As filed via EDGAR with the Securities and Exchange Commission on December 19,
1996.
File No. 811-7843
Registration No. 333-13317
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Pre-Effective Amendment No. 2 |X|
Post-Effective Amendment No. | |
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 2 |X|
-------------------------------
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 NEW GROWTH OPPORTUNITIES 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>
[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
NEW GROWTH OPPORTUNITIES FUND: Capital Growth
SMALL CAP VALUE FUND: Capital Growth
INTERNATIONAL EQUITY FUND: Total Return
---------------------------------------------
December , 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 December , 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.
<PAGE>
TABLE OF CONTENTS
Expense Summary ........................................................... 4
Fund Objectives and Investment Approach ................................... 6
Common Investment Policies ................................................ 10
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 .................................... 23
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.
<TABLE>
<CAPTION>
Vista Select
Vista Select Vista Select Vista Select New Growth Vista Select Vista Select
Vista Select Equity Income Large Cap Large Cap Opportunities Small Cap International
Balanced Fund Fund Equity Fund Growth Fund Fund Value Fund Equity Fund
------------- ------------- ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Annual Fund Operating Expenses (as a
percentage of average net assets)
Investment Advisory Fee ................. 0.50% 0.40% 0.40% 0.40% 0.65% 0.65% 1.00%
12b-1 Fee ............................... None None None None None None None
Shareholder Servicing Fee ............... None None None None None None None
Other Expenses (after reimbursements)* .. 0.24% 0.19% 0.26% 0.18% 0.21% 0.18% 0.40%
Total Fund Operating Expenses
(after reimbursements )* .............. 0.74% 0.59% 0.66% 0.58% 0.86% 0.83% 1.40%
Example
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return:
1 Year .................................. $ 8 $ 7 $ 7 $ 6 $ 9 $ 8 $14
3 Years ................................. $24 $21 $21 $19 $27 $26 $44
</TABLE>
* 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 New Growth Opportunities 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.
4 & 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 NEW GROWTH
OPPORTUNITIES 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.
The Fund is classified as a "non-diversified" fund under federal securities
law.
VISTA SELECT INTERNATIONAL
EQUITY FUND
The Fund's objective is total return from long-term capital growth and income.
The Fund will invest principally (under normal market conditions, at least 65%
of its total assets) 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,
8
<PAGE>
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
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.
9
<PAGE>
The Fund is classified as a "non-diversified" fund under federal securities
law.
COMMON INVESTMENT
POLICIES
- --------
Each Fund may invest any portion of its assets not invested as described above
in high quality money market 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 New Growth Opportunities 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
10
<PAGE>
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 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
11
<PAGE>
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 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, New Growth
Opportunities 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, and each
other Fund may invest up to 20% of its total assets in stripped obligations
where the underlying obligations are backed by the full faith and credit of the
U.S. Government, including
12
<PAGE>
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 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
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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 losses that may exceed the
original investment of the Fund. 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 Funds-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.
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Inverse floaters are instruments whose interest rates bear an inverse
relationship to the interest rate on another security or the value of an index.
The market value of an inverse floater will vary inversely with changes in
market interest rates, and will be more volatile in response to interest rate
changes than that of a fixed-rate obligation. 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
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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 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 objective, 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.
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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.
The performance of the Balanced Fund, Equity Income Fund, New Growth
Opportunities 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 New Growth Opportunities 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, including formerly
communist countries, entail 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
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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.
Because the New Growth Opportunities 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 Funds' 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, New Growth
Opportunities 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,
New Growth Opportunities 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
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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 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. David Klassen, Director, U.S. Funds Management and Equity
Research, is responsible for asset allocation and investment strategy for the
Domestic Equity Portfolios. Mr. Klassen joined Chase in March 1992. Prior to
joining Chase, Mr. Klassen was a vice president and portfolio manager at Dean
Witter Reynolds, responsible for managing several mutual funds and other
accounts.
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 private accounts since 1981 and pooled
investment funds, with 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. Donald Quigley, Vice President of Chase, also
participates in the management of the Balanced Fund. Mr. Quigley joined Chase in
1993 and has served as a fixed income trader. Prior to joining Chase, Mr.
Quigley was employed at Metropolitan Life Insurance Company for six years and
was responsible for trading the corporate and asset-backed sectors of the fixed
income markets.
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 team composed of Chase investment professionals is responsible for the
management of the Large Cap Growth Fund's portfolio.
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A team composed of Chase investment professionals is responsible for the
day-to-day management for the New Growth Opportunities Fund's portfolio.
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 1978 and, since 1982, has served 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 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"). 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 accompanied by payment in
federal funds. 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.
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ELIGIBLE INVESTORS
Qualified investors are defined as trusts and fiduciary accounts. Financial
Institutions may establish additional eligibility requirements, including
minimum investment requirements, for qualified investors. Financial Institutions
are required to maintain at least $5,000,000 in an omnibus account with one or
more of the Vista Select Funds. Financial Institutions may offer investors that
cease to be qualified investors the ability to continue to hold their shares in
the Vista Select Funds through a separate account, for which a separate account
fee and transaction costs may be charged to the investor. Financial Institutions
that do not offer this feature may redeem an investor's shares if the investor
ceases to be qualified.
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.
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
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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 New Growth Opportunities 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.
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.
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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
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.
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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 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.
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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
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 a 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
25
<PAGE>
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.
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
believe 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 the
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. In the event a Fund adopts a master/feeder structure and invests
all of its investable assets in a Portfolio, shareholders of the Fund will be
given at least 30 days' prior written notice.
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
26
<PAGE>
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.
Because each Fund is the successor to one or more common trust funds, the assets
of which it acquired on a tax-free basis at the time the Fund commenced
operations, a Fund's portfolio may include net unrealized appreciation
comparable to that of a mutual fund which has been in existence for the life of
the predecessor common trust fund or funds. Additional information on unrealized
appreciation is included under "Performance Information" in the SAI.
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.
27
<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
VSE-1-1196
<PAGE>
[Vista Logo]
PROSPECTUS
VISTA SELECT FIXED INCOME FUNDS
---------------------------
SHORT-TERM BOND FUND
INTERMEDIATE BOND FUND
BOND FUND
---------------------------
INVESTMENT STRATEGY: Income
---------------------------
December , 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 December , 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.
<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>
Vista Select Vista Select Vista Select
Short-Term Intermediate Bond Bond
Bond Fund Fund Fund
-------------- ------------------ -------------
<S> <C> <C> <C>
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 0.54%, 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 be greater
than three years but 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
4
<PAGE>
economic conditions and trends. 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 where the underlying obligations are backed
by the full faith and credit of the U.S. government, including instruments known
as "STRIPS". 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
6
<PAGE>
of indebtedness or safekeeping are 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
0floaters 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. The market value of an
inverse floater will vary inversely with changes in market interest rates, and
will be more volatile in response to interest rate changes than that of a
fixed-rate obligation. 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
7
<PAGE>
insurance or guarantees, while other such securities may be backed only by
the underlying mortgage collateral.
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
8
<PAGE>
contracts; (iii) employ forward interest rate contracts; (iv) purchase and sell
mortgage-backed and asset-backed securities; and (v) 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 losses that may exceed the original investments of the
Fund . 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
Funds-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
9
<PAGE>
be readily marketable in accordance with procedures established by the Board of
Trustees); or (c) investing 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 a Fund's 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.
10
<PAGE>
MANAGEMENT
- ----------
The Funds' 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 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 Funds 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 0.10%, 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 primarily responsible for the day-to-day management of
the Short-Term Bond Fund. 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. Andrew Russell, Second Vice President of Chase, participates
in the management of the Short-Term Bond Fund. Since joining Chase in 1990, Mr.
Russell has held several positions within the U.S. Fixed Income area, including
taxable fixed-income trader, assistant trader and portfolio analyst. Mr. Russell
is a member of the U.S. Fixed Income area's quantitative research team where he
specializes in the analysis of asset-backed securities.
Patrick Quilty is responsible for the day-to-day management of the Intermediate
Bond Fund and the Bond Fund. Mr. Quilty joined Chase in December 1996. Prior to
joining Chase, from 1994 through 1996, Mr. Quilty was a Vice President and
Portfolio Manager at ARM Capital Advisors, Inc. where he managed mutual fund and
institutional portfolios. From 1991 to 1994, Mr. Quilty was a Portfolio
Strategist at Lehman Brothers, Inc. where he analyzed taxable fixed income
portfolios. Ms. Huang participates in the management of the Intermediate Bond
Fund and the Bond Fund.
11
<PAGE>
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"). 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 accompanied by payment in
federal funds. 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.
ELIGIBLE INVESTORS
Qualified investors are defined as trusts and fiduciary accounts. Financial
Institutions may establish additional eligibility requirements, including
minimum investment requirements, for qualified investors. Financial Institutions
are required to maintain at least $5,000,000 in an omnibus account with one or
more of the Vista Select Funds. Financial Institutions may offer investors that
cease to be qualified investors the ability to continue to hold their shares in
the Vista Select Funds through a separate account, for which a separate account
fee and transaction costs may be charged to the investor. Financial Institutions
that do not offer this feature may redeem an investor's shares if the investor
ceases to be qualified.
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
12
<PAGE>
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 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
13
<PAGE>
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 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
14
<PAGE>
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 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
15
<PAGE>
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
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
16
<PAGE>
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.
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
believe 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. In the event a Fund adopts a master/feeder structure and invests
all of its investable assets in a Portfolio, shareholders of that Fund will be
given at least 30 days' prior written notice.
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
17
<PAGE>
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.
Because each Fund is the successor to one or more common trust funds, the assets
of which it acquired on a tax-free basis at the time the Fund commenced
operations, a Fund's portfolio may include net unrealized appreciation
comparable to that of a mutual fund which has been in existence for the life of
the predecessor common trust fund or funds. Additional information on unrealized
appreciation is included under "Performance Information" in the SAI.
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>
[This Page Intentionally Left Blank]
<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
SFI-1-1196
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
December 17, 1996
VISTA(SM) SELECT BALANCED FUND
VISTA(SM) SELECT BOND FUND
VISTA(SM) SELECT NEW GROWTH OPPORTUNITIES 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 New Growth Opportunities 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
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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
Certain Regulatory Matters------------------------------------------------ 37
General Information------------------------------------------------------- 38
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
</TABLE>
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-
4
<PAGE>
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 New Growth Opportunities 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 New Growth Opportunities 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 invest-
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ment of any one issue if that would result in the value of the Fund's holding of
that issue exceeding 30% 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 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 Value 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, New Growth Opportunities 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
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adviser and sub-advisers are not required to obtain the lowest commission or the
best net price for any Fund 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
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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. 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 New Growth Opportunities Fund was established to receive the
assets of the Emerging Growth Fund
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of The Chase Manhattan Bank, the Equity Income Fund was established to receive
the assets of The Equity Income Fund 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, New Growth
Opportunities 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 assuming the reinvestment of all distributions
(but excluding the effects of any applicable sales charges) for, where
applicable, the one, five and ten year periods ended October 31, 1996, and, for
the New Growth Opportunities Fund and the International Equity Fund, for the
period from commencement of business operations of each such Fund to October 31,
1996, were as follows:
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<PAGE>
One Five Ten Since Date of
Fund Year Years Years Inception Inception
- ---- ---- ----- ----- --------- ----------
Balanced Fund 11.76 9.63 9.64 N/A
Bond Fund 5.51 7.62 8.12 N/A
New Growth Opportunities Fund 11.52 13.06 -- 12.78 4/1/89
Equity Income Fund 22.67 14.76 13.48 N/A
Intermediate Bond Fund 4.59 6.89 7.70 N/A
International Equity Fund 11.32 -- -- 5.05 5/1/93
Large Cap Equity Fund 21.54 12.38 12.67 N/A
Large Cap Growth Fund 15.09 13.25 12.13 N/A
Short-Term Bond Fund 5.99 5.78 6.84 N/A
Small Cap Value Fund 13.97 18.43 13.22 N/A
- ----------
Performance presented in the table above and in each table that follows is based
upon the performance of their respective predecessor funds (which had fiscal
years ending on October 31) 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 Funds will not quote yields for periods prior to the consummation of
the CTF Reorganization.
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 ten-year period of business of the
predecessor common trust fund ending October 31, 1996, or, in the case of the
New Growth Opportunities Fund and the International Equity Fund, from the
commencement of operations of their predecessor common trust funds on April 1,
1989 and May 1, 1993, respectively. 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.
22
<PAGE>
<TABLE>
<CAPTION>
Value of Value of
Initial Capital Value of
Period Ended $10,000 Gains Reinvested
October 31, 1996 Investment Distributions Dividends Total Value
---------------- --------- ------------- --------- -----------
<S> <C> <C> <C> <C>
Balanced Fund $25,104 N/A N/A $25,104
Bond Fund 21,836 N/A N/A 21,836
New Growth Opportunities Fund 24,678 N/A N/A 24,678
Equity Income Fund 35,427 N/A N/A 35,427
Intermediate Bond Fund 20,997 N/A N/A 20,997
International Equity Fund 11,836 N/A N/A 11,836
Large Cap Equity Fund 32,970 N/A N/A 32,970
Large Cap Growth Fund 31,421 N/A N/A 31,421
Short-Term Bond Fund 20,219 N/A N/A 20,219
Small Cap Value Fund 34,618 N/A N/A 34,618
</TABLE>
Certain Information Regarding Unrealized Appreciation
Because each Fund is the successor to one or more common trust funds, the
assets of which it acquired on a tax-free basis at the time the fund commenced
operations, a Fund's portfolio may include net unrealized appreciation
comparable to that of a mutual fund which has been in existence for the life of
the predecessor common trust fund or funds. Assuming the assets had been
acquired at October 31, 1996 each Fund's pro forma net unrealized appreciation,
and the percentage of each Fund's pro forma net assets that this appreciation
represents, in each case unaudited, would be as follows:
Percentage
Unrealized of Net
Gain Assets
---- ------
Balanced Fund $ 38,533,281 20.36%
Bond Fund 7,023,102 1.31
New Growth Opportunities Fund 22,823,305 18.00
Equity Income Fund 184,030,180 22.96
Intermediate Bond Fund 1,658,362 0.69
International Equity Fund 6,422,912 2.87
Large Cap Equity Fund 4,955,474 2.48
Large Cap Growth Fund 166,198,646 38.52
Short-Term Bond Fund 289,371 1.01
Small Cap Value Fund 145,622,733 37.09
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
23
<PAGE>
obligations, but including listed issues) in a Fund's portfolio are valued on
the basis of valuations furnished 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
24
<PAGE>
and can therefore satisfy the Distribution Requirement. Under the current view
of the Internal Revenue Service, 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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(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
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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.
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<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: 64. 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: 62. 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: 67. 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: 65. 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.
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<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: 65. 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: 69. 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: 64. 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: 69.
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: 33. 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: 36. 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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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.
Highest Annual Compensation Paid by All Vista Funds
-----------------------------------------------------
$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
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 October 31, 1996
they had contributed $17,400, $45,000 and $67,500, 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 December 1, 1996, the Trustees and officers as a group owned no
outstanding shares of any Fund.
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<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
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<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.
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 or, 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 the Prospectuses and this Statement of Additional Information
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 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
37
<PAGE>
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.
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.
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
38
<PAGE>
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 has been designed to address potential conflicts of
interest that can arise in connection with the personal trading activities of
such persons. Persons subject to the code are generally permitted to engage in
personal securities transactions, subject to certain prohibitions, pre-clearance
requirements and blackout periods.
Principal Holders
As of December 1, 1996, no person owned of record 5% or more of the
outstanding shares of any Fund.
39
<PAGE>
Mutual Fund Select Group
Statement of Assets and Liabilities
December 18, 1996
<TABLE>
<CAPTION>
Vista Select Vista Select Equity Vista Select Large Cap Vista Select Large Cap
Balanced Fund Income Fund Equity Fund Growth Fund
<S> <C> <C> <C> <C>
Assets:
Cash $10,000 $10,000 $10,000 $10,000
Deferred organization costs (Note 3) 21,346 57,541 19,668 32,730
------- ------- ------- -------
Total Assets 31,346 67,541 29,668 42,730
------- ------- ------- -------
Liabilities:
Organization Costs Payable 21,346 57,541 19,668 32,730
------- ------- ------- -------
Commitments (Note 2)
Total Liabilities 21,346 57,541 19,668 32,730
------- ------- ------- -------
Net Assets:
(constituting paid-in capital) $10,000 $10,000 $10,000 $10,000
------- ------- ------- -------
Shares outstanding (.001 par value; 10 10 10 10
unlimited number of shares authorized)
Net Asset Value Per Share $ 1,000 $ 1,000 $ 1,000 $ 1,000
</TABLE>
See accompanying notes to statement of assets and liabilities.
40
<PAGE>
Mutual Fund Select Group
Statement of Assets and Liabilities
December 18, 1996
<TABLE>
<CAPTION>
Vista Select New Growth Vista Select Small Cap Vista Select International
Opportunities Fund Value Fund Equity Fund
<S> <C> <C> <C>
Assets:
Cash $10,000 $10,000 $10,000
Deferred organization costs (Note 3) 14,414 30,322 18,573
------- ------- -------
Total Assets 24,414 40,322 28,573
------- ------- -------
Liabilities:
Organization Costs Payable 14,414 30,322 18,573
------- ------- -------
Commitments (Note 2)
Total Liabilities 14,414 30,322 18,573
------- ------- -------
Net Assets:
(constituting paid-in capital) $10,000 $10,000 $10,000
------- ------- -------
Shares outstanding (no par value; unlimited 10 10 10
number of shares authorized)
Net Asset Value Per Share $ 1,000 $ 1,000 $ 1,000
</TABLE>
See accompanying notes to statement of assets and liabilities.
41
<PAGE>
Mutual Fund Select Group
Statement of Assets and Liabilities
December 18, 1996
<TABLE>
<CAPTION>
Vista Select Short-Term Vista Select Intermediate Vista Select
Bond Fund Bond Fund Bond Fund
<S> <C> <C> <C>
Assets:
Cash $10,000 $10,000 $10,000
Deferred organization costs (Note 3) 7,189 17,186 44,551
------- ------- -------
Total Assets 17,189 27,186 54,551
------- ------- -------
Liabilities:
Organization Costs Payable 7,189 17,186 44,551
------- ------- -------
Commitments (Note 2)
Total Liabilities 7,189 17,186 44,551
------- ------- -------
Net Assets:
(constituting paid-in capital) $10,000 $10,000 $10,000
------- ------- -------
Shares outstanding (.001 par value;
unlimited number of shares authorized) 10 10 10
Net Asset Value Per Share $ 1,000 $ 1,000 $ 1,000
See accompanying notes to statement of assets and liabilities.
</TABLE>
42
<PAGE>
Note 1. Organization
Mutual Fund Select Group (the "Trust") is an open-end management investment
company organized as a business trust under the laws of the Commonwealth of
Massachusetts on October 1, 1996. The Trust comprises 10 separate investment
portfolios: Vista Select Balanced Fund ("BAL"), Vista Select Equity Income Fund
("EI"), Vista Select Large Cap Equity Fund ("LCE"), Vista Select Large Cap
Growth Fund ("LCG"), Vista Select New Growth Opportunities Fund ("NGO"), Vista
Select Small Cap Value Fund ("SCV"), Vista Select International Equity Fund
("IE"), Vista Select Short Term Bond Fund ("STB"), Vista Select Intermediate
Bond Fund ("IB") and Vista Select Bond Fund ("Bond") (each a "Fund," or together
"Funds"). The Funds have been established to accept the assets being converted
from common trust funds (the "Predecessor Funds") to registered investment
companies which is expected to occur in January 1997. The Trust is registered
with the Securities and Exchange Commission, under the Investment Company Act of
1940, as amended. The Funds had no operations other than the issuance to Vista
Fund Distributors, Inc. ("VFD"), the Distributor, at $1,000 per share, of the
shares of the Funds as shown on the statement of assets and liabilities.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
Note 2. Agreements
The Trust will enter into an Investment Advisory Agreements with The Chase
Manhattan Bank ("Chase") pursuant to which Chase will be responsible for
providing investment management services to the Funds. For its services under
the Investment Advisory Agreement, Chase will receive an annual fee, calculated
daily and payable monthly at the rate of .50%, .40%, .40%, .40%, .65%, .65%,
1.00%, .25%, .30% and .30% of the average daily net assets of BAL, EI, LCE, LCG,
NGO, SCV, IE, STB, IB and Bond, respectively. Chase will enter into a
Sub-Investment Advisory Agreement with Chase Asset Management, Inc. ("CAM"),
pursuant to which CAM will provide investment advisory services and assist in
making investment decisions for the Funds on a day to day basis. CAM is entitled
to receive a fee, payable by Chase from its advisory fee, at an annual rate
equal to .25%, .20%, .20%, .20%, .30%, .30%, .10%, .15% and .15% of the average
daily net assets of BAL, EI, LCE, LCG, NGO, SCV, STB, IB and Bond, respectively.
Chase will enter into a Sub-Investment Advisory Agreement with Chase Asset
Management (London Limited) ("CAM London"), pursuant to which CAM London will
provide investment advisory services and assist in making investment decisions
for IE on a day to day basis. CAM London is entitled to receive a fee, payable
by Chase from its advisory fee, at an annual rate equal to .50% of the average
daily net assets of IE.
The Trust will enter into an Administrative Agreement with Chase pursuant to
which Chase will provide certain administrative services including, among other
responsibilities, coordinating the Funds' relationships with service providers,
filing various documents required to maintain compliance with certain laws and
regulations, arranging for the maintenance of the Funds' books and records,
preparing the Funds' financial statements and providing office facilities
necessary to carry out the foregoing. For its administrative services, Chase
will receive an annual fee of .10% of the average daily net assets of each Fund.
The Trust will enter into a custody agreement with Chase under which Chase will
provide custody and fund accounting services.
Chase intends to enter into a distribution and sub-administration agreement with
VFD pursuant to which VFD will provide officers, clerical staff and office space
for a fee equal to .05% of each Fund's average daily net assets.
43
<PAGE>
Note 3.
Costs incurred in connection with the organization and initial registration of
the Trust, amounting to $263,520, which were initially incurred by VFD and will
be reimbursed by the Funds at a later date, have been deferred and will be
amortized on a straight-line basis over sixty months beginning with each Fund's
commencement of operations. Such costs have been allocated in proportion to the
relative net assets of the Predecessor Funds expected to be converted into the
Funds. If any of the initial shares of any class of the Funds are redeemed by a
holder thereof during such amortization period, the proceeds will be reduced by
the unamortized organization expenses in the same ratio as the number of initial
shares being redeemed bears to the number of initial shares outstanding at the
time of redemption.
44
<PAGE>
December 18, 1996
Report of Independent Accountants
To the Trustees and
Shareholder of Mutual Fund
Select Group
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of Vista Select
Balanced Fund, Vista Select Equity Income Fund, Vista Select Large Cap Equity
Fund, Vista Select Large Cap Growth Fund, Vista Select New Growth Opportunities
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 (separately managed portfolios of Mutual Fund Select Group,
hereafter referred to as the "Trust") at December 18, 1996, in conformity with
generally accepted accounting principles. This financial statement is the
responsibility of the Trust's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material misstatment.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statement, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
<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 Form of Proposed Custodian Agreement. (1)
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. (4)
11 Consent of Price Waterhouse LLP (4)
12 None.
13 Form of Share Purchase Agreement. (3)
14 None.
15 None.
16 Schedule for Computation for Each Performance Quotation. (4)
18 Not Applicable
24 Powers of Attorney (4)
27 Financial Data Schedules (4)
- --------------------
(1) Filed as an exhibit to the Registration Statement on Form N-1A of the
Registrant (File No. 333-13317) as filed with the Securities and Exchange
Commission on October 2, 1996.
(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) Filed as an exhibit to Pre-effective Amendment No. 1 as filed with the
Securities and Exchange Commission on November 15, 1996.
(4) Filed herewith
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 December 1, 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 New Growth Opportunities 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 Pre-Effective Amendment
to its 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 18th day of December, 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 December 18, 1996
- ------------------------------
Fergus Reid, III
/s/ H. Richard Vartabedian President December 18, 1996
- ------------------------------ and Trustee
H. Richard Vartabedian
/s/ Martin R. Dean Treasurer and December 18, 1996
- ------------------------------ Principal Financial
Martin R. Dean Officer
/s/ Richard E. Ten Haken Trustee December 18, 1996
- ------------------------------
Richard E. Ten Haken
/s/ William J. Armstrong Trustee December 18, 1996
- ------------------------------
William J. Armstrong
/s/ John R.H. Blum Trustee December 18, 1996
- ------------------------------
John R.H. Blum
/s/ Joseph J. Harkins Trustee December 18, 1996
- ------------------------------
Joseph J. Harkins
/s/ Stuart W. Cragin, Jr. Trustee December 18, 1996
- ------------------------------
Stuart W. Cragin, Jr.
/s/ Irving L. Thode Trustee December 18, 1996
- ------------------------------
Irving L. Thode
/s/ W. Perry Neff Trustee December 18, 1996
- ------------------------------
W. Perry Neff
/s/ Roland R. Eppley, Jr. Trustee December 18, 1996
- ------------------------------
Roland R. Eppley, Jr.
/s/ W.D. MacCallan Trustee December 18, 1996
- ------------------------------
W.D. MacCallan
C-8
<PAGE>
Exhibit
Number
- -------
10 Opinion Regarding Legality of Securities Being Registered
11 Consent of Price Waterhouse LLP
16 Schedule for Computation for Each Performance Quotation
24 Powers of Attorney
27 Financial Data Schedules
PEABODY & BROWN
101 Federal Street
Boston, Massachusetts 02110-1832
(617) 345-1000
December 17, 1996
Securities and Exchange Commission
450 Fifth St., N.W.
Washington, DC 20549
Re: Mutual Fund Select Group
Vista Select Balanced Fund
Vista Select Bond 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 Fund
Vista Select New Growth Opportunities Fund
Vista Select Short-Term Bond Fund
Vista Select Small Cap Value Fund
Ladies and Gentleman:
We have acted as special Massachusetts counsel to Mutual Fund Select
Group, a Massachusetts business trust (the "Trust") currently consisting of the
above-referenced ten series (the "Funds") on various general matters. This
opinion is written in reference to the shares of beneficial interest, $0.001 par
value (the "Shares") of the Funds, to be offered and sold pursuant to a
Registration Statement on Form N-1A (registration no. 333-13317 and 811-7843)
filed by the Trust pursuant to the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended (the "Registration Statement").
We have reviewed, insofar as it relates or pertains to each of the
Funds, the Registration Statement. We have also examined originals or copies,
certified or otherwise identified to our satisfaction, of such documents,
records and other instruments we have deemed necessary or appropriate for the
purposes of this opinion. For purposes of such examination, we have assumed the
genuineness of all signatures and original documents and the conformity to
original documents of all copies submitted.
Based upon the foregoing, we are of the opinion that the Shares have
been duly and validly authorized and, when issued and sold in accordance with
the Trust's Declaration of Trust and Registration Statement, will be legally
issued, fully paid and non-assessable.
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement.
Very truly yours,
/s/ Peabody & Brown
PEABODY & BROWN
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 2 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
December 18, 1996, relating to the statement of assets and liabilities of Vista
Select Balanced Fund, Vista Select Equity Income Fund, Vista Select Large Cap
Equity Fund, Vista Select Large Cap Growth Fund, Vista Select New Growth
Opportunities 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 (constituting Mutual Fund
Select Group) which appears in such Statement of Additional Information, and to
the incorporation by reference of our report into the Prospectus which
constitutes part of this Registration Statement. We also consent to the
reference to us under the heading "Independent Accountants" in the Statement of
Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 18, 1996
VISTA SELECT BALANCED FUND
BEGINNING ENDING
TOTAL REDEMPTION REDEMPTION
RETURN VALUE/NAV VALUE/NAV
1 YEAR 11.76 27.93 29.91
5 YEAR 9.63 23.65 29.91
10 YEAR 9.64 20.11 29.91
SINCE
INCEPTION N/A N/A N/A
The net change in the value of an assumed initial investment of $10,000 for the
ten year period of business of the predecessor common trust fund ending October
31, 1996 would be $25,104.
Page 5
<PAGE>
VISTA SELECT EQUITY INCOME FUND
BEGINNING ENDING
TOTAL REDEMPTION REDEMPTION
RETURN VALUE/NAV VALUE/NAV
1 YEAR 22.67 67.41 80.79
5 YEAR 14.76 45.44 80.79
10 YEAR 13.48 29.64 80.79
SINCE
INCEPTION N/A N/A N/A
The net change in the value of an assumed initial investment of $10,000 for the
ten year period of business of the predecessor common trust fund ending October
31, 1996 would be $35,427.
Page 6
<PAGE>
VISTA SELECT LARGE CAP EQUITY FUND
BEGINNING ENDING
TOTAL REDEMPTION REDEMPTION
RETURN VALUE/NAV VALUE/NAV
1 YEAR 21.54 33.71 40.28
5 YEAR 12.38 24.68 40.28
10 YEAR 12.67 15.37 40.28
SINCE
INCEPTION N/A N/A N/A
The net change in the value of an assumed initial investment of $10,000 for the
ten year period of business of the predecessor common trust fund ending October
31, 1996 would be $32,970.
Page 7
<PAGE>
VISTA SELECT LARGE CAP GROWTH FUND
BEGINNING ENDING
TOTAL REDEMPTION REDEMPTION
RETURN VALUE/NAV VALUE/NAV
1 YEAR 15.09 65.32 74.36
5 YEAR 13.25 42.80 74.36
10 YEAR 12.13 29.49 74.36
SINCE
INCEPTION N/A N/A N/A
The net change in the value of an assumed initial investment of $10,000 for the
ten year period of business of the predecessor common trust fund ending October
31, 1996 would be $31,421.
Page 8
<PAGE>
VISTA SELECT NEW GROWTH OPPORTUNITIES FUND
BEGINNING ENDING
TOTAL REDEMPTION REDEMPTION
RETURN VALUE/NAV VALUE/NAV
1 YEAR 11.52 513.61 570.37
5 YEAR 13.06 319.45 570.37
10 YEAR N/A N/A N/A
SINCE
INCEPTION 12.78 252.45 570.37
The net change in the value of an assumed initial investment of $10,000 for the
period April 1, 1989 (commencement of operations) through October 31, 1996 of
the predecessor common trust fund would be $24,678.
Page 9
<PAGE>
VISTA SELECT SMALL CAP VALUE FUND
BEGINNING ENDING
TOTAL REDEMPTION REDEMPTION
RETURN VALUE/NAV VALUE/NAV
1 YEAR 13.97 44.13 50.00
5 YEAR 18.43 22.01 50.00
10 YEAR 13.22 16.80 50.00
SINCE
INCEPTION N/A N/A N/A
The net change in the value of an assumed initial investment of $10,000 for the
ten year period of business of the predecessor common trust fund ending October
31, 1996 would be $34,618.
Page 10
<PAGE>
VISTA SELECT INTERNATIONAL EQUITY FUND
BEGINNING ENDING
TOTAL REDEMPTION REDEMPTION
RETURN VALUE/NAV VALUE/NAV
1 YEAR 11.32 10.64 11.78
5 YEAR N/A N/A N/A
10 YEAR N/A N/A N/A
SINCE
INCEPTION 5.05 10.18 11.78
The net change in the value of an assumed initial investment of $10,000 for the
period May 1, 1993 (commencement of operations) through October 31, 1996 of the
predecessor common trust fund would be $11,836.
Page 11
<PAGE>
VISTA SELECT SHORT-TERM BOND FUND
BEGINNING ENDING
TOTAL REDEMPTION REDEMPTION
RETURN VALUE/NAV VALUE/NAV
1 YEAR 5.99 10.84 10.85
5 YEAR 5.78 11.18 10.85
10 YEAR 6.84 11.05 10.85
SINCE
INCEPTION N/A N/A N/A
The net change in the value of an assumed initial investment of $10,000 for the
ten year period of business of the predecessor common trust fund ending August
31, 1996 would be $20,219.
Page 12
<PAGE>
VISTA SELECT INTERMEDIATE BOND FUND
BEGINNING ENDING
TOTAL REDEMPTION REDEMPTION
RETURN VALUE/NAV VALUE/NAV
1 YEAR 4.59 10.38 10.17
5 YEAR 6.89 10.03 10.17
10 YEAR 7.70 9.62 10.17
SINCE
INCEPTION N/A N/A N/A
The net change in the value of an assumed initial investment of $10,000 for the
ten year period of business of the predecessor common trust fund ending August
31, 1996 would be $20,997.
Page 13
<PAGE>
VISTA SELECT BOND FUND
BEGINNING ENDING
TOTAL REDEMPTION REDEMPTION
RETURN VALUE/NAV VALUE/NAV
1 YEAR 5.51 40.74 40.53
5 YEAR 7.62 38.92 40.53
10 YEAR 8.12 38.99 40.53
SINCE
INCEPTION N/A N/A N/A
The net change in the value of an assumed initial investment of $10,000 for the
ten year period of business of the predecessor common trust fund ending August
31, 1996 would be $21,836.
Page 14
MUTUAL FUND SELECT GROUP
MUTUAL FUND SELECT TRUST
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints H. Richard Vartabedian,
Lee Schultheis, Ann Bergin, Martin Dean and George Martinez and each of them,
with full powers of substitution as his true and lawful attorneys and agents to
execute in his name and on his behalf in any and all capacities the Registration
Statement on Form N-1A, and any and all amendments thereto, filed by Mutual Fund
Select Group or Mutual Fund Select Trust (the "Trusts") with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended, and
the Securities Act of 1933, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 17th
day of December, 1996.
/s/ Fergus Reid, III
--------------------------
Fergus Reid, III
<PAGE>
MUTUAL FUND SELECT GROUP
MUTUAL FUND SELECT TRUST
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, Lee
Schultheis, Ann Bergin, Martin Dean and George Martinez and each of them, with
full powers of substitution as his true and lawful attorneys and agents to
execute in his name and on his behalf in any and all capacities the Registration
Statement on Form N-1A, and any and all amendments thereto, filed by Mutual Fund
Select Group or Mutual Fund Select Trust (the "Trusts") with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended, and
the Securities Act of 1933, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 17th
day of December, 1996.
/s/ H. Richard Vartabedian
--------------------------
H. Richard Vartabedian
<PAGE>
MUTUAL FUND SELECT GROUP
MUTUAL FUND SELECT TRUST
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Ann Bergin, Martin Dean and George Martinez
and each of them, with full powers of substitution as his true and lawful
attorneys and agents to execute in his name and on his behalf in any and all
capacities the Registration Statement on Form N-1A, and any and all amendments
thereto, filed by Mutual Fund Select Group or Mutual Fund Select Trust (the
"Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended, and
any and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable the Trusts to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorneys and agents, or any of them, shall do or cause to be done by
virtue hereof. Any one of such attorneys and agents have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 17th
day of December, 1996.
/s/ William J. Armstrong
--------------------------
William J. Armstrong
<PAGE>
MUTUAL FUND SELECT GROUP
MUTUAL FUND SELECT TRUST
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Ann Bergin, Martin Dean and George Martinez
and each of them, with full powers of substitution as his true and lawful
attorneys and agents to execute in his name and on his behalf in any and all
capacities the Registration Statement on Form N-1A, and any and all amendments
thereto, filed by Mutual Fund Select Group or Mutual Fund Select Trust (the
"Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended, and
any and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable the Trusts to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorneys and agents, or any of them, shall do or cause to be done by
virtue hereof. Any one of such attorneys and agents have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 17th
day of December, 1996.
/s/ John R.H. Blum
--------------------------
John R.H. Blum
<PAGE>
MUTUAL FUND SELECT GROUP
MUTUAL FUND SELECT TRUST
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Ann Bergin, Martin Dean and George Martinez
and each of them, with full powers of substitution as his true and lawful
attorneys and agents to execute in his name and on his behalf in any and all
capacities the Registration Statement on Form N-1A, and any and all amendments
thereto, filed by Mutual Fund Select Group or Mutual Fund Select Trust (the
"Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended, and
any and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable the Trusts to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorneys and agents, or any of them, shall do or cause to be done by
virtue hereof. Any one of such attorneys and agents have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 17th
day of December, 1996.
/s/ Stuart W. Cragin, Jr.
--------------------------
Stuart W. Cragin, Jr.
<PAGE>
MUTUAL FUND SELECT GROUP
MUTUAL FUND SELECT TRUST
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Ann Bergin, Martin Dean and George Martinez
and each of them, with full powers of substitution as his true and lawful
attorneys and agents to execute in his name and on his behalf in any and all
capacities the Registration Statement on Form N-1A, and any and all amendments
thereto, filed by Mutual Fund Select Group or Mutual Fund Select Trust (the
"Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended, and
any and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable the Trusts to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorneys and agents, or any of them, shall do or cause to be done by
virtue hereof. Any one of such attorneys and agents have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 17th
day of December, 1996.
/s/ Joseph J. Harkins
--------------------------
Joseph J. Harkins
<PAGE>
MUTUAL FUND SELECT GROUP
MUTUAL FUND SELECT TRUST
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Ann Bergin, Martin Dean and George Martinez
and each of them, with full powers of substitution as his true and lawful
attorneys and agents to execute in his name and on his behalf in any and all
capacities the Registration Statement on Form N-1A, and any and all amendments
thereto, filed by Mutual Fund Select Group or Mutual Fund Select Trust (the
"Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended, and
any and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable the Trusts to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorneys and agents, or any of them, shall do or cause to be done by
virtue hereof. Any one of such attorneys and agents have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 17th
day of December, 1996.
/s/ Richard E. Ten Haken
--------------------------
Richard E. Ten Haken
<PAGE>
MUTUAL FUND SELECT GROUP
MUTUAL FUND SELECT TRUST
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Ann Bergin, Martin Dean and George Martinez
and each of them, with full powers of substitution as his true and lawful
attorneys and agents to execute in his name and on his behalf in any and all
capacities the Registration Statement on Form N-1A, and any and all amendments
thereto, filed by Mutual Fund Select Group or Mutual Fund Select Trust (the
"Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended, and
any and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable the Trusts to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorneys and agents, or any of them, shall do or cause to be done by
virtue hereof. Any one of such attorneys and agents have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 17th
day of December, 1996.
/s/ Irving L. Thode
--------------------------
Irving L. Thode
<PAGE>
MUTUAL FUND SELECT GROUP
MUTUAL FUND SELECT TRUST
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Ann Bergin, Martin Dean and George Martinez
and each of them, with full powers of substitution as his true and lawful
attorneys and agents to execute in his name and on his behalf in any and all
capacities the Registration Statement on Form N-1A, and any and all amendments
thereto, filed by Mutual Fund Select Group or Mutual Fund Select Trust (the
"Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended, and
any and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable the Trusts to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorneys and agents, or any of them, shall do or cause to be done by
virtue hereof. Any one of such attorneys and agents have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 17th
day of December, 1996.
/s/ W. Perry Neff
--------------------------
W. Perry Neff
<PAGE>
MUTUAL FUND SELECT GROUP
MUTUAL FUND SELECT TRUST
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Ann Bergin, Martin Dean and George Martinez
and each of them, with full powers of substitution as his true and lawful
attorneys and agents to execute in his name and on his behalf in any and all
capacities the Registration Statement on Form N-1A, and any and all amendments
thereto, filed by Mutual Fund Select Group or Mutual Fund Select Trust (the
"Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended, and
any and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable the Trusts to comply with such Acts, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorneys and agents, or any of them, shall do or cause to be done by
virtue hereof. Any one of such attorneys and agents have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 17th
day of December, 1996.
/s/ Roland R. Eppley, Jr.
--------------------------
Roland R. Eppley, Jr.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001023771
<NAME> VISTA SELECT BALANCED FUND
<SERIES>
<NUMBER> 040
<NAME> VISTA SELECT BALANCED FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> DEC-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 20,346
<OTHER-ITEMS-ASSETS> 10,000
<TOTAL-ASSETS> 30,346
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20,346
<TOTAL-LIABILITIES> 20,346
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,000
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 10,000
<PER-SHARE-NAV-BEGIN> 1,000
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1,000
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001023771
<NAME> VISTA SELECT EQUITY INCOME FUND
<SERIES>
<NUMBER> 050
<NAME> VISTA SELECT EQUITY INCOME FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> DEC-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 66,541
<OTHER-ITEMS-ASSETS> 10,000
<TOTAL-ASSETS> 76,541
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 66,541
<TOTAL-LIABILITIES> 66,541
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,000
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 10,000
<PER-SHARE-NAV-BEGIN> 1,000
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1,000
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001023771
<NAME> VISTA SELECT LARGE CAP EQUITY FUND
<SERIES>
<NUMBER> 060
<NAME> VISTA SELECT LARGE CAP EQUITY FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> DEC-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 18,668
<OTHER-ITEMS-ASSETS> 10,000
<TOTAL-ASSETS> 28,668
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,668
<TOTAL-LIABILITIES> 18,668
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,000
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 10,000
<PER-SHARE-NAV-BEGIN> 1,000
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1,000
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001023771
<NAME> VISTA SELECT LARGE CAP GROWTH FUND
<SERIES>
<NUMBER> 070
<NAME> VISTA SELECT LARGE CAP GROWTH FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> DEC-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 31,730
<OTHER-ITEMS-ASSETS> 10,000
<TOTAL-ASSETS> 41,730
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,730
<TOTAL-LIABILITIES> 31,730
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,000
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 10,000
<PER-SHARE-NAV-BEGIN> 1,000
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1,000
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001023771
<NAME> VISTA SELECT NEW OPPORTUNITIES GROWTH FUND
<SERIES>
<NUMBER> 080
<NAME> VISTA SELECT NEW OPPORTUNITIES GROWTH FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> DEC-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 13,414
<OTHER-ITEMS-ASSETS> 10,000
<TOTAL-ASSETS> 23,414
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,414
<TOTAL-LIABILITIES> 13,414
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,000
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 10,000
<PER-SHARE-NAV-BEGIN> 1,000
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1,000
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001023771
<NAME> VISTA SELECT SMALL CAP VALUE FUND
<SERIES>
<NUMBER> 090
<NAME> VISTA SELECT SMALL CAP VALUE FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> DEC-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 29,322
<OTHER-ITEMS-ASSETS> 10,000
<TOTAL-ASSETS> 39,322
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29,322
<TOTAL-LIABILITIES> 29,322
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,000
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 10,000
<PER-SHARE-NAV-BEGIN> 1,000
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1,000
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001023771
<NAME> VISTA SELECT INTERNATIONAL EQUITY FUND
<SERIES>
<NUMBER> 100
<NAME> VISTA SELECT INTERNATIONAL EQUITY FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> DEC-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 17,573
<OTHER-ITEMS-ASSETS> 10,000
<TOTAL-ASSETS> 27,573
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,573
<TOTAL-LIABILITIES> 17,573
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,000
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 10,000
<PER-SHARE-NAV-BEGIN> 1,000
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1,000
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001023771
<NAME> VISTA SELECT SHORT-TERM BOND FUND
<SERIES>
<NUMBER> 010
<NAME> VISTA SELECT SHORT-TERM BOND FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> DEC-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 6,189
<OTHER-ITEMS-ASSETS> 10,000
<TOTAL-ASSETS> 16,189
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,189
<TOTAL-LIABILITIES> 6,189
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,000
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 10,000
<PER-SHARE-NAV-BEGIN> 1,000
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1,000
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001023771
<NAME> VISTA SELECT INTERMEDIATE BOND FUND
<SERIES>
<NUMBER> 020
<NAME> VISTA SELECT INTERMEDIATE BOND FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> DEC-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 16,186
<OTHER-ITEMS-ASSETS> 10,000
<TOTAL-ASSETS> 26,186
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 16,186
<TOTAL-LIABILITIES> 16,186
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,000
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 10,000
<PER-SHARE-NAV-BEGIN> 1,000
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1,000
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001023771
<NAME> VISTA SELECT BOND FUND
<SERIES>
<NUMBER> 030
<NAME> VISTA SELECT BOND FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> DEC-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 43,551
<OTHER-ITEMS-ASSETS> 10,000
<TOTAL-ASSETS> 53,551
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 43,551
<TOTAL-LIABILITIES> 43,551
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,000
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 10,000
<PER-SHARE-NAV-BEGIN> 1,000
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1,000
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
