(3) 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 Fund'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 a Fund's permissible futures
and options transactions in U.S. Government securities, positions in such
options and futures shall not be subject to this restriction;
(4) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments but this shall not prevent a
Fund 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;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent a Fund from
investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business). Investments by
a Fund in securities backed by mortgages on real estate or in marketable
securities of companies engaged in such activities are not hereby precluded;
(6) issue any senior security (as defined in the 1940 Act), except that
(a) a Fund 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) a Fund 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, a Fund may borrow money as authorized by the 1940 Act. For
purposes of this restriction, collateral arrangements with respect to
permissible options and futures transactions, including deposits of initial
and variation margin, are not considered to be the issuance of a senior
security; or
(7) underwrite securities issued by other persons except insofar as a Fund
may technically be deemed to be an underwriter under the Securities Act of
1933 in selling a portfolio security.
In addition, as a matter of fundamental policy, notwithstanding any other
investment policy or restriction, each Fund may seek to achieve its
investment objective by investing all of its investable assets in another
investment company having substantially the same investment objective and
policies as the Fund. For pur-
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poses of investment restriction (5) above, real estate includes Real Estate
Limited Partnerships. For purposes of investment restriction (3) above,
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." Investment restriction (3) above, however,
is not applicable to investments by a Fund in municipal obligations where the
issuer is regarded as a state, city, municipality or other public authority
since such entities are not members of an "industry." Supranational
organizations are collectively considered to be members of a single
"industry" for purposes of restriction (3) above.
In addition, each Fund is subject to the following nonfundamental
restrictions which may be changed without shareholder approval:
(1) Each Fund other than the Emerging Growth Fund, International Equity
Fund and Small Cap Value Fund may not, with respect to 75% of its assets,
hold more than 10% of the outstanding voting securities of any issuer or
invest more than 5% of its assets in the securities of any one issuer (other
than obligations of the U.S. Government, its agencies and instrumentalities);
Each of the Emerging Growth Fund, International Equity Fund and Small Cap
Value Fund may not, with respect to 50% of its assets, hold more than 10% of
the outstanding voting securities of any issuer.
(2) Each Fund 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
a Fund.
(3) Each Fund may not purchase or sell interests in oil, gas or mineral
leases.
(4) Each Fund may not invest more than 15% of its net assets in illiquid
securities.
(5) Each Fund may not write, purchase or sell any put or call option or
any combination thereof, provided that this shall not prevent (i) the
writing, purchasing or selling of puts, calls or combinations thereof with
respect to portfolio securities or (ii) with respect to a Fund'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.
(6) Each Fund may invest up to 5% of its total assets in the securities of
any one investment company, but may not own more than 3% of the securities of
any one investment company or invest more than 10% of its total assets in the
securities of other investment companies.
It is the Trust's position that proprietary strips, such as CATS and
TIGRS, are United States Government securities. However, the Trust has been
advised that the staff of the Securities and Exchange Commission's Division
of Investment Management does not consider these to be United States
Government securities, as defined under the Investment Company Act of 1940,
as amended.
For purposes of the Funds' investment restrictions, the issuer of a
tax-exempt security is deemed to be the entity (public or private) ultimately
responsible for the payment of the principal of and interest on the security.
With respect to the International Equity Fund, as a matter of
nonfundamental policy, to the extent permitted under applicable law, the
above restrictions do not apply to the following investments ("OECD
investments"): (i) any security issued by or the payment of principal and
interest on which is guaranteed by the government of any member state of the
Organization for Economic Cooperation and Development ("OECD country"); (ii)
any fixed income security issued in any OECD country by any public or local
authority or nationalized industry or undertaking of any OECD country or
anywhere in the world by the International Bank for Reconstruction and
Development, European Investment Bank, Asian Development Bank or any body
which is, in the Trustees' opinion, of similar standing. However, no
investment may be made in any OECD investment of any one issue if that would
result in the value of the Fund's holding of that issue exceeding 30%
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of the net asset value of the Fund and, if the Fund's portfolio consists only
of OECD investments, those OECD investments shall be of at least six
different issues.
In order to permit the sale of its shares in certain states, a Fund may
make commitments more restrictive than the investment policies and
limitations described above and in its Prospectus. Should a Fund determine
that any such commitment is no longer in its best interests, it will revoke
the commitment by terminating sales of its shares in the state involved. In
order to comply with certain federal and state statutes and regulatory
policies, as a matter of operating policy, each Fund will not: (i) invest
more than 5% of its assets in companies which, including predecessors, have a
record of less than three years' continuous operation, except for the Small
Cap Equity Fund which may invest up to 15% of its assets in such companies,
(ii) invest in warrants, valued at the lower of cost or market, in excess of
5% of the value of its net assets, and no more than 2% of such value may be
warrants which are not listed on the New York or American Stock Exchanges, or
(iii) purchase or retain in its portfolio any securities issued by an issuer
any of whose officers, directors, trustees or security holders is an officer
or Trustee of the Trust or is an officer or director of the adviser, if after
the purchase of the securities of such issuer by the Fund one or more of such
persons owns beneficially more than 1/2 of 1% of the shares or securities, or
both, all taken at market value, of such issuer, and such persons owning more
than 1/2 of 1% of such shares or securities together own beneficially more
than 5% of such shares or securities, or both, all taken at market value.
If a percentage or rating restriction on investment or use of assets set
forth herein or in a Prospectus is adhered to at the time a transaction is
effected, later changes in percentage resulting from any cause other than
actions by a Fund will not be considered a violation. If the value of a
Fund's holdings of illiquid securities at any time exceeds the percentage
limitation applicable at the time of acquisition due to subsequent
fluctuations in value or other reasons, the Board of Trustees will consider
what actions, if any, are appropriate to maintain adequate liquidity.
Portfolio Transactions and Brokerage Allocation
Specific decisions to purchase or sell securities for a Fund are made by a
portfolio manager who is an employee of the adviser or sub-adviser to such
Fund and who is appointed and supervised by senior officers of such adviser
or sub-adviser. Changes in a Fund's investments are reviewed by the Board of
Trustees of the Trust. The portfolio managers may serve other clients of the
advisers in a similar capacity.
The frequency of a Fund's portfolio transactions--the portfolio turnover
rate--will vary from year to year depending upon market conditions. Because a
high turnover rate may increase transaction costs and the possibility of
taxable short-term gains, the advisers will weigh the added costs of
short-term investment against anticipated gains. Each Fund will engage in
portfolio trading if its advisers believe a transaction, net of costs
(including custodian charges), will help it achieve its investment objective.
Funds investing in both equity and debt securities apply this policy with
respect to both the equity and debt portions of their portfolios.
For the fiscal year ending October 31, 1997, the annual rates of portfolio
turnover for the Balanced Fund, Bond Fund, Emerging Growth Fund, Equity
Income Fund, Intermediate Bond Fund, International Equity Fund, Large Cap
Equity Fund, Large Cap Growth Fund, Short-Term Bond Fund and Small Cap Value
Fund are expected not to exceed 75%, 150%, 100%, 50%, 150%, 100%, 75%, 50%,
200% and 50%, respectively.
Under the advisory agreement and the sub-advisory agreements, the adviser
and sub-advisers shall use their 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 and Portfolios. In
assessing the best overall terms available for any transaction, the adviser
and sub-advisers consider all factors they deem 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 or sub-advisers, and the
reasonableness of the commissions, if any, both for the specific transaction
and on a continuing basis. The adviser and sub-advisers are not required to
obtain the lowest commission or the best net price for any Fund
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on any particular transaction, and are not required to execute any order in a
fashion either preferential to any Fund relative to other accounts they
manage or otherwise materially adverse to such other accounts.
Debt securities are traded principally in the over-the-counter market
through dealers acting on their own account and not as brokers. In the case
of securities traded in the over-the-counter market (where no stated
commissions are paid but the prices include a dealer's markup or markdown),
the adviser or sub- adviser to a Fund normally seeks to deal directly with
the primary market makers unless, in its opinion, best execution is available
elsewhere. In the case of securities purchased from underwriters, the cost of
such securities generally includes a fixed underwriting commission or
concession. From time to time, soliciting dealer fees are available to the
adviser or sub-adviser on the tender of a Fund's portfolio securities in
so-called tender or exchange offers. Such soliciting dealer fees are in
effect recaptured for a Fund by the adviser and sub-advisers. At present, no
other recapture arrangements are in effect.
Under the advisory and sub-advisory agreements and as permitted by Section
28(e) of the Securities Exchange Act of 1934, the adviser or sub-advisers may
cause the Funds to pay a broker-dealer which provides brokerage and research
services to the adviser or sub-advisers, the Funds and/or other accounts for
which they exercise investment discretion an amount of commission for
effecting a securities transaction for a Fund in excess of the amount other
broker-dealers would have charged for the transaction if they determine in
good faith that the greater commission is reasonable in relation to the value
of the brokerage and research services provided by the executing
broker-dealer viewed in terms of either a particular transaction or their
overall responsibilities to accounts over which they exercise investment
discretion. Not all of such services are useful or of value in advising the
Funds. The adviser and sub-advisers report to the Board of Trustees regarding
overall commissions paid by the Funds and their reasonableness in relation to
the benefits to the Funds. The term "brokerage and research services"
includes advice as to the value of securities, the advisability of investing
in, purchasing or selling securities, and the availability of securities or
of purchasers or sellers of securities, furnishing analyses and reports
concerning issues, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts, and effecting securities
transactions and performing functions incidental thereto such as clearance
and settlement.
The management fees that the Funds pay to the adviser will not be reduced
as a consequence of the adviser's or sub-advisers' receipt of brokerage and
research services. To the extent the Funds' portfolio transactions are used
to obtain such services, the brokerage commissions paid by the Funds will
exceed those that might otherwise be paid by an amount which cannot be
presently determined. Such services generally would be useful and of value to
the adviser or sub-advisers in serving one or more of their other clients
and, conversely, such services obtained by the placement of brokerage
business of other clients generally would be useful to the adviser and
sub-advisers in carrying out their obligations to the Funds. While such
services are not expected to reduce the expenses of the adviser or
sub-advisers, they would, through use of the services, avoid the additional
expenses which would be incurred if they should attempt to develop comparable
information through their own staffs.
In certain instances, there may be securities that are suitable for one or
more of the Funds as well as one or more of the adviser's or sub-advisers'
other clients. Investment decisions for the Funds and for other clients are
made with a view to achieving their respective investment objectives. It may
develop that the same investment decision is made for more than one client or
that a particular security is bought or sold for only one client even though
it might be held by, or bought or sold for, other clients. Likewise, a
particular security may be bought for one or more clients when one or more
clients are selling that same security. Some simultaneous transactions are
inevitable when several clients receive investment advice from the same
investment adviser, particularly when the same security is suitable for the
investment objectives of more than one client. In executing portfolio
transactions for a Fund, the adviser or sub-advisers 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
their other clients if, in the adviser's or sub-advisers' 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 require-
19
<PAGE>
ments, 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. When two or more Funds or other clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable
to each. It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security as far as the Funds
are concerned. However, it is believed that the ability of the Funds to
participate in volume transactions will generally produce better executions
for the Funds.
PERFORMANCE INFORMATION
From time to time, a Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based
on past investment results, it should not be considered as an indication or
representation of the performance of a Fund in the future. From time to time,
the performance and yield of a Fund may be quoted and compared to those of
other mutual funds with similar investment objectives, unmanaged investment
accounts, including savings accounts, or other similar products and to stock
or other relevant indices or to rankings prepared by independent services or
other financial or industry publications that monitor the performance of
mutual funds. For example, the performance of a Fund may be compared to data
prepared by Lipper Analytical Services, Inc. or Morningstar Mutual Funds on
Disc, widely recognized independent services which monitor the performance of
mutual funds. Performance and yield data as reported in national financial
publications including, but not limited to, Money Magazine, Forbes, Barron's,
The Wall Street Journal and The New York Times, or in local or regional
publications, may also be used in comparing the performance and yield of a
Fund. A Fund's performance may be compared with indices such as the Lehman
Brothers Government/Corporate Bond Index, the Lehman Brothers Government Bond
Index, the Lehman Government Bond 1-3 Year Index and the Lehman Aggregate
Bond Index; the S&P 500 Index, the Dow Jones Industrial Average or any other
commonly quoted index of common stock prices; and the Russell 2000 Index and
the NASDAQ Composite Index. Additionally, a Fund may, with proper
authorization, reprint articles written about such Fund and provide them to
prospective shareholders.
A Fund may provide period and average annual "total rates of return." The
"total rate of return" refers to the change in the value of an investment in
a Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period.
One-, five-, and ten-year periods will be shown, unless the Fund has been in
existence for a shorter-period.
Unlike some bank deposits or other investments which pay a fixed yield for
a stated period of time, the yields and the net asset values of shares of a
Fund will vary based on market conditions, the current market value of the
securities held by the Fund and changes in the Fund's expenses. The advisers,
the Administrator, the Distributor and other service providers may
voluntarily waive a portion of their fees on a month-to-month basis. In
addition, the Distributor may assume a portion of a Fund's operating expenses
on a month-to-month basis. These actions would have the effect of increasing
the net income (and therefore the yield and total rate of return) of shares
of the Fund during the period such waivers are in effect. These factors and
possible differences in the methods used to calculate the yields and total
rates of return should be considered when comparing the yields or total rates
of return of shares of a Fund to yields and total rates of return published
for other investment companies and other investment vehicles .
In connection with the conversion of various common trust funds maintained
by Chase into the Vista Select funds (the "CTF Conversion"), the Balanced
Fund was established to receive the assets of The Balanced Fund of Chemical
Bank, the Bond Fund was established to receive the assets of The Taxable Bond
Fund of Chemical Bank and the Trinity Bond Fund and Fixed Income Fund of The
Chase Manhattan Bank, the Emerging Growth Fund was established to receive the
assets of the Emerging Growth Fund of The Chase Manhattan Bank, the Equity
Income Fund was established to receive the assets of The Equity Income Fund
20
<PAGE>
of Chemical Bank and the Equity Income Fund of The Chase Manhattan Bank, the
Intermediate Bond Fund was established to receive the assets of The
Intermediate-Term Taxable Bond Fund of Chemical Bank, the International Equity
Fund was established to receive the assets of The International Equity Fund of
Chemical Bank and the International Equity Fund of The Chase Manhattan Bank, the
Large Cap Equity Fund was established to receive the assets of the Trinity
Equity Fund and Intrinsic Value Equity Fund of The Chase Manhattan Bank, the
Large Cap Growth Fund was established to receive the assets of The Core Equity
Fund of Chemical Bank, the Short-Term Bond Fund was established to receive the
assets of the Short-Term Bond Fund of The Chase Manhattan Bank and the Small Cap
Value Fund was established to receive the assets of The Smaller Companies
Equities Fund of Chemical Bank.
Performance results presented for the Balanced Fund, Bond Fund, Emerging
Growth Fund, Equity Income Fund, Intermediate Bond Fund, International Equity
Fund, Large Cap Equity Fund, Large Cap Growth Fund, Short-Term Bond Fund and
Small Cap Value Fund will be based upon the performance of The Balanced Fund
of Chemical Bank, the Fixed Income Fund of The Chase Manhattan Bank, the
Emerging Growth Fund of The Chase Manhattan Bank, the Equity Income Fund of
The Chase Manhattan Bank, The Intermediate-Term Taxable Bond Fund of Chemical
Bank, The International Equity Fund of Chemical Bank, the Intrinsic Value
Equity Fund of The Chase Manhattan Bank, The Core Equity Fund of Chemical
Bank, the Short-Term Bond Fund of The Chase Manhattan Bank and The Smaller
Companies Equities Fund of Chemical Bank, respectively, for periods prior to
the consummation of the CTF Conversion.
Advertising or communications to shareholders may contain the views of the
advisers as to current market, economic, trade and interest rate trends, as
well as legislative, regulatory and monetary developments, and may include
investment strategies and related matters believed to be of relevance to a
Fund.
Advertisements for the Vista funds may include references to the asset
size of other financial products made available by Chase, such as the
offshore assets of other funds.
Total Rate of Return
A Fund's or class' total rate of return for any period will be calculated
by (a) dividing (i) the sum of the net asset value per share on the last day
of the period and the net asset value per share on the last day of the period
of shares purchasable with dividends and capital gains declared during such
period with respect to a share held at the beginning of such period and with
respect to shares purchased with such dividends and capital gains
distributions, by (ii) the public offering price per share on the first day
of such period, and (b) subtracting 1 from the result. The average annual
rate of return quotation will be calculated by (x) adding 1 to the period
total rate of return quotation as calculated above, (y) raising such sum to a
power which is equal to 365 divided by the number of days in such period, and
(z) subtracting 1 from the result.
The average annual total rate of return figures for the following Funds,
reflecting the initial investment and reinvested dividends (but excluding the
effects of any applicable sales charges) for the one, five and ten year
periods ended October 31, 1996, and for the period from commencement of
business operations of each such Fund to , 1996, were as follows:
21
<PAGE>
<TABLE>
<CAPTION>
One Five Ten Since Date of
Fund Year Years Years Inception Inception
- ------------------------- ---- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Balanced Fund
Bond Fund
Emerging Growth Fund
Equity Income Fund
Intermediate Bond Fund
International Equity Fund
Large Cap Equity Fund
Large Cap Growth Fund
Short-Term Bond Fund
Small Cap Value Fund
</TABLE>
- ----------
Performance presented in the table above and in each table that follows the
Funds is based upon the performance of their respective predecessor funds (which
had fiscal years ending on , 1996) for periods prior to the consummation of the
CTF Reorganization. Performance presented for each of these Funds for periods
prior to the consummation of the CTF Reorganization is based on the historical
performance of shares of its predecessor fund, adjusted to reflect historical
expenses at the levels indicated (absent reimbursements) in the Expense Summary
for that Fund as disclosed in its prosepctus.
The Funds may also from time to time include in advertisements or other
communications a total return figure that is not calculated according to the
formula set forth above in order to compare more accurately the performance
of a Fund with other measures of investment return.
Yield Quotations
Any current "yield" quotation for a Fund shall consist of an annualized
hypothetical yield, carried at least to the nearest hundredth of one percent,
based on a thirty calendar day period and shall be calculated by (a) raising
to the sixth power the sum of 1 plus the quotient obtained by dividing the
Fund's net investment income earned during the period by the product of the
average daily number of shares outstanding during the period that were
entitled to receive dividends and the maximum offering price per share on the
last day of the period, (b) subtracting 1 from the result, and (c)
multiplying the result by 2.
The yields of the shares of the Funds for the thirty-day period ended
, 1996 were as follows:
---
Balanced Fund %
Bond Fund %
Emerging Growth Fund %
Equity Income Fund %
Intermediate Bond Fund %
International Equity Fund %
Large Cap Equity Fund %
Large Cap Growth Fund %
Short-Term Bond Fund %
Small Cap Value Fund %
- ----------
Performance presented in the table above and in each table that follows the
Funds is based upon the performance of their respective predecessor funds (which
had fiscal years ending on , 1996) for periods prior to the consummation of the
CTF Reorganization. Performance presented for each of these Funds for periods
prior to the consummation of the CTF Reorganization is based on the historical
performance of shares of its predecessor fund, adjusted to reflect historical
expenses at the levels indicated (absent reimbursements) in the Expense Summary
for that Fund as disclosed in its prospectus.
22
<PAGE>
Advertisements for the Funds may include references to the asset size of
other financial products made available by Chase, such as the offshore assets
of other funds advised by Chase.
Non-Standardized Performance Results
The table below reflects the net change in the value of an assumed initial
investment of $10,000 in the Funds for the period from the commencement date
of business of the predecessor common trust fund for each such Fund (i.e.,
, 19 for the Balanced Fund, , 19 for the Bond
Fund, , 19 for the Emerging Growth Fund, , 19
for the Equity Income Fund, , 19 for the Intermediate Bond
Fund, , 19 for the International Equity Fund,
, 19 for the Large Cap Equity Fund, , 19 for
the Large Cap Growth Fund, , 19 for the Short-Term Bond Fund
and , 19 for the Small Cap Value Fund) through October 31,
1996. The values reflect an assumption that capital gain distributions and
income dividends, if any, have been invested in additional shares of the same
class. From time to time, the Funds may provide these performance results in
addition to the total rate of return quotations required by the Securities
and Exchange Commission. As discussed more fully in the Prospectuses, neither
these performance results, nor total rate of return quotations, should be
considered as representative of the performance of the Funds in the future.
These factors and the possible differences in the methods used to calculate
performance results and total rates of return should be considered when
comparing such performance results and total rate of return quotations of the
Funds with those published for other investment companies and other
investment vehicles.
<TABLE>
<CAPTION>
Value of Value of
Initial Capital Value of
$10,000 Gains Reinvested
Investment Distributions Dividends Total Value
- ------------------------- ---------- ------------- ---------- -----------
<S> <C> <C> <C> <C>
Balanced Fund
Bond Fund
Emerging Growth Fund
Equity Income Fund
Intermediate Bond Fund
International Equity Fund
Large Cap Equity Fund
Large Cap Growth Fund
Short-Term Bond Fund
Small Cap Value Fund
</TABLE>
DETERMINATION OF NET ASSET VALUE
As of the date of this Statement of Additional Information, the New York
Stock Exchange is open for trading every weekday except for the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. In addition
to the days listed above (other then Good Friday), Chase is closed for
business on the following holidays: Martin Luther King Day, Columbus Day and
Veteran's Day. Since the International Equity Fund invests in securities
primarily listed on foreign exchanges which trade on Saturdays or other
customary United States national business holidays on which the Fund does not
price, the Fund's portfolio will trade and the net asset value of the Fund's
shares may be significantly affected on days when the investor has no access
to the Fund.
Equity securities in a Fund's portfolio are valued at the last sale price
on the exchange on which they are primarily traded or on the NASDAQ National
Market System, or at the last quoted bid price for securities in which there
were no sales during the day or for other unlisted (over-the-counter)
securities not reported on the NASDAQ National Market System. Bonds and other
fixed income securities (other than short-term obligations, but including
listed issues) in a Fund's portfolio are valued on the basis of valuations
furnished
23
<PAGE>
by a pricing service, the use of which has been approved by the Board of
Trustees. In making such valuations, the pricing service utilizes both
dealer-supplied valuations and electronic data processing techniques that
take into account appropriate factors such as institutional-size trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data, without exclusive
reliance upon quoted prices or exchange or over-the-counter prices, since
such valuations are believed to reflect more accurately the fair value of
such securities. Short-term obligations which mature in 60 days or less are
valued at amortized cost, which constitutes fair value as determined by the
Board of Trustees. Futures and option contracts that are traded on
commodities or securities exchanges are normally valued at the settlement
price on the exchange on which they are traded. Portfolio securities (other
than short-term obligations) for which there are no such quotations or
valuations are valued at fair value as determined in good faith by or at the
direction of the Board of Trustees.
Interest income on long-term obligations in a Fund's portfolio is
determined on the basis of coupon interest accrued plus amortization of
discount (the difference between acquisition price and stated redemption
price at maturity) and premiums (the excess of purchase price over stated
redemption price at maturity). Interest income on short-term obligations is
determined on the basis of interest and discount accrued less amortization of
premium.
PURCHASES AND REDEMPTIONS
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Funds' Transfer Agent may defer
acting on a financial institution's instructions until it has received them
in proper form. In addition, the privileges described in the Prospectuses are
not available until a completed and signed account application has been
received by the Transfer Agent.
Subject to compliance with applicable regulations, each Fund has reserved
the right to pay the redemption price of its Shares, either totally or
partially, by a distribution in kind of readily marketable portfolio
securities (instead of cash). The securities so distributed would be valued
at the same amount as that assigned to them in calculating the net asset
value for the shares being sold. If a shareholder received a distribution in
kind, the shareholder could incur brokerage or other charges in converting
the securities to cash. The Trust has filed an election under Rule 18f-1
committing to pay in cash all redemptions by a shareholder of record up to
amounts specified by the rule (approximately $250,000).
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described
in the respective Fund's Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussions here and in each Fund's Prospectus are not intended as
substitutes for careful tax planning.
Qualification as a Regulated Investment Company
Each Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
As a regulated investment company, each Fund is not subject to federal income
tax on the portion of its net investment income (i.e., its investment company
taxable income, as that term is defined in the Code, without a deduction for
dividends paid) and net capital gain (i.e., the excess of net long-term
capital gains over net short-term capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its net investment
income for the taxable year (the "Distribution Requirement"), and satisfies
certain other requirements of the Code that are described below.
Distributions by a Fund made during the taxable year or, under specified
circumstances, within twelve months after the close of the taxable year, will
be considered distributions of income and gains of the taxable year and can
therefore satisfy the Distribution Requirement. Under the current view of the
Internal Revenue Ser-
24
<PAGE>
vice, if a Fund invests all of its assets in another open-end, management
investment company which is classified as a partnership for federal income
tax purposes, such Fund will be deemed to own a proportionate share of the
income of the portfolio into which it contributes all of its assets for
purposes of determining whether such Fund satisfies the Distribution
Requirement and the other requirements necessary to qualify as a regulated
investment company (e.g., Income Requirement (hereinafter defined), etc.).
In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency gains are directly related to the
regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business
of investing in such stock, securities or currencies (the "Income
Requirement"); and (2) derive less than 30% of its gross income (exclusive of
certain gains on designated hedging transactions that are offset by realized
or unrealized losses on offsetting positions) from the sale or other
disposition of stock, securities or foreign currencies (or options, futures
or forward contracts thereon) held for less than three months (the
"Short-Short Gain Test"). However, foreign currency gains, including those
derived from options, futures and forwards, will not in any event be
characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options
or futures thereon). Because of the Short-Short Gain Test, a Fund may have to
limit the sale of appreciated securities that it has held for less than three
months. However, the Short-Short Gain Test will not prevent a Fund from
disposing of investments at a loss, since the recognition of a loss before
the expiration of the three-month holding period is disregarded for this
purpose. Interest (including original issue discount) received by a Fund at
maturity or upon the disposition of a security held for less than three
months will not be treated as gross income derived from the sale or other
disposition of such security within the meaning of the Short-Short Gain Test.
However, income that is attributable to realized market appreciation will be
treated as gross income from the sale or other disposition of securities for
this purpose.
In general, gain or loss recognized by a Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by a Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an
option with respect thereto (but only to the extent attributable to changes
in foreign currency exchange rates), and gain or loss recognized on the
disposition of a foreign currency forward contract, futures contract, option
or similar financial instrument, or of foreign currency itself, except for
regulated futures contracts or non-equity options subject to Code Section
1256, will generally be treated as ordinary income or loss.
Further, the Code also treats as ordinary income, a portion of the capital
gain attributable to a transaction where substantially all of the return
realized is attributable to the time value of a Fund's net investment in the
transaction and: (1) the transaction consists of the acquisition of property
by such Fund and a contemporaneous contract to sell substantially identical
property in the future; (2) the transaction is a straddle within the meaning
of Section 1092 of the Code; (3) the transaction is one that was marketed or
sold to such Fund on the basis that it would have the economic
characteristics of a loan but the interest-like return would be taxed as
capital gain; or (4) the transaction is described as a conversion transaction
in the Treasury Regulations. The amount of the gain recharacterized generally
will not exceed the amount of the interest that would have accrued on the net
investment for the relevant period at a yield equal to 120% of the federal
long-term, mid-term, or short-term rate, depending upon the type of
instrument at issue, reduced by an amount equal to: (1) prior inclusions of
ordinary income items from the conversion transaction; and (2) the
capitalized interest on acquisition indebtedness under Code Section 263(g).
Built-in losses will be preserved where a Fund has a built-in loss with
respect to property that becomes a part of a conversion transaction. No
authority exists that indicates that the converted character of the income
will not be passed to a Fund's shareholders.
25
<PAGE>
In general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or short-term,
the holding period of the asset may be affected if: (1) the asset is used to
close a "short sale" (which includes for certain purposes the acquisition of a
put option) or is substantially identical to another asset so used, (2) the
asset is otherwise held by the Fund as part of a "straddle" (which term
generally excludes a situation where the asset is stock and the Fund grants a
qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto); or (3) the asset is stock and the Fund
grants an in-the- money qualified covered call option with respect thereto.
However, for purposes of the Short-Short Gain Test, the holding period of the
asset disposed of may be reduced only in the case of clause (1) above. In
addition, a Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by a Fund on the lapse of, or any gain or loss recognized
by a Fund from a closing transaction with respect to, an option written by the
Fund will be treated as a short-term capital gain or loss. For purposes of the
Short-Short Gain Test, the holding period of an option written by a Fund will
commence on the date it is written and end on the date it lapses or the date a
closing transaction is entered into. Accordingly, a Fund may be limited in its
ability to write options which expire within three months and to enter into
closing transactions at a gain within three months of the writing of options.
Transactions that may be engaged in by certain of the Funds (such as
regulated futures contracts, certain foreign currency contracts, and options
on stock indexes and futures contracts) will be subject to special tax
treatment as "Section 1256 contracts." Section 1256 contracts are treated as
if they are sold for their fair market value on the last business day of the
taxable year, even though a taxpayer's obligations (or rights) under such
contracts have not terminated (by delivery, exercise, entering into a closing
transaction or otherwise) as of such date. Any gain or loss recognized as a
consequence of the year-end deemed disposition of Section 1256 contracts is
taken into account for the taxable year together with any other gain or loss
that was previously recognized upon the termination of Section 1256 contracts
during that taxable year. Any capital gain or loss for the taxable year with
respect to Section 1256 contracts (including any capital gain or loss arising
as a consequence of the year-end deemed sale of such contracts) is generally
treated as 60% long- term capital gain or loss and 40% short-term capital
gain or loss. A Fund, however, may elect not to have this special tax
treatment apply to Section 1256 contracts that are part of a "mixed straddle"
with other investments of the Fund that are not Section 1256 contracts. The
Internal Revenue Service (the "IRS") has held in several private rulings that
gains arising from Section 1256 contracts will be treated for purposes of the
Short-Short Gain Test as being derived from securities held for not less than
three months if the gains arise as a result of a constructive sale under Code
Section 1256.
The International Equity Fund may enter into notional principal contracts,
including interest rate swaps, caps, floors and collars. Under Treasury
Regulations, in general, the net income or deduction from a notional
principal contract for a taxable year is included in or deducted from gross
income for that taxable year. The net income or deduction from a notional
principal contract for a taxable year equals the total of all of the periodic
payments (generally, payments that are payable or receivable at fixed
periodic intervals of one year or less during the entire term of the
contract) that are recognized from that contract for the taxable year and all
of the non-periodic payments (including premiums for caps, floors and
collars) that are recognized from that contract for the taxable year. No
portion of a payment by a party to a notional principal contract is
recognized prior to the first year to which any portion of a payment by the
counterparty relates. A periodic payment is recognized ratably over the
period to which it relates. In general, a non-periodic payment must be
recognized over the term of the notional principal contract in a manner that
reflects the economic substance of the contract. A non-periodic payment that
relates to an interest rate swap, cap, floor or collar shall be recognized
over the term of the contract by allocating it in accordance with the values
of a series of cash- settled forward or option contracts that reflect the
specified index and notional principal amount upon which the notional
principal contract is based under an alternative method contained in the
proposed regulations.
The International Equity Fund may purchase securities of certain foreign
investment funds or trusts which constitute passive foreign investment
companies ("PFICs") for federal income tax purposes. If the Fund
26
<PAGE>
invests in a PFIC, it may elect to treat the PFIC as a qualifying electing
fund (a "QEF") in which event the Fund will each year have ordinary income
equal to its pro rata share of the PFIC's ordinary earnings for the year and
long-term capital gain equal to its pro rata share of the PFIC's net capital
gain for the year, regardless of whether the Fund receives distributions of
any such ordinary earnings or net capital gain from the PFIC. If the Fund
does not (because it is unable to, chooses not to or otherwise) elect to
treat the PFIC as a QEF, then in general (1) any gain recognized by the Fund
upon sale or other disposition of its interest in the PFIC or any excess
distribution received by the Fund from the PFIC will be allocated ratably
over the Fund's holding period of its interest in the PFIC, (2) the portion
of such gain or excess distribution so allocated to the year in which the
gain is recognized or the excess distribution is received shall be included
in the Fund's gross income for such year as ordinary income (and the
distribution of such portion by the Fund to shareholders will be taxable as
an ordinary income dividend, but such portion will not be subject to tax at
the Fund level), (3) the Fund shall be liable for tax on the portions of such
gain or excess distribution so allocated to prior years in an amount equal
to, for each such prior year, (i) the amount of gain or excess distribution
allocated to such prior year multiplied by the highest tax rate (individual
or corporate) in effect for such prior year plus (ii) interest on the amount
determined under clause (i) for the period from the due date for filing a
return for such prior year until the date for filing a return for the year in
which the gain is recognized or the excess distribution is received at the
rates and methods applicable to underpayments of tax for such period, and (4)
the distribution by the Fund to shareholders of the portions of such gain or
excess distribution so allocated to prior years (net of the tax payable by
the Fund thereon) will again be taxable to the shareholders as an ordinary
income dividend.
Under proposed Treasury Regulations issued in 1992 (but not yet
effective), the International Equity Fund could elect to recognize as gain
the excess as of the last day of its taxable year, of the fair market value
of each share of PFIC stock over the Fund's adjusted tax basis in that share
("mark-to-market gain"). Such mark-to-market gain will be included by the
Fund as ordinary income, such gain will not be subject to the Short-Short
Gain Test, and the Fund's holding period with respect to such PFIC stock
commences on the first day of the next taxable year. If the Fund makes such
election in the first taxable year it holds PFIC stock, the Fund will include
ordinary income from any mark-to-market gain, if any, and will not incur the
tax described in the previous paragraph.
Treasury Regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess
of net long-term capital gain over net short-term capital loss) for any
taxable year, to elect (unless it has made a taxable year election for excise
tax purposes as discussed below) to treat all or any part of any net capital
loss, any net long-term capital loss or any net foreign currency loss
incurred after October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, each Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of a Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which
the Fund has not invested more than 5% of the value of the Fund's total
assets in securities of such issuer and as to which the Fund does not hold
more than 10% of the outstanding voting securities of such issuer), and no
more than 25% of the value of its total assets may be invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are engaged in the same or similar
trades or businesses. Generally, an option (call or put) with respect to a
security is treated as issued by the issuer of the security not the issuer of
the option. However, with regard to forward currency contracts, there does
not appear to be any formal or informal authority which identifies the issuer
of such instrument. For purposes of asset diversification testing,
obligations issued or guaranteed by agencies or instrumentalities of the U.S.
Government such as the Federal Agricultural Mortgage Corporation, the Farm
Credit System Financial Assistance Corporation, a Federal Home Loan Bank, the
Federal Home Loan Mortgage Association, the Government National Mortgage
Corporation, and the Student Loan Marketing Association are treated as U.S.
Government Securities.
27
<PAGE>
If for any taxable year a Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98%
of ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or,
at the election of a regulated investment company having a taxable year
ending November 30 or December 31, for its taxable year (a "taxable year
election"). The balance of such income must be distributed during the next
calendar year. For the foregoing purposes, a regulated investment company is
treated as having distributed any amount on which it is subject to income tax
for any taxable year ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall: (1)
reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year; and (2) exclude
foreign currency gains and losses incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar
year (and, instead, include such gains and losses in determining ordinary
taxable income for the succeeding calendar year).
Each Fund intends to make sufficient distributions or deemed distributions
of its ordinary taxable income and capital gain net income prior to the end
of each calendar year to avoid liability for the excise tax. However,
investors should note that a Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid
excise tax liability.
Fund Distributions
Each Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be
taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes, but they will qualify for the 70%
dividends-received deduction for corporations only to the extent discussed
below.
A Fund may either retain or distribute to shareholders its net realized
capital gain for each taxable year. Each Fund currently intends to distribute
any such amounts. If net capital gain is distributed and designated as a
capital gain dividend, it will be taxable to shareholders as long-term
capital gain, regardless of the length of time the shareholder has held his
shares or whether such gain was recognized by the Fund prior to the date on
which the shareholder acquired his shares.
Conversely, if a Fund elects to retain its net realized capital gain, the
Fund will be taxed thereon (except to the extent of any available capital
loss carryovers) at the 35% corporate tax rate. If a Fund elects to retain
its net capital gain, it is expected that the Fund also will elect to have
shareholders of record on the last day of its taxable year treated as if each
received a distribution of his pro rata share of such gain, with the result
that each shareholder will be required to report his pro rata share of such
gain on his tax return as long-term capital gain, will receive a refundable
tax credit for his pro rata share of tax paid by the Fund on the gain, and
will increase the tax basis for his shares by an amount equal to the deemed
distribution less the tax credit.
With respect to each Fund other than International Equity Fund, ordinary
income dividends paid by a Fund with respect to a taxable year will qualify
for the 70% dividends- received deduction generally available to corporations
to the extent of the amount of qualifying dividends received by a Fund from
domestic corporations for the taxable year. A dividend received by a Fund
will not be treated as a qualifying dividend (1) if it has been received with
respect to any share of stock that the Fund has held for less than 46 days
(91 days in the case of certain preferred stock), excluding for this purpose
under the rules of Code Section 246(c)
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<PAGE>
(3) and (4): (i) any day more than 45 days (or 90 days in the case of certain
preferred stock) after the date on which the stock becomes ex-dividend and
(ii) any period during which a Fund has an option to sell, is under a
contractual obligation to sell, has made and not closed a short sale of, is
the grantor of a deep-in- the-money or otherwise nonqualified option to buy,
or has otherwise diminished its risk of loss by holding other positions with
respect to, such (or substantially identical) stock; (2) to the extent that a
Fund is under an obligation (pursuant to a short sale or otherwise) to make
related payments with respect to positions in substantially similar or
related property; or (3) to the extent the stock on which the dividend is
paid is treated as debt-financed under the rules of Code Section 246A.
Moreover, the dividends-received deduction for a corporate shareholder may be
disallowed or reduced (1) if the corporate shareholder fails to satisfy the
foregoing requirements with respect to its shares of a Fund or (2) by
application of Code Section 246(b) which in general limits the
dividends-received deduction to 70% of the shareholder's taxable income
(determined without regard to the dividends-received deduction and certain
other items). In the case where a Fund invests all of its assets in a
Portfolio and the Fund satisfies the holding period rules pursuant to Code
Section 246(c) as to its interest in the Portfolio, a corporate shareholder
which satisfies the foregoing requirements with respect to its shares of the
Fund should receive the dividends-received deduction.
For purposes of the Corporate AMT and the environmental Superfund tax, the
corporate dividends- received deduction is not itself an item of tax
preference that must be added back to taxable income or is otherwise
disallowed in determining a corporation's AMT. However, corporate
shareholders will generally be required to take the full amount of any
dividend received from a Fund into account (without a dividends- received
deduction) in determining its adjusted current earnings.
Investment income that may be received by certain of the Funds from
sources within foreign countries may be subject to foreign taxes withheld at
the source. The United States has entered into tax treaties with many foreign
countries which entitle any such Fund to a reduced rate of, or exemption
from, taxes on such income. It is impossible to determine the effective rate
of foreign tax in advance since the amount of any such Fund's assets to be
invested in various countries is not known. If more than 50% of the value of
the International Equity Fund's total assets at the close of its taxable year
consists of the stock or securities of foreign corporations, the Fund may
elect to "pass through" to the Fund's shareholders the amount of foreign
taxes paid by such Fund. If the Fund so elects, each shareholder would be
required to include in gross income, even though not actually received, his
pro rata share of the foreign taxes paid by the Fund, but would be treated as
having paid his pro rata share of such foreign taxes and would therefore be
allowed to either deduct such amount in computing taxable income or use such
amount (subject to various Code limitations) as a foreign tax credit against
federal income tax (but not both). For purposes of the foreign tax credit
limitation rules of the Code, each shareholder would treat as foreign source
income his pro rata share of such foreign taxes plus the portion of dividends
received from the Fund representing income derived from foreign sources. No
deduction for foreign taxes could be claimed by an individual shareholder who
does not itemize deductions. Each shareholder should consult his own tax
advisor regarding the potential application of foreign tax credits.
Distributions by a Fund that do not constitute ordinary income dividends,
or capital gain dividends will be treated as a return of capital to the
extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares
received, determined as of the reinvestment date. In addition, if the net
asset value at the time a shareholder purchases shares of a Fund reflects
undistributed net investment income or recognized capital gain net income, or
unrealized appreciation in the value of the assets of the Fund, distributions
of such amounts will be taxable to the shareholder in the manner described
above, although such distributions economically constitute a return of
capital to the shareholder.
Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year
29
<PAGE>
and payable to shareholders of record on a specified date in such a month
will be deemed to have been received by the shareholders (and made by the
Fund) on December 31 of such calendar year if such dividends are actually
paid in January of the following year. Shareholders will be advised annually
as to the U.S. federal income tax consequences of distributions made (or
deemed made) during the year.
A Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of ordinary income dividends and capital gain dividends, and the
proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all,
(2) who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that it is not subject to backup withholding or that it
is a corporation or other "exempt recipient."
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the
shares. All or a portion of any loss so recognized may be disallowed if the
shareholder purchases other shares of the Fund within 30 days before or after
the sale or redemption. In general, any gain or loss arising from (or treated
as arising from) the sale or redemption of shares of a Fund will be
considered capital gain or loss and will be long- term capital gain or loss
if the shares were held for longer than one year. However, any capital loss
arising from the sale or redemption of shares held for six months or less
will be disallowed to the extent of the amount of exempt- interest dividends
received on such shares and (to the extent not disallowed) will be treated as
a long-term capital loss to the extent of the amount of capital gain
dividends received on such shares. For this purpose, the special holding
period rules of Code Section 246(c)(3) and (4) (discussed above in connection
with the dividends-received deduction for corporations) generally will apply
in determining the holding period of shares. Long-term capital gains of
noncorporate taxpayers are currently taxed at a maximum rate 11.6% lower than
the maximum rate applicable to ordinary income. Capital losses in any year
are deductible only to the extent of capital gains plus, in the case of a
noncorporate taxpayer, $3,000 of ordinary income.
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from a
Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from a Fund is not effectively connected with a U.S. trade
or business carried on by a foreign shareholder, ordinary income dividends
paid to a foreign shareholder will be subject to U.S. withholding tax at the
rate of 30% (or lower treaty rate) upon the gross amount of the dividend.
Such a foreign shareholder would generally be exempt from U.S. federal income
tax on gains realized on the sale of shares of the Fund, capital gain
dividends and exempt-interest dividends and amounts retained by the Fund that
are designated as undistributed capital gains. Furthermore, with respect to
the International Equity Fund, such a foreign shareholder may be subject to
U.S. withholding tax at the rate of 30% (or lower treaty rate) on the gross
income resulting from the Fund's election to treat any foreign taxes paid by
it as paid by its shareholders, but may not be allowed a deduction against
this gross income or a credit against this U.S. withholding tax for the
foreign shareholder's pro rata share of such foreign taxes which it is
treated as having paid.
If the income from a Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to
U.S. citizens or domestic corporations.
In the case of foreign noncorporate shareholders, a Fund may be required
to withhold U.S. federal income tax at a rate of 31% on distributions that
are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholders furnish the Fund with proper notification of
its foreign status.
30
<PAGE>
The tax consequences to a foreign shareholder entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign shareholders are urged to consult their own tax advisers with respect to
the particular tax consequences to them of an investment in a Fund, including
the applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax consequences
is based on the Code and the Treasury Regulations issued thereunder as in
effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions
may have a retroactive effect with respect to the transactions contemplated
herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are
urged to consult their tax advisers as to the consequences of these and other
state and local tax rules affecting investment in a Fund.
MANAGEMENT OF THE TRUST AND THE FUNDS OR PORTFOLIOS
Trustees and Officers
The Trustees and officers of the Trust and their principal occupations for
at least the past five years are set forth below. Their titles may have
varied during that period.
Fergus Reid, III--Chairman of the Trust. Chairman and Chief Executive
Officer, Lumelite Corporation, since September 1985; Trustee, Morgan Stanley
Funds. Age: 63. Address: 202 June Road, Stamford, CT 06903.
Richard E. Ten Haken--Trustee; Chairman of the Audit Committee. Formerly
District Superintendent of Schools, Monroe No. 2 and Orleans Counties, New
York; Chairman of the Board and President, New York State Teachers'
Retirement System. Age: 61. Address: 4 Barnfield Road, Pittsford, NY 14534.
William J. Armstrong--Trustee. Vice President and Treasurer,
Ingersoll-Rand Company. Age: 54. Address: 49 Aspen Way, Upper Saddle River,
NJ 07458.
John R.H. Blum--Trustee. Attorney in private practice; formerly, partner
in the law firm of Richards, O'Neil & Allegaert; Commissioner of Agriculture
- - State of Connecticut, 1992-1995. Age: 66. Address: 322 Main Street,
Lakeville, CT 06039.
Joseph J. Harkins--Trustee. Retired; Commercial Sector Executive and
Executive Vice President of The Chase Manhattan Bank, N.A. from 1985 through
1989. He has been employed by Chase in numerous capacities and offices since
1954. Director of Blessings Corporation, Jefferson Insurance Company of New
York, Monticello Insurance Company and National. Age: 64. Address: 257
Plantation Circle South, Ponte Vedra Beach, FL 32082.
*H. Richard Vartabedian--Trustee and President of the Trust; Chairman of
the Portfolios. Consultant, Republic Bank of New York; formerly, Senior
Investment Officer, Division Executive of the Investment Management Division
of The Chase Manhattan Bank, N.A., 1980 through 1991. Age: 60. Address: P.O.
Box 296, Beach Road, Hendrick's Head, Southport, ME 04576.
Stuart W. Cragin, Jr.--Trustee. Retired; formerly President, Fairfield
Testing Laboratory, Inc. He has previously served in a variety of marketing,
manufacturing and general management positions with Union Camp Corp., Trinity
Paper & Plastics Corp., and Conover Industries. Age: 63. Address: 108 Valley
Road, Cos Cob, CT 06807.
31
<PAGE>
Irving L. Thode--Trustee. Retired; formerly Vice President of Quotron
Systems. He has previously served in a number of executive positions with
Control Data Corp., including President of its Latin American Operations, and
General Manager of its Data Services business. Age: 64. Address: 80 Perkins
Road, Greenwich, CT 06830.
*W. Perry Neff--Trustee. Independent Financial Consultant; Director of
North America Life Assurance Co., Petroleum & Resources Corp. and The Adams
Express Co.; Formerly Director and Chairman of The Hanover Funds, Inc.;
Formerly Director, Chairman and President of The Hanover Investment Funds,
Inc. Age: 68. Address: RR 1 Box 102, Weston, VT 05181.
Roland R. Eppley, Jr.--Trustee. Retired; formerly President and Chief
Executive Officer, Eastern States Bankcard Association Inc. (1971-1988);
Director, Janel Hydraulics, Inc.; Formerly Director of The Hanover Funds,
Inc. Age: 63. Address: 105 Coventry Place, Palm Beach Gardens, FL 33418.
W.D. MacCallan--Trustee. Director of The Adams Express Co. and Petroleum &
Resources Corp.; formerly Chairman of the Board and Chief Executive Officer
of The Adams Express Co. and Petroleum & Resources Corp.; Formerly Director
of The Hanover Funds, Inc. and The Hanover Investment Funds, Inc. Age: 68.
Address: 624 East 45th Street, Savannah, GA 31405
Martin R. Dean--Treasurer and Assistant Secretary. Associate Director,
Accounting Services, BISYS Fund Services; formerly Senior Manager, KPMG Peat
Marwick (1987-1994). Age: 32. Address: 3435 Stelzer Road, Columbus, OH 43219.
Ann E. Bergin--Secretary. First Vice President, BISYS Fund Services, Inc.;
formerly, Senior Vice President, Administration, Concord Financial Group
(1991-1995); Assistant Vice President, Dreyfus Service Corporation
(1982-1991). Age: 35. Address: 125 West 55th Street, New York, NY 10019.
- ----------
* Asterisks indicate those Trustees that are "interested persons" (as defined
in the 1940 Act). Mr. Reid is not an interested person of the Trust's
investment advisers or principal underwriter, but may be deemed an
interested person of the Trust solely by reason of being an officer of the
Trust.
The Board of Trustees of the Trust presently has an Audit Committee. The
members of the Audit Committee are Messrs. Ten Haken (Chairman), Blum,
Cragin, Thode, Armstrong, Harkins, Reid and Vartabedian. The function of the
Audit Committee is to recommend independent auditors and monitor accounting
and financial matters.
The Board of Trustees of the Trust has established an Investment
Committee. The members of the Investment Committee are Messrs. Vartabedian
(Chairman) and Reid, as well as Leonard M. Spalding, President of Vista
Capital Management. The function of the Investment Committee is to review the
investment management process of the Trust.
Remuneration of Trustees and Certain Executive Officers:
Each Trustee is reimbursed for expenses incurred in attending each meeting
of the Board of Trustees or any committee thereof. Each Trustee who is not an
affiliate of the advisers is compensated for his or her services according to
a fee schedule which recognizes the fact that each Trustee also serves as a
Trustee of other investment companies advised by the advisers. Each Trustee
receives a fee, allocated among all investment companies for which the
Trustee serves, which consists of an annual retainer component and a meeting
fee component. Each Trustee of the Vista Funds receives a quarterly retainer
of $12,000 and an additional per meeting fee of $1,500. Members of committees
receive a meeting fee only if the committee meeting is held on a day other
than a day on which a regularly scheduled meeting is held. The Chairman of
the Trustees and the Chairman of the Investment Committee each receive a 50%
increment over regular Trustee total compensation for serving in such
capacities for all the investment companies advised by the adviser.
Vista Funds Retirement Plan for Eligible Trustees
The Trustees have instituted a Retirement Plan for Eligible Trustees (the
"Plan") pursuant to which each Trustee (who is not an employee of any of the
Funds advised by the advisers, the advisers, administrator
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<PAGE>
or distributor or any of their affiliates) may be entitled to certain
benefits upon retirement from the Board of Trustees. Pursuant to the Plan,
the normal retirement date is the date on which the eligible Trustee has
attained age 65 and has completed at least five years of continuous service
with one or more of the investment companies advised by the adviser
(collectively, the "Covered Funds"). Each Eligible Trustee is entitled to
receive from the Covered Funds an annual benefit commencing on the first day
of the calendar quarter coincident with or following his date of retirement
equal to 10% of the highest annual compensation received from the Covered
Funds multiplied by the number of such Trustee's years of service (not in
excess of 10 years) completed with respect to any of the Covered Funds. Such
benefit is payable to each eligible Trustee in monthly installments for the
life of the Trustee.
Set forth below in the table are the estimated annual benefits payable to
an eligible Trustee upon retirement assuming various compensation and years
of service classifications. As of September 30, 1996, the estimated credited
years of service for Messrs. Reid, Ten Haken, Armstrong, Blum, Harkins,
Vartabedian, Cragin, Thode, Neff, Eppley and MacCallan were 11, 11, 8, 11, 5,
3, 3, 3, 6, 7 and 6, respectively.
<TABLE>
<CAPTION>
Highest Annual Compensation Paid by All Vista Funds
---------------------------------------------------
<S> <C> <C> <C> <C>
$40,000 $45,000 $50,000 $55,000
Years of
Service Estimated Annual Benefits upon Retirement
- ---------- -------------------------------------------------
10 $40,000 $45,000 $50,000 $55,000
9 36,000 40,500 45,000 49,500
8 32,000 36,000 40,000 44,000
7 28,000 31,500 35,000 38,500
6 24,000 27,000 30,000 33,000
5 20,000 22,500 25,000 27,500
</TABLE>
The Trustees have also instituted a Deferred Compensation Plan for
Eligible Trustees (the "Deferred Compensation Plan") pursuant to which each
Trustee (who is not an employee of any of the Covered Funds, the advisers,
administrator or distributor or any of their affiliates) may enter into
agreements with the Covered Funds whereby payment of the Trustee's fees are
deferred until the payment date elected by the Trustee (or the Trustee's
termination of service). The deferred amounts are invested in shares of Vista
funds selected by the Trustee. The deferred amounts are paid out in a lump
sum or over a period of several years as elected by the Trustee at the time
of deferral. If a deferring Trustee dies prior to the distribution of amounts
held in the deferral account, the balance of the deferral account will be
distributed to the Trustee's designated beneficiary in a single lump sum
payment as soon as practicable after such deferring Trustee's death.
Messrs. Ten Haken, Thode and Vartabedian have each executed a deferred
compensation agreement for the 1996 calendar year and as of September 30,
1996 they had contributed $15,200, $39,500 and $59,250, respectively.
The Declaration of Trust provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with
the Trust, unless, as to liability to the Trust or its shareholders, it is
finally adjudicated that they engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in their
offices or with respect to any matter unless it is finally adjudicated that
they did not act in good faith in the reasonable belief that their actions
were in the best interest of the Trust. In the case of settlement, such
indemnification will not be provided unless it has been determined by a court
or other body approving the settlement or other disposition, or by a
reasonable determination based upon a review of readily available facts, by
vote of a majority of disinterested Trustees or in a written opinion of
independent counsel, that such officers or Trustees have not engaged in
willful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
As of October 1, 1996, the Trustees and officers as a group owned no
outstanding shares of any Fund.
33
<PAGE>
Adviser and Sub-Adviser
Chase acts as investment adviser to the Funds pursuant to an Investment
Advisory Agreement (the "Advisory Agreement"). Subject to such policies as
the Board of Trustees may determine, Chase is responsible for investment
decisions for the Funds. Pursuant to the terms of the Advisory Agreement,
Chase provides the Funds with such investment advice and supervision as it
deems necessary for the proper supervision of the Funds' investments. The
advisers continuously provide investment programs and determine from time to
time what securities shall be purchased, sold or exchanged and what portion
of the Funds' assets shall be held uninvested. The advisers to the Funds
furnish, at their own expense, all services, facilities and personnel
necessary in connection with managing the investments and effecting portfolio
transactions for the Funds. The Advisory Agreement for the Funds will
continue in effect from year to year only if such continuance is specifically
approved at least annually by the Board of Trustees or by vote of a majority
of a Fund's outstanding voting securities and by a majority of the Trustees
who are not parties to the Advisory Agreement or interested persons of any
such party, at a meeting called for the purpose of voting on such Advisory
Agreement.
Under the Advisory Agreement, the adviser may utilize the specialized
portfolio skills of all its various affiliates, thereby providing the Funds
with greater opportunities and flexibility in accessing investment expertise.
Pursuant to the terms of the Advisory Agreement and the sub-advisers'
agreements with the adviser, the adviser and sub-advisers are permitted to
render services to others. Each advisory agreement is terminable without
penalty by the Trust on behalf of the Funds on not more than 60 days', nor
less than 30 days', written notice when authorized either by a majority vote
of a Fund's shareholders or by a vote of a majority of the Board of Trustees
of the Trust, or by the adviser or sub-adviser on not more than 60 days', nor
less than 30 days', written notice, and will automatically terminate in the
event of its "assignment" (as defined in the 1940 Act). The advisory
agreements provide that the adviser or sub-adviser under such agreement shall
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution of
portfolio transactions for the respective Fund, except for wilful
misfeasance, bad faith or gross negligence in the performance of its duties,
or by reason of reckless disregard of its obligations and duties thereunder.
With respect to the Equity Funds, the equity research team of the adviser
looks for two key variables when analyzing stocks for potential investment by
equity portfolios: value and momentum. To uncover these qualities, the team
uses a combination of quantitative analysis, fundamental research and
computer technology to help identify undervalued stocks.
In the event the operating expenses of the Funds, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense
limitation applicable to the Funds imposed by the securities laws or
regulations thereunder of any state in which the shares of the Funds are
qualified for sale, as such limitations may be raised or lowered from time to
time, the adviser shall reduce its advisory fee (which fee is described
below) to the extent of its share of such excess expenses. The amount of any
such reduction to be borne by the adviser shall be deducted from the monthly
advisory fee otherwise payable with respect to the Funds during such fiscal
year; and if such amounts should exceed the monthly fee, the adviser shall
pay to a Fund its share of such excess expenses no later than the last day of
the first month of the next succeeding fiscal year.
Under the Advisory Agreement, Chase may delegate a portion of its
responsibilities to a sub-adviser. In addition, the Advisory Agreement
provides that Chase 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 of the Fund and are under the common control of Chase as
long as all such persons are functioning as part of an organized group of
persons, managed by authorized officers of Chase.
Chase, on behalf of the Funds (except the International Equity Fund), has
entered into an investment sub-advisory agreement with Chase Asset
Management, Inc. ("CAM"). With respect to the International
34
<PAGE>
Equity Fund, Chase has entered into an investment sub-advisory agreement with
Chase Asset Management (London) Limited ("CAM London"). With respect to the
day-to-day management of the Funds, under the sub- advisory agreements, the
sub-advisers make decisions concerning, and place all orders for, purchases
and sales of securities and helps maintain the records relating to such
purchases and sales. The sub-advisers may, in their discretion, provide such
services through their own employees or the employees of one or more
affiliated companies that are qualified to act as an investment adviser to
the Company under applicable laws and are under the common control of Chase;
provided that (i) all persons, when providing services under the sub-advisory
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 the sub-advisers. This arrangement will not result in the payment
of additional fees by the Funds.
Chase, 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. Also 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.
CAM is a wholly-owned operating subsidiary of the Adviser. CAM is
registered with the Securities and Exchange 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, and the same individuals who serve as
portfolio managers for CAM also serve as portfolio managers for Chase.
CAM London is an indirect wholly-owned subsidiary of the Adviser. CAM
London is registered with the Securities and Exchange Commission and is
regulated by the Investment Management Regulatory Organization (IMRO) 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, and the same individuals who serve as
portfolio managers for CAM London also serve as portfolio managers for Chase.
In consideration of the services provided by the adviser pursuant to the
Advisory Agreement, the adviser is entitled to receive from each Fund an
investment advisory fee computed daily and paid monthly based on a rate equal
to a percentage of such Fund's average daily net assets specified in the
relevant Prospectuses. However, the adviser may voluntarily agree to waive a
portion of the fees payable to it on a month- to-month basis. For its
services under its sub-advisory agreement, CAM (or CAM London in the case of
the International Equity Fund) will be entitled to receive, with respect to
each such Fund, such compensation, payable by the adviser out of its advisory
fee, as is described in the relevant Prospectuses.
Administrator
Pursuant to separate Administration Agreements (the "Administration
Agreements"), Chase is the administrator of the Funds. Chase provides certain
administrative services to the Funds, including, among other
responsibilities, coordinating the negotiation of contracts and fees with,
and the monitoring of performance and billing of, the Funds' independent
contractors and agents; preparation for signature by an officer of the Trust
of all documents required to be filed for compliance by the Trust with
applicable laws and regulations excluding those of the securities laws of
various states; arranging for the computation of performance data, including
net asset value and yield; responding to shareholder inquiries; and arranging
for the maintenance of books and records of the Funds and providing, at its
own expense, office facilities, equipment and personnel necessary to carry
its duties. Chase in its capacity as administrator does not have any
responsibility or authority for the management of the Funds, the
determination of investment policy, or for any matter pertaining to the
distribution of Fund shares.
Under the Administration Agreements Chase is permitted to render
administrative services to others. The Administration Agreements will
continue in effect from year to year with respect to each Fund only if such
continuance is specifically approved at least annually by the Board of
Trustees of the Trust or by vote of a majority
35
<PAGE>
of such Fund's outstanding voting securities and, in either case, by a
majority of the Trustees who are not parties to the Administration Agreements
or "interested persons" (as defined in the 1940 Act) of any such party. The
Administration Agreements are terminable without penalty by the Trust on
behalf of each Fund on 60 days' written notice when authorized either by a
majority vote of such Fund's shareholders or by vote of a majority of the
Board of Trustees, including a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust, or by Chase
on 60 days' written notice, and will automatically terminate in the event of
their "assignment" (as defined in the 1940 Act). The Administration
Agreements also provide that neither Chase or its personnel shall be liable
for any error of judgment or mistake of law or for any act or omission in the
administration of the Funds, except for willful misfeasance, bad faith or
gross negligence in the performance of its or their duties or by reason of
reckless disregard of its or their obligations and duties under the
Administration Agreements.
In addition, the Administration Agreements provide that, in the event the
operating expenses of any Fund, including all investment advisory,
administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense
limitation applicable to that Fund imposed by the securities laws or
regulations thereunder of any state in which the shares of such Fund are
qualified for sale, as such limitations may be raised or lowered from time to
time, Chase shall reduce its administration fee (which fee is described
below) to the extent of its share of such excess expenses. The amount of any
such reduction to be borne by Chase shall be deducted from the monthly
administration fee otherwise payable to Chase during such fiscal year, and if
such amounts should exceed the monthly fee, Chase shall pay to such Fund its
share of such excess expenses no later than the last day of the first month
of the next succeeding fiscal year.
In consideration of the services provided by Chase pursuant to the
Administration Agreements, Chase receives from each Fund a fee computed daily
and paid monthly at an annual rate equal to 0.10% of each of the Fund's
average daily net assets, on an annualized basis for the Fund's then-current
fiscal year. Chase may voluntarily waive a portion of the fees payable to it
with respect to each Fund on a month-to-month basis.
Distribution and Sub-Administration Agreement
The Trust has entered into a Distribution and Sub-Administration
Agreement, (the "Distribution Agreement") with the Distributor, pursuant to
which the Distributor acts as the Funds' exclusive underwriter, provides
certain administration services and promotes and arranges for the sale of
Shares. The Distributor is a wholly-owned subsidiary of BISYS Fund Services,
Inc. The Distribution Agreement provides that the Distributor will bear the
expenses of printing, distributing and filing prospectuses and statements of
additional information and reports used for sales purposes, and of preparing
and printing sales literature and advertisements not paid for by the
Distribution Plan. The Trust pays for all of the expenses for qualification
of the shares of each Fund for sale in connection with the public offering of
such shares, and all legal expenses in connection therewith. In addition,
pursuant to the Distribution Agreement, the Distributor provides certain
sub-administration services to the Trust, including providing officers,
clerical staff and office space.
The Distribution Agreement is currently in effect and will continue in
effect with respect to each Fund only if such continuance is specifically
approved at least annually by the Board of Trustees or by vote of a majority
of such Fund's outstanding voting securities and, in either case, by a
majority of the Trustees who are not parties to the Distribution Agreement or
"interested persons" (as defined in the 1940 Act) of any such party. The
Distribution Agreement is terminable without penalty by the Trust on behalf
of each Fund on 60 days' written notice when authorized either by a majority
vote of such Fund's shareholders or by vote of a majority of the Board of
Trustees of the Trust, including a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust, or by the
Distributor on 60 days' written notice, and will automatically terminate in
the event of its "assignment" (as defined in the 1940 Act). The Distribution
Agreement also provides that neither the Distributor nor its personnel shall
be liable for any act or omission in the course of, or connected with,
rendering services under the Distribution Agreement, except for willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties.
In the event the operating expenses of any Fund, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary
36
<PAGE>
expenses such as litigation, for any fiscal year exceed the most restrictive
expense limitation applicable to that Fund imposed by the securities laws or
regulations thereunder of any state in which the shares of such Fund are
qualified for sale, as such limitations may be raised or lowered from time to
time, the Distributor shall reduce its sub-administration fee with respect to
such Fund (which fee is described below) to the extent of its share of such
excess expenses. The amount of any such reduction to be borne by the
Distributor shall be deducted from the monthly sub-administration fee
otherwise payable with respect to such Fund during such fiscal year; and if
such amounts should exceed the monthly fee, the Distributor shall pay to such
Fund its share of such excess expenses no later than the last day of the
first month of the next succeeding fiscal year.
In consideration of the sub-administration services provided by the
Distributor pursuant to the Distribution Agreement, the Distributor receives
an annual fee, payable monthly, of 0.05% of the net assets of each Fund.
However, the Distributor has voluntarily agreed to waive a portion of the
fees payable to it under the Distribution Agreement with respect to each Fund
on a month-to-month basis.
Transfer Agent and Custodian
The Trust has also entered into a Transfer Agency Agreement with DST
Systems, Inc. ("DST") pursuant to which DST acts as transfer agent for the
Trust. DST's address is 210 West 10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the
assets of each Fund and receives such compensation as is from time to time
agreed upon by the Trust and Chase. As custodian, Chase provides oversight
and record keeping for the assets held in the portfolios of each Fund. Chase
is located at 3 Metrotech Center, Brooklyn, NY 11245.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York
10036, independent accountants of the Funds, provides the Funds with audit
services, tax return preparation and assistance and consultation with respect
to the preparation of filings with the Securities and Exchange Commission.
GENERAL INFORMATION
Description of Shares, Voting Rights and Liabilities
Mutual Fund Select Group is an open-end, non-diversified management
investment company organized as Massachusetts business trust under the laws
of the Commonwealth of Massachusetts in 1996. The Trust currently consists of
10 series of shares of beneficial interest, par value $.001 per share. The
Trust has reserved the right to create and issue additional series or
classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or
class. The shares of each series or class participate equally in the
earnings, dividends and assets of the particular series or class. Expenses of
the Trust which are not attributable to a specific series or class are
allocated among all the series in a manner believed by management of the
Trust to be fair and equitable. Shares have no pre-emptive or conversion
rights. Shares when issued are fully paid and non-assessable, except as set
forth below. Shareholders are entitled to one vote for each share held.
Shares of each series or class generally vote together, except when required
under federal securities laws to vote separately on matters that only affect
a particular class, such as the approval of distribution plans for a
particular class.
Each Fund currently issues a single class of shares but may, in the
future, offer other classes of shares. The categories of investors that are
eligible to purchase shares may be different for each class of Fund shares.
Other classes of shares may be subject to differences in sales charge
arrangements, ongoing distribution and service fee levels, and levels of
certain other expenses, which will affect the relative performance of the
different classes.
37
<PAGE>
Any person entitled to receive compensation for selling or servicing
shares of a Fund may receive different levels of compensation for selling one
particular class of shares rather than another.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of a series or class when, in the
judgment of the Trustees, it is necessary or desirable to submit matters for
a shareholder vote. Shareholders have, under certain circumstances, the right
to communicate with other shareholders in connection with requesting a
meeting of shareholders for the purpose of removing one or more Trustees.
Shareholders also have, in certain circumstances, the right to remove one or
more Trustees without a meeting. No material amendment may be made to the
Trust's Declaration of Trust without the affirmative vote of the holders of a
majority of the outstanding shares of each portfolio affected by the
amendment. Shares have no preemptive or conversion rights. Shares, when
issued, are fully paid and non- assessable, except as set forth below. Any
series or class may be terminated (i) upon the merger or consolidation with,
or the sale or disposition of all or substantially all of its assets to,
another entity, if approved by the vote of the holders of two-thirds of its
outstanding shares, except that if the Board of Trustees recommends such
merger, consolidation or sale or disposition of assets, the approval by vote
of the holders of a majority of the series' or class' outstanding shares will
be sufficient, or (ii) by the vote of the holders of a majority of its
outstanding shares, or (iii) by the Board of Trustees by written notice to
the series' or class' shareholders. Unless each series and class is so
terminated, the Trust will continue indefinitely.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides for indemnification and reimbursement of expenses out of the Trust
property for any shareholder held personally liable for the obligations of
the Trust. The Trust's Declaration of Trust also provides that the Trust
shall maintain appropriate insurance (for example, fidelity bonding and
errors and omissions insurance) for the protection of the Trust, its
shareholders, Trustees, officers, employees and agents covering possible tort
and other liabilities. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
both inadequate insurance existed and the Trust itself was unable to meet its
obligations.
The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the
property of the Trust and that the Trustees will not be liable for any action
or failure to act, errors of judgment or mistakes of fact or law, but nothing
in the Declaration of Trust protects a Trustee against any liability to which
he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct
of his office.
The Board of Trustees has adopted a Code of Ethics addressing personal
securities transactions by investment personnel and access persons and other
related matters. The Code of Ethics substantially conforms to the
recommendations made by the Investment Company Institute ("ICI") (except
where noted) and includes such provisions as:
o Prohibitions on investment personnel acquiring securities in initial
offerings;
o A requirement that access persons obtain prior to acquiring securities in a
private placement and that the officer granting such approval have no
interest in the issuer making the private placement;
o A restriction on access persons executing transactions for securities on a
recommended list until 14 days after distribution of that list;
o A prohibition on access persons acquiring securities that are pending
execution by one of the Funds until 7 days after the transactions of the
Funds are completed;
o A prohibition of any buy or sell transaction in a particular security in a
30-day period, except as may be permitted in certain hardship cases or
exigent circumstances where prior approval is obtained. This provision
differs slightly from the ICI recommendation;
38
<PAGE>
o A requirement for pre-clearance of any buy or sell transaction in a
particular security after 30 days, but within 60 days;
o A requirement that any gift exceeding $75.00 from a customer must be
reported to the appropriate compliance officer;
o A requirement that access persons submit in writing any request to serve as
a director or trustee of a publicly traded company;
o A requirement that all securities transactions in excess of $1,000 be
pre-cleared, except that if a person has engaged in more than $10,000 of
securities transactions in a calendar quarter all securities of such person
require pre-clearance (this de minimus exception differs slightly from the
ICI recommendations);
o A requirement that all access persons direct their broker-dealer to submit
duplicate confirmation and customer statements to the appropriate
compliance unit; and
o A requirement that all access persons sign a Code of Ethics acknowledgment,
affirming that they have read and understood the Code and submit a personal
security holdings report upon commencement of employment or status and a
personal security transaction report within 10 days of each calendar
quarter thereafter.
Principal Holders
As of October 1, 1996, no person owned of record 5% or more of the
outstanding shares of any Fund.
39
<PAGE>
APPENDIX A
DESCRIPTION OF CERTAIN OBLIGATIONS
ISSUED OR GUARANTEED BY U.S. GOVERNMENT
AGENCIES OR INSTRUMENTALITIES
Federal Farm Credit System Notes and Bonds--are bonds issued by a
cooperatively owned nationwide system of banks and associations supervised by
the Farm Credit Administration, an independent agency of the U.S. Government.
These bonds are not guaranteed by the U.S. Government.
Maritime Administration Bonds--are bonds issued and provided by the
Department of Transportation of the U.S. Government are guaranteed by the
U.S. Government.
FNMA Bonds--are bonds guaranteed by the Federal National Mortgage
Association. These bonds are not guaranteed by the U.S. Government.
FHA Debentures--are debentures issued by the Federal Housing
Administration of the U.S. Government and are guaranteed by the U.S.
Government.
FHA Insured Notes--are bonds issued by the Farmers Home Administration of
the U.S. Government and are guaranteed by the U.S. Government.
GNMA Certificates--are mortgage-backed securities which represent a
partial ownership interest in a pool of mortgage loans issued by lenders such
as mortgage bankers, commercial banks and savings and loan associations. Each
mortgage loan included in the pool is either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration and therefore
guaranteed by the U.S. Government. As a consequence of the fees paid to GNMA
and the issuer of GNMA Certificates, the coupon rate of interest of GNMA
Certificates is lower than the interest paid on the VA-guaranteed or
FHA-insured mortgages underlying the Certificates. The average life of a GNMA
Certificate is likely to be substantially less than the original maturity of
the mortgage pools underlying the securities. Prepayments of principal by
mortgagors and mortgage foreclosures may result in the return of the greater
part of principal invested far in advance of the maturity of the mortgages in
the pool. Foreclosures impose no risk to principal investment because of the
GNMA guarantee. As the prepayment rate of individual mortgage pools will vary
widely, it is not possible to accurately predict the average life of a
particular issue of GNMA Certificates. The yield which will be earned on GNMA
Certificates may vary from their coupon rates for the following reasons: (i)
Certificates may be issued at a premium or discount, rather than at par; (ii)
Certificates may trade in the secondary market at a premium or discount after
issuance; (iii) interest is earned and compounded monthly which has the
effect of raising the effective yield earned on the Certificates; and (iv)
the actual yield of each Certificate is affected by the prepayment of
mortgages included in the mortgage pool underlying the Certificates.
Principal which is so prepaid will be reinvested although possibly at a lower
rate. In addition, prepayment of mortgages included in the mortgage pool
underlying a GNMA Certificate purchased at a premium could result in a loss
to a Fund. Due to the large amount of GNMA Certificates outstanding and
active participation in the secondary market by securities dealers and
investors, GNMA Certificates are highly liquid instruments. Prices of GNMA
Certificates are readily available from securities dealers and depend on,
among other things, the level of market rates, the Certificate's coupon rate
and the prepayment experience of the pool of mortgages backing each
Certificate. If agency securities are purchased at a premium above principal,
the premium is not guaranteed by the issuing agency and a decline in the
market value to par may result in a loss of the premium, which may be
particularly likely in the event of a prepayment. When and if available, U.S.
Government obligations may be purchased at a discount from face value.
FHLMC Certificates and FNMA Certificates--are mortgage-backed bonds issued
by the Federal Home Loan Mortgage Corporation and the Federal National
Mortgage Association, respectively, and are guaranteed by the U.S.
Government.
A-1
<PAGE>
GSA Participation Certificates--are participation certificates issued by the
General Services Administration of the U.S. Government and are guaranteed by the
U.S. Government.
New Communities Debentures--are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development Act
of 1970, the payment of which is guaranteed by the U.S. Government.
Public Housing Bonds--are bonds issued by public housing and urban renewal
agencies in connection with programs administered by the Department of
Housing and Urban Development of the U.S. Government, the payment of which is
secured by the U.S. Government.
Penn Central Transportation Certificates--are certificates issued by Penn
Central Transportation and guaranteed by the U.S. Government.
SBA Debentures--are debentures fully guaranteed as to principal and
interest by the Small Business Administration of the U.S. Government.
Washington Metropolitan Area Transit Authority Bonds--are bonds issued by
the Washington Metropolitan Area Transit Authority. Some of the bonds issued
prior to 1993 are guaranteed by the U.S. Government.
FHLMC Bonds--are bonds issued and guaranteed by the Federal Home Loan
Mortgage Corporation. These bonds are not guaranteed by the U.S. Government.
Federal Home Loan Bank Notes and Bonds--are notes and bonds issued by the
Federal Home Loan Bank System and are not guaranteed by the U.S. Government.
Student Loan Marketing Association ("Sallie Mae") Notes and bonds--are
notes and bonds issued by the Student Loan Marketing Association and are not
guaranteed by the U.S. Government.
D.C. Armory Board Bonds--are bonds issued by the District of Columbia
Armory Board and are guaranteed by the U.S. Government.
Export-Import Bank Certificates--are certificates of beneficial interest
and participation certificates issued and guaranteed by the Export-Import
Bank of the U.S. and are guaranteed by the U.S. Government.
In the case of securities not backed by the "full faith and credit" of the
U.S. Government, the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment, and may not be able to
assert a claim against the U.S. Government itself in the event the agency or
instrumentality does not meet its commitments.
Investments may also be made in obligations of U.S. Government agencies or
instrumentalities other than those listed above.
A-2
<PAGE>
APPENDIX B
DESCRIPTION OF RATINGS
A description of the rating policies of Moody's, S&P and Fitch with respect
to bonds and commercial paper appears below.
Moody's Investors Service's Corporate Bond Ratings
Aaa--Bonds which are rated "Aaa" are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected
by a large or by an exceptionally stable margin, and principal is secure.
While the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A--Bonds which are rated "A" possess many favorable investment qualities and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa--Bonds which are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
Ba--Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguared
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated "B" generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance
and other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca--Bonds which are rated "Ca" represent obligations which are speculative in
high degree.
Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated "C" are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers "1", "2", and "3" to certain of its
rating classifications. The modifier "1" indicates that the security ranks in
the higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the issue ranks in the
lower end of its generic rating category.
Standard & Poor's Ratings Group Corporate Bond Ratings
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to repay principal and
pay interest.
B-1
<PAGE>
AA--Bonds rated "AA" also qualify as high quality debt obligations. Capacity
to pay principal and interest is very strong, and differs from "AAA" issues
only in small degree.
A--Bonds rated "A" have a strong capacity to repay principal and pay
interest, although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher rated
categories.
BBB--Bonds rated "BBB" are regarded as having an adequate capacity to repay
principal and pay interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to repay principal and pay interest for
bonds in this category than for higher rated categories.
BB-B-CCC-CC-C--Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
CI--Bonds rated "CI" are income bonds on which no interest is being paid.
D--Bonds rated "D" are in default. The "D" category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired unless S&P believes that such
payments will be made during such grace period. The "D" rating is also used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
The ratings set forth above may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
Moody's Investors Service's Commercial Paper Ratings
Prime-1--Issuers (or related supporting institutions) rated "Prime-1" have a
superior ability for repayment of senior short-term debt obligations.
"Prime-1" repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries,
high rates of return on funds employed, conservative capitalization
structures with moderate reliance on debt and ample asset protection, broad
margins in earnings coverage of fixed financial charges and high internal
cash generation, and well- established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2--Issuers (or related supporting institutions) rated "Prime-2" have a
strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternative
liquidity is maintained.
Prime-3--Issuers (or related supporting institutions) rated "Prime-3" have an
acceptable ability for repayment of senior short-term obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level
of debt protection measurements and the requirement for relatively high
financial leverage. Adequate alternate liquidity is maintained.
Not Prime--Issuers rated "Not Prime" do not fall within any of the Prime
rating categories.
Standard & Poor's Ratings Group Commercial Paper Ratings
A S&P commercial paper rating is current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded in several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. The four categories are as
follows:
B-2
<PAGE>
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3--Issues carrying this designation have adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects
of changes in circumstances than obligations carrying the higher
designations.
B--Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C--This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D--Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
Fitch Bond Ratings
AAA--Bonds rated AAA by Fitch are considered to be investment grade and of
the highest credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA--Bonds rated AA by Fitch are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA.
Because bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issues is generally rated F-1+ by Fitch.
A--Bonds rated A by Fitch are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB--Bonds rated BBB by Fitch are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
consequences on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade
is higher than for bonds with higher ratings.
Plus and minus signs are used by Fitch to indicate the relative position of a
credit within a rating category. Plus and minus signs, however, are not used
in the AAA category.
Fitch Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
Fitch's short-term ratings are as follows:
F-1+--Issues assigned this rating are regarded as having the strongest degree
of assurance for timely payment.
B-3
<PAGE>
F-1--Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.
F-2--Issues assigned this rating have a satisfactory degree of assurance for
timely payment but the margin of safety is not as great as for issues
assigned F-1+ and F-1 ratings.
F-3--Issues assigned this rating have characteristics suggesting that the
degree of assurance for timely payment is adequate, although near-term
adverse changes could cause these securities to be rated below investment
grade.
LOC--The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
Like higher rated bonds, bonds rated in the Baa or BBB categories are
considered to have adequate capacity to pay principal and interest. However,
such bonds may have speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade bonds.
After purchase by a Fund, a security may cease to be rated or its rating may
be reduced below the minimum required for purchase by such Fund. Neither
event will require a sale of such security by a Fund. However, a Fund's
investment manager will consider such event in its determination of whether
such Fund should continue to hold the security. To the extent the ratings
given by Moody's, S&P or Fitch may change as a result of changes in such
organizations or their rating systems, a Fund will attempt to use comparable
ratings as standards for investments in accordance with the investment
policies contained in this Prospectus and in the Statement of Additional
Information.
B-4
<PAGE>
PART C
MUTUAL FUND SELECT GROUP
PART C. OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial statements
In Part A: None
In Part B: To be filed by amendment
In Part C: None.
(b) Exhibits:
Exhibit
Number
- -------
1 Declaration of Trust (1)
2 By-laws. (1)
3 None.
4 None.
5(a) Form of Proposed Investment Advisory Agreement. (1)
5(b) Form of Proposed Sub-Advisory Agreement between The Chase Manhattan
Bank and Chase Asset Management, Inc.(1)
5(c) Form of Proposed Investment Subadvisory Agreement between The Chase
Manhattan Bank and Chase Asset Management (London) Limited (1)
6 Form of Proposed Distribution and Sub-Administration Agreement. (1)
7(a) Form of Retirement Plan for Eligible Trustees.(2)
7(b) Form of Deferred Compensation Plan for Eligible Trustees. (2)
8(a) Form of Proposed Custodian Agreement. (1)
8(b) Form of Proposed Sub-Custodian Agreement. (3)
9(a) Form of Proposed Transfer Agency Agreement. (1)
9(b) Form of Proposed Administration Agreement. (1)
C-1
<PAGE>
10 Opinion re: Legality of Securities being Registered. (3)
11 Consent of Price Waterhouse LLP (3)
12 None.
13 Not Applicable
14 None.
15 None.
16 Schedule for Computation for Each Performance Quotation.(3)
17 Financial Data Schedules (3)
18 Not Applicable
- --------------------
(1) Filed herewith
(2) Incorporated by reference to Amendment No. 6 to the Registration Statement
on Form N-1A of Mutual Fund Group (File No. 33-14196) as filed with the
Securities and Exchange Commission on March 23, 1990.
(3) To be filed by amendment
ITEM 25. Persons Controlled by or Under Common
Control with Registrant
Not applicable
C-2
<PAGE>
ITEM 26. Number of Holders of Securities
Number of Record
Title of Series Holders as of September 30, 1996
--------------- --------------------------------
VISTA(SM) Select Balanced Fund None
VISTA(SM) Select Equity Income Fund None
VISTA(SM) Select Large Cap Equity Fund None
VISTA(SM) Select Large Cap Growth Fund None
VISTA(SM) Select Emerging Growth Fund None
VISTA(SM) Select Small Cap Value Fund None
VISTA(SM) Select International Equity Fund None
VISTA(SM) Select Short-Term Bond Fund None
VISTA(SM) Select Intermediate Bond Fund None
VISTA(SM) Select Bond Fund None
ITEM 27. Indemnification
Reference is hereby made to Article V of the Registrant's Declaration
of Trust.
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser, administrator and distributor are insured under
an errors and omissions liability insurance policy. The Registrant and its
officers are also insured under the fidelity bond required by Rule 17g-1 under
the Investment Company Act of 1940.
Under the terms of the Registrant's Declaration of Trust, the
Registrant may indemnify any person who was or is a Trustee, officer or employee
of the Registrant to the maximum extent permitted by law; provided, however,
that any such indemnification (unless ordered by a court) shall be made by the
Registrant only as authorized in the specific case upon a determination that
indemnification of such persons is proper in the circumstances. Such
determination shall be made (i) by the Trustees, by a majority vote of a quorum
which consists of Trustees who are neither in Section 2(a)(19) of the Investment
Company Act of 1940, nor parties to the proceeding, or (ii) if the required
quorum is not obtainable or, if a quorum of such Trustees so directs, by
independent legal counsel in a written opinion. No indemnification will be
provided by the Registrant to any Trustee or officer of the Registrant for any
liability to the Registrant or shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of duty.
Insofar as the conditional advancing of indemnification monies for
actions based upon the Investment Company Act of 1940 may be concerned, such
payments will be made only on the following conditions: (i) the advances must be
limited to amounts used, or to be used, for the preparation or presentation of a
defense to the action, including costs connected with the preparation of a
settlement; (ii) advances may be made only upon receipt of a written promise by,
or on behalf of, the recipient to repay that amount of the advance which exceeds
that amount to which it is ultimately determined that he is entitled to receive
from the Registrant by reason of indemnification; and (iii) (a) such promise
must be secured by a surety bond, other suitable
C-3
<PAGE>
insurance or an equivalent form of security which assures that any repayments
may be obtained by the Registrant without delay or litigation, which bond,
insurance or other form of security must be provided by the recipient of the
advance, or (b) a majority of a quorum of the Registrant's disinterested,
non-party Trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that the recipient of
the advance ultimately will be found entitled to indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of it counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28(a). Business and Other Connections of Investment Adviser
The Chase Manhattan Bank (the "Adviser") is a commercial bank
providing a wide range of banking and investment services.
To the knowledge of the Registrant, none of the Directors or
executive officers of the Adviser, except those described below, are or have
been, at any time during the past two years, engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
Directors and executive officers of the Adviser also hold or have held various
positions with bank and non-bank affiliates of the Adviser, including its
parent, The Chase Manhattan Corporation. Each Director listed below is also a
Director of The Chase Manhattan Corporation.
<TABLE>
<CAPTION>
Principal Occupation or Other
Position with Employment of a Substantial
Name the Adviser Nature During Past Two Years
- ---- ------------- -----------------------------
<S> <C> <C>
Thomas G. Labreque President and Chief Operating Officer Chairman, Chief Executive Officer
and Director and a Director of The Chase
Manhattan Corporation and a
Director of AMAX, Inc.
M. Anthony Burns Director Chairman of the Board, President
and Chief Executive Officer of
Ryder System, Inc.
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
H. Laurance Fuller Director Chairman, President, Chief
Executive Officer and Director of
Amoco Corporation and Director of
Abbott Laboratories
Paul W. MacAvoy Director Dean of Yale School of
Organization and Management
David T. McLaughlin Director President and Chief Executive
Officer of The Aspen Institute,
Chairman of Standard Fuse
Corporation and a Director of each
of ARCO Chemical Company and
Westinghouse Electric Corporation
Edmund T. Pratt, Jr. Director Chairman Emeritus, formerly
Chairman and Chief Executive
Officer, of Pfizer Inc. and a
Director of each of Pfizer, Inc.,
Celgene Corp., General Motors
Corporation and International Paper
Company
Henry B. Schacht Director Chairman and Chief Executive
Officer of Cummins Engine
Company, Inc. and a Director of
each of American Telephone and
Telegraph Company and CBS Inc.
Donald H. Trautlein Director Retired Chairman and
Chief Executive Officer
of Bethlehem Steel
Corporation
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
James L. Ferguson Director Retired Chairman and Chief
Executive Officer of General Foods
Corporation
William H. Gray III Director President and Chief Executive
Officer of the United Negro College
Fund, Inc.
David T. Kearns Director Retired Chairman and Chief
Executive Officer of the Xerox
Corporation
Delano E. Lewis Director President and Chief Executive
Officer of National Public Radio
John H. McArthur Director Dean of the Harvard Graduate
School of Business Administration
Frank A. Bennack, Jr. Director President and Chief Executive Officer
The Hearst Corporation
Michael C. Bergerac Director Chairman of the Board and
Chief Executive Officer Bergerac & Co., Inc.
Susan V. Berresford Director President, The Ford Foundation
Randolph W. Bromery Director President, Springfield College; President,
Geoscience Engineering Corporation
Charles W. Duncan, Jr. Director Private Investor
Melvin R. Goodes Director Chairman of the Board and Chief Executive
Officer, The Warner-Lambert Company
George V. Grune Director Retired Chairman and Chief Executive
Officer, The Reader's Digest Association,
Inc.; Chairman, The DeWitt Wallace-
Reader's Digest Fund; The Lila-Wallace
Reader's Digest Fund
William B. Harrison, Jr. Vice Chairman of the Board
Harold S. Hook Director Chairman and Chief Executive Officer,
General Corporation
Helen L. Kaplan Director Of Counsel, Skadden, Arps, Slate, Meagher
& Flom
E. Michael Kruse Vice Chairman of the Board
J. Bruce Llewellyn Director Chairman of the Board, The Philadelphia
Coca-Cola Bottling Company, The Coca-
Cola Bottling Company of Wilmington,
Inc., Queen City Broadcasting, Inc.
John P. Mascotte Director Chairman, The Missouri Corporation of
Johnson & Higgins
John F. McGillicuddy Director Retired Chairman of the Board and
Chief Executive Officer
Edward D. Miller Senior Vice Chairman
of the Board
Walter V. Shipley Chairman of the Board and
Chief Executive Officer
Andrew C. Sigler Director Chairman of the Board and Chief
Executive Officer, Champion International
Corporation
.
Michael I. Sovern Director President, Emeritus and Chancellor Kent,
Professor of Law, Columbia University
John R. Stafford Director Chairman, President and Chief Executive
Officer, American Home Products
Corporation
W. Bruce Thomas Director Private Investor
Marina v. N. Whitman Director Professor of Business Administration and
Public Policy, University of Michigan
Richard D. Wood Director Retired Chairman of the Board, Eli Lilly
and Company
</TABLE>
<PAGE>
Item 28(b)
Chase Asset Management ("CAM") is an Investment Advisor providing investment
services to institutional clients.
To the knowledge of the Registrant, none of the Directors or executive
officers of the CAM, except those described below, are or have been, at any time
during the past two years, engaged in any other business, profession, vocation
or employment of a substantial nature, except that certain Directors and
executive officers of the CAM also hold or have held various positions with bank
and non-bank affiliates of the Advisor, including its parent, The Chase
Manhattan Corporation.
Principal Occupation or Other
Position with Employment of a Substantial
Name the Sub-Advisor Nature During Past Two Years
- ---- --------------- ----------------------------
James Zeigon Chairman and Director Director of Chase
Asset Management
(London) Limited
Steven Prostano Executive Vice President Chief Operating Officer
and Chief Operating Officer and Director of Chase
Asset Management
(London) Limited
Mark Richardson President and Chief Chief Investment Officer
Investment Officer and Director of Chase
Asset Management
(London) Limited
Item 28(c)
Chase Asset Management (London) Limited ("CAM London") is an Investment
Advisor providing investment services to institutional clients.
To the knowledge of the Registrant, none of the Directors or executive
officers of CAM London, except those described below, are or have been, at any
time during the past two years, engaged in any other business, profession,
vocation or employment of a substantial nature, except that certain Directors
and executive officers of CAM London also hold or have held various positions
with bank and non-bank affiliates of the Advisor, including its parent, The
Chase Manhattan Corporation.
Principal Occupation or Other
Position with Employment of a Substantial
Name the Sub-Advisor Nature During Past Two Years
- ---- --------------- ----------------------------
Michael Browne Director Fund Manager, The Chase Manhattan
Bank, N.A.; Fund Manager, BZW
Investment Management
David Gordon Ross Director Head of Global Fixed Income
Management, Chase Asset
Management, Inc.; Vice President,
The Chase Manhattan Bank, N.A.
Brian Harte Director Investment Manager, The Chase
Manhattan Bank, N.A.
Cornelia L. Kiley Director
James Zeigon Director Chairman and Director of Chase
Asset Management, Inc.
Mark Richardson Chief Investment Director, President and Chief
Officer and Director Operating Officer of Chase Asset
Management, Inc.
Steve Prostano Chief Operating Director, Executive Vice President
Officer and and Chief Operating Officer of Chase
Director Asset Management, Inc.
<PAGE>
ITEM 29. Principal Underwriters
(a) Vista Fund Distributors, Inc., a wholly-owned subsidiary of
The BISYS Group, Inc. is the underwriter for Mutual Fund Group, Mutual Fund
Trust and Mutual Fund Select Trust.
(b) The following are the Directors and officers of Vista Fund
Distributors, Inc. The principal business address of each of these persons, is
listed below.
<TABLE>
<CAPTION>
Position and Offices Position and Offices
Name and Address with Distributor with the Registrant
- ---------------- -------------------- --------------------
<S> <C> <C>
Lynn J. Mangum Chairman None
150 Clove Street
Little Falls, NJ 07424
Robert J. McMullan Director and Exec. Vice President None
150 Clove Street
Little Falls, NJ 07424
Lee W. Schultheis President None
101 Park Avenue, 16th Floor
New York, NY 10178
George O. Martinez Senior Vice President None
3435 Stelzer Road
Columbus, OH 43219
Irimga McKay Vice President None
1230 Columbia Street
5th Floor, Suite 500
San Diego, CA 92101
Michael Burns Vice President/Compliance None
3435 Stelzer Road
Columbus, OH 43219
William Blundin Vice President None
125 West 55th Avenue
11th Floor
New York, NY 10019
Dennis Sheehan Vice President None
150 Clove Street
Little Falls, NJ 07424
Annamaria Porcaro Assistant Secretary None
150 Clove Street
Little Falls, NJ 97424
Robert Tuch Assistant Secretary None
3435 Stelzer Road
Columbus, OH 43219
Stephen Mintos Executive Vice President/COO None
3435 Stelzer Road
Columbus, OH 43219
Dale Smith Vice President/CFO None
3435 Stelzer Road
Columbus, OH 43219
William J. Tomko Vice President None
3435 Stelzer Road
Columbus, OH 43219
</TABLE>
(c) Not applicable
C-6
<PAGE>
ITEM 30. Location of Accounts and Records
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
Name Address
---- -------
Vista Fund Distributors, Inc. 101 Park Avenue,
New York, NY 10178
DST Systems, Inc. 210 W. 10th Street,
Kansas City, MO 64105
The Chase Manhattan Bank 270 Park Avenue,
New York, NY 10017
Chase Asset Mangement, Inc. 1211 Avenue of the
Americas,
New York, NY 10036
Chase Asset Management, Ltd. (London) Colvile House
32 Curzon Street
London, England W1Y8AL
The Chase Manhattan Bank One Chase Square,
Rochester, NY 14363
ITEM 31. Management Services
Not applicable
ITEM 32. Undertakings
(1) Registrant undertakes that its trustees shall promptly
call a meeting of shareholders of the Trust for the purpose of voting upon the
question of removal of any such trustee or trustees when requested in writing so
to do by the record holders of not less than 10 per centum of the outstanding
shares of the Trust. In addition, the Registrant shall, in certain
circumstances, give such shareholders assistance in communicating with other
shareholders of a fund as required by Section 16(c) of the Investment Company
Act of 1940.
(2) The Registrant, on behalf of the Funds, undertakes,
provided the information required by Item 5A is contained in the latest annual
report to shareholders, to furnish to each person to whom a prospectus has been
delivered, upon their request and without charge, a copy of the Registrant's
latest annual report to shareholders.
(3) Registrant undertakes to file a post-effective amendment,
using reasonably current financial statements which need not be certified,
within four to six months from the date of commencement of investment operations
for each of Vista Select Balanced Fund, Vista Select Equity Income Fund, Vista
Select Large Cap Equity Fund, Vista Select Large Cap Growth Fund, Vista Select
Emerging Growth Fund, Vista Select Small Cap Value Fund, Vista Select
International Equity Fund, Vista Select Short-Term Bond Fund, Vista Select
Intermediate Bond Fund and Vista Select Bond Fund.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
on Form N-1A to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and the State of New York on the 1st day of
October, 1996.
MUTUAL FUND SELECT GROUP
By /s/ H. Richard Vartabedian
--------------------------
H. Richard Vartabedian
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
/s/ Fergus Reid, III Chairman and Trustee October 1, 1996
- ------------------------------
Fergus Reid, III
/s/ H. Richard Vartabedian President October 1, 1996
- ------------------------------ and Trustee
H. Richard Vartabedian
/s/ Martin R. Dean Treasurer and October 1, 1996
- ------------------------------ Principal Financial
Martin R. Dean Officer
C-8
<PAGE>
Exhibit
Number
- -------
1 Declaration of Trust.
2 By-Laws.
5(a) Form of Proposed Investment Advisory Agreement.
5(b) Form of Proposed Investment Subadvisory Agreement
between The Chase Manhattan Bank and Chase Asset
Management, Inc.
5(c) Form of Proposed Investment Subadvisory Agreement
between The Chase Manhattan Bank and Chase Asset
Management (London) Limited.
6 Form of Proposed Distribution and Sub-Administration
Agreement.
8(a) Form of Proposed Custodian Agreement.
9(a) Form of Proposed Transfer Agency Agreement.
9(b) Form of Proposed Administration Agreement.
MUTUAL FUND SELECT GROUP
------------------------------------
DECLARATION OF TRUST
Dated October 1, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
NAME AND DEFINITIONS...................... 1
Section 1.1. Name..................................................... 1
Section 1.2. Definitions.............................................. 1
ARTICLE II
TRUSTEES............................ 3
Section 2.1. Number of Trustees....................................... 3
Section 2.2. Term of Office of Trustees............................... 3
Section 2.3. Resignation and Appointment of Trustees.................. 4
Section 2.4. Vacancies................................................ 4
Section 2.5. Delegation of Power to Other Trustees.................... 4
ARTICLE III
POWERS OF TRUSTEES....................... 5
Section 3.1. General.................................................. 5
Section 3.2. Investments.............................................. 5
Section 3.3. Legal Title.............................................. 6
Section 3.4. Issuance and Repurchase of Securities.................... 7
Section 3.5. Borrowing Money; Lending Trust Property.................. 7
Section 3.6. Delegation; Committees................................... 7
Section 3.7. Collection and Payment................................... 7
Section 3.8. Expenses................................................. 7
Section 3.9. Manner of Acting; By-Laws................................ 7
Section 3.10. Miscellaneous Powers.................................... 8
Section 3.11. Principal Transactions.................................. 8
Section 3.12. Trustees and Officers as Shareholders................... 9
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR,
ADMINISTRATOR, TRANSFER AGENT AND SHAREHOLDER SERVICING AGENTS...............9
Section 4.1. Investment Adviser....................................... 9
Section 4.2. Distributor.............................................. 10
Section 4.3. Administrator............................................ 10
Section 4.4. Transfer Agent and Shareholder Servicing
Agents................................................................. 10
Section 4.5. Parties to Contract...................................... 11
i
<PAGE>
Page
----
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS....................... 11
Section 5.1. No Personal Liability of Shareholders,
Trustees; Etc........................................................... 11
Section 5.2. Non-Liability of Trustees, Etc............................ 12
Section 5.3. Mandatory Indemnification................................. 12
Section 5.4. No Bond Required of Trustees.............................. 14
Section 5.6. Reliance on Experts, Etc.................................. 14
ARTICLE VI
SHARES OF BENEFICIAL INTEREST.................. 15
Section 6.1. Beneficial Interest....................................... 15
Section 6.2. Rights of Shareholders.................................... 15
Section 6.3. Trust Only................................................ 15
Section 6.4. Issuance of Shares........................................ 16
Section 6.5. Register of Shares........................................ 16
Section 6.6. Transfer of Shares........................................ 16
Section 6.7. Notices................................................... 17
Section 6.8. Voting Powers............................................. 17
Section 6.9. Series Designation........................................ 18
ARTICLE VII
REDEMPTIONS........................... 21
Section 7.1. Redemptions............................................... 21
Section 7.2. Suspension of Right of Redemption......................... 21
Section 7.3. Redemption of Shares, Disclosure of
Holding................................................................. 22
Section 7.4. Redemptions of Accounts of Less than
$500.................................................................... 22
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS................... 22
ARTICLE IX
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC...................... 23
Section 9.1. Duration.................................................. 23
Section 9.2. Termination of Trust...................................... 23
Section 9.3. Amendment Procedure....................................... 24
Section 9.4. Merger, Consolidation and Sale of Assets.................. 25
Section 9.5. Incorporation, Reorganization............................. 25
Section 9.6. Incorporation or Reorganization of
Series.................................................................. 26
ii
<PAGE>
Page
----
ARTICLE X
REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS.............. 26
ARTICLE XI
MISCELLANEOUS............................................ 27
Section 11.1. Filing................................................... 27
------
Section 11.2. Governing Law............................................ 27
-------------
Section 11.3. Counterparts............................................. 27
------------
Section 11.4. Reliance by Third Parties................................ 27
-------------------------
Section 11.5. Provisions in Conflict with Law or
Regulations............................................................. 28
iii
<PAGE>
DECLARATION OF TRUST
OF THE
MUTUAL FUND SELECT GROUP
------------------------------------
Dated October 1, 1996
------------------------------------
WHEREAS, the Trustees desire to establish a trust for
the investment and reinvestment of funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in
the trust assets be divided into transferable Shares of Beneficial Interest (par
value $0.001 per share) issued in one or more series as hereinafter provided;
and
NOW THEREFORE, the Trustees hereby declare that all money and
property contributed to the trust established hereunder shall be held and
managed in trust for the benefit of holders, from time to time, of the Shares of
Beneficial Interest (without par value) issued hereunder and subject to the
provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is the
"Mutual Fund Select Group", but the Trust may conduct all or a portion of its
business and activities under such other designations or names as the Trustees
may from time to time authorize.
Section 1.2. Definitions. Wherever they are used
herein, the following terms have the following respective
meanings:
(a) "Administrator" means a party furnishing services to the
Trust pursuant to any contract described in Section 4.3 hereof.
(b) "By-Laws" means the By-laws referred to in Section 3.9
hereof, as from time to time amended.
(c) "Commission" has the meaning given that term in
the 1940 Act.
(d) "Custodian" means a party employed by the Trust to furnish
services as described in Article X of the By-Laws.
<PAGE>
2
(e) "Declaration" means this Declaration of Trust as amended
from time to time. Reference in this Declaration of Trust to
"Declaration", "hereof", "herein", and "hereunder" shall be deemed to
refer to this Declaration rather than the article or section in which
such words appear.
(f) "Distributor" means a party furnishing services to the
Trust pursuant to any contract described in Section 4.2 hereof.
(g) "Interested Person" has the meaning given that
term in the 1940 Act.
(h) "Investment Adviser" means a party furnishing services to
the Trust pursuant to any contract described in Section 4.1 hereof.
(i) "Majority Shareholder Vote" has the same meaning as the
phrase "vote of a majority of the outstanding voting securities" as
defined in the 1940 Act, except that such term may be used herein with
respect to the Shares of the Trust as a whole or the Shares of any
particular series, as the context may require.
(j) "1940 Act" means the Investment Company Act of 1940 and
the Rules and Regulations thereunder, as amended from time to time.
(k) "Person" means and includes individuals, corporations,
limited liability companies, partnerships, trusts, associations, joint
ventures and other entities, whether or not legal entities, and
governments and agencies and political subdivisions thereof, whether
domestic or foreign.
(l) "Shareholder" means a record owner of outstanding
Shares.
(m) "Shares" means the Shares of Beneficial Interest into
which the beneficial interest in the Trust shall be divided from time
to time or, when used in relation to any particular series (or class or
subseries of a series) of Shares established by the Trustees pursuant
to Section 6.9 hereof, the equal proportionate units into which such
series (or class or subseries of a series) of Shares shall be divided
from time to time. The term "Shares" includes fractions of Shares as
well as whole Shares.
(n) "Shareholder Servicing Agent" means a party furnishing
services to the Trust pursuant to any shareholder servicing contract
described in Section 4.4 hereof.
<PAGE>
3
(o) "Transfer Agent" means a party furnishing services to the
Trust pursuant to any transfer agency contract described in Section 4.4
hereof.
(p) "Trust" means the trust created hereby.
(q) "Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by or for the
account of the Trust or the Trustees, including, without limitation,
any and all property allocated or belonging to any series of Shares
pursuant to Section 6.9 hereof.
(r) "Trustees" means the persons who have signed the
Declaration, so long as they shall continue in office in accordance
with the terms hereof, and all other persons who may from time to time
be duly elected or appointed, qualified and serving as Trustees in
accordance with the provisions hereof, and reference herein to a
Trustee or the Trustees shall refer to such person or persons in their
capacity as trustees hereunder unless the context otherwise requires.
ARTICLE II
TRUSTEES
Section 2.1. Number of Trustees. The number of Trustees shall
be such number as shall be fixed from time to time by a written instrument
signed by a majority of the Trustees, provided, however, that the number of
Trustees shall in no event be less than three nor more than 15.
Section 2.2. Term of Office of Trustees. Subject to the
provisions of Section 16(a) of the 1940 Act, the Trustees shall hold office
during the lifetime of this Trust and until its termination as hereinafter
provided; except (a) that any Trustee may resign his trust (without need for
prior or subsequent accounting) by an instrument in writing signed by him and
delivered to the other Trustees, which shall take effect upon such delivery or
upon such later date as is specified therein; (b) that any Trustee may be
removed with cause, at any time by written instrument, signed by at least
two-thirds of the remaining Trustees, specifying the date when such removal
shall become effective; (c) that any Trustee who requests in writing to be
retired or who has become incapacitated by illness or injury may be retired by
written instrument signed by a majority of the other Trustees, specifying the
date of his retirement; and (d) a Trustee may be removed at any meeting of
Shareholders by a vote of two-thirds of the outstanding Shares of each series.
Upon the resignation or removal of a Trustee, or his otherwise ceasing to be a
Trustee, he shall execute and deliver such documents as the remaining Trustees
shall require for the purpose of conveying to the Trust or the remaining
Trustees any Trust Property held in
<PAGE>
4
the name of the resigning or removed Trustee. Upon the incapacity or death of
any Trustee, his legal representative shall execute and deliver on his behalf
such documents as the remaining Trustees shall require as provided in the
preceding sentence.
Section 2.3. Resignation and Appointment of Trustees. In case
of the declination, death, resignation, retirement, removal or incapacity of any
of the Trustees, or in case a vacancy shall, by reason of an increase in number,
or for any other reason, exist, the remaining Trustees shall fill such vacancy
by appointing such other individual as they in their discretion shall see fit.
Such appointment shall be evidenced by a written instrument signed by a majority
of the Trustees in office. Any such appointment shall not become effective,
however, until the person named in the written instrument of appointment shall
have accepted in writing such appointment and agreed in writing to be bound by
the terms of the Declaration. Within twelve months of such appointment, the
Trustees shall cause notice of such appointment to be mailed to each Shareholder
at his address as recorded on the books of the Trustees. An appointment of a
Trustee may be made by the Trustees then in office and notice thereof mailed to
Shareholders as aforesaid in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. The power of appointment is subject to the provisions of Section 16(a)
of the 1940 Act.
Section 2.4. Vacancies. The death, declination, resignation,
retirement, removal or incapacity of the Trustees, or any one of them, shall not
operate to annul the Trust or to revoke any existing agency created pursuant to
the terms of this Declaration. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in Section 2.3, the
Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by the Declaration. A written instrument certifying the existence of
such vacancy signed by a majority of the Trustees shall be conclusive evidence
of the existence of such vacancy.
Section 2.5. Delegation of Power to Other Trustees. Any
Trustee may, by power of attorney, delegate his power for a period not exceeding
six months at any one time to any other Trustee or Trustees; provided that in no
case shall fewer than two Trustees personally exercise the powers granted to the
Trustees under the Declaration except as herein otherwise expressly provided.
ARTICLE III
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POWERS OF TRUSTEES
Section 3.1. General. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as the Trustees deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive. In construing the
provisions of the Declaration, the presumption shall be in favor of a grant of
power to the Trustees.
The enumeration of any specific power herein shall not be
construed as limiting the aforesaid power. Such powers of the Trustees may be
exercised without order of or resort to any court.
Section 3.2. Investments. (a) The Trustees shall
have the power:
(i) to conduct, operate and carry on the business of
an investment company;
(ii) to subscribe for, invest in, reinvest in, purchase
or otherwise acquire, own, hold, pledge, sell, assign, transfer,
exchange, distribute, lend or otherwise deal in or dispose of U.S. and
foreign currencies, any form of gold or other precious metal, commodity
contracts, any form of option contract, contracts for the future
acquisition or delivery of fixed income or other securities, and
securities of every nature and kind, including, without limitation, all
types of bonds, debentures, stocks, negotiable or non-negotiable
instruments, obligations, evidences of indebtedness, certificates of
deposit or indebtedness, commercial paper, repurchase agreements,
bankers' acceptances, and other securities of any kind, issued,
created, guaranteed or sponsored by any and all Persons, including,
without limitation,
(A) states, territories and possessions of the United States
and the District of Columbia and any political subdivision, agency or
instrumentality of any such Person,
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6
(B) the U.S. Government, any foreign government, any
political subdivision or any agency or instrumentality of the
U.S. Government, any foreign government or any political
subdivision of the U.S. Government or any foreign government,
(C) any international instrumentality,
(D) any bank or savings institution, or
(E) any corporation or organization organized under the laws
of the United States or of any state, territory or possession thereof, or under
any foreign law;
or in "when issued" contracts for any such securities, to retain Trust assets in
cash and from time to time change the securities or obligations in which the
assets of the Trust are invested; and to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such investments
of every kind and description, including, without limitation, the right to
consent and otherwise act with respect thereto, with power to designate one or
more Persons to exercise any of said rights, powers and privileges in respect of
any of said investments; and
(iii) to carry on any other business in connection with
or incidental to any of the foregoing powers, to do everything
necessary, proper or desirable for the accomplishment of any purpose or
the attainment of any object or the furtherance of any power
hereinbefore set forth, and to do every other act or thing incidental
or appurtenant to or connected with the aforesaid purposes, objects or
powers.
(b) The Trustees shall not be limited to investing in
securities or obligations maturing before the possible termination of the Trust,
nor shall the Trustees be limited by any law limiting the investments which may
be made by fiduciaries.
Section 3.3. Legal Title. Legal title to all Trust Property
shall be vested in the Trustees as joint tenants except that the Trustees shall
have power to cause legal title to any Trust Property to be held by or in the
name of one or more of the Trustees, or in the name of the Trust, or in the name
of any other Person or nominee, on such terms as the Trustees may determine. The
right, title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee, such Trustee shall automatically
cease to have any right, title or interest in any of the Trust Property, and the
right, title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered.
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Section 3.4. Issuance and Repurchase of Securities. The
Trustees shall have the power to issue, sell, repurchase, redeem, retire,
cancel, acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal
in Shares and, subject to the provisions set forth in Articles VII, VIII and IX
and Section 6.9 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds of the Trust or other Trust
Property whether capital or surplus or otherwise, to the full extent now or
hereafter permitted by the laws of the Commonwealth of Massachusetts governing
business corporations.
Section 3.5. Borrowing Money; Lending Trust Property. The
Trustees shall have power to borrow money or otherwise obtain credit and to
secure the same by mortgaging, pledging or otherwise subjecting as security the
Trust Property, to endorse, guarantee, or undertake the performance of any
obligation, contract or engagement of any other Person and to lend Trust
Property.
Section 3.6. Delegation; Committees. The Trustees shall have
power to delegate from time to time to such of their number or to officers,
employees or agents of the Trust the doing of such things and the execution of
such instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient.
Section 3.7. Collection and Payment. Subject to Section 6.9
hereof, the Trustees shall have power to collect all property due to the Trust;
to pay all claims, including taxes, against the Trust Property; to prosecute,
defend, compromise or abandon any claims relating to the Trust Property; to
foreclose any security interest securing any obligations, by virtue of which any
property is owed to the Trust; and to enter into releases, agreements and other
instruments.
Section 3.8. Expenses. Subject to Section 6.9 hereof, the
Trustees shall have the power to incur and pay any expenses which in the opinion
of the Trustees are necessary or incidental to carry out any of the purposes of
the Declaration, and to pay reasonable compensation from the funds of the Trust
to themselves as Trustees. The Trustees shall fix the compensation of all
officers, employees and Trustees.
Section 3.9. Manner of Acting; By-Laws. Except as otherwise
provided herein or in the By-Laws, any action to be taken by the Trustees may be
taken by a majority of the Trustees present at a meeting of Trustees at which a
quorum is present, including any meeting held by means of a conference telephone
circuit or similar communications equipment by means of which all persons
participating in the meeting can hear each other, or by written consents of all
the Trustees. The Trustees may adopt By-Laws not inconsistent with this
Declaration to provide for the conduct of the business of the Trust and may
amend or repeal such
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By-Laws to the extent such power is not reserved to the Shareholders.
Section 3.10. Miscellaneous Powers. The Trustees shall have
the power to: (a) employ or contract with such Persons as the Trustees may deem
desirable for the transaction of the business of the Trust; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) remove
Trustees or fill vacancies in or add to their number, elect and remove such
officers and appoint and terminate such agents or employees as they consider
appropriate, and appoint from their own number, and terminate, any one or more
committees which may exercise some or all of the power and authority of the
Trustees as the Trustees may determine; (d) purchase, and pay for out of Trust
Property, insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, any Investment Adviser, Administrator, Distributor, selected
dealers or independent contractors of the Trust against all claims arising by
reason of holding any such position or by reason of any action taken or omitted
by any such Person in such capacity, whether or not constituting negligence, or
whether or not the Trust would have the power to indemnify such Person against
such liability; (e) establish pension, profit-sharing, Share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees or
agents of the Trust; (f) to the extent permitted by law, indemnify any person
with whom the Trust has dealings, including any Investment Adviser,
Administrator, Custodian, Distributor, Transfer Agent, Shareholder Servicing
Agent and any dealer, to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations of others; (h) determine and
change the fiscal year of the Trust and the method by which its accounts shall
be kept; and (i) adopt a seal for the Trust, provided, that the absence of such
seal shall not impair the validity of any instrument executed on behalf of the
Trust.
Section 3.11. Principal Transactions. Except in transactions
permitted by the 1940 Act, or any order of exemption issued by the Commission,
the Trustees shall not, on behalf of the Trust, buy any securities (other than
Shares) from or sell any securities (other than Shares) to, or lend any assets
of the Trust to, any Trustee or officer of the Trust or any firm of which any
such Trustee or officer is a member acting as principal, or have any such
dealings with any Investment Adviser, Administrator, Shareholder Servicing
Agent, Custodian, Distributor or Transfer Agent or with any Interested Person of
such Person; but the Trust may, upon customary terms, employ any such Person, or
firm or company in which such Person is an Interested Person, as broker, legal
counsel, registrar, transfer agent, dividend disbursing agent or custodian. The
Trustees are specifically authorized to engage the service of The Chase
Manhattan Bank and its affiliates, to act as broker, as an agent or as a
principal, subject to the provisions of the 1940 Act and other applicable laws,
to execute transactions and to provide
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9
other services with respect to the Trust or any series of the Trust so
designated, in the Trustees' discretion as fiduciary, including the purchase of
any securities currently distributed or currently underwritten by The Chase
Manhattan Bank or its affiliates.
Section 3.12. Trustees and Officers as Shareholders. Except as
hereinafter provided, no officer, Trustee or Member of the Advisory Board of the
Trust, and no member, partner, officer, director or trustee of the Investment
Adviser, Administrator or of the Distributor, and no Investment Adviser,
Administrator or Distributor of the Trust, shall take long or short positions in
the securities issued by the Trust. The foregoing provision shall not prevent:
(a) The Distributor from purchasing Shares from the Trust if
such purchases are limited (except for reasonable allowances for
clerical errors, delays and errors of transmission and cancellation of
orders) to purchases for the purpose of filling orders for Shares
received by the Distributor and provided that orders to purchase from
the Trust are entered with the Trust or the Custodian promptly upon
receipt by the Distributor of purchase orders for Shares, unless the
Distributor is otherwise instructed by its customer;
(b) The Distributor from purchasing Shares as agent
for the account of the Trust;
(c) The purchase from the Trust or from the Distributor of
Shares by any officer, Trustee or member of the Advisory Board of the
Trust or by any member, partner, officer, director or trustee of the
Investment Adviser or of the Distributor at a price not lower than the
net asset value of the Shares at the moment of such purchase, provided
that any such sales are only to be made pursuant to an offer described
in the Trust's current prospectus or statement of additional
information; or
(d) The Investment Adviser, the Distributor, or any of their
officers, partners, directors or trustees from purchasing Shares prior
to the effective date of the Trust's Registration Statement under the
Securities Act of 1933, as amended, relating to the Shares.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR,
ADMINISTRATOR, TRANSFER AGENT AND SHAREHOLDER SERVICING AGENTS
Section 4.1. Investment Adviser. Subject to a
Majority Shareholder Vote of the Shares of each series affected
thereby (except to the extent such Majority Shareholder Vote is
not required by the 1940 Act), the Trustees may in their
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10
discretion from time to time enter into one or more investment advisory or
management contracts whereby the other party to each such contract shall
undertake to furnish the Trust such management, investment advisory, statistical
and research facilities and services, promotional activities, and such other
facilities and services, if any, with respect to one or more series of Shares,
as the Trustees shall from time to time consider desirable and all upon such
terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any provision of the Declaration, the Trustees may delegate to
the Investment Adviser authority (subject to such general or specific
instructions as the Trustees may from time to time adopt) to effect purchases,
sales, loans or exchanges of assets of the Trust on behalf of the Trustees or
may authorize any officer, employee or Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of the Investment Adviser (and
all without further action by the Trustees). Any of such purchases, sales, loans
or exchanges shall be deemed to have been authorized by all the Trustees. Such
services may be provided by one or more Persons.
Section 4.2. Distributor. The Trustees may in their discretion
from time to time enter into one or more distribution contracts providing for
the sale of Shares whereby the Trust may either agree to sell the Shares to the
other party to any such contract or appoint any such other party its sales agent
for such Shares. In either case, any such contract shall be on such terms and
conditions as the Trustees may in their discretion determine, provided that such
terms and conditions are not inconsistent with the provisions of the Declaration
or the By-Laws; and such contract may also provide for the repurchase or sale of
Shares by such other party as principal or as agent of the Trust and may provide
that such other party may enter into selected dealer agreements with registered
securities dealers to further the purpose of the distribution or repurchase of
the Shares. Such services may be provided by one or more Persons.
Section 4.3. Administrator. The Trustees may in their
discretion from time to time enter into one or more administrative services
contracts whereby the other party to each such contract shall undertake to
furnish such administrative services to the Trust as the Trustees shall from
time to time consider desirable and all upon such terms and conditions as the
Trustees may in their discretion determine, provided that such terms and
conditions are not inconsistent with the provisions of this Declaration or the
By-Laws. Such services may be provided by one or more persons.
Section 4.4. Transfer Agent and Shareholder Servicing Agents.
The Trustees may in their discretion from time to time enter into one or more
transfer agency and shareholder servicing contracts whereby the other party to
each such contract shall undertake to furnish such transfer agency and/or
shareholder services to the Trust or to shareholders of the Trust as the
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Trustees shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine, provided that such
terms and conditions are not inconsistent with the provisions of this
Declaration or the By-Laws. Such services may be provided by one or more
Persons. Except as otherwise provided in the applicable shareholder servicing
contract, a Shareholder Servicing Agent shall be deemed to be the record owner
of outstanding Shares beneficially owned by customers of such Shareholder
Servicing Agent for whom it is acting pursuant to such shareholder servicing
contract.
Section 4.5. Parties to Contract. Any contract of the
character described in Section 4.1, 4.2, 4.3 or 4.4 of this Article IV or any
Custodian contract may be entered into with any Person, although one or more of
the Trustees or officers of the Trust may be an officer, partner, director,
trustee, shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered voidable by reason of the existence of
any such relationship; nor shall any Person holding such relationship be liable
merely by reason of such relationship for any loss or expense to the Trust under
or by reason of any such contract or accountable for any profit realized
directly or indirectly therefrom, provided that the contract when entered into
was not inconsistent with the provisions of the Article IV or the By-Laws. The
same Person may be the other party to contracts entered into pursuant to
Sections 4.1, 4.2, 4.3 and 4.4 above or any Custodian contract, and any
individual may be financially interested or otherwise affiliated with Persons
who are parties to any or all of the contracts mentioned in this Section 4.5.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1. No Personal Liability of Shareholders, Trustees;
Etc. No Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs of
the Trust. No Trustee, officer, employee or agent of the Trust shall be subject
to any personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, wilful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder, Trustee, officer,
employee, or agent, as such, of the Trust, is made a party to any suit or
proceeding to enforce any such liability, he shall not, on account thereof, be
held to any personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities to which such
Shareholder may become subject by
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reason of his being or having been a Shareholder, and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability. The rights accruing to a
Shareholder under this Section 5.1 shall not exclude any other right to which
such Shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
Notwithstanding any other provision of this Declaration to the contrary, no
Trust Property shall be used to indemnify or reimburse any Shareholder of any
Shares of any series other than Trust Property allocated or belonging to such
series.
Section 5.2. Non-Liability of Trustees, Etc. No Trustee,
officer, employee or agent of the Trust shall be liable to the Trust, its
Shareholders, or to any Shareholder, Trustee, officer, employee, or agent
thereof for any action or failure to act (including without limitation the
failure to compel in any way any former or acting Trustee to redress any breach
of trust) except for his own bad faith, wilful misfeasance, gross negligence or
reckless disregard of his duties.
Section 5.3. Mandatory Indemnification. (a) Subject
to the exceptions and limitations contained in paragraph (b)
below:
(i) every person who is or has been a Trustee or
officer of the Trust shall be indemnified by the Trust against all
liability and against all expenses reasonably incurred or paid by him
in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or incurred
by him in the settlement thereof;
(ii) the words "claim", "action", "suit", or
"proceeding" shall apply to all claims, actions, suits or proceedings
(civil, criminal, administrative or other, including appeals), actual
or threatened; and the words "liability" and "expenses" shall include,
without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to
a Trustee or officer:
(i) against any liability to the Trust or the
Shareholders by reason of a final adjudication by the court or other
body before which the proceeding was brought that he engaged in wilful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;
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(ii) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust; or
(iii) in the event of a settlement involving a payment by
a Trustee or officer or other disposition not involving a final
adjudication as provided in paragraph (b) (i) or (b) (ii) above
resulting in a payment by a Trustee or officer. unless there has been
either a determination that such Trustee or officer did not engage in
wilful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office by the court or
other body approving the settlement or other disposition or by a
reasonable determination, based upon a review of readily available
facts (as opposed to a full trial-type inquiry) that he did not engage
in such conduct:
(A) by vote of a majority of the Disinterested
Trustees acting on the matter (provided that a majority of the
Disinterested Trustees then in office act on the matter); or
(B) by written opinion of independent legal counsel.
(C) The rights of indemnification herein provided may
be insured against by policies maintained by the Trust, shall be
severable, shall not affect any other rights to which any Trustee or
officer may now or hereafter be entitled, shall continue as to a Person
who has ceased to be such Trustee or officer and shall inure to the
benefit of the heirs, executors and administrators of such Person.
Nothing contained herein shall affect any rights to indemnification to
which personnel other than Trustees and officers may be entitled by
contract or otherwise under law.
(c) Expenses of preparation and presentation of a defense to
any claim, action, suit, or proceeding of the character described in paragraph
(a) of this Section 5.3 shall be advanced by the Trust prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification under this Section 5.3, provided that either:
(i) such undertaking is secured by a surety bond or
some other appropriate security or the Trust shall be insured against
losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the Disinterested Trustees then
in office act on the matter) or an independent legal counsel in a
written opinion, shall determine, based
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upon a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 5.3 a "Disinterested Trustee" is one
(i) who is not an "Interested Person" of the Trust (including anyone who has
been exempted from being an "Interested Person" by any rule, regulation or order
of the Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or had been pending.
Section 5.4. No Bond Required of Trustees. No Trustee
shall be obligated to give any bond or other security for the
performance of any of his duties hereunder.
Section 5.5. No Duty of Investigation; Notice in Trust
Instruments, Etc. No purchaser, lender, Shareholder Servicing Agent, Transfer
Agent or other Person dealing with the Trustees or any officer, employee or
agent of the Trust shall be bound to make any inquiry concerning the validity of
any transaction purported to be made by the Trustees or by said officer,
employee or agent or be liable for the application of money or property paid,
loaned, or delivered to or on the order of the Trustees or of said officer,
employee or agent. Every obligation, contract, instrument, certificate, Share,
other security of the Trust or undertaking, and every other act or thing
whatsoever executed in connection with the Trust shall be conclusively presumed
to have been executed or done by the executors thereof only in their capacity as
Trustees under the Declaration or in their capacity as officers, employees or
agents of the Trust. Every written obligation, contract, instrument,
certificate, Share, other security of the Trust or undertaking made or issued by
the Trustees shall recite that the same is executed or made by them not
individually, but as Trustees under the Declaration, and that the obligations of
any such instrument are not binding upon any of the Trustees or Shareholders
individually, but bind only the trust estate, and may contain any further
recital which they or he may deem appropriate, but the omission of such recital
shall not operate to bind any of the Trustees or Shareholders individually. The
Trustees shall at all times maintain insurance for the protection of the Trust
Property, the Trust's Shareholders, Trustees, officers, employees and agents in
such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment shall
deem advisable.
Section 5.6. Reliance on Experts, Etc. Each Trustee and
officer or employee of the Trust shall, in the performance of his duties, be
fully and completely justified and protected with regard to any act or any
failure to act resulting from reliance in good faith upon the books of account
or other records of the Trust, upon an opinion of counsel, or upon reports made
to the
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Trust by any of its officers or employees or by any Investment Adviser,
Administrator, Distributor, Transfer Agent, Custodian, Shareholder Servicing
Agent, selected dealers, accountants, appraisers or other experts or consultants
selected with reasonable care by the Trustees, officers or employees of the
Trust, regardless of whether such counsel or expert may also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1. Beneficial Interest. The interest of the
beneficiaries hereunder may be divided into transferable Shares of Beneficial
Interest (par value $0.001 per share), all of one class, which may be divided
into one or more series as provided in Section 6.9 hereof. Each Share shall
represent an equal proportionate beneficial interest in the net assets of the
Trust with each other Share, except that, if the Shares shall have been divided
into one or more series pursuant to Section 6.9 hereof, each Share of a
particular series shall represent an equal proportionate beneficial interest in
the net assets pertaining to such series with each other Share of such series.
The number of Shares authorized hereunder is unlimited. All Shares issued
hereunder including, without limitation, Shares issued in connection with a
dividend in Shares or a split of Shares, shall be fully paid and non-assessable.
Section 6.2. Rights of Shareholders. The ownership of the
Trust Property of every description and the right to conduct any business
hereinbefore described are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the Trust
nor can they be called upon to assume any losses of the Trust or suffer an
assessment of any kind by virtue of their ownership of Shares. The Shares shall
be personal property giving only the rights specifically set forth in the
Declaration. The Shares shall not entitle the holder to preference, preemptive,
appraisal, conversion or exchange rights, except as the Trustees may determine
with respect to any series of Shares.
Section 6.3. Trust Only. It is the intention of the Trustees
to create only the relationship of Trustee and beneficiary between the Trustees
and each Shareholder from time to time. It is not the intention of the Trustees
to create a general partnership, limited partnership, joint stock association,
corporation, limited liability company, bailment or any form of legal
relationship other than a trust. Nothing in the Declaration shall be construed
to make the Shareholders, either by themselves or with the Trustees, partners or
members of a joint stock association.
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Section 6.4. Issuance of Shares. The Trustees, in their
discretion may, from time to time without vote of the Shareholders, issue
Shares, in addition to the then issued and outstanding Shares and Shares held in
the treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times, and on such
terms as the Trustees may deem best, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with, the
assumption of liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares. The Trustees may from time to
time divide or combine the Shares of any series into a greater or lesser number
without thereby changing their proportionate beneficial interests in Trust
Property allocated or belonging to such series. Contributions to the Trust may
be accepted for, and Shares shall be redeemed as, whole Shares and/or 1/1,000ths
of a Share or integral multiples thereof.
Section 6.5. Register of Shares. A register or registers shall
be kept at the principal office of the Trust or at an office of the Transfer
Agent or any one or more Shareholder Servicing Agents which register or
registers, taken together, shall contain the names and addresses of the
Shareholders and the number of Shares held by them respectively and a record of
all transfers thereof. Such register or registers shall be conclusive as to who
are the holders of the Shares and who shall be entitled to receive dividends or
distributions or otherwise to exercise or enjoy the rights of Shareholders. No
Shareholder shall be entitled to receive payment of any dividend or
distribution, nor to have notice given to him as herein or in the By-Laws
provided, until he has given his address to the Transfer Agent, the Shareholder
Servicing Agent which is the agent of record for such Shareholder, or such other
officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for the Shares;
however, the Trustees, in their discretion, may authorize the issuance of Share
certificates and promulgate appropriate rules and regulations as to their use.
Section 6.6. Transfer of Shares. Shares shall be transferable
on the records of the Trust only by the record holder thereof or by his agent
thereunto duly authorized in writing, upon delivery to the Trustees, the
Transfer Agent or the Shareholder Servicing Agent which is the agent of record
for such Shareholder, of a duly executed instrument of transfer, together with
any certificate or certificates (if issued) for such Shares, and such evidence
of the genuineness of each such execution and authorization and of other matters
as may reasonably be required. Upon such delivery the transfer shall be recorded
on the register of the Trust. Until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all purposes
hereunder and neither the Trustees nor any Transfer Agent, Shareholder Servicing
Agent or registrar nor any officer,
<PAGE>
17
employee or agent of the Trust shall be affected by any notice of
the proposed transfer.
Any person becoming entitled to any Shares in consequence of
the death, bankruptcy, or incompetence of any Shareholder, or otherwise by
operation of law, shall be recorded on the register of Shares as the holder of
such Shares upon production of the proper evidence thereof to the Trustees, the
Transfer Agent or the Shareholder Servicing Agent which is the agent of record
for such Shareholder; but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent, Shareholder Servicing Agent or
registrar nor any officer or agent of the Trust shall be affected by any notice
of such death, bankruptcy or incompetence, or other operation of law.
Section 6.7. Notices. Any and all notices to which any
Shareholder may be entitled and any and all communications shall be deemed duly
served or given if mailed, postage prepaid, addressed to any Shareholder of
record at his last known address as recorded on the register of the Trust.
Section 6.8. Voting Powers. The Shareholders shall have power
to vote only (i) for the removal of Trustees as provided in Section 2.2 hereof,
(ii) with respect to any investment advisory or management contract as provided
in Section 4.1 hereof, (iii) with respect to termination of the Trust as
provided in Section 9.2 hereof, (iv) with respect to any amendment of this
Declaration to the extent and as provided in Section 9.3 hereof, (v) with
respect to any merger, consolidation or sale of assets as provided in Sections
9.4 and 9.6 hereof, (vi) with respect to incorporation of the Trust or any
series to the extent and as provided in Sections 9.5 and 9.6 hereof, (vii) to
the same extent as the stockholders of a Massachusetts business corporation as
to whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, and (viii) with respect to such additional matters relating
to the Trust as may be required by the Declaration, the By-Laws or any
registration of the Trust with the Commission (or any successor agency) or any
state, or as the Trustees may consider necessary or desirable. Each whole Share
shall be entitled to one vote as to any matter on which it is entitled to vote
and each fractional Share shall be entitled to a proportionate fractional vote,
except that Shares held in the treasury of the Trust shall not be voted. Shares
shall be voted by individual series on any matter submitted to a vote of the
Shareholders of the Trust except as provided in Section 6.9(g) hereof. There
shall be no cumulative voting in the election of Trustees. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required by law, the Declaration or the By-Laws to be taken by
Shareholders. At any meeting of shareholders of the Trust or of any series of
the
<PAGE>
18
Trust, without limiting any right or power which it may otherwise have by virtue
of being the record owner of Shares, (a) a Shareholder Servicing Agent may vote
any shares as to which such Shareholder Servicing Agent is the agent of record
and which are not otherwise represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares
otherwise represented at the meeting in person or by proxy as to which such
Shareholder Servicing Agent is the agent of record and (b) any shares so voted
by a Shareholder Servicing Agent will be deemed represented at the meeting for
quorum purposes. The By-Laws may include further provisions for Shareholder
votes and meetings and related matters.
Section 6.9. Series Designation. As set forth in Appendix I
hereto, the Trustees have authorized the division of Shares into series, as
designated and established pursuant to the provisions of Appendix I and this
Section 6.9. The Trustees, in their discretion, may authorize the division of
Shares into one or more additional series, and the different series shall be
established and designated, and the variations in the relative rights,
privileges and preferences as between the different series shall be fixed and
determined by the Trustees upon and subject to the following provisions:
(a) All Shares shall be identical except that there may be
such variations as shall be fixed and determined by the Trustees
between different series as to purchase price, right of redemption and
the price, terms and manner of redemption, and special and relative
rights as to dividends and on liquidation.
(b) The number of authorized Shares and the number of Shares
of each series that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued Shares or any Shares previously
issued and reacquired of any series into one or more series that may be
established and designated from time to time. The Trustees may hold as
treasury shares (of the same or some other series), reissue for such
consideration and on such terms as they may determine, or cancel any
Shares of any series reacquired by the Trust at their discretion from
time to time.
(c) All consideration received by the Trust for the issue or
sale of Shares of a particular series, together with all assets in
which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever
form the same may be, shall irrevocably belong to that series for all
purposes, subject only to the rights of creditors of such series, and
shall be so recorded upon the books of account of the Trust. In the
event that there are any assets, income, earnings, profits, and
proceeds thereof,
<PAGE>
19
funds, or payments which are not readily identifiable as belonging to
any particular series, the Trustees shall allocate them among any one
or more of the series established and designated from time to time in
such manner and on such basis as they, in their sole discretion, deem
fair and equitable. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all series for all
purposes. No holder of Shares of any particular series shall have any
claim on or right to any assets allocated or belonging to any other
series of Shares.
(d) The assets belonging to each particular series shall be
charged with the liabilities of the Trust in respect of that series and
all expenses, costs, charges and reserves attributable to that series,
and any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to any
particular series shall be allocated and charged by the Trustees to and
among any one or more of the series established and designated from
time to time in such manner and on such basis as the Trustees in their
sole discretion deem fair and equitable. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the holders of all series for all
purposes. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be
treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon the
Shareholders. Under no circumstances shall the assets allocated or
belonging to any particular series be charged with liabilities
attributable to any other series. All Persons who have extended credit
which has been allocated to a particular series, or who have a claim or
contract which has been allocated to any particular series, shall look
only to the assets of that particular series for payment of such
credit, claim or contract.
(e) The power of the Trustees to invest and reinvest the Trust
Property allocated or belonging to any particular series shall be
governed by Section 3.2 hereof unless otherwise provided in the
instrument of the Trustees establishing such series which is
hereinafter described.
(f) Each Share of a series shall represent a beneficial
interest in the net assets allocated or belonging to such series only,
and such interest shall not extend to the assets of the Trust
generally. Dividends and distributions on Shares of a particular series
may be paid with such frequency as the Trustees may determine, which
may be monthly or otherwise, pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees
may determine, to the holders of Shares of that series only, from such
of the income and capital gains,
<PAGE>
20
accrued or realized, from the assets belonging to that series, as the
Trustees may determine, after providing for actual and accrued
liabilities belonging to that series. All dividends and distributions
on Shares of a particular series shall be distributed pro rata to the
holders of that series in proportion to the number of Shares of that
series held by such holders at the date and time of record established
for the payment of such dividends or distributions. Shares of any
particular series of the Trust may be redeemed solely out of Trust
Property allocated or belonging to that series. Upon liquidation or
termination of a series of the Trust, Shareholders of such series shall
be entitled to receive a pro rata share of the net assets of such
series only.
(g) Notwithstanding any provision hereof to the contrary, on
any matter submitted to a vote of the Shareholders of the Trust, all
Shares then entitled to vote shall be voted by individual series,
except that (i) when required by the 1940 Act to be voted in the
aggregate, Shares shall not be voted by individual series, and (ii)
when the Trustees have determined that the matter affects only the
interests of Shareholders of one or more series, only Shareholders of
such series shall be entitled to vote thereon.
(h) The establishment and designation of any series of Shares
shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and
designation and the relative rights and preferences of such series, or
as otherwise provided in such instrument. At any time that there are no
Shares outstanding of any particular series previously established and
designated, the Trustees may by an instrument executed by a majority of
their number abolish that series and the establishment and designation
thereof. Each instrument referred to in this paragraph shall have the
status of an amendment to this Declaration.
(i) Notwithstanding anything in this Declaration to the
contrary, the Trustees may, in their discretion, authorize the division
of Shares of any series into shares of one or more classes of such
series. All Shares of a class shall be identical with each other and
with the Shares of each other class or subseries of the same series
except for such varieties between classes as may be approved by the
Board of Trustees and be permitted under the 1940 Act or pursuant to
any exemptive order issued by the Securities and Exchange Commission.
<PAGE>
21
ARTICLE VII
REDEMPTIONS
Section 7.1. Redemptions. In case any Shareholder at any time
desires to dispose of his Shares, he may deposit his certificate or certificates
therefor, duly endorsed in blank or accompanied by an instrument of transfer
executed in blank, or if the Shares are not represented by any certificates, a
written request or other such form of request as the Trustees may from time to
time authorize, at the office of the Transfer Agent, the Shareholder Servicing
Agent which is the agent of record for such Shareholder, or at the office of any
bank or trust company, either in or outside of Massachusetts, which is a member
of the Federal Reserve System and which the said Transfer Agent or the said
Shareholder Servicing Agent has designated in writing for that purpose, together
with an irrevocable offer in writing in a form acceptable to the Trustees to
sell the Shares represented thereby to the Trust at the net asset value thereof
per Share, determined as provided in Section 8.1 hereof, next after such
deposit. Payment for said Shares shall be made to the Shareholder within seven
days after the date on which the deposit is made, unless (i) the date of payment
is postponed pursuant to Section 7.2 hereof, or (ii) the receipt, or
verification of receipt, of the purchase price for the Shares to be redeemed is
delayed, in either of which events payment may be delayed beyond seven days.
Section 7.2. Suspension of Right of Redemption. The
---------------------------------
Trust may declare a suspension of the right of redemption or
postpone the date of payment of the redemption proceeds for the
whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary week-end and
holiday closings, (ii) during which trading on the New York Stock
Exchange is restricted, (iii) during which an emergency exists as
a result of which disposal by the Trust of securities owned by it
is not reasonably practicable or it is not reasonably practicable
for the Trust fairly to determine the value of its net assets, or
(iv) during any other period when the Commission may for the
protection of security holders of the Trust by order permit
suspension of the right of redemption or postponement of the date
of payment of the redemption proceeds; provided that applicable
rules and regulations of the Commission shall govern as to
whether the conditions prescribed in (ii), (iii) or (iv) exist.
Such suspension shall take effect at such time as the Trust shall
specify but not later than the close of business on the business
day next following the declaration of suspension, and thereafter
there shall be no right of redemption or payment of the
redemption proceeds until the Trust shall declare the suspension
at an end, except that the suspension shall terminate in any
event on the first day on which said stock exchange shall have
reopened or the period specified in (ii) or (iii) shall have
expired (as to which, in the absence of an official ruling by the
Commission, the determination of the Trust shall be conclusive).
<PAGE>
22
In the case of a suspension of the right of redemption, a Shareholder may either
withdraw his request for redemption or receive payment based on the net asset
value existing after the termination of the suspension.
Section 7.3. Redemption of Shares, Disclosure of Holding. If
the Trustees shall at any time and in good faith, be of the opinion that direct
or indirect ownership of Shares or other securities of the Trust has or may
become concentrated in any Person to an extent which would disqualify the Trust
as a regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code"), then the Trustees shall have the power by lot or other
means deemed equitable by them (i) to call for redemption by any such Person a
number, or principal amount. of Shares or other securities of the Trust
sufficient to maintain or bring the direct or indirect ownership of shares or
other securities of the Trust into conformity with the requirements for such
qualification, and (ii) to refuse to transfer or issue Shares or other
securities of the Trust to any Person whose acquisition of the Shares or other
securities of the Trust in question would result in such disqualification. The
redemption shall be effected at the redemption price and in the manner provided
in Section 7.1 hereof.
The holders of Shares or other securities of the Trust shall
upon demand disclose to the Trustees in writing such information with respect to
direct and indirect ownership of Shares or other securities of the Trust as the
Trustees deem necessary to comply with the provisions of the Code, or to comply
with the requirements of any other authority. Upon the failure of a Shareholder
to disclose such information and to comply with such demand of the Trustees, the
Trust shall have the power to redeem such Shares at a redemption price
determined in accordance with Section 7.1 hereof.
Section 7.4. Redemptions of Accounts of Less than $500. The
Trustees shall have the power at any time to redeem Shares of any Shareholder at
a redemption price determined in accordance with Section 7.1 hereof if at such
time the aggregate net asset value of the Shares in such Shareholder's account
is less, than $500. A Shareholder shall be notified that the value of his
account is less than $500 and allowed 60 days to make an additional investment
before the redemption is effected.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
The Trustees, in their absolute discretion, may prescribe and
shall set forth in the By-Laws or in a duly adopted vote or votes of the
Trustees such bases and times for determining the per Share net asset value of
the Shares or net
<PAGE>
23
income, or the declaration and payment of dividends and
distributions, as they may deem necessary or desirable.
ARTICLE IX
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
Section 9.1. Duration. The Trust shall continue
without limitation of time but subject to the provisions of this
Article IX.
Section 9.2. Termination of Trust. (a) The Trust may be
terminated (i) by a Majority Shareholder Vote of the holders of each series of
its Shares, or (ii) by the Trustees by written notice to the Shareholders. Any
series of the Trust may be terminated (i) by a Majority Shareholder Vote of the
holders of Shares of that series, or (ii) by the Trustees by written notice to
the Shareholders of that series. Upon the termination of the Trust or any series
of the Trust:
(i) The Trust or series of the Trust shall carry on
no business except for the purpose of winding up its
affairs;
(ii) The Trustees shall proceed to wind up the affairs
of the Trust or series of the Trust and all the powers of the Trustees
under this Declaration shall continue until the affairs of the Trust or
series of the Trust shall have been wound up, including the power to
fulfill or discharge the contracts of the Trust or series of the Trust,
collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust Property or
Trust Property of the series to one or more persons at public or
private sale for consideration which may consist in whole or in part of
cash, securities or other property of any kind, discharge or pay its
liabilities, and to do all other acts appropriate to liquidate its
business; provided, that any sale, conveyance, assignment, exchange,
transfer or other disposition of all or substantially all the Trust
Property shall require Shareholder approval in accordance with Section
9.4 hereof, and any sale, conveyance, assignment, exchange, transfer or
other disposition of all or substantially all of the Trust Property
allocated or belonging to any series shall require the approval of the
Shareholders of such series as provided in Section 9.6 hereof; and
(iii) After paying or adequately providing for the
payment of all liabilities, and upon receipt of such releases,
indemnities and refunding agreements as they deem necessary for their
protection, the Trustees may distribute the remaining Trust Property or
Trust Property of the
<PAGE>
24
series, in cash or in kind or partly in cash and partly in kind, among
the Shareholders of the Trust or the series according to their
respective rights.
(b) After termination of the Trust or series and distribution
to the Shareholders of the Trust or series as herein provided, a majority of the
Trustees shall execute and lodge among the records of the Trust an instrument in
writing setting forth the fact of such termination, and the Trustees shall
thereupon be discharged from all further liabilities and duties hereunder with
respect to the Trust or series, and the rights and interests of all Shareholders
of the Trust or series shall thereupon cease.
Section 9.3. Amendment Procedure. (a) This Declaration may be
amended by a Majority Shareholder Vote of the Shareholders of the Trust or by
any instrument in writing, without a meeting, signed by a majority of the
Trustees and consented to by the holders of not less than a majority of the
Shares of the Trust. The Trustees may also amend this Declaration without the
vote or consent of Shareholders to designate series in accordance with Section
6.9 hereof (or to modify any provision of this Declaration to the extent deemed
necessary or appropriate by the Trustees to reflect such designation), to change
the name of the Trust, to amend, alter, modify or repeal any provision of this
Declaration with respect to any item provided that such amendment, alteration,
modification or repeal does not adversely affect the economic value or legal
rights of a Shareholder, or if they deem it necessary or advisable to conform
this Declaration to the requirements of applicable federal laws or regulations
or the requirements of the regulated investment company provisions of the
Internal Revenue Code of 1986, as amended, but the Trustees shall not be liable
for failing to do so.
(b) No amendment which the Trustees shall have determined
shall adversely affect the rights, privileges or interests of holders of a
particular series of Shares, and which would otherwise require a Majority
Shareholder Vote under paragraph (a) of this Section 9.3, but not the rights,
privileges or interests of holders of Shares of the Trust generally, may be made
except with the vote or consent by a Majority Shareholder Vote of such series.
(c) Notwithstanding any other provision hereof, no amendment
may be made under this Section 9.3 which would change any rights with respect to
the Shares, or any series of Shares, by reducing the amount payable thereon upon
liquidation of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with the Majority Shareholder Vote of the Shares or
that series of Shares. Nothing contained in this Declaration shall permit the
amendment of this Declaration to impair the exemption from personal liability of
the Shareholders,
<PAGE>
25
Trustees, officers, employees and agents of the Trust or to permit assessments
upon Shareholders.
(d) A certificate signed by a majority of the Trustees setting
forth an amendment and reciting that it was duly adopted by the Shareholders or
by the Trustees as aforesaid or a copy of the Declaration, as amended, and
executed by a majority of the Trustees, shall be conclusive evidence of such
amendment when lodged among the records of the Trust.
(e) Notwithstanding any other provision hereof, until such
time as a Registration Statement under the Securities Act of 1933, as amended,
covering the first public offering of securities of the Trust shall have become
effective, this Declaration may be amended in any respect by the affirmative
vote of a majority of the Trustees or by an instrument signed by a majority of
the Trustees.
Section 9.4. Merger, Consolidation and Sale of Assets. The
Trust may merge or consolidate with any other corporation, association, trust or
other organization or may sell, lease or exchange all or substantially all of
the Trust Property (or all or substantially all of the Trust Property allocated
or belonging to a particular series of the Trust) including its good will, upon
such terms and conditions and for such consideration when and as authorized at
any meeting of Shareholders called for such purpose by the vote of the holders
of two-thirds of the outstanding shares of each affected series of the Trust or
by an instrument or instruments in writing without a meeting, consented to by
the vote of the holders of two-thirds of the outstanding Shares of each affected
series of the Trust; provided, however, that if such merger, consolidation,
sale, lease or exchange is recommended by the Trustees, the vote or written
consent by Majority Shareholder Vote shall be sufficient authorization; and any
such merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. Nothing contained herein shall be construed as
requiring approval of Shareholders for any sale of assets in the ordinary course
of the business of the Trust.
Section 9.5. Incorporation, Reorganization. Subject to a
Majority Shareholder Vote, the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction, or
any other trust, unit investment trust, partnership, association or other
organization to take over all of the Trust Property or to carry on any business
in which the Trust shall directly or indirectly have any interest, and to sell,
convey and transfer the Trust Property to any such corporation. trust,
partnership, association or organization in exchange for the shares or
securities thereof or otherwise, and to lend money to, subscribe for the shares
or securities of, and enter into any contracts with any such corporation, trust,
partnership, association or organization in
<PAGE>
26
which the Trust holds or is about to acquire shares or any other interest.
Subject to Section 9.4 hereof, the Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law. Nothing contained in this Section 9.5 shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
Section 9.6. Incorporation or Reorganization of Series. With
the approval of a Majority Shareholder Vote of any series, the Trustees may
sell, lease or exchange all of the Trust Property allocated or belonging to that
series, or cause to be organized or assist in organizing a corporation or
corporations under the laws of any other jurisdiction, or any other trust, unit
investment trust, partnership, association or other organization, to take over
all of the Trust Property allocated or belonging to that series and to sell,
convey and transfer such Trust Property to any such corporation, trust, unit
investment trust, partnership, association, or other organization in exchange
for the shares or securities thereof or otherwise.
ARTICLE X
REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS
The Trustees shall at least semi-annually submit to the
Shareholders a written financial report of the transactions of the Trust,
including financial statements which shall at least annually be certified by
independent public accountants.
Whenever 10 or more Shareholders of record who have been such
for at least six months preceding the date of application, and who hold in the
aggregate either Shares having a net asset value of at least $25,000 or at least
1% of the Shares outstanding, whichever is less, shall apply to the Trustees in
writing, stating that they wish to communicate with other Shareholders with a
view to obtaining signatures to a request for a meeting of Shareholders for the
purpose of removing one or more Trustees pursuant to Section 2.2 hereof and
accompany such application with a form of communication and request which they
wish to transmit, the Trustees shall within five business days after receipt of
such application either (a) afford to such applicants access to a list of the
names and addresses of all Shareholders as recorded on the books of the Trust;
or (b) inform such applicants as to the approximate number of Shareholders of
record, and the approximate cost of mailing to them the proposed communication
and form of request. If the Trustees elect to follow the course specified in (b)
above, the Trustees, upon the written request of such applicants, accompanied by
a tender of the material to be mailed and of the reasonable expenses of
<PAGE>
27
mailing, shall, with reasonable promptness, mail such material to all
Shareholders of record, unless within five business days after such tender the
Trustees mail to such applicants and file with the Commission, together with a
copy of the material to be mailed, a written statement signed by at least a
majority of the Trustees to the effect that in their opinion either such
material contains untrue statements of fact or omits to state facts necessary to
make the statements contained therein not misleading, or would be in violation
of applicable law, and specifying the basis of such opinion.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Filing. This Declaration, as amended, and any
subsequent amendment hereto shall be filed in the office of the Secretary of the
Commonwealth of Massachusetts and in such other place or places as may be
required under the laws of the Commonwealth of Massachusetts and may also be
filed or recorded in such other places as the Trustees deem appropriate. Each
amendment so filed shall be accompanied by a certificate signed and acknowledged
by a Trustee stating that such action was duly taken in a manner provided
herein, and unless such amendment or such certificate sets forth some later time
for the effectiveness of such amendment, such amendment shall be effective upon
its filing. A restated Declaration, integrating into a single instrument all of
the provisions of the Declaration which are then in effect and operative, may be
executed from time to time by a majority of the Trustees and shall, upon filing
with the Secretary of the Commonwealth of Massachusetts, be conclusive evidence
of all amendments contained therein and may thereafter be referred to in lieu of
this original Declaration and the various amendments thereto.
Section 11.2. Governing Law. This Declaration is executed by
the Trustees and delivered in the Commonwealth of Massachusetts and with
reference to the laws thereof, and the rights of all parties and the validity
and construction of every provision hereof shall be subject to and construed
according to the laws of said Commonwealth.
Section 11.3. Counterparts. This Declaration may be
simultaneously executed in several counterparts, each of which shall be deemed
to be an original, and such counterparts, together, shall constitute one and the
same instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 11.4. Reliance by Third Parties. Any
certificate executed by an individual who, according to the
records of the Trust appears to be a Trustee hereunder,
certifying to: (i) the number or identity of Trustees or
Shareholders, (ii) the due authorization of the execution of any
instrument or writing, (iii) the form of any vote passed at a
<PAGE>
28
meeting of Trustees or Shareholders, (iv) the fact that the number of Trustees
or Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (v) the form of any By-Laws
adopted by or the identity of any officers elected by the Trustees, or (vi) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any Person dealing with the Trustees and their successors.
Section 11.5. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code of 1986, as amended, or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of this Declaration; provided however, that such determination shall not
affect any of the remaining provisions of this Declaration or render invalid or
improper any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this
instrument this 1st day of October, 1996.
-----------------------------
Fergus Reid, III
as Trustee
and not individually
101 Park Avenue
New York, New York 10178
-----------------------------
H. Richard Vartabedian
as Trustee
and not individually
101 Park Avenue
New York, New York 10178
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
October 1, 1996
Then personally appeared the above-named Fergus Reid, III and
H. Richard Vartabedian who severally acknowledged the foregoing instrument to be
their free act and deed.
Before me,
----------------------
Notary Public
My commission expires:
<PAGE>
Appendix I
MUTUAL FUND SELECT GROUP
Establishment and
Designation of Series of Shares of
Beneficial Interest (without par value)
Pursuant to Section 6.9 of the Declaration of Trust, dated
October 1, 1996 (the "Declaration of Trust"), of the Mutual Fund Select Group
(the "Trust"), the Trustees of the Trust hereby establish and designate ten
initial series of Shares (as defined in the Declaration of Trust), such series
to have the following special and relative rights:
1. The series shall be respectively designated as follows:
Vista Select Balanced Fund
Vista Select Bond Fund
Vista Select Emerging Growth Equity Fund Vista Select Equity
Income Fund Vista Select Intermediate Bond Fund Vista Select
International Equity Fund Vista Select Large Cap Equity Fund
Vista Select Large Cap Growth Equity Fund Vista Select
Short-Term Bond Fund Vista Select Small Cap Value Equity Fund
When Shares of any of the above series are made available to
customers of an entity with which the Trust has entered into a shareholder
servicing or similar agreement, such series may be referred to by the
designation set forth above with an identifying prefix other than the word
"Vista", to denote the services being offered by that entity to its customers
who own Shares of that series.
2. Each series shall be authorized to invest in cash,
securities, instruments and other property as from time to time described in the
Trust's then currently effective registration statement under the Securities Act
of 1933 to the extent pertaining to the offering of Shares of such series. Each
Share of each series shall be redeemable, shall be entitled to one vote or
fraction thereof in respect of a fractional share on matters on which shares of
that series shall be entitled to vote, shall represent a pro rata beneficial
interest in the assets allocated or belonging to such series, and shall be
entitled to receive its pro rata share of the net assets of such series upon
liquidation of the series, all as provided in Section 6.9 of the Declaration of
Trust.
3. Shareholders of each series shall vote separately
as a class on any matter to the extent required by, and any
matter shall be deemed to have been effectively acted upon with
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2
respect to such series as provided in, Rule 18f-3, as from time to time in
effect, under the Investment Company Act of 1940, as amended, or any successor
rule, and by the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated
among these series as set forth in Section 6.9 of the Declaration of Trust.
5. Subject to the provisions of Section 6.9 and Article IX of
the Declaration of Trust, the Trustees (including any successor Trustees) shall
have the right at any time and from time to time to reallocate assets and
expenses or to change the designation of any series now or hereafter created, or
to otherwise change the special and relative rights of any such series.
BY-LAWS
OF THE
MUTUAL FUND SELECT GROUP
ARTICLE I
DEFINITIONS
The terms "Commission", "Declaration", "Distributor",
"Investment Adviser", "Majority Shareholder Vote", "1940 Act", "Shareholder",
"Shares", "Transfer Agent", "Trust", "Trust Property" and "Trustees" have the
respective meanings given them in the Declaration of Trust of the Mutual Fund
Select Group, dated October 1, 1996, as amended from time to time.
ARTICLE II
OFFICES
Section 1. Principal Office. Until changed by the Trustees,
the principal office of the Trust in the Commonwealth of Massachusetts shall
be in the City of Boston, County of Suffolk.
Section 2. Other Offices. The Trust may have offices in
such other places without as well as within the Commonwealth of Massachusetts
as the Trustees may from time to time determine.
ARTICLE III
SHAREHOLDERS
Section 1. Meetings. Meetings of Shareholders may be called at
any time by a majority of the Trustees and shall be called by any Trustee upon
written request, which shall specify the purpose or purposes for which such
meeting is to be called, of Shareholders holding in the aggregate not less than
10% of the outstanding Shares entitled to vote on the matters specified in such
written request. Any such meeting shall be held within or without the
Commonwealth of Massachusetts on such day and at such time as the Trustees shall
designate. The holders of a majority of outstanding Shares entitled to vote
present in person or by proxy shall constitute a quorum at any meeting of
Shareholders, except that where any provision of law, the Declaration or these
By-Laws permits or requires that holders of any series shall vote as a series,
then a majority of the aggregate number of Shares of that series entitled to
vote shall be necessary to constitute a quorum for the transaction of business
by that series. In the absence of a quorum, a majority of outstanding Shares
entitled to vote present in person or by proxy may adjourn the meeting from time
to time until a quorum shall be present.
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2
Section 2. Notice of Meetings. Notice of all meetings of
Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail to each Shareholder entitled to vote at such
meeting at his address as recorded on the register of the Trust, mailed at least
10 days and not more than 60 days before the meeting. Only the business stated
in the notice of the meeting shall be considered at such meeting. Any adjourned
meeting may be held as adjourned without further notice. No notice need be given
to any Shareholder who shall have failed to inform the Trust of his current
address or if a written waiver of notice, executed before or after the meeting
by the Shareholder or his attorney thereunto authorized, is filed with the
records of the meeting.
Section 3. Record Date. For the purpose of determining the
Shareholders who are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding 30 days, as the Trustees may determine; or without closing the
transfer books the Trustees may fix a date not more than 90 days prior to the
date of any meeting of Shareholders or distribution or other action as a record
date for the determination of the persons to be treated as Shareholders of
record for such purpose.
Section 4. Proxies. At any meeting of Shareholders, any holder
of Shares entitled to vote thereat may vote by proxy, provided that no proxy
shall be voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a vote of a majority of the Trustees, proxies may be solicited in
the name of one or more Trustees or one or more of the officers of the Trust.
Only Shareholders of record shall be entitled to vote. Each full Share shall be
entitled to one vote and fractional Shares shall be entitled to a vote of such
fraction. When any Share is held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Share, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person as regards the charge or management of such Share,
such Share may be voted by such guardian or such other person as regards the
charge or
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3
management of such Share, such Share may be voted by such guardian or such other
person appointed or having such control, and such vote may be given in person or
by proxy.
Section 5. Inspection of Records. The records of the
Trust shall be open to inspection by the Shareholders to the same extent as
is permitted shareholders of a Massachusetts business corporation.
Section 6. Action without Meeting. Any action which may be
taken by Shareholders may be taken without a meeting if a majority of
Shareholders entitled to vote on the matter (or such larger proportion thereof
as shall be required by law, the Declaration or these By-Laws for approval of
such matter) consent to the action in writing and the written consents are filed
with the records of the meetings of Shareholders. Such consent shall be treated
for all purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than regular or stated meetings shall be held whenever called by the Chairman or
by any Trustee. Notice of the time and place of each meeting other than regular
or stated meetings shall be given by the Secretary or an Assistant Secretary or
by the officer or Trustee calling the meeting and shall be mailed to each
Trustee at least two days before the meeting, or shall be telegraphed, cabled,
or wirelessed to each Trustee at his business address, or personally delivered
to him at least one day before the meeting. Such notice may, however, be waived
by any Trustee. Notice of a meeting need not be given to any Trustee if a
written waiver of notice, executed by him before or after the meeting, is filed
with the records of the meeting, or to any Trustee who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
him. A notice or waiver of notice need not specify the purpose of any meeting.
The Trustees may meet by means of a telephone conference circuit or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, which telephone conference meeting shall be deemed
to have been held at a place designated by the Trustees at the meeting.
Participation in a telephone conference meeting shall constitute presence in
person at such meeting. Any action required or permitted to be taken at any
meeting of the Trustees may be taken
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4
by the Trustees without a meeting if all the Trustees consent to the action in
writing and the written consents are filed with the records of the Trustees'
meetings. Such consents shall be treated as a vote for all purposes.
Section 2. Quorum and Manner of Acting. A majority of the
Trustees present in person at any regular or special meeting of the Trustees
shall constitute a quorum for the transaction of business at such meeting and
(except as otherwise required by law, the Declaration or these By-Laws) the act
of a majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
ARTICLE V
COMMITTEES AND ADVISORY BOARD
Section 1. Executive and Other Committees. The Trustees by
vote of a majority of all the Trustees may elect from their own number an
Executive Committee to consist of not less than three Trustees to hold office at
the pleasure of the Trustees. While the Trustees are not in session, the
Executive Committee shall have the power to conduct the current and ordinary
business of the Trust, including the purchase and sale of securities and the
designation of securities to be delivered upon redemption of Shares of the
Trust, and such other powers of the Trustees as the Trustees may, from time to
time, delegate to the Executive Committee except those powers which by law, the
Declaration or these By-Laws the Trustees are prohibited from so delegating. The
Trustees may also elect from their own number other Committees from time to
time, the number composing such Committees, the powers conferred upon the same
(subject to the same limitations as with respect to the Executive Committee) and
the terms of membership on such Committees to be determined by the Trustees. The
Trustees may designate a chairman of any such Committee. In the absence of such
designation a Committee may elect its own chairman.
Section 2. Meeting, Quorum and Manner of Acting. The
Trustees may (i) provide for stated meetings of any Committee, (ii) specify the
manner of calling and notice required for special meetings of any Committee,
(iii) specify the number of members of a Committee required to constitute a
quorum and the number of members of a Committee required to exercise specified
powers delegated to such Committee, (iv) authorize the making of decisions to
exercise specified powers by written assent of the requisite number of
<PAGE>
5
members of a Committee without a meeting, and (v) authorize the members of a
Committee to meet by means of a telephone conference circuit.
Each Committee shall keep regular minutes of its meetings and
records of decisions taken without a meeting and cause them to be recorded in a
book designated for that purpose and kept in the office of the Trust.
Section 3. Advisory Board. The Trustees may appoint an
Advisory Board to consist in the first instance of not less than three members.
Members of such Advisory Board shall not be Trustees or officers and need not be
Shareholders. A member of such Advisory Board shall hold office for such period
as the Trustees may by vote provide and may resign therefrom by a written
instrument signed by him which shall take effect upon its delivery to the
Trustees. The Advisory Board shall have no legal powers and shall not perform
the functions of Trustees in any manner, such Advisory Board being intended
merely to act in an advisory capacity. Such Advisory Board shall meet at such
times and upon such notice as the Trustees may provide.
ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust shall
be a Chairman, a President, a Treasurer and a Secretary, who shall be elected by
the Trustees. The Trustees may elect or appoint such other officers or agents as
the business of the Trust may require, including one or more Vice Presidents,
one or more Assistant Treasurers, and one or more Assistant Secretaries. The
Trustees may delegate to any officer or committee the power to appoint any
subordinate officers or agents.
Section 2. Term of Office and Qualifications. Except as
otherwise provided by law, the Declaration of Trust or these ByLaws, the
Chairman, the President, the Treasurer and the Secretary shall hold office until
his respective successor shall have been duly elected and qualified, and all
other officers shall hold office at the pleasure of the Trustees. The Secretary
and Treasurer may be the same person. A Vice President and the Treasurer or a
Vice President and the Secretary may be the same person, but the offices of Vice
President, Secretary and Treasurer shall not be held by the same person. Neither
the Chairman nor the President shall hold any other office. Except as above
provided, any two offices may be held by the same person. Any officer may be,
but none need be, a Trustee or Shareholder.
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6
Section 3. Removal. The Trustees, at any regular or special
meeting of the Trustees, may remove any officer with or without cause by a vote
of a majority of the Trustees. Any officer or agent appointed by any officer or
committee may be removed with or without cause by such appointing officer or
committee.
Section 4. Powers and Duties of the Chairman. The Chairman may
call meetings of the Trustees and of any Committee thereof when he deems it
necessary and shall preside at all meetings of the Shareholders. Subject to the
control of the Trustees and any Committee of the Trustees, the Chairman shall at
all times exercise a general supervision and direction over the affairs of the
Trust. The Chairman shall have the power to employ attorneys and counsel for the
Trust and to employ such subordinate officers, agents, clerks and employees as
he may find necessary to transact the business of the Trust. The Chairman shall
also have the power to grant, issue, execute or sign such powers of attorney,
proxies or other documents as may be deemed advisable or necessary in
furtherance of the interests of the Trust. The Chairman shall have such other
powers and duties as, from time to time, may be conferred upon or assigned to
him by the Trustees.
Section 5. Powers and Duties of the President. In the absence
or disability of the Chairman, the President shall perform all the duties and
may exercise any of the powers of the Chairman, subject to the control of the
Trustees. The President shall perform such other duties as may be assigned to
him from time to time by the Trustees or the Chairman.
Section 6. Powers and Duties of Vice Presidents. In the
absence or disability of the President, the Vice President or, if there be more
than one Vice President, any Vice President designated by the Trustees shall
perform all the duties and may exercise any of the powers of the President,
subject to the control of the Trustees. Each Vice President shall perform such
other duties as may be assigned to him from time to time by the Trustees or the
President.
Section 7. Powers and Duties of the Treasurer. The Treasurer
shall be the principal financial and accounting officer of the Trust. The
Treasurer shall deliver all funds of the Trust which may come into his hands to
such custodian as the Trustees may employ pursuant to Article X hereof. The
Treasurer shall render a statement of condition of the finances of the Trust to
the Trustees as often as they shall require the same and shall in general
perform all the duties incident to the office of Treasurer and such other duties
as from time to time may be assigned to him by the Trustees. The Treasurer shall
give a bond to the faithful discharge of his duties, if required to do so by the
Trustees, in such sum and with such surety or sureties as the Trustees shall
require.
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7
Section 8. Powers and Duties of the Secretary. The Secretary
shall keep the minutes of all meetings of the Shareholders in the proper books
provided for that purpose; shall keep the minutes of all meetings of the
Trustees; shall have custody of the seal of the Trust; and shall have charge of
the Share transfer books, lists and records unless the same are in the charge of
a Transfer Agent of the Trust (as such party is defined in the Declaration). The
Secretary shall attend to the giving and serving of all notices by the Trust in
accordance with the provisions of these By-Laws and as required by law; and
subject to these By-Laws, shall in general perform all duties incident to the
office of Secretary and such other duties as from time to time may be assigned
to him by the Trustees.
Section 9. Powers and Duties of Assistant Treasurers. In the
absence or disability of the Treasurer, any Assistant Treasurer designated by
the Trustees shall perform all the duties, and may exercise any of the powers,
of the Treasurer. Each Assistant Treasurer shall perform such other duties as
from time to time may be assigned to him by the Trustees. Each Assistant
Treasurer shall give a bond for the faithful discharge of his duties, if
required to do so by the Trustees, in such sum and with such surety or sureties
as the Trustees shall require.
Section 10. Powers and Duties of Assistant Secretaries. In the
absence or disability of the Secretary, any Assistant Secretary designated by
the Trustees shall perform all of the duties, and may exercise any of the powers
of the Secretary. Each Assistant Secretary shall perform such other duties as
from time to time may be assigned to him by the Trustees.
Section 11. Compensation of Officers and Trustees and Members
of the Advisory Board. Subject to any applicable law or provision of the
Declaration, the compensation of the officers and Trustees and members of the
Advisory Board shall be fixed from time to time by the Trustees or, in the case
of officers, by any Committee or officer upon whom such power may be conferred
by the Trustees. No officer shall be prevented from receiving such compensation
as such officer by reason of the fact that he is also a Trustee.
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8
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of
November in each year and shall end on the last day of October in the succeeding
year, provided, however, that the Trustees may from time to time change the
fiscal year.
ARTICLE VIII
SEAL
The Trustees shall adopt a seal which shall be in the form and
shall have such inscription thereon as the Trustees may from time to time
prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice is required to be given by law, the
Declaration or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. A notice shall be deemed to have
been telegraphed, cabled or wirelessed for the purposes of these By-Laws when it
has been delivered to a representative of any telegraph, cable or wireless
company with instruction that it be telegraphed, cabled or wirelessed. Any
notice shall be deemed to be given at the time when the same shall be mailed,
telegraphed, cabled or wirelessed.
ARTICLE X
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or
repealed, or new By-Laws may be adopted (a) by Majority Shareholder Vote, or (b)
by the Trustees, provided, however, that no By-Law may be amended, adopted or
repealed by the Trustees if such amendment, adoption or repeal requires,
pursuant to law, the Declaration or these By-Laws, a vote of the Shareholders.
Dated: October 1, 1996
INVESTMENT ADVISORY AGREEMENT
BETWEEN
MUTUAL FUND SELECT GROUP
AND
THE CHASE MANHATTAN BANK
AGREEMENT made as of the __th day of _________, 1996, by and between
Mutual Fund Select Group, a Massachusetts business trust which may issue one or
more series of shares (hereinafter the "Trust"), and 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;
<PAGE>
(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 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.
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<PAGE>
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 Trust's Declaration of Trust, 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 Trust 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 Trust's Board of Trustees. 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. 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
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<PAGE>
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
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<PAGE>
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 Declaration of Trust for the computation of the value of
the Funds' net assets in connection with the determination of the net asset
value of the Funds' shares of beneficial interest.
(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
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<PAGE>
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. Interested Persons. It is understood that, to the extent
consistent with applicable laws, the Trustees, officers and investors of the
Trust are or may be or become interested in the Adviser as directors, officers
or otherwise and that directors, officers and shareholders of the Adviser are or
may be or become similarly interested in the Trust.
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 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.
-6-
<PAGE>
(a) This Agreement shall continue in force for two years from the
Effective Date and shall continue in effect from year to year thereafter 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 each 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 8,
either party hereto may terminate this Agreement at any time on sixty (60) days'
prior written notice to the other, without payment of any penalty. A termination
of this Agreement on behalf of a Fund may be effected by a vote of the Trust's
Board of Trustees 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.
10. 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.
11. Limitation of Liability of Trustees and Investors. The
Adviser acknowledges the following limitation of liability:
The terms "Mutual Fund Select Group" and "Trustees of Mutual Fund
Select 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 Select 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, investors 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.
12. 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
-7-
<PAGE>
hereafter amended, and shall be understood as inclusive of any applicable rules,
interpretations and/or orders adopted or issued thereunder by the Commission.
13. Independent Contractor. The 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 the Trust or any Fund in any way
or otherwise be deemed an agent of the Trust.
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 Trust shall be in writing and shall be duly given if mailed or delivered to
the Adviser at 270 Park Avenue, New York, New York 10017 or at such other
address or to such individual as shall be so specified by the Adviser to the
Trust. Notices of any kind to be given to the Trust hereunder by the Adviser
shall be in writing and shall be duly given if mailed or delivered to the Trust
at 101 Park Avenue, New York, New York 10178 or at such other address or to such
individual as shall be so specified by the Trust 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, and their
respective seals to be hereunto affixed, all as of the date written above.
THE CHASE MANHATTAN BANK MUTUAL FUND SELECT GROUP
By: _________________________ By:_______________________
Name: Name:
Title: Title:
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<PAGE>
Schedule A
Fund: Fee:
----- -----
1. Vista Select Balanced Fund 0.50%
2. Vista Select Bond Fund 0.30
3. Vista Select Emerging Growth Fund 0.65
4. Vista Select Equity Income Fund 0.40
5. Vista Select Intermediate Bond Fund 0.30
6. Vista Select International Equity Fund 1.00
7. Vista Select Large Cap Equity Fund 0.40
8. Vista Select Large Cap Growth Fund 0.40
9. Vista Select Short Term Bond Fund 0.25
10. Vista Select Small Cap Value Fund 0.65
INVESTMENT SUBADVISORY AGREEMENT
between
THE CHASE MANHATTAN BANK
and
CHASE ASSET MANAGEMENT, INC.
AGREEMENT made as of the __th day of _________, 1996, by and between
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 provides investment advisory services to the
series of Mutual Fund Select Group, a Massachusetts business trust (the
"Trust"), which is registered as an open-end, management investment company
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 Sub-Adviser is a registered investment adviser under
the Investment Advisers Act of 1940, as amended (the "Advisers Act"); 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 The Chase Manhattan
Corporation, the indirect 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
<PAGE>
2
date hereof, and will promptly deliver to it all future amendments and
supplements thereto, if any:
(1) the Trust's Declaration of Trust;
(2) the By-Laws of the Trust;
(3) resolutions of the Board of Trustees of the Trust authorizing
the execution and delivery of the Advisory Agreement and this
Agreement;
(4) 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");
(5) Notification of Registration of the Trust under the 1940 Act
on Form N-8A as filed with the Commission; and
(6) the Prospectuses and Statements of Additional Information of
the Funds.
3. Investment Advisory Services.
(a) Management of the Funds. 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 Funds 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 Funds' portfolios 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
<PAGE>
3
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) other
applicable laws; and (v) such other investment policies, procedures and/or
limitations as may be adopted by the Trust or the Adviser with respect to a Fund
and provided to the Sub-Adviser in writing. The Sub-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 Trust's Board of
Trustees. The management of the Funds by the Sub-Adviser shall at all times be
subject to the review of the Adviser and 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 Fund
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
<PAGE>
4
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.
<PAGE>
5
(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 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 the 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
SubAdviser 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 set forth in Schedule A, 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.
(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
<PAGE>
6
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 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) This Agreement shall continue in force for two years from the
Effective Date and shall continue in effect from year to year thereafter 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
<PAGE>
7
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 SubAdviser may be effected as to any particular
Fund by the Adviser, by a vote of the Trust's Board of Trustees, or 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 Select Group" and "Trustees of Mutual Fund
Select 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 Select 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
<PAGE>
8
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 270 Park Avenue, New York, New York 10017
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 1211 Avenue of the Americas, New York, New
York 10036 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
By:_________________________ By:___________________________
Name: Name:
Title: Title:
<PAGE>
9
Schedule A
Fund: Fee:
1. Vista Select Balanced Fund 0.25%
2. Vista Select Bond Fund 0.15
3. Vista Select Emerging Growth Fund 0.30
4. Vista Select Equity Income Fund 0.20
5. Vista Select Intermediate Bond Fund 0.15
6. Vista Select Large Cap Equity Fund 0.20
7. Vista Select Large Cap Growth Fund 0.20
8. Vista Select Short Term Bond Fund 0.10
9. Vista Select Small Cap Equity Fund 0.30
INVESTMENT SUBADVISORY AGREEMENT
between
THE CHASE MANHATTAN BANK
and
CHASE ASSET MANAGEMENT (LONDON) LIMITED
AGREEMENT made as of the __th day of _________, 1996, by and between The
Chase Manhattan Bank, a New York State chartered bank (the "Adviser"), and Chase
Asset Management (London) Limited, an English corporation (the "Sub-Adviser").
WHEREAS, the Adviser provides investment advisory services to the series
of Mutual Fund Select Group, a Massachusetts business trust (the "Trust"), which
is registered as an open-end, management investment company 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 Sub-Adviser is a registered investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"); 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 The Chase Manhattan Corporation, the indirect
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.
<PAGE>
2
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 Prospectuses and Statements of Additional Information of the
Funds.
3. Investment Advisory Services.
(a) Management of the Funds. 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 Funds 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 Funds' portfolios 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
<PAGE>
3
(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) other
applicable laws; and (v) such other investment policies, procedures
and/or limitations as may be adopted by the Trust or the Adviser
with respect to a Fund and provided to the Sub-Adviser in writing.
The Sub-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
Trust's Board of Trustees. The management of the Funds by the
Sub-Adviser shall at all times be subject to the review of the
Adviser and 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
Fund 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
<PAGE>
4
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 SubAdviser, 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.
<PAGE>
5
4. Representations and Warranties.
(a) The Sub-Adviser hereby represents and warrants to the Adviser as
follows:
(i) The Sub-Adviser is a company duly organized and validly
existing under the laws of England 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 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 the
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 SubAdviser) a fee, which shall be accrued
daily and paid in arrears on the first business day of each month, at an annual
rate set forth in Schedule A, 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.
(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
<PAGE>
6
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.
<PAGE>
7
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 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) This Agreement shall continue in force for two years from the
Effective Date and shall continue in effect from year to year
thereafter 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, or 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 Select Group" and "Trustees of Mutual Fund
Select 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 Select 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
<PAGE>
8
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 SubAdviser shall be in writing and shall be duly given if mailed or
delivered to the Adviser at 270 Park Avenue, New York, New York 10017 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 SubAdviser hereunder by
the Adviser shall be in writing and shall be duly given if mailed or delivered
to the Sub-Adviser at Colvile House, 32 Curzon Street, London W1Y 8AL 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.
<PAGE>
9
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 THE CHASE MANHATTAN BANK
(LONDON) LIMITED
By: ___________________________ By:_____________________________
Name: Name:
Title: Title:
<PAGE>
Schedule A to the Investment Sub-Advisory Agreement
between The Chase Manhattan Bank and
Chase Asset Management (London) Limited
Fund: Fee:
- ----- ----
1. Vista Select International Equity Fund 0.50%
DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT
THIS AGREEMENT made as of the __th day of _________, 1996 by and
between MUTUAL FUND SELECT GROUP (the "Trust"), a Massachusetts business trust,
and VISTA FUND DISTRIBUTORS, INC. (the "Distributor"), an indirect wholly owned
subsidiary of THE BISYS GROUP, INC., a Delaware corporation.
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
FIRST: The Trust on behalf of each of its series and any new series
to be created hereby appoints the Distributor as its sub-administrator and as
its exclusive underwriter to provide certain administration services and to
promote and arrange for the sale of shares of beneficial interest of each series
of the Trust in jurisdictions wherein shares may legally be offered for sale.
The Trust shall notify the Distributor in writing of all states in which its
shares are qualified for offer and sale, including any limitations with respect
to offers or sales in such states. In addition, the Distributor shall receive
payment for certain distribution expenses if and to the extent provided for
pursuant to Rule 12b-1 distribution plans ("12b-1 Plans") adopted by the Trust.
The Trust agrees to sell and deliver its unissued shares of each
series, as from time to time shall be effectively registered under the
Securities Act of 1933 (the "1933 Act"), upon the terms hereinafter set forth.
SECOND: The Trust hereby authorizes the Distributor, subject to law
and the Declaration of Trust of the Trust (the "Declaration of Trust"), to
accept, for the account of each series of the Trust, orders for the purchase of
shares, satisfactory to the Distributor, as of the time of receipt of such
orders or as otherwise described in the then current Prospectuses and Statements
of Additional Information of the Trust.
THIRD: The price at which the shares may be sold (the "offering
price") shall be the net asset value per share plus any sales charge that may be
imposed on any class of shares. For the purpose of computing the offering price,
the net asset value per share and the sales charge, if any, shall be determined
in the manner provided in the Registration Statement of the Trust, as amended
from time to time.
FOURTH: The Distributor shall use its best efforts with reasonable
promptness to promote and sell shares of each of the series of the Trust. The
Distributor, with the consent of the Trust, may enter into agreements with
selected broker-dealers ("Selected Dealers") for the purpose of sale and
redemption of shares of each of the series of the Trust upon terms consistent
with those found in this Agreement. The Distributor shall not be obligated to
sell any certain number of shares of beneficial interest. Each series of the
<PAGE>
Trust reserves the right to issue shares in connection with any merger or
consolidation of the Trust or any series with any other investment company or
any personal holding company or in connection with offers of exchange exempted
from Section 11(a) of the Investment Company Act of 1940 (the "Act").
FIFTH: All sales literature and advertisements used by the
Distributor in connection with sales of shares of any series of the Trust shall
be subject to the approval of the Trust. The Trust authorizes the Distributor in
connection with the sale or arranging for the sale of the shares to give only
such information and to make only such statements or representations as are
contained in the then current Prospectuses and Statements of Additional
Information of the Trust or in sales literature or advertisements approved for
any series by the Trust or in such financial statements and reports as are
furnished to the Distributor pursuant to this Agreement. The Trust shall not be
responsible in any way for any information, statements or representations given
or made by the Distributor or its representative or agents other than such
information, statements or representations contained in the then current
Prospectuses and Statement of Additional Information or other financial
statements of the Trust or any sales literature or advertisements approved by
the Trust.
SIXTH: The Distributor as agent of the Trust, and any Selected
Dealer entering into a Selected Dealer Agreement with the Distributor are
authorized, subject to the direction of the Trust, to accept shares of the
series of the Trust for redemption at their net asset value less any applicable
deferred sales charge, determined as prescribed in the then current Prospectuses
and Statement of Additional Information of the Trust.
SEVENTH: The Trust shall cause to be delivered to the Distributor
all books, records, and other documents and papers relating to the federal and
state registration of Trust shares, as well as all books, records and other
documents and papers relating in any way to the sub-administration of the Trust
or the distribution of Trust shares.
EIGHTH: The Trust shall bear:
(A) The costs and expenses incurred in connection with the
registration of the shares of each series of the Trust under the 1933 Act
(including any amendment to any Registration Statement or Prospectuses or
Statements of Additional Information), and all expenses in connection with
preparing, printing and distributing the Prospectuses or Statements of
Additional Information except as set forth in Paragraph NINTH hereof;
(B) the expenses of qualification of the shares of each series
of the Trust for sale in connection with such public offerings in such states as
shall be selected by the Distributor and of continuing the qualification therein
until the Distributor notifies the Trust that it does not wish such
qualification continued; and
(C) all legal expenses in connection with the foregoing.
NINTH: The Distributor shall provide certain sub-administration and
distribution services including:
-2-
<PAGE>
(A) providing officers, clerical staff and office space to
use as the headquarters of the Trust;
(B) arranging for the printing, distribution and filing of
prospectuses and statements of additional information;
(C) preparing, filing and maintaining all Trust registrations
with the securities regulatory agencies of all states and other jurisdictions in
which the Trust shares are sold;
(D) making all required filings of advertising and promotional
materials with the National Association of Securities Dealers, Inc.; and
(E) bearing the expenses of:
(i) the printing, distribution and filing of prospectuses and
statements of additional information after such have been typeset (other than
those prospectuses and statements of additional information required by
applicable laws and regulations to be distributed to the existing shareholders
of the Trust, unless paid for by any 12b-1 Plan adopted by the Trust);
(ii) any promotional or sales literature which are used by the
Distributor or furnished by the Distributor to purchasers or dealers in
connection with the Distributor's activities pursuant to this Agreement (unless
paid for by any 12b-1 Plan adopted by the Trust);
(iii) any advertising used by the Distributor in connection with
such public offering (unless paid for by any 12b-1 Plan adopted by the Trust);
and
(iv) all legal expenses in connection with the foregoing.
TENTH: The Distributor will accept orders for shares of a series of
the Trust only to the extent of purchase orders actually received and not in
excess of such orders, and it will not avail itself of any opportunity of making
a profit by expediting or withholding orders.
ELEVENTH: The Trust shall keep the Distributor fully informed with
regard to its affairs and shall furnish the Distributor with a certified copy of
all financial statements and any amendments to its Registration Statement under
the 1933 Act.
TWELFTH: The Trust shall register, from time to time as necessary,
additional shares with the Securities and Exchange Commission, state and other
regulatory bodies and to pay the related filing fees therefor and to file such
amendments, reports and other documents as may be necessary in order that there
may be no untrue statement of a material fact in the Registration Statement,
Prospectus or Statements of Additional Information necessary in order that there
may be no omission to state a material fact therein, in light of the
circumstances under which they were made, not misleading. As used in this
Agreement, the term "Registration Statement" shall mean the Registration
Statement most
-3-
<PAGE>
recently filed by the Trust with the Securities and Exchange Commission and
effective under the 1933 Act, as such Registration Statement is amended at such
time, and the term "Prospectus" and "Statement of Additional Information" shall
mean for the purposes of this Agreement the form of the then current
prospectuses and statements of additional information for each series authorized
by the Trust for use by the Distributor and by dealers.
THIRTEENTH:
(A) The Trust and the Distributor shall each comply with all
applicable provisions of the Act, the 1933 Act and the rules and regulations of
the National Association of Securities Dealers, Inc. and of all other Federal
and state laws, rules and regulations governing the issuance and sale of shares
of the series of Trust.
(B) The Distributor shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the Distributor's part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
(C) In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Distributor or any of its officers, directors or employees, the Trust
agrees to indemnify the Distributor and any controlling person of the
Distributor against any and all claims, demands, liabilities and expenses
(including reasonable attorney's fees) which the Distributor may incur (i) based
on any act or omission the course of, or connected with, rendering services
hereunder, (ii) based on any representations made herein by the Trust; (iii)
based on any act or omission of any prior Distributor (in its capacity as
Distributor or Sub-Administrator), Administrator or Adviser to the Trust,
including the registration or failure to register any shares of the Trust in
accordance with state or federal laws or resulting from or relating to any books
or records delivered to the Distributor in connection with its responsibilities
under this Agreement and occurring prior to the date of this Agreement; and (iv)
under the 1933 Act, or common law or otherwise, arising out of or based upon any
alleged untrue statement of a material fact contained in any Registration
Statement, Statements of Additional Information or Prospectuses of the Trust, or
any omission to state a material fact therein, the omission of which makes any
statement contained therein misleading, unless such statement or omission was
made in reliance upon, and in conformity with written information furnished to
the Trust in connection therewith by or on behalf of the Distributor.
(D) The Distributor shall indemnify the Trust against any and
all claims, demands, liabilities and expenses which the Trust may incur under
the 1933 Act, or common law or otherwise, arising out of or based upon any
alleged untrue statement of material fact contained in any Registration
Statement, Statements of Additional Information or Prospectuses of the Trust, or
any omission to state a material fact therein if such statement or omission was
made in reliance upon, and in conformity with, written information furnished to
the Trust in connection therewith by the Distributor.
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FOURTEENTH: Nothing herein contained shall require the Trust to
take any action contrary to any provision of its Declaration of Trust or to any
applicable statute or regulation.
FIFTEENTH: The Trust shall pay the Distributor, as full compensation
for the sub-administration services rendered hereunder, an annual fee on behalf
of each series payable monthly and computed on the net asset value of the series
the end of each business day at the annual rate set forth in Exhibit A, as the
same may be amended from time to time.
It is understood that the fees payable by one series under
this Agreement shall be payable only from the assets relating to that series,
and that no series shall be liable for the payment of any fees relating to
another series.
SIXTEENTH:
(A) This Agreement shall go into effect at the close of business
on the date hereof, and, unless terminated as hereinafter provided, shall
continue in effect for six months thereafter and from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
by the Trust's Board of Trustees, 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
applicable series and by such vote of the Trustees.
(B) This Agreement may be terminated by the Distributor at
any time without penalty upon giving the Board of Trustees of the Trust sixty
(60) days' written notice (which notice may be waived by the Trust) and may be
terminated by the Board of Trustees of the Trust at any time without penalty
upon giving the Distributor sixty (60) days' written notice (which may be waived
by the Distributor), provided that such termination by the Board of Trustees of
the Trust shall be directed or approved by the vote of a majority of all of its
Trustees in office at the time, including a majority of the Trustees who are not
interested persons (as defined in the Act) of the Trust, or by the vote of the
holders of a majority (as defined in the Act) of the voting securities of each
series of the Trust at the time outstanding and entitled to vote. This Agreement
shall automatically terminate in the event of its assignment, the term
"Assignment" for this purpose having the meaning defined in Section 2(a)(4) of
the Act.
SEVENTEENTH: The Distributor may at any time or times in its
discretion and at its own expense appoint (and may at any time remove) an agent
or agents to carry out such of the provisions of Article EIGHTH herein as the
Distributor may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Distributor of its
responsibilities or liabilities hereunder.
EIGHTEENTH: In the event this Agreement is terminated, the
Distributor agrees to delete the word "Vista" from its name and to discontinue
any other use of the words "Vista" and "Vista Select". The adviser to the Trust,
and certain of its affiliates, are entitled to use such names and to grant to
other investment companies, administrators, investment
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advisers or broker-dealers the right to use that name in connection with the
business of operating or providing services to management investment companies,
as defined in the Act.
NINETEENTH: A copy of the Declaration of Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Trustees of the Trust as Trustees
and not individually, and that the obligations of this instrument are not
binding upon any of the Trustees or shareholders individually but are binding
only upon the assets and property of the Trust, and all persons dealing with any
class of shares of the Trust must look solely to the Trust property belonging to
such class for the enforcement of any claims against the Trust.
TWENTIETH: Any notice 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 notices. Until
further notice to the other party, it is agreed that the address of the Trust
and the Distributor shall be 101 Park Avenue, New York, NY 10178.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
ATTEST: MUTUAL FUND SELECT GROUP
_________________________________ By:_________________________________
ATTEST: VISTA FUND DISTRIBUTORS, INC. an
indirect wholly owned subsidiary of THE
BISYS GROUP, INC.
_________________________________ By:_________________________________
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EXHIBIT A
Mutual Fund Select Group
Schedule of
Distribution and
Sub-Administration Fees
The Trust shall pay the Distributor/Sub-Administrator, as full
compensation for all services rendered, an annual fee on behalf of each Fund
payable monthly and computed on the net asset value of the Fund at the end of
each business day at the annual following rates:
Fund Fee%
---- -----
Vista Select Balanced Fund 0.05%
Vista Select Bond Fund 0.05
Vista Select Emerging Growth Fund 0.05
Vista Select Equity Income Fund 0.05
Vista Select Intermediate Bond Fund 0.05
Vista Select International Equity Fund 0.05
Vista Select Large Cap Equity Fund 0.05
Vista Select Large Cap Growth Fund 0.05
Vista Select Short Term Bond Fund 0.05
Vista Select Small Cap Value Fund 0.05
Agreed and Approved:
Vista Fund Distributors, Inc. Mutual Fund Select Group
By:__________________________ By:_____________________________
Name: Name:
Title: Title:
MUTUAL FUND CUSTODY AGREEMENT
THIS AGREEMENT is effective as of the __th day of _________,
1996, by and between Mutual Fund Select Group (the "Trust"), an open-end
management investment company organized as a Massachusetts business trust in
1996, on behalf of all of its existing Series and any and all Series it may
create in the future (individually "a Fund" and collectively "the Funds") and
The Chase Manhattan Bank (the "Custodian"), a New York State chartered bank.
W I T N E S S E T H:
WHEREAS, the Trust is registered as an open-end,
non-diversified, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Custodian to serve as
the Trust's custodian and the Custodian is willing to 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) The Trust hereby appoints the Custodian to act as
custodian of its portfolio securities, cash and other property and to act as
agent to perform certain accounting and recordkeeping functions required of a
duly registered investment company in compliance with applicable provisions of
federal, state and local laws, rules and regulations including, as may be
required:
<PAGE>
(i) Provide information necessary for the Trust to file
required financial reports; maintaining and
preserving required books, accounts and records as
the basis for such reports; and performing certain
daily functions in connection with such accounts and
records.
(ii) Calculating daily net asset value of each Fund, and
(iii) Acting as liaison with independent auditors.
(b) The Custodian accepts such appointment and agrees to
furnish the services herein set forth in return for the compensation as provided
in Paragraph 25 of this Agreement. The Custodian agrees to comply with all
relevant provisions of the 1940 Act and applicable rules and regulations
thereunder. The Trust may from time to time issue separate Funds, classes or
classify and reclassify shares of such Funds or classes. Pursuant to
Instructions, the Custodian shall identify to each such Fund or class Property
belonging to such Fund or class and in such reports, confirmations and notices
to the Trust called for under this Agreement shall identify the Fund or class to
which such report, confirmation or notice pertains.
2. Delivery of Documents. The Trust has furnished the
Custodian with copies properly certified or authenticated of each of the
following:
(a) Resolutions of the Trust's Board of Trustees authorizing
the appointment of the Custodian as custodian of the portfolio securities, cash
and other property of the Trust, the recordkeeper for certain Fund accounting
functions as described herein and approving this Agreement;
(b) Schedule A identifying and containing the signatures of
the Trust's officers and/or other persons authorized to issue Oral Instructions
and to sign Written Instructions, as hereinafter defined, on behalf of the
Trust;
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(c) Schedule B setting forth the names and signatures
of the present officers of the Trust;
(d) The Trust's current Registration Statement on Form N-1A
under the 1940 Act and the Securities Act of 1933, as amended ("the 1933 Act")
as filed with the Securities and Exchange Commission ("the SEC"), relating to
the Trust's shares of beneficial interest, no par value (the "Shares");
(e) The current prospectus and statement of additional
information of each of the Fund, including all amendments and supplements
thereto (the "Prospectuses").
(f) A copy of the notice filed with the Commodity Futures
Trading Commission ("CFTC") of eligibility to claim the exclusion from the
definition of "commodity pool operator" contained in Section 2(a)(1)(A) of the
Commodity Exchange Act ("CEA") that is provided in Rule 4.5 under the CEA,
together with all supplements as are required by the CFTC.
The Trust will furnish Custodian from time to time with
copies, properly certified or authenticated, of all amendments of or supplements
to the foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means any of the Trust's officers, and any other person,
whether or not any such person is an officer or employee of the Trust, duly
authorized by the Board of Trustees of the Trust to give Oral and Written
Instructions on behalf of the Trust and listed on Schedule A, which may be
amended from time to time.
(b) "Book-Entry System". As used in this Agreement,
the term "Book-Entry System" means the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees
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and any book-entry system maintained by a clearing agency registered with the
SEC under Section 17A of the Securities Exchange Act of 1934 (the "1934 Act").
(c) "Oral Instructions". As used in this Agreement, the term
"Oral Instructions" means oral instructions actually received by the Custodian
from an Authorized Person or from a person reasonably believed by the Custodian
to be an Authorized Person. The Trust agrees to deliver to the Custodian, at the
time and in the manner specified in Paragraph 9 of this Agreement, Written
Instructions confirming Oral Instructions.
(d) "Officer's Certificate". The term "Officer's Certificate"
as used in this Agreement means instructions delivered by hand, mail, tested
telegram, cable, telex or facsimile sending device and received by the Custodian
signed by two officers of the Fund.
(e) "Property". The term "Property", as used in this
Agreement, means:
(i) any and all securities and other property
of the Trust which the Trust may from time to time deposit,
or cause to be deposited, with the Custodian or which the
Custodian may from time to time hold for the Trust;
(ii) all income in respect of any other
such securities or other property;
(iii) all proceeds of the sales of any of
such securities or other property;
and
(iv) all proceeds of the sale of securities
issued by the Trust, which are received by the Custodian from
time to time from or on behalf of the Trust.
(f) "Securities Depository". As used in this Agreement,
the term "Securities Depository" shall mean the Depository Trust Company or
Participants Trust Company, each a clearing agency registered with the SEC or,
their successor or successors and their nominee or nominees; and shall also
mean any other registered or industry recognized clearing agency, its successor
or successors specifically identified in a certified
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<PAGE>
copy of a resolution of the Trust's Board of Trustees approving deposits by the
Custodian therein.
(g) "Written Instructions". As used in this Agreement,
"Written Instructions" means instructions delivered by hand, mail, tested
telegram, cable, telex, facsimile sending device, and received by the Custodian,
signed by two Authorized Persons.
4. Delivery and Registration of the Property. The Trust will
deliver or cause to be delivered to the Custodian all securities and all moneys
owned by it, including cash received for the issuance of its Shares, at any time
during the period of this Agreement, except for securities and monies to be
delivered to any subcustodian appointed pursuant to Paragraph 7 hereof. The
Custodian will not be responsible for such securities and such monies until
actually received by it. All securities delivered to the Custodian or to any
such subcustodian (other than in bearer form) shall be registered in the name of
the Trust or in the name of a nominee of the Trust or in the name of the
Custodian or any nominee of the Custodian (with or without indication of
fiduciary status) or in the name of any subcustodian or any nominee of such
subcustodian appointed pursuant to Paragraph 7 hereof or shall be properly
endorsed and in form for transfer satisfactory to the Custodian.
5. Domestic and Foreign Corporate Actions and Proxies.
With respect to all securities, however registered, it is
understood that the voting and other rights and powers shall be exercised by
the Trust. The Custodian shall transmit promptly to the Trust any proxy
statement, proxy materials, notice of a call or conversation or similar
communications received by it as Custodian for the Trust as follows:
(i) With respect to domestic U.S. and
Canadian securities (the latter if held in DTC), the
Custodian will send to the Trust or the proper authorized
person, such proxies (signed in blank, if issued in the name
of the Custodian's
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<PAGE>
nominee or the nominee of a central depository) and
communications with respect to securities in the Trust's
Account as call for voting or relate to legal proceedings
within a reasonable time after sufficient copies are received
by the Custodian for forwarding to its customers. In addition,
the Custodian will follow coupon payments, redemptions,
exchanges or similar matters with respect to securities in the
Trust's Account and advise the Trust or the proper authorized
person for such Account of rights issued, tender offers or any
other discretionary rights with respect to such securities, in
each case, of which the Custodian has received notice from the
issuer of the securities, or as to which notice is published
in publications routinely utilized by the Custodian for this
purpose.
Where warrants, options, tenders or other securities
have fixed expiration dates, the Trust understands that in
order for the Custodian to act, the Custodian must receive the
Trust's instructions at its offices in New York City,
addressed as the Custodian may from time to time request, by
no later than noon (NY City time) at least one business day
prior to the last scheduled date to act with respect thereto
(or such earlier date or time as the Custodian may reasonably
notify the Trust). Absent the Custodian's timely receipt of
such instructions, such instructions will expire without
liability to the Custodian. Corporate reports need not be
forwarded to the Trust.
(ii) With respect to securities held or settled through
the Chase global custody network, whenever the Custodian
receives information which requires discretionary action by
the Trust (other than a proxy), such as subscription rights,
bonus issues, stock repurchase plans and rights offerings, or
legal
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<PAGE>
notices or other material intended to be transmitted to
securities holders ("Corporate Actions"), the Custodian will
give the Trust notice of such Corporate Actions to the extent
that the Custodian's central corporate actions department has
actual knowledge of a Corporate Action in time to notify its
customers. When a rights entitlement or a fractional interest
resulting from a rights issue,
stock dividend, stock split or similar Corporate Action is received which bears
an expiration date, the Custodian will endeavor to obtain Instructions from the
Trust, but if Instructions are not received in time for the Custodian to take
timely action, or actual notice of such Corporate Action was received too late
to seek Instructions, the Custodian is authorized to sell such rights
entitlement or fractional interest and to credit the proper Fund account with
the proceeds or take any other action it deems, in good faith, to be appropriate
in which case it shall be held harmless for any such action.
The Custodian will deliver proxies to the Trust or its
designated agent pursuant to special arrangements which may have been agreed to
in writing. Such proxies shall be executed in the appropriate nominee name
relating to portfolio securities in the Custody Account registered in the name
of such nominee but without indicating the manner in which such proxies are to
be voted; and where bearer securities are involved, proxies will be delivered in
accordance with Instructions.
6. Receipt and Disbursement of Money.
(a) The Custodian shall open and maintain a custody account
for each Fund of the Trust, subject only to draft or order by the Custodian
acting pursuant to the terms of this Agreement, and shall hold in such account,
subject to the provisions hereof, all cash received by it from or for each Fund
of the Trust. The Custodian shall make payments of
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cash to, or for the account of, each Fund of the Trust from such cash only (i)
for the purchase of securities for the Trust as provided in paragraph 15 hereof;
(ii) upon receipt of an Officer's Certificate, for the payment of dividends or
other distributions of shares, or for the payment of interest, taxes,
administration, distribution or advisory fees or expenses which are to be borne
by the Trust under the terms of this Agreement, and, with respect to each Fund,
any Investment Advisory Agreement, Administration Agreement or Distribution and
Sub-administration Agreement; (iii) upon receipt of Written Instructions for
payments in connection with the conversion, exchange or surrender of securities
owned or subscribed to by the Trust and held by or to be delivered to the
Custodian; (iv) to a subcustodian pursuant to Paragraph 7 hereof; or (v) for the
redemption of Trust Shares; or (vi) upon receipt of an Officer's Certificate for
other corporate purposes. No payment pursuant to (i) other than pursuant to
Instruction and in accordance with local market practice.
(b) the Custodian is hereby authorized to endorse and collect
all checks, drafts or other orders for the payment of money received as
custodian for the Trust.
7. Receipt of Securities.
(a) Except as provided by Paragraph 8 hereof, the Custodian
shall hold and physically segregate in a separate account with respect to each
Fund, identifiable from those of any other person, all securities and non-cash
property received by it for the Trust. All such securities and non-cash property
are to be held or disposed of by the Custodian for each Fund of the Trust
pursuant to the terms of this Agreement. In the absence of Written Instructions
accompanied by a certified resolution authorizing the specific transaction by
the Trust's Board of Trustees, the Custodian shall have no power or authority to
withdraw, deliver, assign, hypothecate, pledge or otherwise dispose of any such
securities and investments, except in accordance with the express terms provided
for in this Agreement. In
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no case may any trustee, officer, employee or agent of the Trust withdraw any
securities except as provided in this Agreement and pursuant to a duly adopted
resolution of the Board of Trustees. In connection with its duties under this
Paragraph 7, the Custodian may, at its own expense, except to the extent the
Custodian is instructed to engage a subcustodian it would not otherwise have
engaged, enter into subcustodian agreements with other banks or trust companies
for the receipt of certain securities and cash to be held by the Custodian for
the account of a Fund of the Trust pursuant to this Agreement; provided that
each such bank or trust company has an aggregate capital, surplus and undivided
profits, as shown by its last published report, of not less than one million
dollars ($1,000,000) for a Custodian Subsidiary or affiliate, or of not less
than twenty million dollars ($20,000,000) for a subcustodian that is not a
Custodian Subsidiary or affiliate and that in either case such bank or trust
company agrees with the Custodian to comply with all relevant provisions of the
1940 Act and applicable rules and regulations thereunder. The Custodian will
provide the Trust with a copy of each subcustodian agreement it executes
relating to the Trust. The Custodian will be liable for acts or omissions of any
such subcustodian, except to the extent the Custodian is instructed by the Trust
to engage a subcustodian it would not otherwise have engaged and the Trust is a
party to the agreement with such sub-custodian, under the standards of care
provided for herein, of any bank or trust company that it chooses pursuant to
this Paragraph 7.
(b) Notwithstanding any other provisions of this Agreement,
the foreign securities of each Fund of the Trust (as defined in Rule 17f-5(c)(1)
under the 1940 Act) and each Fund's cash or cash equivalents, in amounts
reasonably necessary to effect the Fund's foreign securities transactions, may
be held in the custody of one or more banks or trust companies acting as
subcustodians; and thereafter, pursuant to a written contract or contracts
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as approved by Trust's Board of Trustees, may be transferred to an account
maintained by such subcustodian with an eligible foreign custodian, as defined
in Rule 17f-5(c)(2), provided that any such arrangement involving a foreign
custodian shall be in accordance with the provisions of Rule 17f-5 under the
1940 Act or any exemptive order issued to the Custodian under the 1940 Act.
(c) Promptly after the close of business on each day the
Custodian shall furnish the Trust with a summary of all transfers to or from the
account of each Fund of the Trust during said day. Where securities are
transferred to the account of any Fund of the Trust established at a Securities
Depository or the Book Entry System pursuant to Paragraph 8 herein, the
Custodian shall also by book-entry or otherwise identify as belonging to such
Fund the quantity of securities in a fungible bulk of securities registered in
the name of the Custodian (or its nominee) or shown in the Custodian's account
on the books of a Securities Depository or the Book-Entry System. At least
monthly and from time to time, the Custodian shall furnish the Trust with a
detailed statement of the Property held for each Fund under this Agreement.
8. Use of Securities Depository or the Book-Entry System. The
Trust shall deliver to the Custodian a certified resolution of the Board of
Trustees of the Trust approving, authorizing and instructing the Custodian on a
continuous and ongoing basis until instructed to the contrary by Oral or Written
Instructions actually received by the Custodian (i) to deposit in a Securities
Depository or the Book-Entry System all securities of the Trust eligible for
deposit therein and (ii) to utilize a Securities Depository or the Book-Entry
System to the extent possible in connection with the performance of its duties
hereunder, including without limitation settlements of purchases and sales of
securities by the Trust, and deliveries and returns of securities loaned,
subject to repurchase agreements or used as
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collateral in connection with borrowings. Without limiting the generality of
such use, it is agreed that the following provisions shall apply thereto:
(a) Securities and any cash of the Trust deposited in a
Securities Depository or the Book-Entry System will at all times be segregated
from any assets and cash controlled by the Custodian in other than a fiduciary
or custodian capacity. The Custodian and its subcustodians, if any, will pay out
money only upon receipt of securities and will deliver securities only upon
receipt of money, unless the Trust has given the Custodian Written Instructions
to the contrary.
(b) All Books and records maintained by the Custodian that
relate to the Trust participation in a Securities Depository or the Book-Entry
System will at all times during the Custodian's regular business hours be open
to the inspection of the Trust's duly authorized employees or agents, the
Trust's independent auditors in accordance with applicable regulations, and the
Trust will be furnished with all information in respect of the services rendered
to it as it may require.
(c) The Custodian will provide the Trust with copies of any
report obtained by the Custodian on the system of internal accounting control of
the Securities Depository or Book-Entry System promptly after receipt of such a
report by the Custodian. The Custodian will also provide the Trust with such
reports on its own system of internal control as the Trust may reasonably
request from time to time.
9. Instructions Consistent With the Charter, etc. Unless
otherwise provided in this Agreement, the Custodian shall act only upon Oral and
Written Instructions. The Custodian may assume that any Oral or Written
Instructions received hereunder are not in any way inconsistent with any
provision of the Charter, By-Laws, any prospectus pursuant to which Shares of a
Fund are offered for sale, any rule or regulation of any applicable
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regulatory body or governmental agency or any vote or resolution of the Trust's
Board of Trustees, or any committee thereof. The Custodian shall be entitled to
rely upon any Oral or Written Instructions actually received by the Custodian
pursuant to this Agreement. The Trust agrees to forward to the Custodian Written
Instructions confirming Oral Instructions in such manner that the Written
Instructions are received by the Custodian at the close of business of the same
day that such Oral Instructions are given to the Custodian. The Trust agrees
that the fact that such confirming Written Instructions are not received by the
Custodian shall in no way affect the validity of any of the transactions
authorized by the Trust by giving Oral Instructions nor shall receipt of
conflicting Written Instructions affect the validity of transactions undertaken
based on Oral Instructions or the Custodian's obligations or responsibilities
with respect thereto if such actions have been taken prior to the receipt of
such Written Instructions. The Trust agrees that the Custodian shall incur no
liability in acting upon Oral Instructions given to the Custodian hereunder
concerning such transactions provided such instructions reasonably appear to
have been received from an Authorized Person, unless any liability to the Trust
results from the negligence or willful misconduct of the Custodian. In accord
with instructions from the Trust, as required by accepted industry practice or
as the Custodian may elect in effecting the execution of Trust instructions,
advances of cash or other Property made by the Custodian, arising from the
purchase, sale, redemption, transfer or other disposition of Property of the
Trust, or in connection with the disbursement of funds to any party, or in
payment of fees, expenses, claims or liabilities owed to the Custodian by the
Trust, or to any other party which has secured judgment in a court of law
against the Trust which creates an overdraft in the accounts or overdelivery of
Property shall be deemed a loan by the Custodian to the Trust, payable on
demand, bearing interest at such rate customarily charged by the Custodian for
similar loans.
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10. Transactions Not Requiring Instructions. The
Custodian is authorized to take the following action without Written
Instructions:
(a) Collection of Income and Other Payments. The
Custodian shall:
(i) collect and receive for the account of
any Fund of the Trust, all income and other payments and
distributions, including (without limitation) stock
dividends, rights, warrants and similar items, included or
to be included in the Property of any Fund of the Trust,
and promptly advise the Trust of such receipt and shall
credit such income, as collected, to such Fund of the Trust.
With respect to non-foreign issuers, the Custodian shall
credit the account with interest, dividends or principal
payments on the payable date, in anticipation of receiving
same from a payor, central depository, broker or
other agent employed by the Trust or the Custodian (each
advance made hereunder shall be subject to reversal in the
event that (i) payment to which it relates is not made within
a reasonable time after its due date and (2) the Custodian
notifies the Trust within 30 days of such due date that it
anticipates a delay in collection).
(ii) with respect to securities of foreign issue, effect
collection of dividends, interest and other income, and to
notify the Trust of any call for redemption, offer of
exchange, right of subscription, reorganization, or other
proceedings affecting such securities, or any default in
payments due thereon. It is understood, however, the Custodian
shall be under no responsibility for any failure or delay in
effecting such collections or giving such notice with respect
to securities of foreign issue, regardless of whether or not
the relevant information is published in any financial service
available to it unless such failure or delay is due to its
negligence. Collections of income in foreign
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<PAGE>
currency are, to the extent possible, to be converted into
United States dollars unless otherwise instructed in writing,
and in effecting such conversion the Custodian may use such
methods or agencies as it may see fit, including the
facilities of its own foreign division at customary rates. All
risk and expenses incident to such collection and conversion
is for the account of the Trust and the Custodian shall have
no responsibility for fluctuations in exchange rates affecting
any such conversion.
(iii) endorse and deposit for collection in
the name of the Trust and each of its Funds, checks, drafts,
or other orders for the payment of money on the same day as
received;
(iv) receive and hold for the account of each of the
Funds all securities received by the Trust as a result of a
stock dividend, share split-up or reorganization,
recapitalization, readjustment or other rearrangement or
distribution of rights or similar securities issued with
respect to any portfolio securities of the Trust held by the
Custodian hereunder;
(v) present for payment and collect the amount payable
upon all securities which may mature or be called, redeemed or
retired, or otherwise become payable on the date such
securities become payable;
(vi) take any action which may be necessary and proper
in connection with the collection and receipt of such income
and other payments and the endorsement for collection of
checks, drafts and other negotiable instructions;
(vii) to exchange securities in temporary form for
securities in definitive form, to effect an exchange of the
shares where the par value of stock is changed, and to
surrender securities at maturity or when advised of earlier
call
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<PAGE>
for redemption, against payment therefor in accordance with
accepted local industry practice. When fractional shares of
stock of a declaring corporation are received as a stock
distribution, the Custodian is authorized to sell the fraction
received and credit the Trust's account. Unless specifically
instructed to the contrary in writing, the Custodian is
authorized to exchange securities in bearer form for
securities in registered form. If any Property registered in
the name of a nominee of the Custodian is called for partial
redemption by the issuer of such Property, the Custodian is
authorized to allot the called portion to the respective
beneficial holders of the Property in such manner deemed to be
fair and equitable by the Custodian in its sole discretion.
(b) Miscellaneous Transactions. The Custodian is authorized to
deliver or cause to be delivered Property against payment
or other consideration or written receipt therefor in the
following cases:
(i) for examination by a broker selling for
the account of the Trust in accordance with local
industry practice;
(ii) for the exchange of interim receipts or
temporary securities for definitive securities;
(iii) for transfer of securities into the name
of the Trust or the Custodian or a nominee of either, or for
exchange or securities for a different number of bonds,
certificates, or other evidence, representing the same
aggregate face amount or number of units bearing the same
interest rate, maturity date and call provisions, if any;
provided that, in any such case, the new securities are to be
delivered to the Custodian.
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<PAGE>
11. Transactions Requiring Instructions. Upon receipt
of Oral or Written Instructions and not otherwise, the Custodian, directly or
through the use of a Securities Depository or the Book-Entry System, shall:
(a) Execute and deliver to such persons as may be designated
in such Oral or Written Instructions, proxies, consents, authorizations, and any
other instruments whereby the authority of the Trust as owner of any securities
may be exercised;
(b) Deliver any securities held for any Fund of the Trust
against receipt of other securities or cash issued or paid in connection with
the liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
(c) Deliver any securities held for any Fund of the Trust to
any protective committee, reorganization committee or other person in connection
with the reorganization, refinancing, merger, consolidation, recapitalization or
sale of assets of any corporation, against receipt of such certificates or
deposit, interim receipts or other instruments or documents as may be issued to
it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of any Fund
of the Trust and take such other steps as shall be stated in said instructions
to be for the purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Trust;
(e) Release securities belonging to any Fund of the Trust to
any bank or trust company for the purpose of pledge or hypothecation to secure
any loan incurred by the Trust; provided, however, that securities shall be
released only upon payment to the Custodian of the monies borrowed, except that
in cases where additional collateral is required to secure a borrowing already
made, subject to proper prior authorization, further securities may be
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<PAGE>
released for that purpose; and pay such loan upon redelivery to it of the
securities pledged or hypothecated therefore and upon surrender of the note or
notes evidencing the loan;
(f) Deliver any securities held for the Trust upon the
exercise of a covered call option written by the Trust on such securities;
(g) Release and deliver securities owned by the Trust in
connection with any repurchase agreement entered into on behalf of any Fund of
the Trust, but only on receipt of payment therefor; and pay out moneys of the
Trust in connection with such repurchase agreements, but only upon the delivery
of the securities;
(h) otherwise transfer, exchange or deliver securities
in accordance with Oral or Written Instructions.
12. Segregated Accounts. The Custodian shall upon receipt of
Written or Oral Instructions establish and maintain a segregated account or
accounts on its records for and on behalf of any Fund of the Trust, into which
account or accounts may be transferred cash and/or securities, including
securities in the Book-Entry System (i) for the purposes of compliance by the
Trust with the procedures required by a securities or option exchange, providing
such complies with the Investment Company Act and Release No. 10666 or any
subsequent release or releases of the SEC relating to the maintenance of
segregated accounts by registered investment companies and (ii) for other proper
corporate purposes, but only, in the case of clause (ii), upon receipt of,
Written Instructions.
13. Calculation of Net Asset Value. Custodian will calculate
the net asset value of each Fund or class of a Fund once daily in accordance
with the procedures attached as Schedule C. Custodian will prepare and maintain
a daily evaluation of portfolio securities of each Fund for which market
quotations are available by the use of outside services normally used and
contracted for this purpose; all other portfolio securities of each Fund will
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<PAGE>
be evaluated in accordance with Trust's instructions. Custodian will have no
responsibility for the accuracy of the prices quoted by these outside services
or for the information supplied by Trust or upon instructions.
14. Dividends and Distributions. (a) The Trust shall furnish
the Custodian with appropriate evidence of action by the Trust's Board of
Trustees declaring and authorizing the payment of any dividends and
distributions. The amounts of Dividends and/or distributions will be calculated
by the Custodian in accordance with the procedures attached as Schedule C. Upon
receipt by the Custodian of an Officer's Certificate with respect to dividends
and distributions declared by the Trust's Board of Trustees and payable to
shareholders of any Fund or class who are entitled to receive cash for
fractional shares and those who have elected in the proper manner to receive
their distributions on dividends in cash, and in conformance with the procedures
mutually agreed upon by the Custodian, the Trust, and the Trust's Administrator
or Transfer Agent, the Custodian shall pay to the Trust's transfer agent, as
agent for the shareholders, an amount equal to the amount indicated in said
Officer's Certificate as payable by the Trust to such shareholders for
distribution in cash by the transfer agent to such shareholders. In lieu of
paying the Trust's transfer agent cash dividends and distributions, the
Custodian may arrange for the direct payment of cash dividends and distributions
to shareholders by the Custodian in accordance with such procedures and controls
as are mutually agreed upon from time to time by and among the Trust, the
Custodian and the Trust's Administrator and transfer agent.
(b) The Custodian may enter into separate custodial agreements
with various futures commission merchants ("FCMs") that the Trust uses (each an
"FCM Agreement"), pursuant to which the Trust's margin deposits in any
transactions involving futures contracts and options on futures contracts will
be held by Custodian in accounts (each
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<PAGE>
an "FCM Account") subject to the disposition by the FCM involved in such
contracts in accordance with the customer contract between FCM and the Trust
("FCM Contract"), SEC rules governing such segregated accounts, CFTC rules and
the rules of the applicable commodities exchange. Such FCM Agreements shall only
be entered into upon receipt of Written Instructions from the Trust. Transfers
of initial margin shall be made into an FCM Account only upon Written
Instructions; transfers of premium and variation margin may be made into an FCM
Account pursuant to Oral Instructions. Transfers of funds from an FCM Account to
the FCM for which Custodian holds such an account may only occur upon
certification by the FCM to the Custodian that pursuant to the FCM Agreement and
the FCM Contract, all conditions precedent to its right to give the Custodian
such instruction have been satisfied.
15. Purchase of Securities. Promptly after each purchase of
securities by the Investment Adviser on behalf of any Fund, the Trust shall
deliver to the Custodian Oral or Written Instructions specifying with respect to
each such purchase: (a) the name of the issuer and the title of the securities,
(b) the number of shares or the principal amount purchased and accrued interest,
if any, (c) the dates of purchase and settlement, (d) the purchase price per
unit, (e) the total amount payable upon such purchase, (f) the name of the
person from whom or the broker through whom the purchase was made, (g) the Fund
for which the purchase was made and (h) the cusip number or other industry
standard identification when available. The Custodian shall upon receipt of
securities purchased by or for the Trust pay out of the moneys held for the
account of such Trust the total amount payable to the person from whom or the
broker through whom the purchase was made, provided that the same conforms to
the total amount payable as set forth in such Oral or Written Instructions.
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16. Notation Pursuant to Section 17f-2 of the 1940 Act. With
respect to each deposit or withdrawal of securities or when ordering the deposit
or withdrawal of securities from safekeeping, the Custodian shall sign a
notation in respect of each such deposit, withdrawal or order that shall show:
(a) the date and time of the deposit, withdrawal or order; (b) the title and
amount of the securities or other investments deposited, withdrawn or ordered to
be withdrawn, and the identification thereof by certificate numbers or
otherwise; (c) the manner of acquisition of the securities or similar
investments deposited or the purpose for which they have been withdrawn, or
ordered to be withdrawn; and (d) if withdrawn and delivered to another person,
the name of such person. The time of any deposit, withdrawal or order means the
time of the formal recording of such transactions on the books of the Custodian
at the Custodian's close of business. Such notation shall be transmitted
promptly to an officer or trustee of the Trust designated by the Board of
Trustees who shall not otherwise be authorized to have access to the Trust's
securities. Such notation shall be on serially numbered forms and shall be
preserved for at least one year.
17. Sales of Securities. Promptly after each sale of
securities by the investment manager, the Trust shall deliver to the Custodian
Oral or Written Instructions, specifying with respect to each such sale: (a) the
name of the issuer and the title of the security, (b) the number of shares or
principal amount sold, and accrued interest, if any, (c) the date of sale, (d)
the sale price per unit, (e) the total amount payable to the Trust upon such
sale, (f) the name of the broker through whom or the person to whom the sale was
made, (g) the Fund for which the sale was made and (h) the cusip number or other
industry standard identification when available. The Custodian shall deliver the
securities upon receipt of the total amount payable to the Trust upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Oral or Written Instructions. Subject to the
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<PAGE>
foregoing, the Custodian may accept payment in such form as shall be
satisfactory to it, and may deliver securities and arrange for payment in
accordance with the local customs prevailing among dealers in securities.
18. Records. The books and records pertaining to the Trust
shall be prepared and maintained as required by the 1940 Act, as amended, and
other applicable securities laws and rules and regulations. The Trust, or the
Trust's authorized representatives, shall have access to such books and records
at all times during the Custodian's normal business hours, and such books and
records shall be surrendered to the Trust promptly upon request. Upon reasonable
request of the Trust, copies of any such books and records shall be provided by
the Custodian to the Trust or the Trust's authorized representative at the
Trust's expense.
19. Reports.
(a) The Custodian shall furnish the Trust the
following reports:
(1) such periodic and special reports as the
Trust may reasonably request;
(2) a monthly statement summarizing all
transactions and entries for the
account of each Fund;
(3) a monthly report of portfolio securities
belonging to each Fund showing the
adjusted average cost of each issue and the
market value at the end of such month;
(4) a monthly report of the cash account of
each Fund showing disbursements;
(5) the reports to be furnished to the Trust
pursuant to Rule 17f-4;
(6) the reports to be furnished to the Trust
pursuant to Rule 17f-5, and;
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<PAGE>
(7) such other information as may be agreed
upon from time to time between the Trust
and the Custodian.
(b) The Custodian with the direction and as interpreted by the
Trust, the Trust's accountants and/or other tax advisors will prepare and
maintain as complete, accurate, and current all accounts and records required to
be maintained by each Fund under the Internal Revenue Code of 1986, as amended,
under the rules and regulations of the 1940 Act and as agreed upon between the
parties and will preserve such records in the manner and for the periods
required by law.
(c) Unless the information necessary to perform the above
functions is furnished in writing or its electronic or digital equivalent to the
Custodian in a timely manner prior to the next calculation of each Fund's net
asset value, the Custodian shall incur no liability except as provided in
Paragraph 9 herein and the Trust shall indemnify and hold the Custodian harmless
from and against any liability arising from any discrepancy between the
information received by the Custodian and used in such calculation and any
subsequent information received from the Trust.
(d) The Custodian shall assist the Trust's independent
auditors, or upon approval of the Trust or upon demand, any regulatory body, in
any requested review of the Trust's accounts and records maintained by the
Custodian but shall be reimbursed by the Trust for all expenses and employee
time invested in any such review outside of routine and normal periodic reviews.
(e) Upon receipt from the Trust of the necessary information,
the Custodian shall provide information for tax returns, questionnaires, or
periodic reports to shareholders and such other reports and information requests
as the Trust and the Custodian shall agree upon from time to time.
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<PAGE>
20. Cooperation with Accountants. The Custodian shall
cooperate with the Trust's independent certified public accountants and shall
take all reasonable action in the performance of its obligations under this
Agreement and under Rule 17f-2 to assure that the necessary information is made
available to such accountants for the expression of their unqualified opinion
with respect to, including without limitation, the three audits required each
year, the certificates with respect to such annual audits and the opinion
included in the Trust's semi-annual report on Form N-SAR, and will require each
sub-custodian appointed pursuant to paragraph 7 hereof to grant such access to
the information to the Trust's independent certified public accountant. The
Custodian shall require any sub-custodian it appoints with respect to the Trust
to comply with the provisions of this Paragraph 20.
21. Confidentiality. The Custodian agrees on behalf of itself
and its employees to treat confidentially and as the proprietary information of
the Trust all records and other information relative to the Trust and its prior,
present or potential shareholders and relative to the managers and its prior,
present or potential customers, and not to use such records and information for
any purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where the
Custodian may be exposed to civil or criminal contempt proceedings for failure
to comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Trust.
22. Equipment Failures. In the event of equipment
failures beyond the Custodian's control, the Custodian shall, at no additional
expense to the Trust, take reasonable steps to minimize service interruptions
but shall not have liability with respect thereto. The
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<PAGE>
Custodian shall make and maintain reasonable provisions for back up emergency
use of electronic data processing equipment to the extent appropriate equipment
is available.
23. Right to Receive Advice.
(a) Advice of Trust. If the Custodian shall be in doubt as to
any action to be taken or omitted by it, it may request, and shall receive, from
the Trust clarification or advice, including Oral or Written Instructions.
(b) Advice of Counsel. If the Custodian shall be in doubt as
to any question of law involved in any action to be taken or omitted by the
Custodian, it may request advice from counsel of its own choosing (who may be
counsel for the Trust or the Custodian, at the option of the Custodian).
(c) Conflicting Advice. In case of conflict between
directions, advice or Oral or Written Instructions received by the Custodian
pursuant to subparagraph (a) of this paragraph and advice received by the
Custodian pursuant to subparagraph (b) of this paragraph, the Custodian shall be
entitled to rely on and follow the advice received pursuant to the latter
provision alone.
(d) Protection of The Custodian. The Custodian shall be
protected in any action or inaction which it takes or omits to take in reliance
on any directions, advice or Oral or Written Instructions received pursuant to
subparagraphs (a) or (b) of this section which the Custodian, after receipt of
any such directions, advice or Oral or Written Instructions, in good faith
believes to be consistent with such directions, advice or Oral or Written
Instructions, as the case may be. Nothing in this paragraph shall be construed
as imposing upon the Custodian any obligation (i) to seek such directions,advice
or Oral or Written Instructions, or (ii) to act in accordance with such
directions, advice or Oral or Written Instructions when received, unless, under
the terms or another provision of this Agreement, the same is a
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<PAGE>
condition to the Custodian's properly taking or omitting to take such action.
Nothing in this subparagraph shall excuse the Custodian when an action or
omission on the part of the Custodian constitutes willful misfeasance, bad
faith, negligence or reckless disregard by the Custodian of its duties under
this Agreement.
24. Compliance with Governmental Rules and Regulations. The
Custodian undertakes to comply with all applicable requirements of the 1933 Act,
the 1934 Act, the 1940 Act and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to the duties and obligations to be
performed by the Custodian hereunder. The Custodian acknowledges that it is
subject to Rule 17f-2 under the 1940 Act with respect to its duties to be
performed pursuant to this Agreement.
25. Compensation. As compensation for the services rendered by
the Custodian during the term of this Agreement, the Trust will pay to the
Custodian, in addition to reimbursement of its reasonable out-of-pocket
expenses, including reasonable counsel fees, monthly fees as outlined in
Schedule D, or as otherwise agreed upon from time to time in writing by the
Custodian and the Trust.
26. Indemnification. The Trust, as sole owner of the Property,
agrees to indemnify and hold harmless the Custodian and its nominees from all
taxes, charges, expenses, assessments, claims, and liabilities (including,
without limitation, liabilities arising under the 1933 Act, the Act of 1934, the
1940 Act, the CEA, and any state and foreign securities and blue sky laws, all
as or to be amended from time to time) and expenses, including (without
limitation) attorney's fees and disbursements, arising directly or indirectly
(a) from the fact that securities included in the Property are registered in the
name of any such nominee or (b) without limiting the generality of the foregoing
clause (a) from any action or thing which the Custodian takes or does or omits
to take or do (i) at the request or
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<PAGE>
on the direction of or in reliance on the advice of the Trust, or (ii) upon Oral
or Written Instructions, provided, that neither the Custodian nor any of its
nominees or subcustodian shall be indemnified against any liability to any Fund
of the Trust or to its shareholders (or any expenses incident to such liability)
arising out of (x) the Custodian's or such nominee's or subcustodian's own
willful misfeasance, bad faith, negligence or reckless disregard of its duties
under this Agreement or (y) the Custodian's own negligent failure to perform its
duties under this Agreement. In the event of any advance of cash for any purpose
made by the Custodian resulting from Oral or Written Instructions of the Trust,
or in the event that the Custodian or its nominee or subcustodian shall incur or
be assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's or subcustodian's own negligent action, negligent failure
to act, willful misconduct, or reckless disregard, the Trust shall promptly
reimburse the Custodian for such advance of cash or such taxes, charges,
expenses, assessment claims or liabilities. Notwithstanding anything to the
contrary, any one Fund shall not provide indemnification to the Custodian for
any loss or liability resulting from actions with respect to any other Fund.
27. Responsibility of The Custodian. The Custodian shall be
under no duty to take any action on behalf of the Trust except as specifically
set forth herein or as may be specifically agreed to by the Custodian in
writing. In the performance of its duties hereunder, the Custodian shall be
obligated to exercise reasonable care and diligence and to act in good faith to
insure the accuracy of all services performed under this Agreement. The
Custodian shall be responsible for its own negligent failure or that of any
subcustodian it shall appoint to perform its duties under this Agreement but to
the extent that duties, obligations and responsibilities are not expressly set
forth in this Agreement, the Custodian shall not be liable
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<PAGE>
for any act or omission which does not constitute willful misfeasance, bad
faith, or negligence on the part of the Custodian or reckless disregard of such
duties, obligations and responsibilities. Without limiting the generality of the
foregoing or of any other provision of this Agreement, the Custodian in
connection with its duties under this Agreement shall not be under any duty or
obligation to inquire into and shall not be liable for or in respect of (a) the
validity or invalidity or authority or lack thereof of any advice, direction,
notice or other instrument which conforms to the applicable requirements of this
Agreement, if any, and which the Custodian believes to be genuine, (b) the
validity of the issue of any securities purchased or sold by the Trust, the
legality of the purchase or sale thereof or the propriety of the amount paid or
received therefore, (c) the legality of the issue or sale of any Shares, or the
sufficiency of the amount to be received therefore, (d) delays or errors or loss
of data occurring by reason of circumstances beyond the Custodian's control,
including acts of civil or military authority, national emergencies, strikes or
work stoppages, fire, mechanical breakdown (except as provided in Paragraph 22),
flood or catastrophe, acts of God, insurrection, acts of war or terrorism,
riots, revolutions, nuclear fusion, fission or radiation, or failure of the
mail, transportation, communication or power supply. Without limiting the
foregoing,the Custodian shall not be liable for any loss which results from: (1)
the general risk of investing, or (2) investing or holding Fund assets in a
particular country including, but not limited to, losses resulting from
nationalization, expropriation or other governmental actions; regulation of the
banking or securities industry; currency restrictions, devaluations or
fluctuations; and market conditions which prevent the orderly execution of
securities transactions or affect the value of assets.
28. Collection. All collections of monies or other
property in respect, or which are to become part, of the Property (but not
the safekeeping thereof upon receipt by the
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<PAGE>
Custodian) shall be at the sole risk of the Trust. In any case in which the
Custodian does not receive any payment due the Trust within a reasonable time
after the Custodian has made proper demands for the same, it shall so notify the
Trust in writing, including copies of all demand letters, any written responses
thereto, and memoranda of all oral responses thereto, and to telephonic demands,
and await instructions from the Trust. The Custodian shall not be obliged to
take legal action for collection unless and until reasonably indemnified to its
satisfaction. The Custodian shall also notify the Trust as soon as reasonably
practicable whenever income due on securities is not collected in due course.
29. Duration and Termination. This Agreement shall be
effective as of the date hereof and shall continue until termination by the
Trust or by the Custodian on 90 days' written notice. Upon any termination of
this Agreement, pending appointment of a successor to the Custodian or a vote of
the shareholders of the Trust to dissolve or to function without a custodian of
its cash, securities or other property, the Custodian shall not deliver cash,
securities or other property of the Trust to the Trust, but may deliver them to
a bank or trust company of its own selection, having aggregate capital, surplus
and undivided profits, as shown by its last published report of not less than
twenty million dollars ($20,000,000) as a custodian for the Trust to be held
under terms similar to those of this Agreement, provided, however, that the
Custodian shall not be required to make any such delivery or payment until full
payment shall have been made by the Trust of all liabilities constituting a
charge on or against the properties then held by the Custodian or on or against
the Custodian and until full payment shall have been made to the Custodian of
all of its fee, compensation, costs and expenses, subject to the provisions of
Paragraph 22 of this Agreement.
30. Notices. All notices and other communications
(collectively referred to as "Notice" or "Notices" in this paragraph)
hereunder shall be in writing or by confirmed
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<PAGE>
telegram, cable, telex, or facsimile sending device. Notices shall be addressed
(a) if to the Custodian, The Chase Manhattan Bank, Institutional Custody &
Escrow, One Chase Manhattan Plaza Floor 3B, New York, New York 10081, Attention:
________________; (b) if to the Trust, at the address of the Trust, Attention:
Ann Bergin, Secretary; or (c) if to neither of the foregoing, at such other
address as shall have been notified to the sender of any such Notice or other
communication. Notice shall be deemed to have been given when actually received
by the other party. All postage, cable, telegram, telex and facsimile sending
device charges arising from the sending of a Notice hereunder shall be paid by
the sender.
31. Further Actions. Each party agrees to perform such
further acts and execute such further documents as are necessary to effectuate
the purposes hereof.
32. Amendments. This Agreement or any part hereof may
be changed or waived only by an instrument in writing signed by the party
against which enforcement of such change or waiver is sought.
33. Miscellaneous. This Agreement embodies the entire
Agreement and understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to the subject matter hereof. The
captions in this Agreement are included for convenience of reference only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement shall be deemed to be a contract made in
New York and governed by New York law. 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. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below as of the day and
year first above written.
MUTUAL FUND SELECT GROUP
By:_____________ ATTEST:________________
Title: Title:
THE CHASE MANHATTAN BANK
By:_______________ ATTEST:__________________
Title: Title:
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an "FCM Account") subject to the disposition by the FCM involved in such
contracts in accordance with the customer contract between FCM and the Trust
("FCM Contract"), SEC rules governing such segregated accounts, CFTC rules and
the rules of the applicable commodities exchange. Such FCM Agreements shall only
be entered into upon receipt of Written Instructions from the Trust. Transfers
of initial margin shall be made into an FCM Account only upon Written
Instructions; transfers of premium and variation margin may be made into an FCM
Account pursuant to Oral Instructions. Transfers of funds from an FCM Account to
the FCM for which Custodian holds such an account may only occur upon
certification by the FCM to the Custodian that pursuant to the FCM Agreement and
the FCM Contract, all conditions precedent to its right to give the Custodian
such instruction have been satisfied.
15. Purchase of Securities. Promptly after each purchase of
securities by the Investment Adviser on behalf of any Fund, the Trust shall
deliver to the Custodian Oral or Written Instructions specifying with respect to
each such purchase: (a) the name of the issuer and the title of the securities,
(b) the number of shares or the principal amount purchased and accrued interest,
if any, (c) the dates of purchase and settlement, (d) the purchase price per
unit, (e) the total amount payable upon such purchase, (f) the name of the
person from whom or the broker through whom the purchase was made, (g) the Fund
for which the purchase was made and (h) the cusip number or other industry
standard identification when available. The Custodian shall upon receipt of
securities purchased by or for the Trust pay out of the moneys held for the
account of such Trust the total amount payable to the person from whom or the
broker through whom the purchase was made, provided that the same conforms to
the total amount payable as set forth in such Oral or Written Instructions.
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<PAGE>
16. Notation Pursuant to Section 17f-2 of the 1940 Act. With
respect to each deposit or withdrawal of securities or when ordering the deposit
or withdrawal of securities from safekeeping, the Custodian shall sign a
notation in respect of each such deposit, withdrawal or order that shall show:
(a) the date and time of the deposit, withdrawal or order; (b) the title and
amount of the securities or other investments deposited, withdrawn or ordered to
be withdrawn, and the identification thereof by certificate numbers or
otherwise; (c) the manner of acquisition of the securities or similar
investments deposited or the purpose for which they have been withdrawn, or
ordered to be withdrawn; and (d) if withdrawn and delivered to another person,
the name of such person. The time of any deposit, withdrawal or order means the
time of the formal recording of such transactions on the books of the Custodian
at the Custodian's close of business. Such notation shall be transmitted
promptly to an officer or trustee of the Trust designated by the Board of
Trustees who shall not otherwise be authorized to have access to the Trust's
securities. Such notation shall be on serially numbered forms and shall be
preserved for at least one year.
17. Sales of Securities. Promptly after each sale of
securities by the investment manager, the Trust shall deliver to the Custodian
Oral or Written Instructions, specifying with respect to each such sale: (a) the
name of the issuer and the title of the security, (b) the number of shares or
principal amount sold, and accrued interest, if any, (c) the date of sale, (d)
the sale price per unit, (e) the total amount payable to the Trust upon such
sale, (f) the name of the broker through whom or the person to whom the sale was
made, (g) the Fund for which the sale was made and (h) the cusip number or other
industry standard identification when available. The Custodian shall deliver the
securities upon receipt of the total amount payable to the Trust upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Oral or Written Instructions. Subject to the
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<PAGE>
foregoing, the Custodian may accept payment in such form as shall be
satisfactory to it, and may deliver securities and arrange for payment in
accordance with the local customs prevailing among dealers in securities.
18. Records. The books and records pertaining to the Trust
shall be prepared and maintained as required by the 1940 Act, as amended, and
other applicable securities laws and rules and regulations. The Trust, or the
Trust's authorized representatives, shall have access to such books and records
at all times during the Custodian's normal business hours, and such books and
records shall be surrendered to the Trust promptly upon request. Upon reasonable
request of the Trust, copies of any such books and records shall be provided by
the Custodian to the Trust or the Trust's authorized representative at the
Trust's expense.
19. Reports.
(a) The Custodian shall furnish the Trust the
following reports:
(1) such periodic and special reports as the
Trust may reasonably request;
(2) a monthly statement summarizing all
transactions and entries for the
account of each Fund;
(3) a monthly report of portfolio securities
belonging to each Fund showing the
adjusted average cost of each issue and the
market value at the end of such month;
(4) a monthly report of the cash account of
each Fund showing disbursements;
(5) the reports to be furnished to the Trust
pursuant to Rule 17f-4;
(6) the reports to be furnished to the Trust
pursuant to Rule 17f-5, and;
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<PAGE>
(7) such other information as may be agreed
upon from time to time between the Trust
and the Custodian.
(b) The Custodian with the direction and as interpreted by the
Trust, the Trust's accountants and/or other tax advisors will prepare and
maintain as complete, accurate, and current all accounts and records required to
be maintained by each Fund under the Internal Revenue Code of 1986, as amended,
under the rules and regulations of the 1940 Act and as agreed upon between the
parties and will preserve such records in the manner and for the periods
required by law.
(c) Unless the information necessary to perform the above
functions is furnished in writing or its electronic or digital equivalent to the
Custodian in a timely manner prior to the next calculation of each Fund's net
asset value, the Custodian shall incur no liability except as provided in
Paragraph 9 herein and the Trust shall indemnify and hold the Custodian harmless
from and against any liability arising from any discrepancy between the
information received by the Custodian and used in such calculation and any
subsequent information received from the Trust.
(d) The Custodian shall assist the Trust's independent
auditors, or upon approval of the Trust or upon demand, any regulatory body, in
any requested review of the Trust's accounts and records maintained by the
Custodian but shall be reimbursed by the Trust for all expenses and employee
time invested in any such review outside of routine and normal periodic reviews.
(e) Upon receipt from the Trust of the necessary information,
the Custodian shall provide information for tax returns, questionnaires, or
periodic reports to shareholders and such other reports and information requests
as the Trust and the Custodian shall agree upon from time to time.
-22-
<PAGE>
20. Cooperation with Accountants. The Custodian shall
cooperate with the Trust's independent certified public accountants and shall
take all reasonable action in the performance of its obligations under this
Agreement and under Rule 17f-2 to assure that the necessary information is made
available to such accountants for the expression of their unqualified opinion
with respect to, including without limitation, the three audits required each
year, the certificates with respect to such annual audits and the opinion
included in the Trust's semi-annual report on Form N-SAR, and will require each
sub-custodian appointed pursuant to paragraph 7 hereof to grant such access to
the information to the Trust's independent certified public accountant. The
Custodian shall require any sub-custodian it appoints with respect to the Trust
to comply with the provisions of this Paragraph 20.
21. Confidentiality. The Custodian agrees on behalf of itself
and its employees to treat confidentially and as the proprietary information of
the Trust all records and other information relative to the Trust and its prior,
present or potential shareholders and relative to the managers and its prior,
present or potential customers, and not to use such records and information for
any purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where the
Custodian may be exposed to civil or criminal contempt proceedings for failure
to comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Trust.
22. Equipment Failures. In the event of equipment
failures beyond the Custodian's control, the Custodian shall, at no additional
expense to the Trust, take reasonable steps to minimize service interruptions
but shall not have liability with respect thereto. The
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<PAGE>
Custodian shall make and maintain reasonable provisions for back up emergency
use of electronic data processing equipment to the extent appropriate equipment
is available.
23. Right to Receive Advice.
(a) Advice of Trust. If the Custodian shall be in doubt as to
any action to be taken or omitted by it, it may request, and shall receive, from
the Trust clarification or advice, including Oral or Written Instructions.
(b) Advice of Counsel. If the Custodian shall be in doubt as
to any question of law involved in any action to be taken or omitted by the
Custodian, it may request advice from counsel of its own choosing (who may be
counsel for the Trust or the Custodian, at the option of the Custodian).
(c) Conflicting Advice. In case of conflict between
directions, advice or Oral or Written Instructions received by the Custodian
pursuant to subparagraph (a) of this paragraph and advice received by the
Custodian pursuant to subparagraph (b) of this paragraph, the Custodian shall be
entitled to rely on and follow the advice received pursuant to the latter
provision alone.
(d) Protection of The Custodian. The Custodian shall be
protected in any action or inaction which it takes or omits to take in reliance
on any directions, advice or Oral or Written Instructions received pursuant to
subparagraphs (a) or (b) of this section which the Custodian, after receipt of
any such directions, advice or Oral or Written Instructions, in good faith
believes to be consistent with such directions, advice or Oral or Written
Instructions, as the case may be. Nothing in this paragraph shall be construed
as imposing upon the Custodian any obligation (i) to seek such directions,advice
or Oral or Written Instructions, or (ii) to act in accordance with such
directions, advice or Oral or Written Instructions when received, unless, under
the terms or another provision of this Agreement, the same is a
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<PAGE>
condition to the Custodian's properly taking or omitting to take such action.
Nothing in this subparagraph shall excuse the Custodian when an action or
omission on the part of the Custodian constitutes willful misfeasance, bad
faith, negligence or reckless disregard by the Custodian of its duties under
this Agreement.
24. Compliance with Governmental Rules and Regulations. The
Custodian undertakes to comply with all applicable requirements of the 1933 Act,
the 1934 Act, the 1940 Act and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to the duties and obligations to be
performed by the Custodian hereunder. The Custodian acknowledges that it is
subject to Rule 17f-2 under the 1940 Act with respect to its duties to be
performed pursuant to this Agreement.
25. Compensation. As compensation for the services rendered by
the Custodian during the term of this Agreement, the Trust will pay to the
Custodian, in addition to reimbursement of its reasonable out-of-pocket
expenses, including reasonable counsel fees, monthly fees as outlined in
Schedule D, or as otherwise agreed upon from time to time in writing by the
Custodian and the Trust.
26. Indemnification. The Trust, as sole owner of the Property,
agrees to indemnify and hold harmless the Custodian and its nominees from all
taxes, charges, expenses, assessments, claims, and liabilities (including,
without limitation, liabilities arising under the 1933 Act, the Act of 1934, the
1940 Act, the CEA, and any state and foreign securities and blue sky laws, all
as or to be amended from time to time) and expenses, including (without
limitation) attorney's fees and disbursements, arising directly or indirectly
(a) from the fact that securities included in the Property are registered in the
name of any such nominee or (b) without limiting the generality of the foregoing
clause (a) from any action or thing which the Custodian takes or does or omits
to take or do (i) at the request or
-25-
<PAGE>
on the direction of or in reliance on the advice of the Trust, or (ii) upon Oral
or Written Instructions, provided, that neither the Custodian nor any of its
nominees or subcustodian shall be indemnified against any liability to any Fund
of the Trust or to its shareholders (or any expenses incident to such liability)
arising out of (x) the Custodian's or such nominee's or subcustodian's own
willful misfeasance, bad faith, negligence or reckless disregard of its duties
under this Agreement or (y) the Custodian's own negligent failure to perform its
duties under this Agreement. In the event of any advance of cash for any purpose
made by the Custodian resulting from Oral or Written Instructions of the Trust,
or in the event that the Custodian or its nominee or subcustodian shall incur or
be assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's or subcustodian's own negligent action, negligent failure
to act, willful misconduct, or reckless disregard, the Trust shall promptly
reimburse the Custodian for such advance of cash or such taxes, charges,
expenses, assessment claims or liabilities. Notwithstanding anything to the
contrary, any one Fund shall not provide indemnification to the Custodian for
any loss or liability resulting from actions with respect to any other Fund.
27. Responsibility of The Custodian. The Custodian shall be
under no duty to take any action on behalf of the Trust except as specifically
set forth herein or as may be specifically agreed to by the Custodian in
writing. In the performance of its duties hereunder, the Custodian shall be
obligated to exercise reasonable care and diligence and to act in good faith to
insure the accuracy of all services performed under this Agreement. The
Custodian shall be responsible for its own negligent failure or that of any
subcustodian it shall appoint to perform its duties under this Agreement but to
the extent that duties, obligations and responsibilities are not expressly set
forth in this Agreement, the Custodian shall not be liable
-26-
<PAGE>
for any act or omission which does not constitute willful misfeasance, bad
faith, or negligence on the part of the Custodian or reckless disregard of such
duties, obligations and responsibilities. Without limiting the generality of the
foregoing or of any other provision of this Agreement, the Custodian in
connection with its duties under this Agreement shall not be under any duty or
obligation to inquire into and shall not be liable for or in respect of (a) the
validity or invalidity or authority or lack thereof of any advice, direction,
notice or other instrument which conforms to the applicable requirements of this
Agreement, if any, and which the Custodian believes to be genuine, (b) the
validity of the issue of any securities purchased or sold by the Trust, the
legality of the purchase or sale thereof or the propriety of the amount paid or
received therefore, (c) the legality of the issue or sale of any Shares, or the
sufficiency of the amount to be received therefore, (d) delays or errors or loss
of data occurring by reason of circumstances beyond the Custodian's control,
including acts of civil or military authority, national emergencies, strikes or
work stoppages, fire, mechanical breakdown (except as provided in Paragraph 22),
flood or catastrophe, acts of God, insurrection, acts of war or terrorism,
riots, revolutions, nuclear fusion, fission or radiation, or failure of the
mail, transportation, communication or power supply. Without limiting the
foregoing,the Custodian shall not be liable for any loss which results from: (1)
the general risk of investing, or (2) investing or holding Fund assets in a
particular country including, but not limited to, losses resulting from
nationalization, expropriation or other governmental actions; regulation of the
banking or securities industry; currency restrictions, devaluations or
fluctuations; and market conditions which prevent the orderly execution of
securities transactions or affect the value of assets.
28. Collection. All collections of monies or other
property in respect, or which are to become part, of the Property (but not
the safekeeping thereof upon receipt by the
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<PAGE>
Custodian) shall be at the sole risk of the Trust. In any case in which the
Custodian does not receive any payment due the Trust within a reasonable time
after the Custodian has made proper demands for the same, it shall so notify the
Trust in writing, including copies of all demand letters, any written responses
thereto, and memoranda of all oral responses thereto, and to telephonic demands,
and await instructions from the Trust. The Custodian shall not be obliged to
take legal action for collection unless and until reasonably indemnified to its
satisfaction. The Custodian shall also notify the Trust as soon as reasonably
practicable whenever income due on securities is not collected in due course.
29. Duration and Termination. This Agreement shall be
effective as of the date hereof and shall continue until termination by the
Trust or by the Custodian on 90 days' written notice. Upon any termination of
this Agreement, pending appointment of a successor to the Custodian or a vote of
the shareholders of the Trust to dissolve or to function without a custodian of
its cash, securities or other property, the Custodian shall not deliver cash,
securities or other property of the Trust to the Trust, but may deliver them to
a bank or trust company of its own selection, having aggregate capital, surplus
and undivided profits, as shown by its last published report of not less than
twenty million dollars ($20,000,000) as a custodian for the Trust to be held
under terms similar to those of this Agreement, provided, however, that the
Custodian shall not be required to make any such delivery or payment until full
payment shall have been made by the Trust of all liabilities constituting a
charge on or against the properties then held by the Custodian or on or against
the Custodian and until full payment shall have been made to the Custodian of
all of its fee, compensation, costs and expenses, subject to the provisions of
Paragraph 22 of this Agreement.
30. Notices. All notices and other communications
(collectively referred to as "Notice" or "Notices" in this paragraph)
hereunder shall be in writing or by confirmed
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<PAGE>
telegram, cable, telex, or facsimile sending device. Notices shall be addressed
(a) if to the Custodian, The Chase Manhattan Bank, Institutional Custody &
Escrow, One Chase Manhattan Plaza Floor 3B, New York, New York 10081, Attention:
________________; (b) if to the Trust, at the address of the Trust, Attention:
Ann Bergin, Secretary; or (c) if to neither of the foregoing, at such other
address as shall have been notified to the sender of any such Notice or other
communication. Notice shall be deemed to have been given when actually received
by the other party. All postage, cable, telegram, telex and facsimile sending
device charges arising from the sending of a Notice hereunder shall be paid by
the sender.
31. Further Actions. Each party agrees to perform such
further acts and execute such further documents as are necessary to effectuate
the purposes hereof.
32. Amendments. This Agreement or any part hereof may
be changed or waived only by an instrument in writing signed by the party
against which enforcement of such change or waiver is sought.
33. Miscellaneous. This Agreement embodies the entire
Agreement and understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to the subject matter hereof. The
captions in this Agreement are included for convenience of reference only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement shall be deemed to be a contract made in
New York and governed by New York law. 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. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below as of the day and
year first above written.
MUTUAL FUND SELECT GROUP
By:_____________ ATTEST:________________
Title: Title:
THE CHASE MANHATTAN BANK
By:_______________ ATTEST:__________________
Title: Title:
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<PAGE>
SCHEDULE A
- ---------------------------------------------------------
Fund:
- ---------------------------------------------------------
1. Vista Select Balanced Fund
- ---------------------------------------------------------
2. Vista Select Bond Fund
- ---------------------------------------------------------
3. Vista Select Emerging Growth Fund
- ---------------------------------------------------------
4. Vista Select Equity Income
- ---------------------------------------------------------
5. Vista Select Intermediate Bond Fund
- ---------------------------------------------------------
6. Vista Select International Equity Fund
- ---------------------------------------------------------
7. Vista Select Large Cap Equity Fund
- ---------------------------------------------------------
8. Vista Select Large Cap Growth Fund
- ---------------------------------------------------------
9. Vista Select Short Term Bond Fund
- ---------------------------------------------------------
10. Vista Select Small Cap Value Fund
- ---------------------------------------------------------
<PAGE>
SCHEDULE B
- --------------------------------------------------------------------------
Fergus Reid Chairman of the Board
- --------------------------------------------------------------------------
H. Richard Vartabedian President
- --------------------------------------------------------------------------
Ann Bergin Secretary and Assistant Treasurer
- --------------------------------------------------------------------------
Martin R. Dean Treasurer and Assistant Secretary
- --------------------------------------------------------------------------
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT made the ____ day of _________, 1996, by and between
MUTUAL FUND SELECT GROUP, a Massachusetts business trust, having its principal
place of business at 125 West 55th Street, New York, New York 10022 ("Fund"),
and DST SYSTEMS, INC., a Missouri corporation, having its principal place of
business at 1055 Broadway, Kansas City, Missouri 64105 ("DST"):
WITNESSETH:
WHEREAS, the Fund is a Massachusetts business trust registered with
the Securities and Exchange Commission as an investment company pursuant to the
Investment Company Act of 1940, as amended; and
WHEREAS, the Fund wishes to appoint DST as transfer agent and
dividend disbursing agent as to any and all shares issued by the Fund; and
WHEREAS, DST wishes to accept such appointment; and
NOW, THEREFORE, in consideration of the mutual
covenants herein contained, the parties hereto agree as follows:
1. Documents to be Filed with Appointment.
In connection with the appointment of DST as Transfer Agent
and Dividend Disbursing Agent for the Fund, there will be
filed with DST the following documents:
A. A certified copy of the Votes of the Board of
Trustees of the Fund appointing DST as
Transfer Agent and Dividend Disbursing Agent,
approving the form of this Agreement, and
<PAGE>
2
designating certain persons to sign stock
certificates, if any, and give written
instructions and requests on behalf of the
Fund;
B. A certified copy of the Articles of
Incorporation and all future amendments
affecting the number of authorized shares or
DST's provision of services hereunder;
C. A certified copy of the Bylaws of the Fund;
D. Copies of all current and future Registration
Statements and amendments thereto, filed with
the Securities and Exchange Commission;
E. Specimens of all forms of outstanding stock
certificates, if any;
F. An opinion of counsel for the Fund with
respect to:
(1) Fund's organization and existence under
the laws of its state of organization,
(2) The status of all shares of stock of
Fund covered by the appointment under the
Securities Act of 1933, as amended, and any other
applicable federal or state statute, and
(3) That all issued shares are, and all unissued
shares will be when issued, validly issued, fully
paid and nonassessable.
<PAGE>
3
2. Certain Representations and Warranties of DST.
DST represents and warrants to the Fund that:
A. It is a corporation duly organized and
existing and in good standing under the laws
of Missouri.
B. It is duly qualified to carry on its business
in the State of Missouri.
C. It is empowered under applicable laws and by
its Articles of Incorporation and bylaws to
enter into and perform the services
contemplated in this Agreement.
D. It is registered as a transfer agent to the
extent required under the Securities Exchange
Act of 1934.
E. All requisite corporate proceedings have been
taken to authorize it to enter into and
perform this Agreement.
F. It has and will continue to have and maintain
the necessary facilities, equipment and
personnel to perform its duties and
obligations under this Agreement.
3. Certain Representations and Warranties of the
Fund. The Fund represents and warrants to DST
that:
A. It is a business trust duly organized and
existing and in good standing under the laws
of the Commonwealth of Massachusetts.
<PAGE>
4
B. It is an open-end diversified management
investment company registered under the
Investment Company Act of 1940, as amended.
C. A registration statement under the Securities Act of
1933 has been filed and is effective with respect to the
shares of the Fund being offered for sale.
D. All requisite steps have been and, in the
future, will be taken to register the Fund's
shares for sale in applicable states.
E. The Fund is empowered under applicable laws
and by Articles of Incorporation and bylaws
to enter into and perform this Agreement.
4. Scope of Appointment.
A. Subject to the conditions set forth in this Agreement,
effective the ___th day of _________, 1996, the Fund
hereby employs and appoints DST as Transfer Agent and
Dividend Disbursing Agent as to all current and future
issued and outstanding shares of the Fund.
B. DST hereby accepts such employment and
appointment and agrees that it will act as
the Fund's Transfer Agent and Dividend
Disbursing Agent. DST agrees that it will
also act as agent in connection with the
Fund's periodic investment and withdrawal
<PAGE>
5
payment accounts, other open-account and
similar plans for shareholders, if any.
C. DST agrees to provide the necessary
facilities, equipment and personnel to
perform its duties and obligations hereunder
in accordance with industry practice.
D. The Fund agrees to deliver to DST in Kansas
City, Missouri, as soon as they are
available, all of its shareholder account
records.
E. Subject to the provisions of Sections 19. and
20. hereof, DST agrees that it will perform
all of the usual and ordinary services of
Transfer Agent and Dividend Disbursing Agent
and as Agent for the various shareholder
accounts, including, without limitation, the
following: issuing, transferring and
cancelling stock certificates; maintaining
all shareholder accounts; preparing
shareholder meeting lists, mailing proxies,
receiving and tabulating proxies (outside
agency bills treated as out-of-pocket
expenses); mailing shareholder reports and
prospectuses; withholding taxes on
nonresident alien and foreign corporation
accounts, for pension and deferred income
accounts for which DST is the named trustee
<PAGE>
6
or custodian, on accounts which DST has been advised are
subject to backup withholding or other instances agreed
upon by the parties; preparing and mailing checks for
disbursement of income dividends and capital gains
distributions, preparing and filing U.S. Treasury
Department Form 1099 for shareholders as directed by the
Fund; preparing and mailing confirmation forms to
shareholders and dealers with respect to purchases and
liquidation of the Fund shares and other transactions in
shareholder accounts for which confirmations are
required or as directed by the Fund; recording
reinvestments of dividends and distributions in Fund
shares; and preparing and mailing checks for payments
upon redemption and for disbursements to withdrawal plan
holders.
5. Limit of Authority.
Unless otherwise expressly limited by the resolution of
appointment or by subsequent action by the Fund, the
appointment of DST as Transfer Agent will be construed to
cover the full amount of the Shares of the Fund for which DST
is appointed as the same will, from time to time, be
constituted, and any subsequent increases in such authorized
amount.
<PAGE>
7
In case of such increase the Fund will file with
DST:
A. If the appointment of DST was theretofore
expressly limited, a certified copy of a Vote
of the Board of Trustees of the Fund
increasing the authority of DST;
B. A certified copy of the amendment to the
Articles of Incorporation authorizing the increase of
shares.
6. Compensation and Expenses.
A. In consideration for its services hereunder
as Transfer Agent and Dividend Disbursing
Agent, the Fund will pay to DST from time to
time a reasonable compensation for all
services rendered as Agent, and also, all its
reasonable out-of-pocket expenses, charges,
counsel fees, and other disbursements
incurred in connection with the agency. Such
compensation will be set forth in a separate
schedule to be agreed to by the Fund and DST,
a copy of which is attached hereto and
incorporated herein by reference. If the
Fund has not paid such compensation and
expenses to DST within a reasonable time, and
as permitted by applicable law, DST may
charge against any monies held under this
Agreement in the Fund's name, the amount of
<PAGE>
8
any compensation, expense, loss or liability for which
DST shall be entitled to reimbursement under this
Agreement.
B. The Fund agrees to promptly reimburse DST for
all reasonable out-of-pocket expenses or
advances incurred by DST in connection with
the performance of services under this
Agreement, for postage (which may be required
to be paid in advance) and first class mail
insurance in connection with mailing stock
certificates, envelopes, check forms,
continuous forms, forms for reports and
statements, stationery, and other similar
items, telephone and telegraph charges
incurred in answering or making inquiries
from or of dealers or shareholders, microfilm
used each year to record the previous year's
transactions in shareholder accounts and
computer tapes used for permanent storage of
records and cost of insertion of materials in
mailing envelopes by outside firms.
7. Operation of DST System.
A. In connection with the performance of its
services under this Agreement, DST is
responsible for such items as:
(1) The accuracy of entries made by DST in
DST's records reflecting orders and
<PAGE>
9
instructions received by DST from
dealers, shareholders, the Fund or its
principal underwriter;
(2) The availability and the accuracy of shareholder
lists, shareholder account verifications,
confirmations and other shareholder account
information to be produced from its records or
data;
(3) The accurate and timely issuance of dividend and
distribution checks in accordance with
instructions received from the Fund;
(4) The accuracy of redemption transactions and
payments in accordance with redemption
instructions received from dealers, shareholders
or the Fund;
(5) The deposit daily in the Fund's appropriate bank
account of all checks and payments received
directly or individually from dealers or
shareholders for investment in shares;
(6) The requiring of proper forms of instructions,
signatures and signature guarantees and any
necessary documents supporting the legality of
transfers, redemptions and other shareholder
account transactions, all in conformance
<PAGE>
10
with DST's present procedures with such
changes as may be required or approved
by the Fund; and
(7) The maintenance of a current duplicate set of the
Fund's essential records maintained by DST for the
Fund under this agreement at a secure distant
location.
B. DST is not responsible for and shall have no
liability as a result of or which arises out
of errors, inaccuracies or omissions in the
Fund's books and records as received by DST
from the prior transfer and dividend
disbursing agent and any errors, inaccuracies
or omissions in reports, lists,
verifications, confirmations or other
information or data derived or produced
therefrom.
8. Indemnification
A. DST will not be responsible for, and the Fund
will hold harmless and indemnify DST from and
against any loss by or liability to the Fund
or a third party, including attorney's fees,
in connection with any claim or suit
asserting any such liability arising out of
or attributable to actions taken or omitted
by DST pursuant to this Agreement, unless DST
<PAGE>
11
has acted negligently or in bad faith. The matters
covered by this indemnification include but are not
limited to those of Section 14. hereof and any costs,
including legal fees, incurred in enforcing this right
of indemnification. The Fund will be responsible for,
and will have the right to conduct or control the
defense of any litigation asserting liability against
which DST is indemnified hereunder. DST will not be
under any obligation to prosecute or defend any action
or suit in respect of the agency relationship hereunder,
which, in its opinion, may involve it in expense or
liability, unless the Fund will, as often as requested,
furnish DST with reasonable, satisfactory security and
indemnity against such expense or liability and pay all
costs, including attorney's fees, as incurred.
B. DST will hold harmless and indemnify the Fund
from and against any loss or liability
arising out of DST's failure to comply with
the terms of this Agreement or out of DST's
negligence, misconduct, or bad faith, except
to the extent DST is entitled to
indemnification under Subsection A. hereof
<PAGE>
12
9. Certain Covenants of DST and the Fund.
A. The Fund hereby agrees that all requisite
steps will be taken by the Fund from time to time when
and as necessary to register the Fund's shares for sale
in all states in which the Fund's shares shall at the
time be offered for sale and require registration. If at
any time the Fund will receive notice of any stop order
or other proceeding in any such state affecting such
registration or the sale of the Fund's shares, or of any
stop order or other proceeding under the Federal
securities laws affecting the sale of the Fund's shares,
the Fund will give prompt notice thereof to DST.
B. DST hereby agrees to perform such transfer
agency functions as are attached hereto as
Exhibit A and establish and maintain
facilities and procedures reasonably
acceptable to the Fund for safekeeping of
stock certificates, check forms, and
facsimile signature imprinting devices, if
any; and for the preparation or use, and for
keeping account of, such certificates, forms
and devices, and to carry such insurance as
specified in Exhibit B.
<PAGE>
13
C. To the extent required by Section 31 of the
Investment Company Act of 1940 as amended and
Rules thereunder, DST agrees that all records
maintained by DST relating to the services to
be performed by DST under this Agreement are
the property of the Fund and will be
preserved and will be surrendered promptly to
the Fund on request. The Fund will be
responsible for the costs of storing and
retrieving such records.
D. DST agrees to furnish the Fund annual reports of its
financial condition, consisting of a balance sheet,
earnings statement and any other public financial
information reasonably requested by the Fund. The annual
financial statements will be certified by DST's
certified public accountants.
E. DST represents and agrees that it will use
its best efforts to keep current on the
trends of the investment company industry
relating to transfer agent services and will
use its best efforts to continue to modernize
and improve its system without additional
cost to the Fund. Notwithstanding the
foregoing, (i) DST shall not be liable for
failing to make any modification or
improvement as to the necessity which the
<PAGE>
14
Fund has not advised DST in writing; (ii) for any delay
in the implementation of such modification or
improvement where DST reasonably required more time than
was permitted by circumstances or regulations; and (iii)
the Fund may be charged for utilization of any
modification or improvement if utilization of such
modification or improvement is charged to DST's clients
generally, and provided such modification or improvement
is utilized to provide services to the Fund hereunder.
F. DST will permit the Fund and its authorized
representatives to make periodic inspections of its
operations as such would involve the Fund at reasonable
times during business hours, subject to such authorized
representatives' execution of DST's Confidentiality and
Limited Use Agreement.
10. Recapitalization or Readjustment.
--------------------------------
In case of any recapitalization, readjustment or
other change in the capital structure of the Fund
requiring a change in the form of share
certificates, DST will issue or register
certificates in the new form in exchange for, or
in transfer of, the outstanding certificates in
the old form, upon receiving:
<PAGE>
15
A. Written instructions from an officer of the
Fund;
B. Certified copy of the amendment to the
Articles of Incorporation or other document
effecting the change;
C. Certified copy of the order or consent of
each governmental or regulatory authority,
required by law to the issuance of the shares
in the new form, and an opinion of counsel
that the order or consent of no other
government or regulatory authority is
required;
D. Specimens of the new certificates in the form
approved by the Board of Trustees of the
Fund, with a certificate of the Clerk of the
Fund as to such approval;
E. Opinion of counsel for the Fund stating:
(1) The status of the shares of stock of the
Fund in the new form under the Securities Act of
1933, as amended and any other applicable federal
or state statute; and
(2) That the issued shares in the new form are, and
all unissued shares will be, when issued, validly
issued, fully paid and nonassessable.
11. Stock Certificates.
<PAGE>
16
The Fund will furnish DST with a sufficient supply of blank
stock certificates and from time to time will renew such
supply upon the request of DST. Such certificates will be
signed manually or by facsimile signatures of the officers of
the Fund authorized by law and by bylaws to sign share
certificates, and if required, will bear the Funds's seal or
facsimile thereof.
12. Death, Resignation or Removal of Signing Officer.
------------------------------------------------
The Fund will file promptly with DST written
notice of any change in the officers authorized to
sign share certificates, written instructions or
requests, together with two signature cards
bearing the specimen signature of each newly
authorized officer. In case any officer of the
Fund who will have signed manually or whose
facsimile signature will have been affixed to
blank share certificates will die, resign, or be
removed prior to the issuance of such
certificates, DST may issue or register such share
certificates as the share certificates of the Fund
notwithstanding such death, resignation, or
removal, until specifically directed to the
contrary by the Fund in writing. In the absence
of such direction, the Fund will file promptly
with DST such approval, adoption, or ratification
as may be required by law.
<PAGE>
17
13. Future Amendments of Articles of Incorporation and
Bylaws.
The Fund will promptly file with DST copies of all
material amendments to its Articles of
Incorporation or bylaws made after the date of
this Agreement.
14. Instructions, Opinion of Counsel and Signatures.
-----------------------------------------------
Except as otherwise provided for in a written
memorandum signed by both parties hereto, at any
time DST may apply to any officer of the Fund, The
Chase Manhattan Bank ("Chase") or Mutual Fund
Select Group for instructions, and if such
instructions are not received within a reasonable
time following subsequent notification with the
Fund's Chief Executive Officer, then DST may
consult with legal counsel for the Fund or its own
legal counsel at the expense of the Fund, with
respect to any matter arising in connection with
the agency and it will not be liable for any
action taken or omitted by it in good faith in
reliance upon such instructions or upon the
opinion of such counsel. DST will be protected in
acting upon any paper or document reasonably
believed by it to be genuine and to have been
signed by the proper person or persons and will
not be held to have notice of any change of
authority of any person, until receipt of written
<PAGE>
18
notice thereof from the Fund. It will also be protected in
recognizing share certificates which it reasonably believes to
bear the proper manual or facsimile signatures of the officers
of the Fund, and the proper countersignature of any former
Transfer Agent or Registrar, or of a co-Transfer Agent or
co-Registrar.
15. Papers Subject to Approval of Counsel.
-------------------------------------
The acceptance by DST, of its appointment as
Transfer Agent and Dividend Disbursing Agent and
all documents filed in connection with such
appointment and thereafter in connection with the
agencies, will be subject to the approval of legal
counsel for DST (which approval will be not
unreasonably withheld).
16. Certification of Documents.
The required copy of the Articles of Incorporation of the Fund
and copies of all amendments thereto may be duplicates of the
original certified by the Secretary of State (or other
appropriate official) of the Commonwealth of Massachusetts.
The copy of the Bylaws, copies of all amendments thereto, and
copies of resolutions or Votes of the Board of Trustees of the
Fund, will be certified by the Clerk or an Assistant Clerk of
the Fund under the Fund's seal, if any.
17. Records.
<PAGE>
19
DST will maintain customary records in connection with its
agency, and particularly will maintain those records required
to be maintained pursuant to subparagraph (2)(iv) of paragraph
(b) of Rule 31a-1 under the Investment Company Act of 1940, if
any.
18. Disposition of Books, Records and Cancelled
-------------------------------------------
Certificates. DST may send periodically to the
------------
Fund, or to where designated by the Clerk or an
Assistant Clerk of the Fund, all books, documents,
and all records no longer deemed by it as needed
for current purposes and stock certificates which
have been cancelled in transfer or in exchange.
At a minimum all such records will be maintained
for the periods required by applicable law and
under and in compliance with the requirements of
17 C.F.R. Section 240.17Ad-7(g), adopted under the
------
Securities and Exchange Act of 1934.
19. Provisions Relating to DST as Transfer Agent.
A. DST will make original issues of stock
certificates upon written request of an
officer of the Fund and upon being furnished
with a certified copy of a resolution of the
Board of Directors authorizing such original
issue, an opinion of counsel as outlined in
paragraphs 1.D. and G. of this Agreement, any
documents required by paragraphs 5. or 10. of
<PAGE>
20
this Agreement, and necessary funds for the
payment of any original issue tax.
B. Before making any original issue of
certificates the Fund will furnish DST with
sufficient funds to pay all required taxes on
the original issue of the stock, if any. The
Fund will furnish DST such evidence as may be
required by DST to show the actual value of
the stock. If no taxes are payable DST will
be furnished with an opinion of outside
counsel to that effect.
C. Stock certificates will be transferred and
new certificates issued in transfer, or stock
certificates accepted for redemption and
funds remitted therefor, upon surrender of
the old certificates in form deemed by DST
properly endorsed for transfer or redemption
accompanied by such documents as DST may deem
necessary to evidence that authority of the
person making the transfer or redemption, and
bearing satisfactory evidence of the payment
of any applicable transfer taxes. DST
reserves the right to refuse to transfer or
redeem shares until it is satisfied that the
endorsement or signature on the Certificate
or any other document is valid and genuine,
and for that purpose it may require a
<PAGE>
21
guarantee of signature by a bank, broker or dealer,
municipal securities dealer or broker, government
securities dealer or broker, credit union, national
securities exchange, registered securities association,
clearing agency, savings association (including savings
bank and savings and loan) or any entity which affixes a
medallion which reasonably appears to be that of a
Signature Guarantee Program (collectively an "Eligible
Guarantor Institution"). DST will incur no liability and
shall be indemnified and held harmless by the Fund for
any action taken by it in accordance with an instruction
bearing what purports to be a signature guarantee or
medallion of an Eligible Guarantor Institution or
otherwise in accordance with DST's Signature Guarantee
Procedures adopted pursuant to 17 C.F.R. Section
240.17Ad-15 under the Securities and Exchange Act of
1934. DST also reserves the right to refuse to transfer
or redeem shares until it is satisfied that the
requested transfer or redemption is legally authorized,
and it will incur no liability and shall be indemnified
and held harmless by the Fund for the refusal in good
faith to make transfers or
<PAGE>
22
redemptions which, in its judgment, are improper or
unauthorized. DST may, in effecting transfers or
redemptions, rely upon Simplification Acts or other
statutes which protect it and the Fund in not requiring
complete fiduciary documentation. In cases in which DST
is not directed or otherwise required to maintain the
consolidated records of shareholder's accounts, DST will
not be liable for any loss which may arise by reason of
not having such records, provided that such loss could
not have been prevented by the exercise of ordinary
diligence. DST will be under no duty to use a greater
degree of diligence by reason of not having such
records.
D. D. When mail is used for delivery of stock
certificates DST will forward share
certificates in "nonnegotiable" form by first
class or registered mail and share
certificates in "negotiable" form by
registered mail, all such mail deliveries to
be covered while in transit to the addressee
by insurance arranged for by DST.
E. DST will issue and mail subscription
warrants, certificates representing
dividends, exchanges or split ups, or act as
<PAGE>
23
Conversion Agent upon receiving written instructions
from any officer of the Fund and such other documents as
DST deems necessary.
F. DST will issue, transfer, and split up
certificates and will issue certificates
representing full shares upon surrender of
scrip certificates aggregating one full share
or more when presented to DST for that
purpose upon receiving written instructions
from an officer of the Fund and such other
documents as DST may deem necessary.
G. DST may issue new certificates in place of
certificates represented to have been lost,
destroyed, stolen or otherwise wrongfully
taken upon receiving instructions from the
Fund and indemnity satisfactory to DST and
the Fund, and may issue new certificates in
exchange for, and upon surrender of,
mutilated certificates.
H. DST will supply a shareholder's list to the Fund for one
meeting of shareholders upon receiving a request
therefor from an officer of the Fund. It will also
supply lists at such other times as may be requested by
an officer of the Fund, but may, in its discretion,
charge therefor.
<PAGE>
24
I. Upon receipt of written instructions of an
officer of the Fund, DST will address and
mail notices to shareholders.
J. In case of any request or demand for the
inspection of the shareholder records of the
Fund or any other books in the possession of
DST, DST will endeavor to notify the Fund and
endeavor to secure instructions as to
permitting or refusing such inspection. DST
reserves the right, however, to exhibit the
shareholder records or other books to any
person in case it is advised by its counsel
that it may be held responsible for the
failure to exhibit the shareholder records or
other books to such person.
20. Provisions Relating to Dividend Disbursing Agency.
A. DST will, at the expense of the Fund, provide
a special form of check containing the imprint of any
device or other matter desired by the Fund. Said checks
must, however, be of a form and size convenient for use
by DST.
B. If the Fund desires to include additional printed
matter, financial statements, etc., with the dividend
checks, the same will be furnished DST within a
reasonable time prior to the date of mailing of the
dividend checks, at the expense of the Fund.
<PAGE>
25
C. If the Fund desires its distributions mailed
in any special form of envelopes, sufficient
supply of the same will be furnished to DST
but the size and form of said envelopes will
be subject to the approval of DST. If
stamped envelopes are used, they must be
furnished by the Fund; or if postage stamps
are to be affixed to the envelopes, the
stamps or the cash necessary for such stamps
must be furnished by the Fund (prior to
mailing if so requested by DST).
D. DST will maintain one or more deposit accounts as Agent
for the Fund, into which the funds for payment of
dividends, distributions, redemptions or other
disbursements provided for hereunder will be deposited,
and against which checks will be drawn.
E. DST is authorized and directed to stop
payment of checks issued hereunder, but not
presented for payment, when the payees
thereof allege either that they have not
received the checks or that such checks have
been mislaid, lost, stolen, destroyed or
through no fault of theirs, are otherwise
beyond their control, and cannot be produced
by them for presentation and collection, and,
<PAGE>
26
to issue and deliver duplicate checks in replacement
thereof. DST shall bear no liability if payment upon
stopped checks is subsequently compelled by a Holder in
Due Course (or a Bona Fide Purchaser for Value).
21. Assumption of Duties By the Fund.
--------------------------------
The Fund or its agent or affiliate may assume
certain duties and responsibilities of DST or
those usual and ordinary services of Transfer
Agent and Dividend Disbursement Agent as those
terms are referred to in Section 4.E. of this
Agreement including but not limited to accepting
shareholder instructions and transmitting orders
based on such instructions to DST, preparing and
mailing confirmations, obtaining certified TIN
numbers, answering telephones, and disbursing
monies of the Fund. To the extent the Fund or its
agent or affiliate assumes such duties and
responsibilities, DST shall be relieved from all
responsibility and liability therefor.
22. Termination of Agreement.
A. This Agreement may be terminated by either
party upon receipt of six (6) months prior
written notice from the other party.
B. The Fund, in addition to any other rights and
remedies, shall have the right to terminate
<PAGE>
27
this Agreement forthwith upon the occurrence
at any time of any of the following events:
(1) Any interruption or cessation of
operations by DST or its assigns which
materially interferes with the business
operation of the Fund;
(2) The bankruptcy of DST or its assigns or
the appointment of a receiver for DST or
its assigns;
(3) Any merger, consolidation or sale of
substantially all the assets of DST or
its assigns;
(4) The acquisition of a controlling interest in DST
or its assigns, by any broker, dealer, investment
adviser or investment company except as may
presently exist; or
(5) Failure by DST or its assigns to perform its
duties in accordance with the Agreement, which
failure materially adversely affects the business
operations of the Fund and which failure continues
for thirty (30) days after receipt of written
notice from the Fund.
C. In the event of termination, the Fund will
promptly pay DST all amounts due to DST
hereunder.
<PAGE>
28
D. In the event of termination, DST will use its
best efforts to transfer the books and
records of the Fund to the designated
successor transfer agent and to provide other
information relating to its service provided
hereunder for reasonable compensation
therefore. In this connection, DST's
conversion assistance shall be billed at its
then current rates. DST's present rates are:
(i) for clerical assistance, __________
dollars ($__________) per hour; (ii) for
Supervisor/Manager assistance, __________
dollars ($__________) per hour; and (iii) for
programming assistance, to the extent DST
agrees thereto, __________ ($__________),
__________ ($__________) and __________
($__________) dollars per hour for
non-technical, mainframe and work station
personnel.
E. Nothing herein is intended to, nor does it, compel DST
to disclose non-public information or to provide
programming assistance or information which might tend
to improve, enhance or add functionality to anyone
else's operating systems, respectively.
23. Assignment.
<PAGE>
29
A. Neither this Agreement nor any rights or
obligations hereunder may be assigned by
either party hereto without the written
consent of the other party. In the event of
a mutually agreed to assignment, each party
shall remain liable for the performance of
its assignee(s). DST may, however, employ
agents to assist it in performing its duties
hereunder. Notwithstanding anything herein
to the contrary, DST shall have no
responsibility or liability hereunder for
services provided or omissions to provide by
unaffiliated, nationally recognized third
parties such as federal Express, Airborne
Services, UPS, the U.S. Mails,
telecommunications companies, etc.
B. This Agreement will inure to the benefit of
and be binding upon the parties and their
respective successors and assigns.
24. Confidentiality.
A. DST agrees that, except as provided in the last sentence
of Section 19.H hereof, or as otherwise required by law,
DST will keep confidential all records of and
information in its possession relating to the Fund or
its shareholders or shareholder accounts and will
505339\0007\02350\969QFL4B.AGR 09/30/96 1:51PM
<PAGE>
30
not disclose the same to any person except at
the request or with the consent of the Fund.
B. The Fund agrees to keep confidential all
financial statements and other financial
records (other than statements and records
relating solely to the Fund's business
dealings with DST) and all manuals, systems
and other technical information and data, not
publicly disclosed, relating to DST's
operations and programs furnished to it by
DST pursuant to this Agreement and will not
disclose the same to any person except at the
request or with the consent of DST.
C. The Fund acknowledges that DST and DST have
proprietary rights in and to the computerized
data processing recordkeeping system used by
DST to perform services hereunder including,
but not limited to the maintenance of
shareholder accounts and records, processing
of related information and generation of
output (the "MFS System"), including, without
limitation any changes or modifications of
the MFS System and any other DST or DST
programs, data bases, supporting
documentation, or procedures ("collectively
DST Protected Information") which the Fund's
access to the MFS System or computer hardware
<PAGE>
31
or software may permit the Fund or its employees or
agents to become aware of or to access and that the DST
Protected Information constitutes confidential material
and trade secrets of DST. The Fund agrees to maintain
the confidentiality of the DST Protected Information.
The Fund acknowledges that any unauthorized use, misuse,
disclosure or taking of DST Protected Information which
is confidential as provided by law, or which is a trade
secret, residing or existing internal or external to a
computer, computer system, or computer network, or the
knowing and unauthorized accessing or causing to be
accessed of any computer, computer system, or computer
network, may be subject to civil liabilities and
criminal penalties under applicable state law. The Fund
will advise all of its employees and agents who have
access to any DST Protected Information or to any
computer equipment capable of accessing DST or DST
hardware or software of the foregoing. DST is intended
to be, and shall be, a third party beneficiary of the
Fund's obligations and undertakings contained in this
Section.
<PAGE>
32
25. Survival of Representations and Warranties,
Indemnifications and Miscellaneous Provisions.
A. All representations and warranties by either
party herein contained will survive the
execution and delivery of this Agreement.
B. All indemnifications and undertakings of
(i) confidential treatment of the other's
information, data, systems, materials, etc.
and (ii) of non-solicitation and
non-employment of employees of the other (and
of affiliates of the other) shall survive the
termination of this agreement.
26. Miscellaneous.
A. This Agreement is executed and delivered in
the State of Missouri and is intended to be
and shall be governed by the laws of said
state.
B. All the terms and provisions of this
Agreement shall be binding upon, inure to the
benefit of, and be enforceable by the
respective successor and assigns of the
parties hereto.
C. No provisions of the Agreement may be amended
or modified, in any manner except by a
written agreement properly authorized and
executed by both parties hereto.
<PAGE>
33
D. The captions in this Agreement are included for
convenience of reference only, and in no way define or
delimit any of the provisions hereof or otherwise affect
their construction or effect.
E. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an
original but all of which together shall constitute one
and the same instrument.
F. If any part, term or provision of this
Agreement is by the courts held to be
illegal, in conflict with any law or
otherwise invalid, the remaining portion or
portions shall be considered severable and
not be affected, and the rights and
obligations of the parties shall be construed
and enforced as if the Agreement did not
contain the particular part, term or
provision held to be illegal or invalid.
G. The obligations of this Agreement shall only be binding
upon the assets and property of the Fund and shall not
be binding upon any Director, officer or shareholder of
the Fund individually.
H. Each party hereto agrees not to offer
employment to, solicit employment by or
<PAGE>
34
employ any employee of the other or, in the case of DST,
of the Fund and its affiliated companies or, in the case
of the Fund, of DST or DST or either of their affiliated
companies. For purposes hereof, an "affiliated company"
shall be any entity which directly or indirectly
controls, is controlled by or is under common control
with the Fund or payment thereof to DST and for
internally determining the appropriate allocation
thereof among the Portfolios.
I. Notice is hereby given that a copy of the
Fund's Agreement and Declaration of Trust and
all amendments thereto is on file with the
Secretary of the Commonwealth of
Massachusetts; that this Agreement has been
executed on behalf of the Fund by the
undersigned duly authorized representative of
the Fund in his/her capacity as such and not
individually; and that the obligations of
this Agreement shall only be binding upon the
assets and property of the Fund and shall not
be binding upon any trustee, officer or
shareholder of the Fund individually.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers.
<PAGE>
35
DST SYSTEMS, INC.
By:____________________________
ATTEST:
_________________________________
MUTUAL FUND SELECT GROUP
By:____________________________
Title:_________________________
ATTEST:
_________________________________
Secretary
<PAGE>
36
EXHIBIT A
TRANSFER AGENCY SERVICES AND SYSTEMS FEATURES
FUNCTIONS
A. Issuance of stock certificates
B. Recording of non-certificate shares
C. Purchase, redemptions, exchanges, transfers and legal
D. Changes of address, etc.
E. Daily balancing of the Fund
F. Dividend calculation and disbursement
G. Mailing of quarterly and annual reports, if requested
H. Filing of 1099/1042 information to shareholders and
government
I. Provide N1R information
[J. Systematic withdrawal plans]
K. Pre-authorized checks
L. Purchase reminders
M. Reconcilement of dividend and disbursement accounts
N. Provide research and correspondence to shareholder's
inquiries
O. Daily communication of reports to the Fund
P. Provide listings, labels and other special reports
Q. Proxy issuance and tabulation
R. Annual statements of shareholders on microfilm
S. Blue-sky reports
T. Wire order processing
[U. 12B-1 processing]
<PAGE>
37
EXHIBIT B
INSURANCE COVERAGE
Insurance coverages maintained by DST effective May 1, 1993, subject to
deductibles
DESCRIPTION OF POLICY:
Brokers Blanket Bond, Standard form 14 Covering losses caused by
dishonesty of employees, physical loss of securities on or outside
of premises while in possession of authorized person, loss caused by
forgery or alteration of checks or similar instruments.
Coverage: $75,000,000
Errors and Omissions Insurance
Covering replacement of destroyed records and computer errors and
omissions.
Coverage. $10,000,000
Special Forgery Bond
Covering losses through forgery or alteration of checks or drafts of
customers processed by insured but drawn on or against them.
Coverage: $1,000,000
Mail Insurance (apples to all full service operations)
Provides indemnity for security lost in the mails.
Coverage:
$10,000,000 nonnegotiable securities mailed
to domestic locations via registered mail.
<PAGE>
38
$1,000,000 nonnegotiable securities mailed to
domestic locations via first-class or
certified mail.
$1,000,000 nonnegotiable securities mailed to
foreign locations via registered mail.
$1,000,000 negotiable securities mailed to
all locations via registered mail.
ADMINISTRATION AGREEMENT
THIS AGREEMENT made this __th day of _________, 1996, by and between
MUTUAL FUND SELECT GROUP (the "Trust"), a Massachusetts business trust and THE
CHASE MANHATTAN BANK (the "Administrator").
WITNESSETH:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
FIRST: The Trust on behalf of each of its series and any new series
to be created hereby authorizes the Administrator to provide administrative
services to the Trust in accordance with the terms and conditions of this
Agreement. The Administrator's services shall be subject to the direction and
control of the Board of Trustees of the Trust and shall be performed under the
direction of the appropriate Trust officers. The Administrator's functions shall
be entirely ministerial in nature, and it shall not have any responsibility or
authority for the management of the Trust, the determination of its policies, or
for any matter pertaining to the distribution of securities issued by the Trust.
SECOND: The Administrator shall provide certain
administration services including:
(A) arranging for the maintenance of the Trust's books and records
except for: accounting books and records, sales literature and other documents
relating to the sale of securities
<PAGE>
2
issued by the Trust (other than copies of such documents preserved as a record
of presentations to the Board of Trustees or Trust officers), and records
pertaining to the ownership of securities issued by the Trust;
(B) preparing applications for insurance for the Trust
and claims under any insurance policy;
(C) preparing for the signature of the appropriate Trust officer (or
assist counsel and auditors in the preparation of) all required Trust tax
returns, proxy statements, semiannual reports to the Trust's shareholders,
semiannual reports to be filed with the Securities and Exchange Commission, and
updates to the Trust's Registration Statement under the Investment Company Act
of 1940 (the "Act");
(D) arranging for the printing and mailing (at the Trust's
expense) of proxy statements and other reports or other materials provided to
the Trust's shareholders;
(E) preparing (beginning January 1, 1997) applications and reports
which may be necessary to maintain on behalf of the Trust any registration of
the Trust and/or the shares of any series of the Trust under the securities or
"Blue Sky" laws of any state, province, or foreign country (the Trust shall pay
for any filing or legal fees in connection with such filings);
(F) preparing agendas and supporting documentation
for, and minutes of, Trustee and shareholder meetings;
(G) arranging for the computation of performance data
including net asset value and yield;
<PAGE>
3
(H) arranging for the publication of current price
information in newspapers and publications;
(I) responding to all inquires or other communications from
shareholders of the Trust and other parties or, if the inquiry is more properly
responded to by the Trust's transfer agent or distributor, referring the
individual making the inquiry to the appropriate person;
(J) reviewing from time to time the portfolios of each series of
the Trust and transactions with brokers and dealers for compliance with
applicable law and Trust policy;
(K) coordinating all relationships between the Trust and its
contractors, including coordinating the negotiation of agreements, the review of
performance of agreements, and the exchange of information, provided that
coordination with the distributor shall be limited to the exchange of
information necessary for the administration of the Trust and the reporting of
that information to the Board of Trustees and Trust officers.
THIRD: Any activities performed by the Administrator under this
Agreement shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the Act and of any rules or
regulations in force thereunder; (2) any other applicable provision of law; (3)
the provisions of the Agreement and Declaration of Trust and By-Laws of the
Trust as amended from time to time; (4) any policies and determinations of the
Board of Trustees of the Trust; and (5) the fundamental policies of each series
of the Trust, as reflected in the then current Registration Statement of the
Trust. As used in this
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Agreement, the term "Registration Statement" shall mean the Registration
Statement most recently filed by the Trust with the Securities and Exchange
Commission and effective under the Securities Act of 1933, as amended, as such
Registration Statement is amended at such time, and the term "Prospectus" and
"Statement of Additional Information" shall mean for the purposes of this
Agreement the form of the then current prospectus and statement of additional
information for each series of the Trust.
FOURTH: Nothing in this Agreement shall prevent the Administrator or
any officer thereof from acting as administrator for any other person, firm or
corporation and shall not in any way limit or restrict the Administrator or any
of its directors, officers, employees or affiliates from buying, selling or
trading any securities for its own or their own accounts or for the accounts of
others for whom it or they may be acting, provided, however, that the
Administrator expressly represents that it will undertake no activities which,
in its judgment, will adversely affect the performance of its obligations to the
Trust under the Agreement.
FIFTH: The Administrator shall, at its own expense, provide office
space and facilities, equipment and personnel for the performance of its
functions hereunder.
SIXTH: The Trust shall pay the Administrator, as full compensation
for all services rendered hereunder, an annual fee on behalf of each series
payable monthly and computed on the net asset value of the series at the end of
each business day at the annual rates set forth in Exhibit A hereto.
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5
SEVENTH: In the event the operating expenses of any series of the
Trust, including all investment advisory, administration and sub-administrator
fees, but excluding brokerage commissions and fees, taxes, interest and
extraordinary expenses such as litigation, for any fiscal year ending on a date
on which this Agreement is in effect exceed the most restrictive expense
limitation applicable to the series imposed by the securities laws or
regulations thereunder of any state in which the shares of the series are
qualified for sale, as such limitations may be raised or lowered from time to
time, the Administrator shall reduce its administration fee to the extent of its
share of such excess expenses. The amount of any such reduction to be borne by
the Administrator shall be deducted from the monthly administration fee
otherwise payable to the Administrator during such fiscal year; and if such
amounts should exceed the monthly fee, the Administrator shall pay to such
series its share of such excess expenses no later than the last day of the first
month of the next succeeding fiscal year. For the purposes of this paragraph,
the term "fiscal year" shall exclude the portion of the current fiscal year
which shall have elapsed prior to the date hereof and shall include the portion
of the then current fiscal year which shall have elapsed at the date of
termination of this Agreement.
EIGHTH:
(A) This Agreement shall go into effect at the close of the business
on the date hereof, and, unless terminated as hereinafter provided, shall
continue in effect for two years
505339\0007\02350\969PEMNL.AGR 09/30/96 2:11PM
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6
thereafter and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the Trust's Board of
Trustees, 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 applicable series and by such vote of the
Trustees.
(B) This Agreement may be terminated by the Administrator at any
time without penalty upon giving the Board of Trustees of the Trust sixty (60)
days' written notice (which notice may be waived by the Trust) and may be
terminated by the Board of Trustees of the Trust at any time without penalty
upon giving the Administrator sixty (60) days' written notice (which notice may
be waived by the Administrator), provided that such termination by the Board of
Trustees of the Trust shall be directed or approved by the vote of a majority of
all of its Trustees in office at the time, including a majority of the Trustees
who are not interested persons (as defined in the Act) of the Trust, or by the
vote of the holders of a majority (as defined in the Act) of the voting
securities of each series of the Trust at the time outstanding and entitled to
vote. This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" for this purpose having the meaning defined in
Section 2(a)(4) of the Act.
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7
NINTH: In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Administrator or any of its officers, directors or employees, the Trust
shall indemnify the Administrator against any and all claims, demands and
liabilities and expenses (including reasonable attorney's fees) which the
Administrator may incur based on any omission in the course of, or connected
with, rendering services hereunder.
TENTH: The Trust hereby reserves the right to use the name "Vista"
as part of its name. In the event this Agreement is terminated, the Trust shall
be entitled to continue to use that name and to grant to other investment
companies, administrators, investment advisers or broker-dealers the right to
use that name in connection with the business of operating or providing services
to management investment companies as defined in the Act.
ELEVENTH: A copy of the Agreement and Declaration of Trust of the
Trust is on file with the Secretary of the Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually, and that the obligations
of this instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Trust.
TWELFTH: Any notice 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
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8
the receipt of such notices. Until further notice to the other party, it is
agreed that the address of the Trust shall be 101 Park Avenue, New York, NY
10178, and the address of the Administrator shall be 1 Chase Square, Rochester,
NY 14643.
IN WITNESS WHEREOF, the parties hereto have caused the Agreement to
be executed by their duly authorized officers as of the day and year first above
written.
ATTEST: MUTUAL FUND SELECT GROUP
____________________ By:___________________________
ATTEST: THE CHASE MANHATTAN BANK
____________________ By:___________________________
