SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/x/ Preliminary Proxy Statement /_/ Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/_/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AVESTA TRUST
_____________________________________________________________________________
(Name of Registrant as Specified in Its Charter)
_____________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/_/ Fee paid previously with preliminary materials:
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/_/ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the off-setting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
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(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
_____________________________________________________________________________
(4) Date Filed:
_____________________________________________________________________________
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AVESTA Trust
26-TCBE-45
P.O. Box 2558
Houston, Texas 77252-8045
Dear Participating Trust:
A special meeting of the Money Market, Income, Intermediate Term Bond, Equity
Growth, Equity Income, Balanced, Short-Intermediate Term U.S. Government
Securities, U.S. Government Securities, Small Capitalization and Core Equity
Funds of the AVESTA Trust will be held to determine important issues
affecting your retirement portfolio, beginning at 10:00 a.m. on Tuesday,
December 2, 1997, at __________, Texas Commerce Tower, 600 Travis Street,
Houston, Texas. You will receive a separate proxy card for each Fund you
own. I urge you to return the enclosed proxy card(s) to register your vote.
At the meeting, a number of important changes to the AVESTA Trust will be
considered in connection with the proposal by Texas Commerce Bank National
Association ("TCB"), which acts as Trustee to the AVESTA Trust, to expand the
availability of the Trust and modernize the investment policies of the
various Funds of the AVESTA Trust. In order to expand the AVESTA Trust's
availability, included in the accompanying proxy statement is discussion of a
proposal to convert the AVESTA Trust to a new Massachusetts business trust, a
common corporate venue for investment companies such as the AVESTA Trust (the
"Conversion"). After the Conversion, the Funds of the AVESTA Trust would be
known as the "Avesta Funds." While the investment adviser to the Avesta Funds
will be TCB's affiliate, The Chase Manhattan Bank ("Chase"), the Funds would
continue to be managed on a day-to-day basis by TCB.
The Conversion is being proposed because the AVESTA Trust's current structure
has limited the ability of the Funds to grow and to realize resultant
economies of scale. Approval and consummation of the Conversion will not
affect your economic interest in the Funds of the AVESTA Trust. You would
merely own shares in a corresponding investment portfolio or portfolios of
the Avesta Funds rather than of the Funds of the AVESTA Trust. You would
continue to be able to purchase or redeem your investment on a daily basis.
The cost and expenses associated with the Conversion, including costs of
soliciting proxies, will be borne by _____ and not by the Funds (or
Participating Trusts in the Funds).
As you will also see from the accompanying proxy statement, your vote is also
being requested on a number of changes to the existing investment objectives,
policies and restrictions of the AVESTA Trust. The changes are not intended
to change in any material way the investment strategies used by TCB in
managing the Funds. The changes to investment objectives will only effective
if the changes and the Conversion are approved by Participating Trusts of
each Fund. The changes to investment policies and restrictions are intended
to modernize the policies to provide additional flexibility in the management
of the Funds and to provide consistency with similar mutual funds advised by
TCB, Chase and their affiliates, as further discussed in the proxy statement.
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If approved by the Participating Trusts of a Fund, these changes will be
effective whether or not the Conversion is approved.
If the Conversion is approved: While there will be changes in how
management fees and expenses are allocated and paid, the actual levels
of such fees and expenses will remain the same for at least one year
after the Conversion. The Conversion may provide you with greater
portfolio diversification and other potential benefits. In addition, it
is expected that the Avesta Funds will include a number of new
investment options not currently available in the AVESTA Trust.
If you vote against the Conversion, yet approval is obtained: Unless you
notify the AVESTA Trust to the contrary, you will have elected to redeem
your investments, redemption will be effected prior to the Conversion,
and your proceeds will be placed in _______________ pending further
instructions from you.
If you do not vote, yet approval to the Conversion is obtained: You will
automatically receive shares in the new Money Market, Income,
Intermediate Term Bond, Equity Growth, Equity Income, Balanced, Short-
Intermediate Term U.S. Government Securities, Small Capitalization and
Core Equity Funds as appropriate.
As discussed in the proxy statement, your vote is being solicited to
authorize the approval of new advisory agreements and the election of two new
trustees who would serve on the Board of Trustees of the Avesta Funds. The
proposals have been carefully reviewed by the Supervisory Committee of the
AVESTA Trust, which has approved the proposals. Please read the enclosed
materials carefully. Your vote is important! Accordingly, please sign, date
and mail the proxy card(s) promptly in the enclosed return envelope.
If you have any questions on voting of proxies and/or the meeting agenda,
please call us at 1-800-________.
Thank you for your attention to these matters and we look forward to our
continued partnership and success.
Henry J. Lartigue
Chairman, Supervisory Committee
SPECIAL NOTE: You may receive a telephone call from us to answer any
questions you may have or to provide assistance in voting. Remember, your
vote is important! Please sign, date and promptly mail your proxy card(s) in
the return envelope provided.
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Why is the Conversion being recommended?
The Conversion is being proposed because the AVESTA Trust's current structure
has limited the ability of the Funds to grow and to realize resultant
economies of scale. By converting to an investment vehicle that can be sold
to a broader range of investors, the Supervisory Committee hopes to increase
the assets of the Funds, which, in turn, may enable the Funds to achieve
lower per share expenses than the current per share expenses of the Funds as
fixed and relatively fixed costs can be spread over a larger asset base.
Redomiciling the AVESTA Trust from a Texas trust to a Massachusetts business
trust, a common jurisdiction for mutual funds, is necessary to accommodate
the broader availability of the Funds.
If the Conversion is approved, what will happen?
Under the Conversion, each of the Funds would transfer its assets to a
portfolio of a newly-created Massachusetts business trust and would receive,
in exchange, shares of the new portfolios. The AVESTA Trust would then be
liquidated and the shares of the new portfolios would be distributed to
Participating Trusts such as yourself.
How will the adoption of these Proposals affect my investment?
Approval and consummation of the Conversion will not affect your economic
interest in the Funds of the AVESTA Trust. You would merely own shares in a
corresponding investment portfolio or portfolios of the Avesta Funds rather
than of the Funds of the AVESTA Trust. You would continue to be able to
purchase or redeem your investment on a daily basis.
How will the fees and expenses of the Funds be affected?
While there will be changes in how management fees and expenses are allocated
and paid, the actual levels of such fees and expenses will remain the same
for at least one year after the Conversion.
Will there be any change in the way the Funds are being managed?
TCB will continue to manage the day-to-day investment activities of the
Funds, just as it does now. In order to achieve consistency with the other
registered investment companies managed by TCB and its affiliates, TCB would
perform its role as a subadviser to its affiliate, The Chase Manhattan Bank,
which would serve as the investment adviser to the Funds.
Why are changes to the investment objectives, policies and restrictions being
proposed?
The proposed changes to investment objectives eliminate references to
managing retirement assets and are necessary for the Conversion to occur.
The changes to investment policies and restrictions are intended to modernize
the policies to provide additional flexibility in the management of the Funds
and to provide consistency with similar mutual funds advised by TCB and
Chase.
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What will be the effect on the Funds' investment strategies if the proposed
changes to the Funds' investment objectives, policies and restrictions are
approved?
The Funds have no current intention of altering their investment strategies
and the proposals which request approvals of modifications to the Funds'
investment policies and restrictions are not expected to have any immediate
impact on the management of the Funds.
Will I incur any additional expenses in connection with the Conversion?
The cost and expenses associated with the Conversion, including costs of
soliciting proxies, will be borne by _____ and not by the Funds (or
Participating Trusts in the Funds).
What if I vote against the Conversion, yet approval is obtained?
Unless you notify the AVESTA Trust to the contrary, you will have elected to
redeem your investments, redemption will be effected prior to the Conversion,
and your proceeds will be placed in _______________ pending further
instructions from you.
What if I do not vote, yet approval to the Conversion is obtained?
You will automatically receive shares in the new Money Market, Income,
Intermediate Term Bond, Equity Growth, Equity Income, Balanced, Short-
Intermediate Term U.S. Government Securities, Small Capitalization and Core
Equity Funds as appropriate.
As a holder of units of the AVESTA Trust, what do I need to do?
Please read the enclosed proxy statement and vote. Your vote is important!
Accordingly, please sign, date and mail the proxy card(s) promptly in the
enclosed return envelope as soon as possible.
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AVESTA TRUST
26-TCBE-45
P.O. Box 2558
Houston, Texas 77252-8045
NOTICE OF SPECIAL MEETING OF PARTICIPATING TRUSTS
To Be Held December 2, 1997
A Special Meeting of Participating Trusts (the "Meeting") of the AVESTA
Trust will be held at __________, Texas Commerce Tower, 600 Travis Street,
Houston, Texas at 10:00 a.m., local time on December 2, 1997, for the
following purposes:
1. To vote upon the redomiciling and conversion (the
"Conversion") of the Money Market Fund series, Income Fund series,
Intermediate Term Bond Fund series, Equity Growth Fund series, Equity
Income Fund series, Balanced Fund series, Short-Intermediate Term U.S.
Government Securities Fund series, U.S. Government Securities Fund
series, Small Capitalization Fund series and Core Equity Fund series of
the AVESTA Trust (collectively, the "Funds") pursuant to an Agreement
and Plan of Conversion which provides that (i) each Fund shall transfer
all its assets to Mutual Fund Investment Trust, a newly formed
Massachusetts business trust ("MFIT"), in exchange for which MFIT will
issue Institutional Shares of the Money Market Fund series, Income Fund
series, Intermediate Term Bond Fund series, Equity Growth Fund series,
Equity Income Fund series, Balanced Fund series, Short-Intermediate Term
U.S. Government Securities Fund series, U.S. Government Securities Fund
series, Small Capitalization Fund series and Core Equity Fund series
(collectively, the "Avesta Funds"), respectively, of MFIT, (ii) each
Avesta Fund shall assume all the liabilities of the corresponding Fund
of the AVESTA Trust, (iii) each Fund of the AVESTA Trust shall make a
pro rata distribution of the Institutional Shares of its corresponding
Avesta Fund to its Participating Trusts and (iv) the AVESTA Trust shall
subsequently terminate.
2. To vote upon modification of certain of the Funds' investment
objectives (Proposal 2(a), restrictions (Proposals 2(b)-2(p) and
policies (Proposals 2(q)-2(r)).
3. To authorize or not authorize each Fund, as the holder of one
Institutional Share of its corresponding Avesta Fund immediately prior
to the Conversion, to approve (i) an Investment Advisory Agreement
between The Chase Manhattan Bank ("Chase") and MFIT with respect to the
Avesta Funds (Proposal 3(a)), and (ii) an Investment Subadvisory
Agreement between Chase and Texas Commerce Bank National Association
("TCB") with respect to the Avesta Funds (Proposal 3(b)).
4. To authorize or not authorize each Fund, as the holder of one
Institutional Share of its corresponding Avesta Fund immediately prior
to the Conversion, to approve the election of two Trustees of MFIT
until their successors are elected and qualified.
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5. To transact such other business as may properly come before
the Meeting or any adjournment thereof.
Proposals 1, 2(a) and 3 are a related part of a plan to increase the
availability of the Funds and to achieve future economies of scale, and none
of these Proposals will be adopted unless all of them are approved for all
Funds and the Conversion is completed. The modification of the Funds'
investment policies and restrictions (Proposals 2(b)-2(r)) will be effective
even if the proposed Conversion of the Funds is not completed. There will be
separate votes for the Participating Trusts of each Fund with respect to
Proposals 1, 2 and 3. Participating Trusts will vote in the aggregate with
respect to Proposal 4.
Participating Trusts of record of the AVESTA Trust at the close of
business on October 7, 1997 will be entitled to notice of and to vote at the
Meeting or any adjournment thereof. Each Participating Trust is requested to
sign, date and return the enclosed proxy card(s) without delay, even if the
Participating Trust will be in attendance at the Meeting. A postage-paid
envelope is enclosed for this purpose. Prompt return of the enclosed proxy
by Participating Trusts may save the necessity and expense of further
solicitation to ensure a quorum at the Meeting. Any Participating Trust
present at the Meeting may vote personally on all matters brought before the
Meeting and in that event such Participating Trust's proxy will not be used.
By Order of the Supervisory Committee
Thomas J. Press
Secretary
October __, 1997
______________________
YOUR VOTE IS IMPORTANT REGARDLESS OF HOW
MANY UNITS YOU OWNED ON THE RECORD DATE.
______________________
<PAGE>
AVESTA TRUST
26-TCBE-45
P.O. Box 2558
Houston, Texas 77252-8045
______________
PROXY STATEMENT
______________
INTRODUCTION
This Proxy Statement (the "Proxy Statement") is furnished in connection with
the solicitation of proxies by the Supervisory Committee of the AVESTA Trust
for use at a Special Meeting of Participating Trusts to be held on December
2, 1997 at 10:00 a.m. local time at __________, Texas Commerce Tower, 600
Travis Street, Houston, Texas, and any adjournment thereof, for the purposes
set forth in the Notice of Special Meeting of Participating Trusts. The
AVESTA Trust's telephone number is 1-800-________. This Proxy Statement and
the enclosed form of proxy (the "Proxy") were first mailed to Participating
Trusts entitled to vote at the Meeting on or about October __, 1997.
The Meeting has been called for the principal purpose of considering
ways to increase the availability of the AVESTA Trust in order to achieve
certain economies of scale. To that end, Participating Trusts are being
asked to approve the redomiciling and conversion (the "Conversion") of the
AVESTA Trust from a Texas collective investment trust to a Massachusetts
business trust. Pursuant to the Conversion, the Money Market Fund series,
Income Fund series, Intermediate Term Bond Fund series, Equity Growth Fund
series, Equity Income Fund series, Balanced Fund series, Short-Intermediate
Term U.S. Government Securities Fund series, U.S. Government Securities Fund
series, Small Capitalization Fund series and Core Equity Fund series of the
AVESTA Trust (collectively, the "Funds") will become separate series of MFIT
("MFIT"), a recently organized Massachusetts business trust. The new series
will be called the Avesta Money Market Fund, Avesta Income Fund, Avesta
Intermediate Term Bond Fund, Avesta Equity Growth Fund, Avesta Equity Income
Fund, Avesta Balanced Fund, Avesta Short-Intermediate Term U.S. Government
Securities Fund, Avesta U.S. Government Securities Fund, Avesta Small
Capitalization Fund and Avesta Core Equity Fund, respectively (collectively,
the "Avesta Funds").
The Agreement and Plan of Conversion (the "Conversion Plan") between the
AVESTA Trust and MFIT provides that each Fund shall transfer all its assets
to its corresponding investment portfolio of MFIT in exchange for which MFIT
will issue Institutional Shares ("Institutional Shares") of the Avesta Funds;
each Avesta Fund will assume all of the liabilities of its corresponding
Fund; the Avesta Fund shares will be distributed pro rata to the
Participating Trusts of the AVESTA Trust; and the AVESTA Trust will be
terminated. As a result of the Conversion, each Participating Trust in a
Fund will hold Institutional Shares of the corresponding Avesta Fund having
the same aggregate net asset value as the Units of the Fund held by such
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Participating Trust immediately prior to the time of the closing of the
Conversion. See Proposal 1.
Certain changes are proposed in the AVESTA Trust's investment
objectives, policies and restrictions. See Proposal 2. To the extent the
changes are approved by Participating Trusts (as defined below) and the
Conversion occurs, the changes would be effective with respect to the Avesta
Funds. If the Conversion does not occur, the changes to the investment
policies and restrictions would be effective with respect to the Funds;
however, the changes to the investment objectives would not be effective.
Upon approval of the Participating Trusts and consummation of the
Conversion, the investment adviser of the Avesta Funds corresponding to the
Funds will be The Chase Manhattan Bank ("Chase") and the investment sub-
adviser to the Avesta Funds corresponding to the Funds will be Texas Commerce
Bank National Association ("TCB"), which serves as the Trustee for the AVESTA
Trust and currently manages each of the Funds. See Proposal 3.
The AVESTA Trust will furnish, without charge, a copy of its most recent
Annual Report and its most recent Semi-Annual Report succeeding such Annual
Report, to any Participating Trust upon request. Requests should be directed
to the Secretary of the AVESTA Trust in writing at its address above or by
calling 1-800-________.
_____ and not the AVESTA Trust or its Participating Trusts will bear the
cost of the solicitation of proxies, including the cost of printing,
preparing, assembling and mailing the Notice of Meeting, Proxy Statement and
form of Proxy. In addition to solicitations by mail, proxies may also be
solicited by officers and regular employees of TCB by personal interview, by
telephone or by telegraph without additional remuneration therefor.
Professional solicitors may also be retained.
UNITS AND VOTING
The presence in person or by proxy of Participating Trusts that own
one-third of the outstanding units of the AVESTA Trust (the "Units") will
constitute a quorum for purposes of transacting business at the Meeting.
Similarly, where a vote is required to be taken with respect to each of one
or more Funds, the presence in person or by proxy of one-third of the Units
of the particular Fund or Funds at the Meeting will constitute a quorum with
respect to such Fund. If a quorum is not present at the Meeting, sufficient
votes in favor of the proposals set forth in the Notice of Meeting are not
received by the time scheduled for the Meeting, or the holders of Units
present, in person or by proxy, determine to adjourn the Meeting for any
other reason, the Participating Trusts present (in person or by proxy) may
adjourn the Meeting from time to time, without notice other than announcement
at the Meeting. Any such adjournment will require the affirmative vote of
Participating Trusts holding a majority of the Units present, in person or by
proxy, at the Meeting. The persons named in the Proxy will vote in favor of
such adjournment those Units of the AVESTA Trust which they are entitled to
vote if such adjournment is necessary to obtain a quorum or if they determine
such an adjournment is desirable for any other reason. Business may be
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conducted once a quorum is present and may continue until adjournment of the
Meeting notwithstanding the withdrawal or temporary absence of sufficient
Units to reduce the number present to less than a quorum.
Each Participating Trust is entitled to one vote for each full Unit and
a fractional vote for each fractional Unit outstanding on the books of the
AVESTA Trust in the name of such Participating Trust or its nominee on the
record date. The record date and time for determining those Participating
Trusts entitled to notice of and to vote at the Meeting has been fixed at the
close of business on October 7, 1997. At October 7, 1997, the Money Market
Fund had outstanding ______________ Units, the Income Fund had outstanding
______________ Units, the Intermediate Term Bond Fund had outstanding
______________ Units, the Equity Growth Fund had outstanding ______________
Units, the Equity Income Fund had outstanding ______________ Units, the
Balanced Fund had outstanding ______________ Units, the Short-Intermediate
Term U.S. Government Securities Fund had outstanding ______________ Units,
the U.S. Government Securities Fund had outstanding ______________ Units, the
Small Capitalization Fund had outstanding ______________ Units and the Core
Equity Fund had outstanding ______________ Units. At October 7, 1997 no
person owned of record and, to the best knowledge of the AVESTA Trust, no
person owned beneficially, as much as 5% of the outstanding Units of any
Fund, and, as a group, the officers and members of the Supervisory Committee
of the AVESTA Trust beneficially owned less than 1% of the outstanding Units
of each Fund.
All Units represented by each properly signed Proxy received prior to
the Meeting will be voted at the Meeting. If a Participating Trust specifies
how the Proxy is to be voted on any of the business to come before the
Meeting, it will be voted in accordance with such specifications. If a
Participating Trust returns its proxy but no direction is made on the Proxy,
the Proxy will be voted FOR each of the proposals described in this Proxy
Statement. Participating Trusts voting to ABSTAIN on a proposal will be
treated as present for purposes of achieving a quorum and in determining the
votes cast on the proposal, but not as having voted FOR the proposal.
A Proxy may be revoked by a Participating Trust at any time prior to its
use by written notice to the AVESTA Trust, by submission of a later dated
Proxy or by voting in person at the Meeting. If any other matters come
before the Meeting, Proxies will be voted by the persons named as proxies in
accordance with their best judgment.
Participating Trusts of each Fund will vote separately with respect to
Proposals 1, 2 and 3. Proposals 1, 2(a) and 3 will not be adopted unless all
of them are approved by each of the Funds voting thereon. Participating
Trusts of the Funds will vote in the aggregate with respect to Proposal 4.
BACKGROUND OF THE PROPOSALS
The AVESTA Trust is a collective investment trust organized under Texas
law and is registered with the Securities and Exchange Commission as an open-
end investment company. The AVESTA Trust is also regulated by the Office of
the Comptroller of the Currency. Under applicable regulations, Units of the
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Funds may be made currently available for purchase only by retirement
accounts for which TCB or an affiliate acts as trustee. This has limited the
potential asset size of the Funds. However, following consummation of the
Conversion, shares of the Avesta Funds will be available for purchase by all
types of investors. The Conversion, if consummated, could result in asset
growth which would, in turn, provide an opportunity (i) for the Funds to
diversify their investments to a greater extent than in the past, providing
additional protection against adverse developments with respect to individual
portfolio securities (such as defaults and decreases in value), and (ii)
shorten the time period in which the Funds may achieve certain economies with
respect to advisory and other fees. However, there can be no assurance that
further economies of scale or other benefits will be realized through the
Conversion.
The proposed Conversion (Proposal 1), the approval of changes to the
investment objectives of the Funds (Proposal 2(a)) and the approval of the
proposed Investment Advisory Agreement and proposed Subadvisory Agreement
(Proposal 3) are related parts of a plan to achieve future economies of
scale, and none of these Proposals will be adopted unless all are approved by
the Participating Trusts of each Fund.
Unless it notifies the AVESTA Trust to the contrary, any Participating
Trust of the Avesta Funds which votes against the approval of the Conversion
will be treated as having elected to redeem such Participating Trust's Units
in the Avesta Funds (assuming that the Conversion is approved and all other
conditions to the Conversion have been satisfied). The redemption will be
effected at net asset value prior to the Conversion, and the proceeds of such
redemption will be held in _______________ pending receipt of investment
instructions from the Participating Trust. All other Participating Trusts
(including those which abstain or fail to return proxies or vote at the
Meeting) will receive shares of the appropriate Avesta Funds.
1. APPROVAL OF THE PROPOSED CONVERSION
DESCRIPTION OF THE PROPOSED CONVERSION
The Conversion Plan
The terms and conditions under which the proposed Conversion of the
AVESTA Trust will be consummated are set forth in the Conversion Plan, the
form of which is attached to this Proxy Statement as Exhibit A. The
following summary does not purport to be a complete description of the
Conversion Plan and is subject to the terms and conditions of the Conversion
Plan.
The Conversion Plan provides that, at the closing of the transactions
contemplated by the Conversion Plan (the "Closing"), each Avesta Fund will
acquire all of its corresponding Fund's assets in exchange for a number of
Avesta Fund Institutional Shares of equal value and the assumption by the
Avesta Fund of all of the Fund's outstanding liabilities. (Each Avesta Fund
will also offer another class of shares, Retail Shares.) Upon receipt of the
Institutional Shares, the AVESTA Trust will distribute in complete
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liquidation, pro rata, to the Participating Trusts of record of each Fund as
of the Closing, the Institutional Shares of the Avesta Fund received by such
Fund. This distribution of Institutional Shares to the Participating Trusts
will be accomplished by the establishment of open book accounts on the share
records of the Avesta Funds in the names of the Participating Trusts.
Certificates representing Institutional Shares will not be issued. Following
the Closing and the pro rata liquidating distributions of Institutional
Shares to the Participating Trusts, TCB, as Trustee of the AVESTA Trust, will
terminate the AVESTA Trust.
_____ will pay all expenses of the Conversion, including legal and
accounting fees, proxy solicitation and unitholder meeting expenses, costs of
printing and mailing proxy statements, organization expenses of MFIT, and
expenses of special meetings of the Supervisory Committee of the AVESTA Trust
and the Board of Trustees of MFIT.
The Closing is subject to various conditions, including approval of the
Conversion and of Proposals 2(a) and 3 by the required vote of Units of each
Fund, completion of all filings with, and receipt of all orders or approvals
from, the Securities and Exchange Commission (the "SEC") and applicable state
securities commissions, and delivery of legal opinions regarding certain
federal tax consequences of the Conversion and other corporate and securities
matters. Any of the conditions may be waived by the Supervisory Committee of
the AVESTA Trust or the Board of Trustees of MFIT (whichever is entitled to
the benefit of such conditions) if, in its judgment, such action or waiver
will not have a material adverse effect on the interests of the Participating
Trusts of the AVESTA Trust or the shareholders of MFIT, respectively. The
Conversion Plan may be terminated at any time without liability, by either
the AVESTA Trust or MFIT, if its Supervisory Committee or Board of Trustees,
respectively, determines in good faith that the Conversion is not in the
interests of its Participating Trusts or shareholders.
Avesta Funds
If the Conversion is approved and completed, Participating Trusts of
each Fund of the AVESTA Trust will become shareholders of the corresponding
Avesta Fund. The net asset value of the Institutional Shares of each Avesta
Fund held by a Participating Trust of a Fund immediately after the
consummation of the Conversion will be the same as the net asset value of the
Units of the corresponding Fund held by such Participating Trust immediately
prior to the consummation of the Conversion. Shareholders of the Avesta
Funds following the closing will be able to purchase and redeem Fund shares
at net asset value next determined after receipt of the order, just as they
can now do with respect to Units of the Funds.
Subject to approval of Proposals 3(a) and 3(b) and consummation of the
Conversion, Chase will serve as investment adviser and TCB will serve as sub-
adviser to each of the Avesta Funds corresponding to the Funds. TCB
currently provides or is responsible for providing administrative,
accounting, custody and transfer agency services for the Funds. Chase,
either directly or through its affiliates, currently provides certain sub-
custody and accounting services that TCB would otherwise be required to
<PAGE>
provide. Chase, either directly or through its affiliates, will provide
custody, administration and accounting services to the Avesta Funds upon
consummation of the Conversion (see "Comparison of the AVESTA Trust and MFIT
- - Advisory and Administration Services").
For investment management, unitholder accounting, custodian and certain
other services, the Funds currently pay the Trustee an aggregate fee based
upon the net asset values of the respective Funds. Following the Conversion,
the Avesta Funds will pay separate fees for each of these services. Although
the aggregate expenses of the Avesta Funds will be limited by certain
undertakings of Chase, Chase will not be contractually obligated to waive
fees payable to it or reimburse expenses as TCB currently is under the AVESTA
Management Agreements. See "Comparison of the AVESTA Trust and MFIT -- Pro
Forma Expenses").
COMPARISON OF THE AVESTA TRUST AND MFIT
A brief comparison of the AVESTA Trust and MFIT is set forth below.
Comparative Information on Shareholder Rights
Avesta Trust was organized on April 1, 1988 under the Texas trust law,
which limits investors in the AVESTA Trust to Participating Trusts for which
TCB or an affiliate acts in a fiduciary capacity. In order to make the Funds
available to a broader range of investors, the Supervisory Committee has
determined that it is advisable and necessary in the Conversion to change the
structure and domicile of the AVESTA Trust. The Supervisory Committee has
determined that the Massachusetts business trust law affords certain
advantages to the operations of a more broadly-based investment company, such
as the Avesta Funds. The Massachusetts business trust is a common form of
organization for mutual funds.
General. As a Massachusetts business trust, the operation of MFIT will
be governed by the Declaration of Trust of MFIT (the "MFIT Declaration of
Trust") and applicable Massachusetts law rather than by the Amended and
Restated Declaration of Trust of the AVESTA Trust (the "AVESTA Declaration of
Trust") and applicable Texas law. The two forms of organization are
summarized below.
Shares of Funds. Interests in the AVESTA Trust are represented by
transferable units of interest, without par value. The AVESTA Declaration of
Trust authorizes the Supervisory Committee to issue an unlimited number of
units. The Supervisory Committee may, without unitholder approval, divide
authorized but unissued units into an unlimited number of separate portfolios
or series, and classes thereof. Currently, all the Units of the AVESTA Trust
are divided into fifteen separate series (consisting of the ten Funds, three
portfolios which are not participating in the Conversion and two additional
portfolios that have not to date commenced investment operations). All Units
have equal voting rights and will be voted in the aggregate and not by
series, except where voting by series is required by law or where the matter
involved affects only one series. The AVESTA Declaration of Trust does not
require the Trust to hold annual meetings of Participating Trusts, but
<PAGE>
special meetings of Participating Trusts may be had from time to time. There
are no conversion or preemptive rights in connection with Units of the AVESTA
Trust.
MFIT has an unlimited number of authorized shares of beneficial
interest, par value $0.001 per share, which may be divided into portfolios or
series and classes thereof. Each Avesta Fund is one portfolio of MFIT, and
may issue multiple classes of shares. Upon consummation of the Conversion,
each of the Avesta Funds will be able to offer two classes of shares to the
public, Institutional Class and Retail Class shares. Each share of a
portfolio or class of MFIT represents an equal proportionate interest in that
portfolio or class with each other share of that portfolio or class. The
shares of each portfolio or class of MFIT participates equally in the
earnings, dividends and assets of the particular portfolio or class.
Fractional shares have proportionate rights to full shares. Expenses of MFIT
which are not attributable to a specific portfolio or class will be allocated
to all the portfolios of MFIT in a manner believed by management of the
Avesta Funds to be fair and equitable. Generally, shares of each portfolio
will be voted separately, for example, to approve an investment advisory
agreement and shares of each class of each portfolio will be voted
separately, for example, to approve a distribution plan, but shares of all
series and classes vote together, to the extent required by the 1940 Act,
including the election or selection of trustees and independent accountants.
MFIT is not required to hold regular annual meetings of shareholders, but may
hold special meetings from time to time. There are no conversion or
preemptive rights in connection with shares of MFIT.
Shareholder Voting Rights. Each member of the Supervisory Committee of
the AVESTA Trust holds office, unless sooner removed, until his successor is
elected and qualified. A vacancy in the Supervisory Committee resulting from
the resignation of a Supervisory Committee member or otherwise may be filled
by a vote of a majority of the remaining Supervisory Committee members then
in office. However under the 1940 Act, no vacancy may be filled by
Supervisory Committee members unless immediately thereafter at least two-
thirds of the Supervisory Committee members holding office shall have been
elected to such office by the unitholders. Special meetings of Participating
Trusts for any purpose or purposes may be called by the AVESTA Trust's
Secretary and upon the written request of the Participating Trusts holding at
least 25% of the Units of the AVESTA Trust outstanding and entitled to vote
at such meeting.
A vacancy in the MFIT Board resulting from the resignation of a Trustee
or otherwise may be filled similarly by a vote of a majority of the remaining
Trustees then in office, subject to the 1940 Act. In addition, Trustees may
be removed from office by a vote of holders of shares representing two-thirds
of the outstanding shares of each portfolio of MFIT at a meeting duly called
for the purpose. A meeting of shareholders shall be held upon the written
request of the holders of shares representing not less than 10% of the
outstanding shares entitled to vote on the matters specified in the written
request. Upon written request by the holders of shares representing at least
$25,000 or 1% of the outstanding shares of MFIT stating that such
shareholders wish to communicate with the other shareholders for the purpose
<PAGE>
of obtaining the signatures necessary to demand a meeting to consider removal
of a Trustee, the Trustees will within five business days after receipt of
such request either provide a list of shareholders or inform such applicants
as to the approximate number of shareholders and the approximate costs of
mailing the request to them. If the second option is chosen by the Trustees,
then the Trustees are generally obligated, upon written request of the
applicants, to mail the requested materials to all shareholders of record (at
the expense of the requesting shareholders). Except as set forth above, the
Trustees may continue to hold office and may appoint successor Trustees.
Shareholder Liability. Under Texas law, the AVESTA Trust unitholders
have no personal liability for the AVESTA Trust's acts or obligations. Under
Massachusetts law, shareholders of MFIT could, under certain circumstances,
be held personally liable as partners for the obligations of MFIT. However,
the MFIT Declaration of Trust disclaims shareholder liability for acts or
obligations of MFIT and provides for indemnification and reimbursement of
expenses out of MFIT property for any shareholder held personally liable for
the obligations of MFIT. The MFIT Declaration of Trust also provides that
MFIT shall maintain appropriate insurance (for example, fidelity bonding and
errors and omissions insurance) for the protection of MFIT, 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 MFIT itself was unable to meet its
obligations.
Liability of Directors and Trustees. Under the AVESTA Declaration of
Trust, as long as they have exercised reasonable care and have acted in good
faith, members of the Supervisory Committee are not liable for neglect or
wrongdoing by TCB, any member of the Supervisory Committee or of any officer,
agent, employee or investment adviser of the Trust, but are not protected in
the case of willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties. In addition, the AVESTA Declaration of Trust
provides for the indemnification of TCB and its employees and members of the
Supervisory Committee and officers of the Trust for expenses reasonably
incurred in connection with actions, suits or proceedings if such indemnified
person acted in good faith and in a reasonable manner. Under the MFIT
Declaration of Trust, the Trustees of MFIT are personally liable only for bad
faith, willful misfeasance, gross negligence or reckless disregard of their
duties as Trustees. Under the MFIT Declaration of Trust, a Trustee or
officer of MFIT will generally be indemnified against all liability and
against all expenses reasonably incurred or paid by him in connection with
any claim, action, suit or by proceeding in which he becomes involved as a
party or otherwise by virtue of his being or having been a Trustee or officer
and against amounts paid or incurred by him in the settlement thereof.
The foregoing is only a summary of certain of the major provisions of
the AVESTA Declaration of Trust, the Rules and Procedures of the Supervisory
Committee and Texas law, and the MFIT Declaration of Trust and By-Laws and
Massachusetts law. Participating Trusts may wish to refer directly to the
provisions of the AVESTA Declaration of Trust and the Rules and Procedures,
and Texas law, and MFIT's Declaration of Trust and By-Laws and Massachusetts
<PAGE>
law for a more thorough comparison. Copies of these documents may be
obtained by contacting the AVESTA Trust at 1-800-________.
Investment Objectives, Policies and Restrictions
MFIT is a newly organized business trust which will have nominal assets
prior to the Conversion. The investment objectives, policies and
restrictions of each of the Avesta Funds will be the same as to those of the
corresponding Funds, after giving effect to Proposal 2.
Advisory and Administrative Services
As Trustee of the AVESTA Trust, TCB is the manager of and investment
adviser to the AVESTA Trust and has served in such capacity since the
organization of the AVESTA Trust in 1988. Pursuant to the terms of three
separate, but substantially similar, Management Agreements (the "AVESTA
Management Agreements"), the Trustee as investment adviser manages the
investment of the assets of each Fund in conformity with the stated
objectives and policies of that Fund. The Trustee supervises the AVESTA
Trust's investments and maintains a continuous investment program, places
purchase and sale orders and pays costs of certain clerical and
administrative services involved in managing and servicing the AVESTA Trust's
investments and complying with regulatory reporting requirements. TCB also
furnishes employees, office space and facilities required for the
administrative operations of the AVESTA Trust. TCB provides most services
necessary for the operations and activities of the Trust and the Funds. For
this reason, unlike the Avesta Funds, the Funds do not directly utilize the
services of separate organizations to obtain advisory, administrative,
custody or transfer agent services. As noted above, however, Chase currently
provides certain services that TCB would otherwise be required to provide to
the Trust.
As compensation for its investment management and administrative
services under the AVESTA Management Agreements, TCB is entitled to receive a
monthly management fee (i) for its services with respect to the Money Market
Fund, at an annual rate of .65% of the average daily net assets of the Money
Market Fund; (ii) for its services with respect to the Income Fund, Equity
Growth Fund, Equity Income Fund, Balanced Fund and Core Equity Fund, at an
annual rate of 1.00% of the first $250,000,000 of the average daily net
assets of each such Fund, .90% of the next $250,000,000 of such assets, and
.80% of such assets in excess of $500,000,000; (iii) for its services with
respect to the Short-Intermediate Term U.S. Government Securities Fund and
Intermediate Term Bond Fund, at an annual rate of .75% of the first
$250,000,000 of the average daily net assets of each such Fund, .65% of the
next $250,000,000 of such assets, and .55% of such assets in excess of
$500,000,000; (iv) for its services with respect to the U.S. Government
Securities Fund, at an annual rate of .85% of the first $250,000,000 of the
average daily net assets of each such Fund, .75% of the next $250,000,000 of
such assets, and .65% of such assets in excess of $500,000,000; and (v) for
its services with respect to the Small Capitalization Fund, at an annual rate
of 1.15% of the first $250,000,000 of the average daily net assets of such
Fund, 1.05% of the next $250,000,000 of such assets, and .95% of such assets
<PAGE>
in excess of $500,000,000. Voluntary fee waivers are currently in effect
with respect to the Money Market, U.S. Government Income, Income and Small
Capitalization Funds, and under the terms of the Management Agreements, TCB
currently is obligated to reimburse the Funds for certain expenses.
Upon consummation of the Conversion, the AVESTA Management Agreements
will be terminated. Chase will serve as investment adviser for the Avesta
Funds corresponding to the Funds pursuant to the proposed Investment Advisory
Agreement with MFIT (the "New Advisory Agreement"), subject to approval of
Proposal 3(a). In its capacity as investment adviser, Chase will have
overall responsibility for management of the Avesta Funds' investment
portfolios. However, subject to approval of Proposal 3(b), TCB will enter
into an Investment Subadvisory Agreement with Chase (the "Subadvisory
Agreement") and will continue to make investment decisions for the Avesta
Funds on a day-to-day basis. The New Advisory Agreement provides that the
Avesta Funds will pay Chase a monthly management fee based upon the net
assets of the Avesta Funds, at the rate of .30% of net assets of the Avesta
Money Market Fund, .50% of net assets of the Avesta Income Fund, .50% of net
assets of the Avesta Intermediate Term Bond Fund, .75% of net assets of the
Avesta Equity Growth Fund, .75% of net assets of the Avesta Equity Income
Fund, .75% of net assets of the Avesta Balanced Fund, .50% of net assets of
the Avesta Short-Intermediate Term U.S. Government Securities Fund, .50% of
net assets of the Avesta U.S. Government Securities Fund, .75% of net assets
of the Avesta Small Capitalization Fund, and .75% of net assets of the Avesta
Core Equity Fund. Chase may waive fees from time to time to assist the
Avesta Funds in maintaining competitive yields. Chase, an affiliate of TCB,
is a New York State chartered bank which provides commercial banking and
trust services throughout the United States. Chase and its affiliates serve
as investment adviser to registered and unregistered investment companies,
personal and institutional accounts and, as of September 30, 1997, had over
$__ billion under management. The principal offices of Chase are located at
270 Park Avenue, New York, New York 10017. TCB is a national banking
association which provides commercial banking and trust services throughout
the United States. TCB and its affiliates serve as investment adviser to
registered and unregistered investment companies, personal and institutional
accounts and, as of September 30, 1997, had over $__ billion under
management. See Proposal 3 for further information regarding the New
Advisory Agreement and Subadvisory Agreement.
Chase will serve as administrator of the Avesta Funds pursuant to an
Administration Agreement with MFIT (the "Chase Administration Agreement").
Under the Chase Administration Agreement, Chase would be responsible for,
among other things, coordinating the negotiation of contracts and fees with,
and the monitoring of performance and billing of, the Avesta Funds'
independent contractors and agents; preparation for signature by an officer
of MFIT of all documents required to be filed for compliance by MFIT 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; arranging for
the maintenance of books and records of the Avesta Funds; providing, at its
own expense, office facilities, equipment and personnel necessary to carry
out its duties; and generally assisting in all aspects of the operation of
<PAGE>
the business and affairs of the Avesta Funds, other than those advisory
services to be provided by TCB, those services to be provided by Chase
pursuant to MFIT's custody agreement, those transfer agency services to be
provided by DST Systems, Inc., those distribution services to be provided by
CF Distributors, Inc., fund accounting services to be provided by an
affiliate of Chase and those services normally performed by MFIT's counsel
and independent public accountants. For its services, Chase will be entitled
to receive a fee from the Avesta Funds at an annual rate of .10% of the
average daily net asset value of the Avesta Funds.
MFIT intends to contract with CF Distributors, Inc. ("CFD") to provide
certain administrative services to the Avesta Funds pursuant to a
Distribution and Sub-Administration Agreement (the "Distribution and Sub-
Administration Agreement"). CFD, located at 101 Park Avenue, New York, New
York 10178, is a Delaware corporation organized in 1997. Under the
Distribution and Sub-Administration Agreement, CFD will provide officers and
compliance monitoring services to MFIT. For its services, Chase will be
entitled to receive a fee from the Avesta Funds at an annual rate of .05% of
the average daily net asset value of the Avesta Funds.
Similarly, Chase, in its capacity as custodian of the Avesta Funds,
intends to contract with Chase Global Investor Services ("Chase GIS") to
provide certain accounting services to the Avesta Funds pursuant to an
Accounting Services Agreement (the "Chase Accounting Services Agreement").
Chase GIS, located at 3 Metrotech Center, Brooklyn, New York 11245, is
engaged in the business of providing administration and accounting services
to investment companies. For its services, Chase GIS will be paid by Chase
out of its custody fee.
Custodian, Transfer Agent and Dividend Paying Agent
As Trustee of the AVESTA Trust, TCB acts as custodian of the assets of
the AVESTA Trust. Chase currently acts as subcustodian for the AVESTA Trust.
The AVESTA Trust has no separate transfer agent or dividend paying agent.
Upon consummation of the Conversion, Chase will serve as custodian of the
Avesta Funds, for which it will be compensated by the Avesta Funds. DST
Systems, Inc. ("DST") will serve as transfer agent and dividend paying agent
for the Avesta Funds, for which it will be compensated by the Avesta Funds.
DST serves as transfer agent for numerous other mutual funds, including funds
advised by Chase and TCB.
Pro Forma Expenses
The following table shows the actual expenses of each Fund for such
Fund's fiscal year ended December 31, 1996 and a pro forma adjustment thereof
assuming the Conversion had been consummated. The pro forma adjustment for
each Fund reflects the commitment by Chase to waive fees payable to it and/or
reimburse expenses for a period of at least one year commencing January 1,
1998 to the extent necessary to prevent Total Operating Expenses for such
period from exceeding the amount in the table.
<PAGE>
Pursuant to the AVESTA Management Agreements, TCB is contractually
obligated to reimburse expenses of a particular Fund exclusive of the
management fee until such Fund's asset are greater than or equal to
$250,000,000. Expense reimbursements are currently in effect for all of the
Funds. Under the New Advisory Agreement, Chase would not be contractually
obligated to maintain Avesta Fund expenses at any particular level.
The pro forma adjustment assumes that the average assets of the Avesta
Funds during the year were the same as those of the Funds.
Money Market Fund Operating Expenses
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Pro Forma
---------------
Fund Avesta
Actual Fund
-------------- ---------------
<S> <C> <C>
Annual Operating Expenses
Management Fee . . . . . . . . . . .50%<F1> N/A
Investment Advisory Fee . . . . . . N/A .30%
Administration Fee . . . . . . . . N/A .10%
Other Operating Expenses<F2> . . . .07% .56%
--- ---
Total Operating Expenses Before
Reimbursement . . . . . . . . . . . .57% .96%
Reimbursement . . . . . . . . . . . . . .07% .46%
--- ---
Total Operating Expenses .50% .50%
=== ===
____________________
<FN>
<F1> Net of voluntary management fee waiver.
<F2> "Other Operating Expenses" include, for the Fund and the comparable
Avesta Fund, all normal operating expenses for a mutual fund, except
that the "Fund Management" Fee includes administration, custody,
transfer agent and accounting fees.
</TABLE>
<PAGE>
Income Fund Operating Expenses
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Pro Forma
----------------
Fund Avesta
Actual Fund
------------------- ----------------
<S> <C> <C>
Annual Operating Expenses
Management Fee . . . . . . . . . . .75%<F1> N/A
Investment Advisory Fee . . . . . N/A .50%
Administration Fee . . . . . . . . N/A .10%
Other Operating Expenses<F2> . . . .07% .32%
--- ---
Total Operating Expenses Before
Reimbursement . . . . . . . . . . .82% .92%
Reimbursement . . . . . . . . . . . . .07% .17%
--- ---
Total Operating Expenses . . . . . . .75% .75%
=== ===
____________________
<FN>
<F1> Net of voluntary management fee waiver.
<F2> "Other Operating Expenses" include, for the Fund and the comparable
Avesta Fund, all normal operating expenses for a mutual fund, except
that the "Fund Management" Fee includes administration, custody,
transfer agent and accounting fees.
</TABLE>
<PAGE>
Intermediate Term Bond Fund Operating Expenses
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Pro Forma
----------------
Fund Avesta
Actual Fund
----------------- ----------------
<S> <C> <C>
Annual Operating Expenses
Management Fee . . . . . . . . .75% N/A
Investment Advisory Fee . . . N/A .50%
Administration Fee . . . . . . N/A .10%
Other Operating Expenses<F1> . .67% .68%
--- ---
Total Operating Expenses Before
Reimbursement . . . . . . . . 1.42% 1.28%
Reimbursement . . . . . . . . . . .67% .53%
--- ---
Total Operating Expenses . . . . .75% .75%
=== ===
____________________
<FN>
<F1> "Other Operating Expenses" include, for the Fund and the comparable
Avesta Fund, all normal operating expenses for a mutual fund, except
that the "Fund Management" Fee includes administration, custody,
transfer agent and accounting fees.
</TABLE>
<PAGE>
Equity Growth Fund Operating Expenses
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Pro Forma
----------------
Fund Avesta
Actual Fund
------------------ ----------------
<S> <C> <C>
Annual Operating Expenses
Management Fee . . . . . . . . . 1.00% N/A
Investment Advisory Fee . . . . N/A .75%
Administration Fee . . . . . . . N/A .10%
Other Operating Expenses<F1> . . .07% .27%
---- ----
Total Operating Expenses Before
Reimbursement . . . . . . . . . 1.07% 1.12%
Reimbursement . . . . . . . . . . . .07% .12%
---- ----
Total Operating Expenses . . . . . 1.00% 1.00%
==== ====
____________________
<FN>
<F1> "Other Operating Expenses" include, for the Fund and the comparable
Avesta Fund, all normal operating expenses for a mutual fund, except
that the "Fund Management" Fee includes administration, custody,
transfer agent and accounting fees.
</TABLE>
<PAGE>
Equity Income Fund Operating Expenses
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Pro Forma
-----------------
Fund Avesta
Actual Fund
------------------ -----------------
<S> <C> <C>
Annual Operating Expenses
Management Fee . . . . . . . . . 1.00% N/A
Investment Advisory Fee . . . . N/A .75%
Administration Fee . . . . . . . N/A .10%
Other Operating Expenses<F1> . . .07% .27%
---- ----
Total Operating Expenses Before
Reimbursement . . . . . . . . . 1.07% 1.12%
Reimbursement . . . . . . . . . . . .07% .12%
---- ----
Total Operating Expenses . . . . . 1.00% 1.00%
==== ====
____________________
<FN>
<F1> "Other Operating Expenses" include, for the Fund and the comparable
Avesta Fund, all normal operating expenses for a mutual fund, except
that the "Fund Management" Fee includes administration, custody,
transfer agent and accounting fees.
</TABLE>
<PAGE>
Balanced Fund Operating Expenses
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Pro Forma
----------------
Fund Avesta
Actual Fund
----------------- ----------------
<S> <C> <C>
Annual Operating Expenses
Management Fee . . . . . . . . 1.00% N/A
Investment Advisory Fee . . . N/A .75%
Administration Fee . . . . . . N/A .10%
Other Operating Expenses<F1> . .17% .61%
---- ----
Total Operating Expenses Before
Reimbursement . . . . . . . . 1.17% 1.36%
Reimbursement . . . . . . . . . . .17% .36%
---- ----
Total Operating Expenses . . . . 100% 1.00%
---- ----
____________________
<FN>
<F1> "Other Operating Expenses" include, for the Fund and the comparable
Avesta Fund, all normal operating expenses for a mutual fund, except
that the "Fund Management" Fee includes administration, custody,
transfer agent and accounting fees.
</TABLE>
<PAGE>
Short-Intermediate Term U.S. Government Securities Fund Operating Expenses
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Pro Forma
-----------------
Fund Avesta
Actual Fund
---------------- -----------------
<S> <C> <C>
Annual Operating Expenses
Management Fee . . . . . . . . . .75% N/A
Investment Advisory Fee . . . . N/A .50%
Administration Fee . . . . . . . N/A .10%
Other Operating Expenses<F1> . . .13% .52%
--- ---
Total Operating Expenses Before
Reimbursement . . . . . . . . . .88% 1.12%
Reimbursement . . . . . . . . . . . .13% .37%
--- ---
Total Operating Expenses . . . . . .75% .75%
=== ===
____________________
<FN>
<F1> "Other Operating Expenses" include, for the Fund and the comparable
Avesta Fund, all normal operating expenses for a mutual fund, except
that the "Fund Management" Fee includes administration, custody,
transfer agent and accounting fees.
</TABLE>
<PAGE>
U.S. Government Securities Fund Operating Expenses
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Pro Forma
------------------
Fund Avesta
Actual Fund
------------------- ------------------
<S> <C> <C>
Annual Operating Expenses
Management Fee . . . . . . . . .75%<F1> N/A
Investment Advisory Fee . . . N/A .50%
Administration Fee . . . . . . N/A .10%
Other Operating Expenses<F2> . 1.24% 3.65%
---- ----
Total Operating Expenses
Before Reimbursement . . . . . 1.99% 4.25%
Reimbursement . . . . . . . . . . 1.24% 3.50%
---- ----
Total Operating Expenses . . . . .75% .75%
==== ====
____________________
<FN>
<F1> Net of voluntary management fee waiver.
<F2> "Other Operating Expenses" include, for the Fund and the comparable
Avesta Fund, all normal operating expenses for a mutual fund, except
that the "Fund Management" Fee includes administration, custody,
transfer agent and accounting fees.
</TABLE>
<PAGE>
Small Capitalization Fund Operating Expenses
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Pro Forma
--------------
Fund Avesta
Actual Fund
--------------- --------------
<S> <C> <C>
Annual Operating Expenses
Management Fee . . . . . . . . 1.00%<F1> N/A
Investment Advisory Fee . . . N/A .75%
Administration Fee . . . . . . N/A .10%
Other Operating Expenses<F2> . .22% .44%
---- ----
Total Operating Expenses Before
Reimbursement . . . . . . . . 1.22% 1.29%
Reimbursement . . . . . . . . . . .22% .29%
---- ----
Total Operating Expenses . . . . 1.00% 1.00%
---- ----
____________________
<FN>
<F1> Net of voluntary management fee waiver.
<F2> "Other Operating Expenses" include, for the Fund and the comparable
Avesta Fund, all normal operating expenses for a mutual fund, except
that the "Fund Management" Fee includes administration, custody,
transfer agent and accounting fees.
</TABLE>
<PAGE>
Core Equity Fund Operating Expenses
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Pro Forma
-------------
Fund Avesta
Actual Fund
---------- -------------
<S> <C> <C>
Annual Operating Expenses
Management Fee . . . . . . . . 1.00% N/A
Investment Advisory Fee . . . N/A .75%
Administration Fee . . . . . . N/A .10%
Other Operating Expenses<F1> . .14% .39%
---- ----
Total Operating Expenses Before
Reimbursement . . . . . . . . . . 1.14% 1.24%
Reimbursement . . . . . . . . . . .14% .24%
---- ----
Total Operating Expenses . . . . 1.00% 1.00%
---- ----
____________________
<FN>
<F1> "Other Operating Expenses" include, for the Fund and the comparable
Avesta Fund, all normal operating expenses for a mutual fund, except
that the "Fund Management" Fee includes administration, custody,
transfer agent and accounting fees.
</TABLE>
<PAGE>
Example. The following table shows the expenses that would be incurred on a
$1,000 investment based upon payment of operating expenses at the levels set
forth in the tables above, assuming 5% annual return.
<TABLE>
<CAPTION>
The AVESTA
--------------
Portfolio Trust MFIT
--------- -------------- ---------------
<S> <C> <C>
Money Market Fund
1 Year . . . . . . . . . . . . . . $ 5 $ 5
3 Years . . . . . . . . . . . . . . $ 16 $ 16
5 Years . . . . . . . . . . . . . . $ 28 $ 28
10 Years . . . . . . . . . . . . . $ 63 $ 63
Income Fund, Intermediate Term Bond
Fund, Short-Intermediate Term U.S.
Government Securities Fund, U.S.
Government Securities Fund
1 Year . . . . . . . . . . . . . . $ 8 $ 8
3 Years . . . . . . . . . . . . . . $ 24 $ 24
5 Years . . . . . . . . . . . . . . $ 41 $ 41
10 Years . . . . . . . . . . . . . $ 93 $ 93
Equity Groth Fund, Equity Income
Fund, Balanced Fund, Small
Capitalized Fund, Core Equity Fund
1 Year . . . . . . . . . . . . . . $ 10 $ 10
3 Years . . . . . . . . . . . . . . $ 32 $ 32
5 Years . . . . . . . . . . . . . . $ 55 $ 55
10 Years . . . . . . . . . . . . . $122 $122
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.
</TABLE>
Distribution Procedures
Units of the Funds are purchased and redeemed at net asset value per
Unit and are available for purchase only by (i) individual retirement trust
accounts (including Simplified Employee Pension Programs and IRA Rollover
Accounts) for which TCB or one of its affiliated banks serves as trustee and
that are maintained in accordance with Section 408(a) of the Code and (ii)
single or commingled pension or profit-sharing trusts, including corporate
pension or profit-sharing trusts and pension or profit-sharing trusts
benefiting one or more self-employed individuals (generally referred to as
<PAGE>
H.R. 10 or Keogh Plans) for which TCB or one of its affiliated banks serves
as trustee and that are maintained in accordance with Section 401(a) of the
Code (collectively, "Eligible Retirement Accounts"). The minimum initial
investment requirement in the AVESTA Trust is $100,000 and the minimum
initial investment for admission to any Fund is $100. Minimum subsequent
investments are $100. CFD will act as distributor of the Avesta Funds, and
shares of the Avesta Funds will be purchased and redeemed at net asset value
per share without a sales charge. Institutional Shares of the Avesta Funds
may be purchased by shareholders who can meet the minimum initial investment
requirement in any Avesta Fund of $100,000. There are no minimum subsequent
investments. The Retail Shares of the Avesta Funds may be purchased by all
other types of investors. The minimum initial investment requirement in
Retail Shares in any Avesta Fund is $2,500, with a minimum subsequent
investment of $100.
There are no distribution plans for the Funds and the Funds' assets
are not used to pay any cost of distributing Units of the AVESTA Trust. TCB
makes its customers aware, at TCB's expense, of the availability of Units of
the AVESTA Trust as an investment option for Eligible Retirement Accounts.
No Avesta Fund assets attributable to Institutional Shares will be used to
pay distribution costs. However, each Avesta Fund intends to offer Retail
Shares. Each Avesta Fund will adopt a plan of distribution under Rule 12b-1
under the 1940 Act. Pursuant to the 12b-1 plan, each Avesta Fund will be
authorized to spend up to .25% annually of its average net assets
attributable to Retail Shares as compensation to CFD for distribution
services.
Units in any Fund may be redeemed at any time without cost at the net
asset value per Unit determined after receipt of an appropriate order. Units
in any Fund may also be exchanged without cost for Units in any other Fund.
Any exchange is based on the respective net asset values of the Units
involved next determined after receipt by the TCB of a Participating Trust's
instructions for an exchange. Shares of the Avesta Funds may be redeemed and
exchanged on similar terms.
Income, Capital Gain Distributions and Taxes
Any distributions made by the Money Market Fund are made daily to
Participating Trusts of record at the end of the prior business day. No
other Fund declares or pays dividends of net investment income. The Avesta
Funds intend to distribute to their shareholders substantially all their
respective net investment income. Dividends will be (i) declared and paid
daily by the Avesta Money Market Fund, (ii) declared daily and paid monthly
by the Avesta Intermediate Term Bond Fund, Avesta Income Fund, Avesta Short-
Intermediate Term U.S. Government Securities Fund and Avesta U.S. Government
Securities Fund and (iii) declared and paid quarterly by the Avesta Balanced
Fund, Avesta Equity Income Fund, Avesta Equity Growth Fund, Avesta Core
Equity Fund and Avesta Small Capitalization Fund. Shareholders of the Avesta
Funds will have the election of having distributions made in (i) additional
shares of the Avesta Funds, (ii) cash or (iii) a combination thereof.
<PAGE>
The AVESTA Trust has received from the Internal Revenue Service a
determination that it qualifies as a "group trust" arrangement under Revenue
Ruling 81-100 and is therefore exempt from income tax under Section 501(a) of
the Code. Accordingly, the AVESTA Trust is not subject to federal income tax
on taxable income which is distributed to Participating Trusts. Each Avesta
Fund intends to elect and qualify as a regulated investment company under
subchapter M of the Code and, as such, will not be subject to federal income
tax to taxable income and capital gains which are distributed to shareholders
on a timely basis.
Portfolio Transactions
For a description of the portfolio transaction and brokerage policies
of MFIT, see Proposal 3. Under the New Advisory Agreement and Subadvisory
Agreement, Chase and TCB will be subject to the same restrictions and
policies as TCB in its capacity as Trustee under the AVESTA Management
Agreements.
APPROVAL OF THE SUPERVISORY COMMITTEE
In reviewing the proposed Conversion, the Supervisory Committee of
the AVESTA Trust inquired into a number of matters and considered the
following factors, among others:
(1) The current asset size of the Funds and the possibility
that investment in the Avesta Funds will result in additional
economies of scale if the assets of the Avesta Funds increase, which
may enable the Avesta Funds to achieve lower per share expenses than
the per share expenses of the Funds as fixed and relatively fixed
costs can be spread over a larger asset base.
(2) The agreement of Chase to reimburse the Avesta Funds
for expenses in excess of fixed expense caps, and to facilitate the
achievement of certain economies of scale with respect to
Participating Trusts' investments by reducing such expense caps as
the assets of the Avesta Funds grow.
(3) The proposed operations of the Avesta Funds, including
the fee structure and the services to be performed by Chase under the
New Advisory Agreement and TCB under the Subadvisory Agreement,
comparative management and advisory fee structures for funds with
similar investment objectives and the possibility that Chase and TCB
could benefit from the Conversion by increasing assets under
management by attracting investors other than Eligible Retirement
Accounts.
(4) The terms and conditions of the Conversion Plan,
including the agreement of _____ to pay the expenses of the
Conversion.
After considering the Conversion at a meeting held on October __,
1997, the Supervisory Committee of the AVESTA Trust approved the Conversion,
<PAGE>
subject to Participating Trust approval. The Supervisory Committee
determined that the proposed new structure is in the best interests of the
Participating Trusts and will not dilute the interests of the Participating
Trusts. The Supervisory Committee further concluded that the Conversion
places the Funds in a position to achieve potential additional economies of
scale and portfolio management advantages by participation in the Avesta
Funds, as described above, and may shorten the time period in which the Funds
may achieve certain economies with respect to advisory and other fees.
Accordingly, the Supervisory Committee concluded that, while the Conversion
does not provide any immediate benefits to the Participating Trusts, and
there can be no assurance that such benefits will be achieved in the future,
the Conversion is in the best interests of the Participating Trusts.
DISSENTERS' RIGHTS OF APPRAISAL
Participating Trusts of the Funds who object to the Conversion will
not be entitled to any "dissenters' rights" under Texas law. Accordingly, if
the proposed Conversion is approved by the required vote of the outstanding
Units of each of the Funds and the other conditions to the closing are
satisfied, it is anticipated that the transaction will be consummated as soon
as practicable after the Meeting. Participating Trusts will be notified of
the Conversion as soon as practicable thereafter.
Although there are no dissenters' rights available to Participating
Trusts of the Funds, Participating Trusts will have the right to redeem their
Units prior to the Closing. In addition, unless it notifies the AVESTA Trust
to the contrary, any Participating Trust who votes against the approval of
the Conversion will be treated as having elected to redeem such Participating
Trust's investments in the Avesta Funds (assuming that the Conversion is
approved and all other conditions to the Conversion will have been
satisfied). The redemption will be effected at net asset value prior to the
conversion, and the proceeds of such redemption will be held in
_______________ pending receipt of investment instructions from the
Participating Trust. All other Participating Trusts of the Avesta Funds
(including those which abstain or fail to return proxies or vote at the
Meeting) will receive shares of the appropriate Avesta Funds.
VOTE REQUIRED
Approval of the Conversion requires the affirmative vote of the
Participating Trusts holding a majority of each Fund's outstanding Units.
The term "majority" means the vote of the lesser of (i) 67% of the Fund's
outstanding Units present at the Meeting if the Participating Trusts holding
more than 50% of the outstanding Units of such Fund are present in person or
by proxy, or (ii) more than 50% of such Fund's outstanding Units. Approval
of this Proposal is contingent upon approval of Proposals 2(a) and 3 by each
Fund. If the requisite number of Participating Trusts of each Fund do not
approve the proposed Conversion, or the Conversion is not consummated for any
other reason, then the AVESTA Trust will continue its current operations.
<PAGE>
2. MODIFICATION OF THE INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS OF THE FUNDS
At the Meeting of the Supervisory Committee of the AVESTA Trust held
on October __, 1997, the Committee, including each Committee member who is
not an "interested person," within the meaning of the 1940 Act, of the AVESTA
Trust or TCB, on the recommendation of TCB, considered and unanimously
approved, subject to approval by Participating Trusts, proposed changes to
(i) the Funds' fundamental investment objectives, which shall be effective
upon the Conversion, and (ii) certain of the Funds' fundamental and
nonfundamental policies, all of which shall be effective whether or not the
Conversion occurs. While Participating Trusts will vote on the proposed
changes to each Fund's objectives and policies, to the extent that the
Conversion occurs, the objectives and policies of the Avesta Funds will be
identical to those approved by the Participating Trusts.
As was discussed at the Meeting, TCB had undertaken an analysis of
each Fund's current fundamental investment objectives and policies and, where
appropriate, had recommended that, subject to Participating Trust approval,
certain changes should be adopted. Based on TCB's review and
recommendations, the Supervisory Committee believes that changes should be
implemented with respect to the investment objectives of each Fund to be
effective upon the Conversion. The changes to the objectives are primarily
designed to reflect the intention of the Funds to attract investors other
than retirement accounts. The changes to the policies fall within the
following three categories: (i) modifications of certain policies, (ii)
elimination of certain policies and (iii) reclassification of certain
policies as nonfundamental policies, which could thereafter be changed with
the approval of the Supervisory Committee (or the Board of Trustees of MFIT
following the Conversion) without a unitholder vote.
Based on the recommendations of TCB, the Supervisory Committee has
approved the proposed changes to the investment objectives, restrictions and
certain of the investment policies and believes that they are in the best
interests of the Funds for the following reasons:
(i) Standardization - Some of the Funds' restrictions differ in form
and substance from similar restrictions of similar mutual funds
advised by Chase and TCB. Increased standardization could help
promote operational efficiencies and facilitate the monitoring of
portfolio compliance.
(ii) Modernization - The Funds' restrictions are derived from
restrictions which have been in effect, without changes, for a number
of years. The Supervisory Committee, acting on TCB's recommendation,
recommends that each Fund should modernize its restrictions, where
appropriate, to conform to current regulation and authorize the use
of currently available financial instruments and techniques. In
addition, recent changes in regulation of mutual fund disclosure
documents at the state level have effectively eliminated the need for
certain fundamental restrictions.
<PAGE>
(iii) Clarification - Some of the Funds' restrictions contain
ambiguities that, if interpreted in a narrow way, might prevent the
Fund from following the intent of the restriction. Accordingly, the
Supervisory Committee, acting on TCB's recommendation, recommends
that the Funds change these restrictions, where appropriate, to
eliminate any ambiguities.
(iv) Flexibility - The Funds' restrictions are proposed to be changed
so as to allow the Funds to respond to recent and future regulatory
developments and changes in the financial markets. In addition,
restrictions prohibiting certain transactions have been or may be
changed or eliminated by a federal securities regulator. In order to
give the Funds more flexibility in responding to regulatory and
market developments, the Supervisory Committee, acting on TCB's
recommendations, recommends changing, eliminating or reclassifying
some of the restrictions described below.
In addition, the Supervisory Committee, based on representations from
Chase and TCB, believes that the risks inherent in investing in each of the
respective Funds should not change materially from those inherent at the
present time under each Fund's current investment restrictions, since Chase
and TCB have represented that none of the proposed changes is intended or
anticipated to have an immediate impact on the day-to-day investment program
utilized by a Fund.
The significance of an investment restriction being fundamental is
that it may be changed only with the approval of Participating Trusts or
shareholders, as the case may be. Except for any investment policies or
restrictions which are specifically identified as fundamental, each Fund's
investment policies and restrictions are nonfundamental.
Proposal 2(a) Changes in Fundamental Investment Objectives for Each Fund
Based on the recommendations of TCB, the Supervisory Committee has
approved the proposed changes to the investment objective for each of the
Funds. In the chart below, the current investment objective is set forth
first in italics. In each case, it is proposed that the investment objective
be restated to read as indicated below the current objective. In addition, a
capsule summary of the reasons behind the proposed change is provided below
the proposed objective. Participating Trusts of each Fund will be asked to
approve the amendment to such Fund's investment objective.
Money Market Fund:
Current: The Money Market Fund seeks to increase retirement assets by
providing a high level of current income with equal emphasis
on liquidity and stability of principal.
Proposed: The Money Market Fund's objective is to provide maximum
current income consistent with the preservation of capital
and the maintenance of liquidity.
<PAGE>
Explanation: The amendment is intended to eliminate the reference to
retirement assets and to standardize the objective with
similar mutual funds advised by Chase and TCB.
Income Fund:
Current: The Income Fund seeks to increase retirement assets by
investing in securities that earn a high level of current
income with consideration also given to safety of principal.
Proposed: The Income Fund's objective is to invest in securities that
earn a high level of current income with consideration also
given to safety of principal.
Explanation: The amendment is intended to eliminate the reference to
retirement assets.
Intermediate Term Bond Fund:
Current: The Intermediate Term Bond Fund seeks to increase retirement
assets primarily through current income, with consideration
also given to stability of principal.
Proposed: The Intermediate Term Bond Fund's objective is to provide
current income, with consideration also given to stability
of principal.
Explanation: The amendment is intended to eliminate the reference to
retirement assets.
Equity Growth Fund:
Current: The Equity Growth Fund seeks to increase retirement assets
primarily through capital appreciation. Current income is a
secondary objective.
Proposed: The Equity Growth Fund's primary objective is to provide
capital appreciation. Current income is a secondary
objective.
Explanation: The amendment is intended to eliminate the reference to
retirement assets.
Equity Income Fund:
Current: The Equity Income Fund seeks to increase retirement assets
through investments in securities that provide both capital
appreciation as well as current income.
Proposed: The Equity Income Fund's objective is to invest in
securities that provide capital appreciation as well as
current income.
<PAGE>
Explanation: The amendment is intended to eliminate the reference to
retirement assets.
Balanced Fund:
Current: The Balanced Fund seeks to increase retirement assets by
investing in a combination of bonds and equity-based
securities, which include common stocks and debt securities
and preferred stocks that are convertible into common
stocks, to provide a balance of current income and growth of
capital.
Proposed: The Balanced Fund's objective is to provide a balance of
current income and growth of capital.
Explanation: The amendment is intended to eliminate the references to (a)
retirement assets and (b) the techniques which the Balanced
Fund might employ. The Fund will have a nonfundamental
policy that it will seek to meet its objective by investing
in a combination of bonds and equity securities, which
include common stocks and those debt securities and
preferred stock that are convertible into common stock.
Short-Intermediate Term U.S. Government Securities Fund:
Current: The Short-Intermediate Term Fund seeks to increase
retirement assets by providing as high a level of current
income as is consistent with the preservation of capital.
Proposed: The Short-Intermediate Term Fund's objective is to provide
as high a level of current income as is consistent with the
preservation of capital.
Explanation: The amendment is intended to eliminate the reference to
retirement assets.
U.S. Government Securities Fund:
Current: The U.S. Government Securities Fund seeks to increase
retirement assets by providing current income with emphasis
on the preservation of capital.
Proposed: The U.S. Government Securities Fund's objective is to
provide current income with emphasis on the preservation of
capital.
Explanation: The amendment is intended to eliminate the reference to
retirement assets.
<PAGE>
Small Capitalization Fund
Current: The Small Cap Fund seeks to increase retirement assets
primarily through capital appreciation.
Proposed: The Small Cap Fund's objective is to provide capital
appreciation.
Explanation: The amendment is intended to eliminate the reference to
retirement assets.
Core Equity Fund
Current: The Core Equity Fund seeks to increase retirement assets by
maximizing total investment return through emphasis on long-
term capital appreciation and current income consistent with
reasonable risk.
Proposed: The Core Equity Fund's objective is to maximize total
investment return through emphasis on long-term capital
appreciation and current income consistent with reasonable
risk.
Explanation: The amendment is intended to eliminate the reference to
retirement assets.
Proposals 2(b)-2(p) Changes in Fundamental Investment Restrictions
In the chart below, the current investment restriction is set forth
first in italics. In each case, it is proposed that the investment
restriction be restated to read as indicated below the current restriction.
In addition, a capsule summary of the reasons behind the proposed change is
provided below the proposed restriction.
Proposal 2(b)
Current: Each Fund may not invest more than 5% of its assets in any one
issuer (except securities issued or guaranteed as to principal or interest by
the United States Government, its agencies and instrumentalities) with
respect to 75% of the assets of the Trust or purchase more than 10% of the
outstanding voting securities of such issuer; for purposes of this
limitation, identification of the "issuer" will be based on a determination
of the source of assets and revenues committed to paying dividends or meeting
interest and principal payments on each security.
Current: Each Fund may not purchase any securities that would cause more
than 10% of the value of the Fund's total assets at the time of such purchase
to be invested in the securities of one issuer, provided that there is no
limitation with respect to investments in obligations issued or guaranteed by
the United States Government, its agencies and instrumentalities or
obligations of domestic branches of United States banks.
<PAGE>
Proposed nonfundamental restriction: Each 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).
Explanation: The reclassification as nonfundamental and restatement of the
restriction would standardize the restriction. The elimination of the
restriction on investing for the purpose of exercising control stems from the
elimination of certain state regulatory requirements with respect to mutual
fund disclosure documents. The restated restriction conforms to the current
diversification requirements set forth in the 1940 Act.
Proposal 2(c)
Current: Each Fund may not borrow money except for temporary emergency
purposes and then only in an amount not exceeding 5% of the value of the
total assets of the Fund, with respect to the Money Market Fund, the Income
Fund, the Equity Growth Fund, the Equity Income Fund and the Balanced Fund,
and 33-1/3% of the value of the total assets of the Fund with respect to the
Short-Intermediate Term U.S. Government Securities Fund, the U.S. Government
Securities Fund, the Intermediate Term Bond Fund, the Small Capitalization
Fund and the Core Equity Fund. Each Fund will repay all borrowings before
making additional investments and interest paid on such borrowings will
reduce income.
Current: Each Fund may not pledge, mortgage or hypothecate its assets to any
extent greater than 10% of the value of the total assets of the Fund, with
respect to the Money Market Fund, the Income Fund, the Equity Growth Fund,
the Equity Income Fund and the Balanced Fund, and 33-1/3% of the value of the
total assets of the Fund with respect to the Short-Intermediate Term U.S.
Government Securities Fund, the Intermediate Term Bond Fund, the Small
Capitalization Fund and the Core Equity Fund.
Proposed fundamental restriction: Each Fund may not 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.
Explanation: The proposed amendment clarifies and modernizes the restriction
on borrowing. Borrowing may be necessary to address excessive or
unanticipated liquidations of Fund Units that exceed available cash. The
proposed amendment would increase flexibility by permitting a Fund to make
additional investments even if it had outstanding borrowings provided, that
such borrowings represent 5% or less of the Fund's assets. With respect to
the Money Market Fund, the Income Fund, the Equity Income Fund, the Equity
Growth Fund and the Balanced Fund, the proposed amendment would increase
permitted borrowing from 5% to 33-1/3% of total assets. The proposed
<PAGE>
amendment also would allow each Fund to enter into reverse repurchase
agreements, subject to a limitation of 33-1/3% of a Fund's assets.
Reverse repurchase agreements involve the sale and simultaneous commitment to
repurchase a portfolio security at an agreed-upon price and time. Each Fund
may use this practice to generate cash for redemptions without selling
securities during unfavorable market conditions. 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). The Funds would
be required to pay interest on amounts obtained through reverse repurchase
agreements, which are considered borrowings under federal securities laws.
The proposed restriction on mortgaging, pledging or hypothecating securities
has been eliminated to provide the Funds with additional flexibility in
taking, or adding to, certain investment positions.
Proposal 2(d)
Current: Each Fund may not issue senior securities.
Proposed fundamental restriction: Each Fund may not 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.
Explanation: Under the 1940 Act, an open-end investment company (such as the
AVESTA Trust) cannot issue senior securities except under very limited
conditions. The proposed amendment eliminates the outright prohibition on
issuing senior securities and would permit issuances of senior securities
under some circumstances. The proposed amendment modernizes and standardizes
the restriction among the various mutual funds managed by Chase and TCB. The
proposed restriction excludes those issuances which are allowed by current
regulatory interpretations and policies, and which are consistent with
current investment marketplace practices. Therefore, the proposed
fundamental restrictions will allow, for example, the following investments
even though they may result in the issuance of senior securities: The Funds
could, to the extent permitted by applicable law or exemptive order, (a)
enter into commitments, including reverse repurchase agreements and delayed
delivery and when-issued securities; (b) engage in transactions that may
result in the issuance of a senior security; (c) engage in short sales of
securities; (d) purchase and sell futures contracts and related options; (e)
borrow money; and (f) issue multiple classes of securities in each case
subject to any other applicable restrictions. The proposal also clarifies
<PAGE>
that collateral arrangements with respect to certain options and futures
transactions would not be deemed senior securities.
Proposal 2(e)
Current: Each Fund may not underwrite any issue of securities.
Proposed fundamental restriction: Each Fund may not 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.
Explanation: The proposed amendment is intended to clarify the basic
limitation on underwriting securities, and would also exclude from the
restriction those transactions that current regulatory interpretations and
policies allow.
Proposal 2(f)
Current: Each Fund may not purchase or sell real estate or real estate
mortgage loans, but this shall not prevent investments in instruments secured
by real estate or interests therein or in marketable securities of issuers
that engage in real estate operations.
Proposed fundamental restriction: Each Fund may not 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.
Explanation: The restatement of the restriction is intended to standardize
the restriction among the various mutual funds managed by Chase and TCB. For
purposes of proposed restriction 2(f), real estate includes Real Estate
Limited Partnerships.
Proposal 2(g)
Current: Each Fund may not make loans to other persons, except the Trust may
make time or demand deposits with banks, provided that time deposits that
mature in more than seven days do not exceed 10% of the value of the net
assets of the Fund for whose account the Trust has made the time deposits.
The Trust also may purchase bonds, debentures or similar obligations that are
publicly distributed. Further, the Trust may loan to a bank, broker-dealer
or other recognized financial institution portfolio securities not in excess
of 10% of the value of the net assets of any Fund if collateral values are
continuously maintained at no less than 100% by marking to market daily. The
Trust may enter into repurchase agreements as long as repurchase agreements
maturing in more than seven days do not exceed 10% of the value of the net
assets of the Fund. Any investment in illiquid assets made pursuant to this
<PAGE>
subparagraph is subject to the restrictions of subparagraph (m).
(Investments in illiquid assets are dealt with in Proposal 2(m).)
Proposed fundamental restriction: Each Fund may not 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.
Explanation: The proposed amendment permits the Funds to invest in fixed
income securities even if they are not "publicly distributed." This allows
the Funds to have the flexibility to adapt to market developments such as the
increase in private offerings of debt securities. The proposed amendment
also deletes references to illiquid securities, which are to be exclusively
dealt with in proposed restriction 2(m) below.
The proposed amendment is also intended to increase and clarify the basic
limitation on securities lending, and would also exclude those transactions
that current regulatory interpretations and policies allow. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities, and the Fund may invest the cash collateral
and earn additional income, or it may receive an agreed-upon amount of
interest income from the borrower who has delivered equivalent collateral or
a letter of credit. 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 an 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.
Proposal 2(h)
Current: Each Fund may not purchase securities on margin or sell short.
Proposed nonfundamental restriction: 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.
Explanation: The proposed change modernizes the restriction with respect to
purchases on margin and short sales and provides more flexibility for the
Funds. The reclassification as nonfundamental could enable the Funds to
respond more quickly to changes in financial markets.
In a short sale, an investor sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. In
<PAGE>
an investment technique known as a short sale "against the box," which are
the only short sales to be permitted, an investor sells securities short
while owning the same securities in the same amount, or having the right to
obtain equivalent securities.
Proposal 2(i)
Current: Each Fund may not purchase or retain securities of an issuer if
those members of the Supervisory Committee, each of whom owns more than 1/2
of 1% of such securities, together own more than 5% of the securities of such
issuer.
It is proposed that this restriction be eliminated.
Explanation: The elimination of this restriction stems from the elimination
of certain state regulatory requirements with respect to mutual fund
disclosure documents.
Proposal 2(j)
Current: Each Fund may not purchase or sell commodities or commodity
contracts, except that any Fund may purchase or sell futures contracts on
financial instruments, such as bank certificates of deposit and United States
Treasury securities, foreign currencies and stock indexes and options on any
such futures if such options are written by other persons and if (i) the
futures or options are listed on a national securities or commodities
exchange, (ii) the aggregate premiums paid on all such options that are held
at any time do not exceed 20% of the total assets of that Fund and (iii) the
aggregate margin deposits required on all such futures or options thereon
held at any time do not exceed 5% of the total assets of that Fund; provided,
however, that the Short-Intermediate Term U.S. Government Securities Fund,
the U.S. Government Securities Fund, the Intermediate Term Bond Fund, the
Small Capitalization Fund and the Core Equity Fund are not subject to the
limitations set forth in (i) and (iii).
Proposed fundamental restriction: Each Fund may not 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.
Explanation: The elimination of the percentage requirements with respect to
aggregate premiums paid and aggregate margin deposits required stems from the
elimination of certain state regulatory requirements with respect to mutual
fund disclosure documents. The elimination is not intended to alter in any
material way the manner in which the Funds utilize these investment
techniques. The proposal also standardizes the restriction among the Funds
as well as among mutual funds advised by Chase and TCB.
<PAGE>
Proposal 2(k)
Current: Each Fund may not acquire securities of any other investment
company unless (i) immediately after such purchase or acquisition not more
than 3% of the total outstanding stock of such issuer is owned by the Trust
and all affiliated persons of the Trust; and (ii) the Trust has not offered
or sold and is not proposing to offer or sell any security issued by it
through a principal underwriter or otherwise at a public offering price that
includes a sales load of more than 1 1/2%.
Proposed nonfundamental restriction: Except for each Fund's ability 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, 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.
Explanation: The proposed amendment to the restriction in other investment
companies and its reclassification as nonfundamental are intended to
modernize the restriction so as to allow the Funds to have the flexibility to
invest in other investment companies to the extent permitted by the 1940 Act.
Proposal 2(l)
Current: Each Fund may not invest in interests, or sell put, call, straddle
or spread options or interests, in oil, gas or other mineral exploration or
development programs.
Proposed nonfundamental restriction: Each Fund may not purchase or sell
interests in oil, gas or mineral leases.
Explanation: The proposed amendment clarifies the restriction. The proposed
reclassification of this restriction as nonfundamental would enable the Funds
to adapt in the event that the permissible guidelines for such investments
change at some time in the future. This would avoid the delay and expense
involved in obtaining a unitholder vote.
Proposal 2(m)
Current: Each Fund may not invest its assets in securities that are not
readily marketable (including repurchase agreements maturing in more than
seven days), debt securities for which there is no established market
(including variable rate master demand notes for which there is no
established market), and except as described below, securities of foreign
issuers that are not listed on a recognized domestic or foreign securities
exchange, and any other assets for which a readily available market does not
exist at the time of the purchase or subsequent valuation, to any extent
greater than 10% (15% with respect to the Short-Intermediate Term U.S.
Government Securities Fund, the U.S. Government Securities Fund, the
Intermediate Term Bond Fund, the Small Capitalization Fund and the Core
Equity Fund) of the value of the net assets of the Fund. With respect to the
<PAGE>
Intermediate Term Bond Fund, the Small Capitalization Fund and the Core
Equity Fund, the Fund's determination of whether securities of foreign
issuers are subject to the foregoing limitation shall be based on whether the
securities are "liquid" irrespective of whether the issue is listed on a
recognized domestic or foreign securities exchange. If through the
appreciation of illiquid assets, or the depreciation of liquid assets, the
Fund has more than 10% (or 15% as applicable) of its net assets invested in
illiquid assets, the Fund will reduce its holdings of illiquid assets to 10%
(or 15% as applicable) or less of its net assets.
Proposed nonfundamental restriction: Each Fund may not invest more than 15%
(10% with respect to the Money Market Fund) of its net assets in illiquid
securities.
Explanation: The proposed amendment modernizes the restriction by permitting
all non-money market Funds to invest in illiquid securities to the fullest
extent permitted. The proposed amendment would also standardize the
restriction among the Funds as well as among investment companies advised by
Chase and TCB and would remove certain interpretations of what may constitute
illiquid securities. By doing this, each Fund would be subject to the same
current interpretations, from time to time, of what constitutes an illiquid
security under SEC releases and other relevant authority. The
reclassification of this restriction as nonfundamental would enable the Funds
to adapt in the event that the permissible guidelines for such investments
change at some time in the future. This would avoid the delay and expense
involved in obtaining a unitholder vote.
Proposal 2(n)
Current: The investment in warrants, valued at the lower of cost or market,
may not exceed 5.0% of the value of any Fund's net assets. Included within
that amount, but not to exceed 2.0% of the value of any Fund's net assets,
may be warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange. Warrants acquired by any Fund in units or attached
to securities may be deemed to be without value.
It is proposed that this restriction be eliminated.
Explanation: The elimination of the restriction stems from the elimination
of certain state regulatory requirements with respect to mutual fund
disclosure documents.
Proposal 2(o)
Current: Each Fund may not purchase any securities that would cause more
than 25% of the value of its total assets at the time of such purchase to be
invested in the securities of one or more issuers conducting their principal
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the United
States Government, its agencies and instrumentalities or obligations of
domestic branches of United States banks.
<PAGE>
Proposed fundamental restriction: Each Fund may not purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities, or repurchase
agreements secured thereby) if, as a result, more than 25% of the Fund's
total assets would be invested in the securities of companies whose principal
business activities are in the same industry. Notwithstanding the foregoing,
(i) 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 and (ii) the Money Market Fund may invest more
than 25% of their total assets in obligations issued by banks, including U.S.
banks.
Explanation: The proposed amendment would clarify the restriction by
excepting positions in futures and options transactions in U.S. Government
securities and certain bank obligations backed by bank letters of credit or
guarantees. The proposed amendment would also standardize the restriction
among mutual funds advised by Chase and TCB.
For purposes of proposed restriction 2(o), industrial development bonds,
where the payment of principal and interest is the ultimate responsibility of
companies within the same industry are grouped together as an "industry."
Proposed investment restriction 2(o), 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
proposed restriction 2(o).
Proposal 2(p)
Current: Each Fund may not invest in companies for the purpose of exercising
control.
It is proposed that this restriction be eliminated.
Explanation: The elimination of the restriction stems from the elimination
of certain state regulatory requirements with respect to mutual fund
disclosure documents.
Proposal 2(q)-2(r) Changes in Fundamental Investment Policies
Proposal 2(q)
Each Fund other than the Intermediate Term Bond Fund currently has a
fundamental policy that it will not invest more than 30% of its assets in
securities of foreign issuers. It is proposed that this policy be
reclassified as nonfundamental and amended such that each Fund may invest up
to 30% of its assets in foreign securities. It is proposed that this policy
be reclassified as nonfundamental to provide the Funds with greater
flexibility to react to market developments while avoiding the delay and
expense associated with obtaining unitholder approval. However, no Fund has
a present intention to invest more than 30% its assets in foreign securities.
<PAGE>
Proposal 2(r)
Introduction: Master/Feeder Fund Structure
At a meeting held on October __, 1997, the Supervisory Committee
considered and approved, subject to Participating Trust approval, the
adoption of a new fundamental investment policy with respect to each Fund
which would allow each Fund to convert to a Master/Feeder Structure. The
Master/Feeder Fund Structure is an arrangement that allows several investment
companies with different shareholder-related features or distribution
channels, but having substantially the same investment objective, policies
and restrictions, to combine their investments by investing all of their
assets in the same portfolio instead of managing them separately, which may
result in economies of scale.
There is no present intention to convert any Fund to a Master/Feeder
Fund structure. In adopting this new fundamental investment policy, a Fund
would be given the flexibility to convert to a Master/Feeder Fund Structure
and pursue investment opportunities consistent with its investment objective
with the approval of the Supervisory Committee, without the requirement of
submitting such matter to a vote of unitholders, which is a time-consuming
and expensive process. The Supervisory Committee will consider and evaluate
specific proposals prior to the implementation of any conversion to a
Master/Feeder Fund Structure. The AVESTA Trust prospectus and statement of
additional information would be amended to reflect the implementation of a
Fund's conversion to a Master/Feeder Fund Structure and its unitholders would
be notified.
Under a Master/Feeder Fund Structure, a Fund will have the ability to
invest all of its investable assets in another investment company (the
"Master Portfolio") having substantially the same investment objectives and
policies as the Fund in exchange for shares of beneficial interest in the
Master Portfolio. This could mean that the only investment securities that
will be held by a Fund will be the Fund's interest in the Master Portfolio.
Each Master Portfolio will be a series of an investment company ("Master
Trust"), as each Fund is a series of the AVESTA Trust.
Conversion to a Master/Feeder Fund Structure may serve to attract
other collective investment vehicles with different shareholder servicing or
distribution arrangements and with shareholders that would not have invested
in a Fund. In this event, additional assets may allow for operating expenses
to be spread over a larger asset base. In addition, a Master/Feeder Fund
Structure may serve as an alternative for large, institutional investors in a
Fund who may prefer to offer separate, proprietary investment vehicles and
who otherwise might establish such vehicles outside of a Fund's current
operational structure. Conversion to a Master/Feeder Fund Structure may
allow a Fund to stabilize its expenses and achieve certain operational
efficiencies. No assurance can be given, however, that the Master/Feeder
Fund Structure will result in a Fund stabilizing its expenses or achieving
greater operational efficiencies.
<PAGE>
New Investment Policy
The Supervisory Committee has approved with respect to each Fund,
subject to Participating Trust approval, the adoption of a new fundamental
investment policy that would permit a Fund to convert to the Master/Feeder
Fund Structure by investing all or a part of its assets in another
appropriate investment fund. As discussed above under "Introduction:
Master/Feeder Fund Structure," the purpose of this Proposal is to allow a
Fund to enhance its flexibility and permit it to take advantage of potential
efficiencies available through investment of all or a part of its assets in
another investment company. At present, certain of the fundamental
investment restrictions of each Fund, such as those limiting investment in a
single issuer or concentration in an industry, may prevent it from investing
all or a part of its assets in another registered investment company. The
Supervisory Committee proposes that these restrictions be modified by adding
the following fundamental investment policy:
Notwithstanding any other investment policy or restriction,
a 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.
A Fund's methods of operation and shareholder services would not be
materially affected by its investment in a corresponding Master Portfolio,
except that the assets of the Fund may be managed as part of a larger pool.
If a Fund invested all of its assets in a Master Portfolio, it would hold
only beneficial interests in the Master Portfolio; the Master Portfolio would
directly invest in individual securities of other issuers. The Fund would
otherwise continue its normal operation. The Supervisory Committee would
retain the right to withdraw a Fund's investment from its corresponding
Master Portfolio at any time it determines that it would be in the best
interest of unitholders; the Fund would then resume investing directly in
individual securities of other issuers or invest in another Master Portfolio.
Additional Information Regarding Each Master Portfolio
Each Master Portfolio would be a series of a Master Trust which, like
the Trust, would be an open-end management investment company under the 1940
Act. It is expected that the Master Trust would have one series to
correspond to each series of the Trust that converts to the Master/Feeder
Fund Structure. The investment objective and policies of each Master
Portfolio would be substantially the same as those of the corresponding Fund;
in seeking to achieve the same objective as the Fund, the Master Portfolio
would invest in the same type of securities and engage in the same
transactions permitted by the investment policies and restrictions of the
corresponding Fund.
Chase or TCB would be the investment adviser of each Fund's
corresponding Master Portfolio. Entities that currently perform services
with respect to each Fund, such as administrative or custodial services,
would perform substantially similar services for each Master Portfolio.
<PAGE>
Each Master Portfolio normally would not hold meetings of investors
except as required under the 1940 Act. As an investor in the Master
Portfolio, a Fund would be entitled to vote in proportion to its relative
interest in the Master Portfolio. As to any issue on which Fund unitholders
vote, a Fund would vote its interest in the Master Portfolio in proportion to
the votes cast by its unitholders. If there were other investors in the
Master Portfolio, there could be no assurance that any issue that receives a
majority of the votes cast by a Fund's unitholders would receive a majority
of votes cast by all Master Portfolio interestholders.
Changing a fundamental policy of a Master Portfolio would require
approval of the holders of a majority of interests in the Master Portfolio.
The Board of Trustees of the Master Trust would have the ability to change
nonfundamental policies without prior interestholder approval.
In addition to a vote to change a fundamental policy, examples of
matters that would require approval of interestholders of the Master Trust
include, subject to applicable statutory and regulatory requirements: the
election of Trustees; approval of an investment advisory contract; certain
amendments to the trust instrument of the Master Trust; a merger,
consolidation or sale of substantially all of a Master Portfolio's assets; or
any additional matters required or authorized by the trust instrument of the
Master Trust or any registration statement of the Master Trust, or as the
Trustees may consider desirable.
Generally, a Fund would hold a meeting of its unitholders to obtain
instructions on how to vote its interest in the Master Portfolio when the
Master Portfolio is conducting a meeting of its interestholders. However,
subject to applicable statutory and regulatory requirements, a Fund would not
seek instructions from its unitholders with respect to (i) any proposal
relating to the Master Portfolio which, if made with respect to a Fund, would
not require the vote of Fund unitholders, or (ii) any proposal relating to
the Master Portfolio that is identical in all material respects to a proposal
previously approved by the Fund's unitholders.
Examples of proposals with respect to a Master Portfolio that may not
require the approval of unitholders of its corresponding Fund would include
the following, subject to applicable statutory and regulatory requirements:
(i) approval of an advisory agreement with Chase or TCB on terms that do not
differ in any material respect from an advisory agreement then in effect with
respect to that Fund; (ii) election of Trustees of the Master Trust who had
previously been elected as Supervisory Committee members of the AVESTA Trust;
and (iii) selection, or ratification of the selection of, a firm of
independent certified public accountants that had previously been approved by
unitholders of that Fund. Examples of matters that would be submitted to
unitholders of a Master Portfolio's corresponding Avesta Fund would include
the following: (i) approval of an advisory agreement with an investment
adviser other than Chase or TCB, or one that provided for compensation in
excess of the amount of compensation payable to Chase or TCB pursuant to the
advisory agreement then in effect with respect to that Fund, (ii) election
when required by the 1940 Act of Trustees of the Master Trust who had not
previously been elected by unitholders as Supervisory Committee members of
<PAGE>
the AVESTA Trust; or (iii) selection of, or the ratification of the selection
of, a firm of independent certified public accountants that had not
previously been approved by the unitholders of the Fund. Any proposal
submitted to holders in a Master Portfolio, and that is not required to be
voted on by unitholders of that Master Portfolio's corresponding Fund, would
nonetheless be voted on by the Supervisory Committee.
The Master Trust's operations would be governed by its trust
instrument and applicable law. The operations of the Master Trust and the
Master Portfolios, like those of the AVESTA Trust and the Funds, would be
subject to the provisions of the 1940 Act and the rules and regulations of
the SEC thereunder and applicable state securities laws.
Trustees and Officers of the Master Trust
The initial interestholders of the Master Trust would be expected to
elect as Trustees of the Master Trust, the individuals serving as members of
the Supervisory Committee of the AVESTA Trust. Subject to the provisions of
its trust instrument, the business of the Master Trust would be supervised by
its Trustees, who would serve indefinite terms and who would have all powers
necessary or convenient to carry out their responsibilities. The Trustees of
the Master Trust would elect officers of the Master Trust whom they deemed
appropriate.
Tax Consequences of Investment in a Master Portfolio
The AVESTA Trust would apply for a ruling from the Internal Revenue
Service ("IRS") or would obtain an opinion of tax counsel to the effect that
its contribution of assets of a Fund to its corresponding Master Portfolio in
exchange for an interest in that Master Portfolio would not result in the
recognition of gain or loss to that Fund for federal income tax purposes.
It is intended that each Fund would qualify as a regulated investment
company under Subchapter M of the Code. In each taxable year that a Fund so
qualified, the Fund (but not its unitholders) would be relieved of Federal
income tax on that part of its investment company taxable income and net
capital gain that is distributed to its unitholders. Neither a Fund nor the
Master Portfolio would be expected to be required to pay any Federal income
or excise taxes. Distributions from a Fund, except for distributions from a
Fund designated as long-term capital gain distributions, would continue to be
taxable to its unitholders as ordinary income, whether received in cash or
reinvested in Fund units.
VOTE REQUIRED
The proposed modifications have been approved by the Supervisory
Committee in connection with its consideration of the Conversion for the
reasons specified above and in Proposal 1. Approval of each modification of
the investment objective, policies and restrictions with respect to a Fund
requires the affirmative vote of the Participating Trusts holding a majority
of such Fund's outstanding Units. The term "majority" means the vote of the
lesser of (i) 67% of the Fund's outstanding Units present at the Meeting if
<PAGE>
the Participating Trusts holding more than 50% of the outstanding Units of
such Fund are present in person or by proxy, or (ii) more than 50% of such
Fund's outstanding Units.
Proposal 2(a) will not be effective unless the proposed Conversion of
the Funds is completed. Approval of Proposals 2(b)-2(r) for each Fund is not
contingent upon the approval of any of the other Proposals in this Proxy
Statement.
3. APPROVAL OF THE NEW ADVISORY AGREEMENTS
Proposal 3(a) Approval of Investment Advisory Agreement between MFIT and
Chase Proposal 3(b) Approval of Sub-Investment Advisory Agreement between Chase
and TCB
The Avesta Funds are currently being organized for the purpose of
continuing the investment operations of the Funds. Under Proposal 3(a),
Participating Trusts are being asked to authorize or not authorize each Fund,
as the holder of one Institutional Share of its corresponding Avesta Fund
immediately prior to the Conversion, to approve the proposed New Advisory
Agreement of MFIT. In a separate vote, under Proposal 3(b), Participating
Trusts are being asked to authorize or not authorize each Fund, as the holder
of one Institutional Share of its corresponding Avesta Fund immediately prior
to the Conversion, to approve the proposed Subadvisory Agreement. As
discussed above, upon the Conversion, the AVESTA Management Agreements will
be terminated.
As noted above, the Funds are currently managed by TCB pursuant to
three separate Management Agreements, dated as of (i) March 29, 1988, with
respect to the Money Market Fund, Income Fund, Equity Growth Fund, Equity
Income Fund and Balanced Fund, (ii) February 17, 1993, with respect to the
Short-Intermediate Term U.S. Government Securities Fund, U.S. Government
Securities Fund, Small Cap Fund and Core Equity Fund, and (iii) April 22,
1994, with respect to the Intermediate Term Bond Fund. The initial trustees
of MFIT approved the New Advisory Agreement on September 24, 1997.
As discussed above, although TCB will continue to be responsible for
the day-to-day management of the Avesta Funds after the Conversion, it is
proposed that Chase serve as investment adviser to the Avesta Funds pursuant
to the New Advisory Agreement between Chase and MFIT. In addition, it is
proposed that Chase and TCB enter into the Subadvisory Agreement pursuant to
which TCB will act as sub-investment adviser to the Avesta Funds. Therefore,
in anticipation of the Conversion, Participating Trusts are being asked to
authorize or not authorize each Fund, as the holder of one Institutional
Share of its corresponding Avesta Fund immediately prior to the Conversion,
to approve the New Advisory Agreement and Subadvisory Agreement. Copies of
the forms of New Advisory Agreement and Subadvisory Agreement are attached as
Exhibits B-1 and B-2 hereto. This summary does not purport to be a complete
description of the New Advisory Agreement or Subadvisory Agreement and is
subject to the terms and conditions of the New Advisory Agreement and
Subadvisory Agreement set forth in Exhibit B-1 and B-2.
<PAGE>
DESCRIPTION OF CHASE
Chase is an indirect wholly-owned subsidiary of The Chase Manhattan
Corporation, a registered bank holding company ("CMC"). Chase's principal
executive offices are located at 270 Park Avenue, New York, New York 10017.
Chase is a New York state chartered bank which provides commercial banking
and trust services. As of August 31, 1997, Chase and certain of its
affiliates provided investment management services with respect to assets of
approximately $___ billion. CMC's principal executive offices are located at
270 Park Avenue, New York, New York 10017.
The services provided by Chase to the Avesta Funds will not be
exclusive; Chase will be free to serve as manager for, and render investment
advisory services to, others. Chase is currently the investment adviser for
the investment companies set forth below:
<TABLE>
<CAPTION>
Approximate Investment Advisory
Open-End Management Net Assets as of Fee
Investment Companies August 31, 1997 (annual rate)
- ------------------------------- ------------------ -------------------
(as a % of
(in millions) net assets)
<S> <C> <C>
Mutual Fund Trust Vista Cash $______ .10%
Management Fund . . . . . .
Mutual Fund Group Vista ______ .45%<F1>
Balanced Fund . . . . . . .
Vista Capital Growth Fund . ______ .40%
Vista Bond Fund . . . . . . ______ .00%<F1>
Vista Equity Income Fund . . ______ .25%<F1>
Vista Growth and Income Fund ______ .40%
Vista International Equity ______ .00%<F1>
Fund . . . . . . . . . . .
Vista Large Cap Equity Fund ______ .00%<F1>
Vista Short-Term Bond Fund . ______ .00%<F1>
Vista Small Cap Equity Fund ______ .65%
Vista Small Cap ______ .65%
Opportunities Fund . . . .
Vista U.S. Government ______ .30%
Securities Fund . . . . .
Mutual Fund Select Group ______ .50%
Vista Select Balanced Fund .
Vista Select Bond Fund . . . ______ .30%
Vista Select Equity Income ______ .40%
Fund . . . . . . . . . . .
Vista Select Intermediate ______ .30%
Term Bond Fund . . . . . .
Vista Select International ______ 1.00%
Equity Fund . . . . . . .
<PAGE>
<CAPTION>
Approximate Investment Advisory
Open-End Management Net Assets as of Fee
Investment Companies August 31, 1997 (annual rate)
- ------------------------------- ------------------ -------------------
(as a % of
(in millions) net assets)
<S> <C> <C>
Vista Select Large Cap ______ .40%
Equity Fund . . . . . . .
Vista Select Large Cap ______ .40%
Growth Fund . . . . . . .
Vista New Growth ______ .65%
Opportunities Fund . . . .
Vista Short-Term Bond Fund . ______ .25%
Vista Select Small Cap ______ .65%
Value Fund . . . . . . . .
Mutual Fund Variable Annuity ______ .00%<F1>
Trust Asset Allocation
Portfolio . . . . . . . . .
Capital Growth Portfolio . . ______ .00%<F1>
Growth and Income Portfolio ______ .00%<F1>
International Equity ______ .00%<F1>
Portfolio . . . . . . . .
Money Market Portfolio . . ______ .00%<F1>
____________________
<FN>
<F1> Reflects waiver arrangements for such funds' most recent fiscal years.
Without such waivers, the Investment Advisory Fees for the Vista
Balanced Fund, Vista Bond Fund, Vista Equity Income Fund, Vista
International Equity Fund, Vista Large Cap Equity Fund, Vista Short-
Term Bond Fund, Asset Allocation Portfolio, Capital Growth Portfolio,
Growth and Income Portfolio, International Equity Portfolio and Money
Market Portfolio would be .50%, .30%, .40%, 1.00%, .40%, .25%, .55%,
.60%, .60%, .80% and .25%, respectively.
</TABLE>
Certain information regarding the Directors and the principal
executive officers of Chase is set forth below. The address of each such
person is 270 Park Avenue, New York, New York 10017.
<PAGE>
Name Position with Chase Principal Occupation
- ---- ----------------- --------------------
Thomas G. Labreque President and Chief Chairman, Chief Executive
Operating Officer and Officer and a Director of
Director 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.
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
<PAGE>
Name Position with Chase Principal Occupation
- ---- ----------------- --------------------
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
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
<PAGE>
Name Position with Chase Principal Occupation
- ---- ----------------- --------------------
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
<PAGE>
Name Position with Chase Principal Occupation
- ---- ----------------- --------------------
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
<PAGE>
Name Position with Chase Principal Occupation
- ---- ----------------- --------------------
Richard D. Wood Director Retired Chairman of the
Board, Eli Lilly and
Company
DESCRIPTION OF TCB
TCB is an indirect wholly-owned subsidiary of CMC. TCB's principal
executive offices are located at Texas Commerce Tower, Houston, Texas 77252.
TCB is a national banking association which provides commercial banking and
trust services. As of August 31, 1997, TCB and certain of its affiliates
provided investment management services with respect to assets of
approximately $___ billion.
The services provided by TCB to the Avesta Funds will not be
exclusive; TCB will be free to serve as manager for, and render investment
advisory services to, others. In addition to the Funds, TCB is currently the
sub-adviser and day-to-day investment adviser for the investment companies
set forth below:
<TABLE>
<CAPTION>
Approximate Investment
Open-End Management Net Assets as of Subadvisory Fee
Investment Companies August 31, 1997 (annual rate)
- --------------------------------- ------------------ ----------------
(as a % of net
(in millions) assets)
<S> <C> <C>
Mutual Fund Trust
Vista Cash Management Fund . . $ _______ .05%
Vista Tax Free Money Market _______ .05%
Fund . . . . . . . . . . . . .
</TABLE>
Certain information regarding the Directors and the principal
executive officers of TCB is set forth below. The address of each such
person is P.O. Box 2558, Houston, Texas 77252.
<PAGE>
Name Position with TCB Principal Occupation
- ---- ----------------- --------------------
John L. Adams Director, Vice Chairman
Elaine B. Agather CEO, TCB-Fort Worth, Vice
Chairman, TCB-Metroplex
David W. Biegler Director Chairman, President
and CEO, ENSERCH
Corporation, 300 South
St. Paul St., Dallas,
TX 75201
Robert W. Bishop Executive Vice President
Alan R. Buckwalter, III Director, Vice Chairman
H. Worth Burke Executive Vice President
Dan S. Hallmark Chairman and CEO TEC-
Beaumont
Dennis R. Hendrix Director Chairman, PanEnergy
Corp., P.O. Box 1642,
Houston, TX 77251-1642
Harold S. Hook Director Chairman and CEO,
American General
Corporation, P.O. Box
3247, Houston, TX
77253
Robert C. Hunter Director, Vice Chairman
Ed Jones President and CEO TCB-
Midland
R. Bruce LaBoon Director Managing Partner,
Liddell, Sapp, Zivley,
Hill & LaBoon, L.L.P.,
3400 Texas Commerce
Tower, Houston, TX
77002-3004
Shelaghmichael C. Lents Executive Vice President
S. Todd Maclin President, TCB-Dallas,
Executive Vice President
Al Martinez-Fonts Chairman and CEO TCB-El
Paso
<PAGE>
Name Position with TCB Principal Occupation
- ---- ----------------- --------------------
Beverly H. McCaskill Executive Vice President
Joe C. McKinney Chairman and CEO TCB-San
Antonio
Scott J. McLean Executive Vice President
Randal B. McLelland President and CEO, TCB-Rio
Grande Valley
David L. Mendez Executive Vice President
W. Merriman Morton Chairman and CEO TCB-Austin
Cathy Nunnally Senior Vice President
Paul Poullard Executive Vice President
Jeffrey B. Reitman General Counsel
Edward N. Robinson Executive Vice President
Ann V. Rogers Executive Vice President
Marc J. Shapiro Director, Chairman,
President and CEO
Larry L. Shryock Executive Vice President
Richard Summers Executive Vice President
Kenneth L. Tilton Executive Vice President
and Controller
Harriet S. Wasserstrum Executive Vice President
Gary K. Wright Executive Vice President
Banking laws, including the Glass-Steagall Act as currently
interpreted, prohibit bank holding companies and their affiliates from
sponsoring, organizing, controlling, or distributing shares of, mutual funds,
and generally prohibit banks from issuing, underwriting, selling or
distributing securities. These laws do not prohibit banks or their
affiliates from acting as investment adviser, administrator or custodian to
mutual funds or from purchasing mutual fund shares as agent for a customer.
Chase, TCB and MFIT believe that Chase and TCB (including their affiliates)
may perform the services to be performed by it as described in this Proxy
<PAGE>
Statement without violating such laws. If future changes in these laws or
interpretations required Chase or TCB to alter or discontinue any of these
services, it is expected that the Board of Trustees of MFIT 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.
Approval of AVESTA Management Agreements
The Supervisory Committee of the AVESTA Trust, including a majority
of the members who are not "interested persons" (as defined in the Investment
Company Act) of the Funds or the Trustee, most recently approved the AVESTA
Management Agreements on February 13, 1997. The AVESTA Management Agreement
for the Money Market, Equity Growth, Equity Income and Balanced Funds was
last approved by unitholders on April 25, 1991. The AVESTA Management
Agreements for the remaining Funds were approved by sole unitholders prior to
commencement of the public offerings of Units.
THE NEW ADVISORY AGREEMENT AND THE AVESTA MANAGEMENT AGREEMENTS
The terms of the AVESTA Management Agreements differ significantly
from the New Advisory Agreement. Set forth below is a description of the
material provisions of each of the New Advisory Agreement and the AVESTA
Management Agreement.
Services to be Performed
Under the New Advisory Agreement, Chase will be responsible for
making decisions with respect to, and placing orders for, all purchases and
sales of the portfolio securities of the Avesta Funds. Under the AVESTA
Management Agreements, the Trustee as investment adviser currently manages
the investment of the assets of each Fund. Chase's responsibilities under
the New Advisory Agreement are similar to those of the Trustee under the
AVESTA Management Agreements in that Chase would supervise the Funds'
investments and maintains a continuous investment program, places purchase
and sale orders and pays costs of certain clerical and administrative
services involved in managing and servicing the Funds' investments and
complying with regulatory reporting requirements. Subject to Participating
Trust approval of the Subadvisory Agreement, Chase would delegate certain of
these responsibilities to TCB. Accordingly, TCB would have similar
responsibilities with respect to the actual day-to-day investment management
of the Funds before and after the Conversion. Under both the New Advisory
Agreement and the AVESTA Management Agreements, Chase and TCB, respectively,
are obligated to furnish employees, office space and facilities required for
operation of MFIT or the AVESTA Trust, as the case may be. However,
reflecting the structure of the AVESTA Trust, under the AVESTA Management
Agreements, the Trustee is also obligated to provide or arrange for the
provision of custodial, administrative and account servicing functions,
including preparation and distribution of communications to unitholders,
accounting and recordkeeping. After the Conversion, Chase would provide
<PAGE>
administrative, and custody and accounting services to the Funds under
separate contracts.
Expenses and Advisory Fees
The New Advisory Agreement provides that the Avesta Funds will pay
Chase a monthly advisory fee based upon the net assets of the Avesta Funds,
at the annual rate of .30% of net assets of the Avesta Money Market Fund,
.50% of net assets of the Avesta Income Fund, .50% of net assets of the
Avesta Intermediate Term Bond Fund, .75% of net assets of the Avesta Equity
Growth Fund, .75% of net assets of the Avesta Equity Income Fund, .75% of net
assets of the Avesta Balanced Fund, .50% of net assets of the Avesta Short-
Intermediate Term U.S. Government Securities Fund, .50% of net assets of the
Avesta U.S. Government Securities Fund, .75% of net assets of the Avesta
Small Capitalization Fund and .75% of net assets of the Avesta Core Equity
Fund. Chase may waive fees from time to time to assist the Avesta Funds in
maintaining competitive yields.
Under the AVESTA Management Agreements, the Funds pay the Trustee a
management fee which serves as compensation for the bundle of services it
provides. As discussed above, the Trustee is entitled to receive a monthly
management fee (i) for its services with respect to the Money Market Fund, at
an annual rate of .65% of the average daily net assets of the Money Market
Fund; (ii) for its services with respect to the Income Fund, Equity Growth
Fund, Equity Income Fund, Balanced Fund and Core Equity Fund, at an annual
rate of 1.00% of the first $250,000,000 of the average daily net assets of
each such Fund, .90% of the next $250,000,000 of such assets, and .80% of
such assets in excess of $500,000,000; (iii) for its services with respect to
the Short-Intermediate Term U.S. Government Securities Fund and Intermediate
Term Bond Fund, at an annual rate of .75% of the first $250,000,000 of the
average daily net assets of each such Fund, .65% of the next $250,000,000 of
such assets, and .55% of such assets in excess of $500,000,000; (iv) for its
services with respect to the U.S. Government Securities Fund, at an annual
rate of .85% of the first $250,000,000 of the average daily net assets of
each such Fund, .75% of the next $250,000,000 of such assets, and .65% of
such assets in excess of $500,000,000; and (v) for its services with respect
to the Small Capitalization Fund, at an annual rate of 1.15% of the first
$250,000,000 of the average daily net assets of such Fund, 1.05% of the next
$250,000,000 of such assets, and .95% of such assets in excess of
$500,000,000.
Under the New Advisory Agreement, except as indicated above, each
Avesta Fund would be responsible for its operating expenses including, but
not limited to, taxes; interest; fees (including fees paid to its Trustees
who are not affiliated with Chase, TCB or any of their affiliates); fees
payable to the SEC; state securities qualification fees; association
membership dues; costs of preparing and printing prospectuses for regulatory
purposes and for distribution to existing shareholders; advisory and
administrative fees; charges of the custodian and transfer agent; insurance
premiums; auditing and legal expenses; costs of shareholders' reports and
shareholder meetings; any extraordinary expenses; and brokerage fees and
<PAGE>
commissions, if any, in connection with the purchase or sale of portfolio
securities.
Under the terms of the AVESTA Management Agreements, Avesta is
responsible for the same types of expenses as Chase under the New Advisory
Agreement. In addition, however, under the AVESTA Management Agreements, the
Trustee pays (i) all marketing and advertising expenses of the AVESTA Trust;
(ii) expenses of all employees, office space and facilities necessary to
carry out its duties under the AVESTA Management Agreements; and (iii) all
expenses incurred by it in connection with acting as investment adviser,
other than costs (including taxes and brokerage commissions) of securities
purchased for the AVESTA Trust and the expenses of computer facilities of
third parties in connection with fund accounting. Expenses incurred by the
Trustee in connection with acting as investment adviser include the costs of
statistical and research data, other accounting, data processing, bookkeeping
and internal auditing services, rendering periodic and special reports to the
Supervisory Committee, and other costs associated with providing investment
research and portfolio management. (See "Comparison of the AVESTA Trust and
MFIT--Advisory and Administrative Services" and "--Expense Limitations" under
Proposal 1.)
Pursuant to the AVESTA Management Agreements, TCB is contractually
obligated to reimburse expenses of a particular Fund exclusive of the
management fee until such Fund's asset are greater than or equal to
$250,000,000. Expense reimbursements are currently in effect for all of the
Funds. Under the New Advisory Agreement, Chase would not be contractually
obligated to maintain Avesta Fund expenses at any particular level. However,
as indicated under Proposal 1, Chase has voluntarily agreed to waive fees
payable to it and/or reimburse expenses for a period of at least one year
commencing January 1, 1998 to the extent necessary to prevent each Fund's
Total Operating Expenses for such period from exceeding the amount of the
management fee as set forth in the AVESTA Management Agreements. (See
"Comparison of the AVESTA Trust and MFIT--Expense Limitations" under Proposal
1.)
Subcontracting
Chase will be authorized by the New Advisory Agreement to employ or
associate with such other persons or entities as it believes to be
appropriate to assist it in the performance of its duties. Any such person
is required to be compensated by Chase, not by MFIT, and to be approved by
the shareholders of MFIT as required by the 1940 Act. Under the AVESTA
Management Agreements, the Trustee may arrange for the performance of certain
of its obligations by third parties, including investment advisers who are
affiliated or unaffiliated. In order to provide fund accounting services to
the AVESTA Trust, TCB has contracted for the use by its personnel of certain
computer facilities. The expense of the use of these facilities are required
to be paid by the AVESTA Trust.
<PAGE>
Limitation on Liability
The New Advisory Agreement provides that Chase will not be liable for
any error of judgment or mistake of law or for any act or omission or loss
suffered by MFIT in connection with the performance of the New Advisory
Agreement except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or from willful
misfeasance, bad faith, or gross negligence in the performance of its duties
or reckless disregard of its obligations and duties under the Agreement.
Chase would be as fully responsible to MFIT for the acts of any sub-adviser
as it is for its own acts.
The AVESTA Management Agreements provide that the Trustee shall give
the AVESTA Trust the benefit of its best judgment and effort in rendering
services under the Agreements, but that the Trustee shall not be liable for
any loss sustained by the AVESTA Trust by reason of the adoption of any
investment policy or by the purchase, retention, sale or exchange of any
investment. The AVESTA Management Agreements provide that the Trustee shall
not be protected against liability by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or by reason of
its reckless disregard of its obligations and duties under the Agreements.
Duration and Termination
The New Advisory Agreement will be in effect for a two year period,
unless sooner terminated, and will continue in effect from year to year
thereafter with respect to a Avesta Fund only so long as such continuation is
approved at least annually by (i) the Board of Trustees of MFIT or the vote
of a "majority", as defined in the 1940 Act, of the outstanding voting
securities of such Avesta Fund, and (ii) a majority of those Trustees who are
neither parties to the New Advisory Agreement nor "interested persons", as
defined in the 1940 Act, of any such party, acting in person at a meeting
called for the purpose of voting on such approval. The New Advisory
Agreement will terminate automatically in the event of its "assignment", as
defined in the 1940 Act. In addition, the New Advisory Agreement is
terminable at any time as to any Avesta Fund without penalty by the Board of
Trustees of MFIT or by vote of the holders of a majority of such Avesta
Fund's outstanding voting securities upon 60 days' written notice to Chase,
and by Chase on 60 days' written notice to MFIT. The AVESTA Management
Agreements have substantially similar provisions with respect to duration and
termination.
THE SUBADVISORY AGREEMENT
The following description of the Subadvisory Agreement is qualified
in its entirety by reference to the form of the Subadvisory Agreement
attached hereto as Exhibit B-2.
The proposed arrangement between Chase and TCB under the Subadvisory
Agreement permits Chase to delegate to TCB portfolio management duties
relating to transactions in the securities held by such Avesta Funds. With
respect to the day-to-day management of the Avesta Funds under the
<PAGE>
Subadvisory Agreement, TCB would make decisions concerning, and place all
orders for, purchases and sales of securities and help maintain the records
relating to such purchases and sales. TCB may, in its discretion, provide
such services through its own employees or the employees of one or more
affiliated companies that are qualified to act as an investment adviser to
the Trust under applicable laws and are under the common control of Chase;
provided that (i) all persons, when providing services under the Subadvisory
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 TCB.
Chase and TCB would bear all expenses in connection with the
performance of their respective services under the agreement.
As investment adviser, Chase would oversee the management of the
Avesta Funds under the Subadvisory Agreement, and, subject to the general
supervision of the Board of Trustees, would make recommendations and provide
guidelines to TCB based on general economic trends and macroeconomic factors.
Among the recommendations which may be provided by Chase to TCB would be
guidelines and benchmarks against which the Avesta Funds would be managed.
From the fee paid by the Avesta Funds under the New Advisory Agreement to
Chase, Chase will bear responsibility for payment of sub-advisory fees to
TCB. Therefore, the Avesta Funds would not bear any increase in advisory fee
rates resulting from the New Advisory Agreement and the Subadvisory
Agreement.
The Supervisory Committee of the AVESTA Trust, including a majority
of the Trustees who are not interested persons of the Avesta Funds, Chase or
TCB, unanimously approved the Subadvisory Agreement at a meeting held on
October __, 1997. If approved by shareholders, unless sooner terminated, the
Subadvisory Agreement will remain in effect for two years and will thereafter
continue for successive one-year periods, provided that such continuation is
specifically approved at least annually by the Board of Trustees of MFIT, or
by the vote of a "majority of the outstanding voting securities" of the
Avesta Funds under the Subadvisory Agreement as defined under the 1940 Act
and, in either case, by a majority of the Trustees who are not interested
persons of MFIT, Chase or TCB, by vote cast in person at a meeting called for
such purposes. The Subadvisory Agreement is terminable at any time, without
penalty, by vote of the Board of Trustees of MFIT, by Chase by the vote of "a
majority of the outstanding voting securities" of the Avesta Funds under the
Subadvisory Agreement, or by TCB, upon 60 days' written notice. The
Subadvisory Agreement will terminate automatically in the event of its
assignment, as defined under the 1940 Act.
In the event that both the New Advisory Agreement and the Subadvisory
Agreement are not approved by shareholders of any Fund, neither the New
Advisory Agreement nor the Subadvisory Agreement will be implemented for such
Fund, the Conversion will not be consummated and the Supervisory Committee of
the AVESTA Trust will consider the appropriate course of action.
<PAGE>
EXPENSE LIMITATION
For a description of Chase's commitment to reimburse the Avesta Funds
in order to limit the expenses of the Avesta Funds, see "Pro Forma Expenses"
under Proposal 1.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Chase, as the investment adviser to the Avesta Funds, will have
responsibilities with respect to the Avesta Funds' portfolio transactions and
brokerage arrangements, similar to those of the Trustee with respect to the
AVESTA Trust pursuant to the Funds' policies and the AVESTA Management
Agreements, subject to the overall authority of the Board of Trustees of
MFIT. In addition, the Subadvisory Agreement will provide that TCB's
responsibilities with respect to the Avesta Funds' portfolio transactions and
brokerage arrangements will be equivalent to those of Chase under the New
Advisory Agreement. Accordingly, the description below of Chase's
responsibilities under the New Advisory Agreement would also apply to TCB's
responsibilities under the Subadvisory Agreement.
Under the New Advisory Agreement, Chase, subject to the general
supervision of the Board of Trustees of MFIT, is responsible for the
placement of orders for the purchase and sale of portfolio securities for
each Avesta Fund with brokers and dealers selected by Chase, which may
include brokers or dealers affiliated with Chase to the extent permitted by
the 1940 Act and MFIT's policies and procedures applicable to the Avesta
Funds. Chase shall use its best efforts to seek to execute portfolio
transactions at prices which, under the circumstances, result in total costs
or proceeds being the most favorable to the Avesta Funds. In assessing the
best overall terms available for any transaction, Chase shall consider all
factors it deems relevant, including the breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer, research services provided to Chase, and
the reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. In no event shall Chase be under any
duty to obtain the lowest commission or the best net price for any Avesta
Fund on any particular transaction, nor shall Chase be under any duty to
execute any order in a fashion either preferential to any Avesta Fund
relative to other accounts managed by Chase or otherwise materially adverse
to such other accounts.
In selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to Chase, the Avesta Funds and/or the other
accounts over which Chase exercises investment discretion. Chase is
authorized to pay a broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction for an Avesta
Fund which is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if Chase determines in good
faith that the total commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
<PAGE>
terms of either that particular transaction or the overall responsibilities
of Chase with respect to accounts over which it exercises investment
discretion. Chase shall report to the Board of Trustees of MFIT regarding
overall commissions paid by the Avesta Funds and their reasonableness in
relation to the benefits to the Avesta Funds.
In executing portfolio transactions for an Avesta Fund, Chase 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 Avesta Funds or its other clients if, in Chase's reasonable judgment,
such aggregation (i) will result in an overall economic benefit to the Avesta
Fund, taking into consideration the advantageous selling or purchase price,
brokerage commission and other expenses, and trading requirements, and (ii)
is not inconsistent with the policies set forth in MFIT's registration
statement and the Avesta Fund's Prospectus and Statement of Additional
Information. In such event, Chase will allocate the securities so purchased
or sold, and the expenses incurred in the transaction, in an equitable
manner, consistent with its fiduciary obligations to the Avesta Fund and such
other clients.
It is possible that certain of the brokerage and research services
received will primarily benefit one or more other investment companies or
other accounts for which Chase exercises investment discretion. Conversely,
MFIT or any of its portfolios may be the primary beneficiary of the brokerage
or research services received as a result of portfolio transactions effected
for such other accounts or investment companies.
Evaluation by the Supervisory Committee
At a meeting held on October __, 1997, the AVESTA Trust's Supervisory
Committee, including the members who are not "interested persons" (as defined
in the 1940 Act) of the AVESTA Trust, Chase, or their affiliates, approved
the terms of the New Advisory Agreement and Subadvisory Agreement for each
Fund and recommended that Participating Trusts of each Fund authorize each
Fund, as the holder of one Institutional Share of its corresponding Avesta
Fund immediately prior to the Conversion, to approve such agreements. The
New Advisory Agreement and Subadvisory Agreement will become effective on
date the Conversion is consummated.
In approving the New Advisory Agreement and Subadvisory Agreement and
determining to submit them to Participating Trusts for their authorization
for each Fund, as the holder of one Institutional Share of its corresponding
Avesta Fund immediately prior to the Conversion, to approve the agreements,
the Supervisory Committee of the AVESTA Trust has determined that the New
Advisory Agreement and Subadvisory Agreement will enable the Funds to obtain
high-quality services at costs which it deems appropriate and reasonable and
that approval of the New Advisory Agreement and Subadvisory Agreement is in
the best interests of each Fund and its Participating Trusts. In connection
with its review of the New Advisory Agreement and Subadvisory Agreement, the
Supervisory Committee requested and reviewed, with the assistance of legal
counsel, materials furnished by Chase and TCB.
<PAGE>
In approving the New Advisory Agreement and Subadvisory Agreement,
the Supervisory Committee focused primarily on the nature, quality and scope
of the operations and advisory services to be provided by Chase and TCB to
the Avesta Funds, which are expected to continue to be provided after the
Conversion with no increase in fees. (As discussed above, however, certain
administrative and other non-advisory services which are currently provided
by the Trustee under the AVESTA Management Agreements would be provided by
other entities if the New Advisory Agreement is approved.) In connection
with these primary considerations, comparisons were made between the New
Advisory Agreement and Subadvisory Agreement, the AVESTA Management
Agreements and similar arrangements for other investment companies,
particularly with regard to levels of fees, and the benefits to Chase and TCB
of their relationship with each Fund. In addition, the Supervisory Committee
considered the commitment of Chase and TCB to maintain and enhance the
services currently provided to the Funds by TCB. In connection with these
considerations, the Supervisory Committee considered possible alternatives to
approval of the New Advisory Agreement and Subadvisory Agreement.
Based upon its review of the above factors, the Supervisory Committee
concluded that the New Advisory Agreement and Subadvisory Agreement are each
in the best interests of each Fund and its Participating Trusts.
VOTE REQUIRED
The New Advisory Agreement and the Subadvisory Agreement have been
approved by the Supervisory Committee in connection with its consideration of
the Conversion, for the reasons specified in Proposal 1. Authorization for
the Funds, as the holder of one Institutional Share of its corresponding
Avesta Fund immediately prior to the Conversion, to approve the New Advisory
Agreement and Subadvisory Agreement with respect to each Avesta Fund requires
the affirmative vote of Participating Trusts holding a majority of the
outstanding Units of each Fund corresponding to such Avesta Fund. The term
"majority" means the vote of the lesser of (i) 67% of such Fund's outstanding
Units present at the Meeting if Participating Trusts holding more than 50% of
the outstanding Units of such Fund are present in person or by proxy, or (ii)
more than 50% of such Fund's outstanding Units.
Consummation of the Conversion is conditioned upon approval of
Proposals 3(a) and 3(b) by the Participating Trusts of all of the Funds. The
effectiveness of the New Advisory Agreement and Subadvisory Agreement are
contingent upon approval of Proposal 1.
4. ELECTION OF TRUSTEES
At the Meeting, Participating Trusts are being asked to authorize or
not authorize each Fund, as the holder of one Institutional Share of its
corresponding Avesta Fund immediately prior to the Conversion, to elect two
Trustees of MFIT to hold office until their successors shall be elected and
have qualified.
It is intended that the proxies will be voted for the authorization
to elect the nominees named below, each of whom has consented to be named and
<PAGE>
have indicated their intent to serve if elected. If any nominee will be
unavailable for any reason, the proxy holders named in the form of Proxy are
expected to consult with the Supervisory Committee of the AVESTA Trust in
determining how to vote the shares represented by them.
Set forth below as to each nominee for election is his or her name,
age, principal occupation during the past five years and other directorships
held in public companies. Neither nominee owns any Units in the Funds.
<PAGE>
Units Owned
Beneficially
Name and Principal Occupation and Per Cent of
Position Age and Other Information Class
- ---------------- ------- -------------------------- -------------------
Sarah E. Jones 46 President and Chief -0-
Operating Officer of Chase
Mutual Funds Corp.;
formerly Managing Director
for the Global Asset
Management and Private
Banking Division of The
Chase Manhattan Bank.
Trustee, Mutual Fund
Group, Mutual Fund Trust,
Mutual Fund Select Group,
Mutual Fund Select Trust,
Mutual Fund Variable
Annuity Trust, Capital
Growth Portfolio, Growth
and Income Portfolio and
International Equity
Portfolio (collectively,
the "Vista Funds").
Fergus Reid, III 65 Chairman and Chief -0-
Executive Officer,
Lumelite Corporation since
September 1985. Chairman
and Trustee, the Vista
Funds. Trustee, Morgan
Stanley Funds.
Set forth below are the current members of the Supervisory Committee of
the AVESTA Trust who will be Trustees of MFIT. Henry J. Lartigue, the
Chairman of the Supervisory Committee, will not be a Trustee of MFIT.
<PAGE>
Units Owned
Beneficially
Principal Occupation and Per Cent of
Name and Position Age and Other Information Class
- ----------------- ------- ------------------------- --------------------
Frank A. Liddell, Jr. 68 Retired; Of Counsel, See Note <F1>
Liddell, Sapp, Zivley,
Hill & LaBoon. Member of
AVESTA Trust Supervisory
Committee from inception
to 1997.
George E. McDavid 66 President, Houston See Note <F1>
Chronicle Publishing
Company. Member of AVESTA
Trust Supervisory
Committee from inception
to 1997.
Kenneth L. Otto 66 Retired; formerly, Senior See Note <F1>
Vice President, Tenneco
Inc. Member of AVESTA
Trust Supervisory
Committee from inception
to 1997.
H. Michael Tyson 58 Retired; formerly See Note <F1>
Executive Vice President,
Texas Commerce Bank from
19__ to 1995. Member of
AVESTA Trust Supervisory
Committee from 1988 to
1997.
____________________
[FN]
<F1> As of April 21, 1997, Mr. Liddell owned 1.15% of the outstanding Units
of the Short-Intermediate Term U.S. Government Securities Fund. The
Supervisory Committee members and officers of the AVESTA Trust as a
group owned less than 1% of each other Fund's Units, all of which were
acquired for investment purposes.
Set forth below as to each executive officer of MFIT is his or her name,
position with MFIT, principal occupation during the past five years, other
directorships held in public companies and the number of shares of beneficial
interest owned by him or her. Thomas J. Press and Nancy Burge, the Treasurer
and Secretary, respectively, of the AVESTA Trust, will not be officers of
MFIT.
<PAGE>
Shares Owned
Beneficially
Principal Occupation and Per Cent of
Name and Position Age and Other Information Class
- --------------------- -------- ---------------------- -------------------
Martin R. Dean 33 Associate Director, -0-
Accounting Services,
BISYS Fund Services;
formerly Senior
Manager, KPMG Peat
Marwick (1987-1994).
W. Anthony Turner 36 Senior Vice President -0-
and Regional Client
Executive, BISYS Fund
Services; formerly
Senior Vice President,
First Union Brokerage
Services, Inc. and
Senior Vice President,
Nationsbank.
All Trustees, -0-
nominees and
officers as a
group (8
persons)
TRANSACTIONS WITH AND REMUNERATION OF TRUSTEES AND OFFICERS
No compensation, direct or otherwise, other than through fees paid to
Chase or TCB, will be payable by MFIT to any of its officers or Trustees who
are affiliated with Chase or TCB (or any of their affiliates). Those
Trustees who are not affiliated with Chase or TCB (or any of their
affiliates) will be paid an annual fee of $5,000 plus $500 for each meeting
of the Board of Trustees or any committee thereof that such Trustee attends,
together with reimbursement for reasonable expenses incurred in attending
such meetings.
TCB as Trustee, or an affiliate thereof, currently pays the compensation
and expenses of the AVESTA Trust's officers. For its services, TCB is paid a
fee, as described above under Proposal 1. All of the AVESTA Trust's officers
are officers of the Trustee or of an affiliate of the Trustee and thus may be
deemed to share indirectly in the fees paid to the Trustee.
Chase, TCB and their affiliates have had, and expect in the future to
have, banking and other business transactions in the ordinary course of
business with corporations of which those Trustees who are not "interested
persons" of Chase or TCB are directors or officers. Any such transactions
are made on substantially the same terms as those prevailing at the time for
comparable transactions with other persons, including, where applicable,
interest rates, collateral, fees and other charges, and do not involve more
than the normal risk of collectability (in the case of loans) or present
other unfavorable features.
<PAGE>
VOTE REQUIRED
The authorization to elect each of the Nominees listed above requires the
affirmative vote of Participating Trusts holding a majority of the
outstanding Units of the AVESTA Trust. The term "majority" means the vote of
the lesser of (i) 67% of such Fund's outstanding Units present at the Meeting
if Participating Trusts holding more than 50% of the outstanding Units of
such Fund are present in person or by proxy, or (ii) more than 50% of such
Fund's outstanding Units.a majority of all the votes entitled to be cast at
the Meeting by all Participating Trusts of the AVESTA Trust.
NEXT MEETING OF PARTICIPATING TRUSTS
If the Conversion is not approved and a subsequent meeting of
Participating Trusts is scheduled to be held, any Participating Trust wishing
to submit a written proposal for consideration for inclusion in the proxy
statement and form of proxy (i) should send its written proposal or proposals
to: The AVESTA Trust, 26-TCBE-45, P.O. Box 2558, Houston, Texas 77252-8045,
which proposal or proposals must be received by the AVESTA Trust in
reasonable time prior to the meeting, as determined by the Supervisory
Committee, and (ii) must satisfy all other legal requirements.
OTHER MATTERS
At the time of the preparation of this Proxy Statement, management has not
been informed of any matters that will be presented for action at the Meeting
other than the proposals specifically set forth in the Notice of Meeting. If
other matters are properly presented to the Meeting for action, it is
intended that the persons named in the Proxy will vote or refrain from voting
in accordance with their best judgment on such matters.
By Order of the Supervisory Committee
Thomas J. Press
Secretary
October __, 1997The AVESTA Trust
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF CONVERSION
This AGREEMENT AND PLAN OF Conversion (the "Agreement") is made as of this
__th day of ________, 1997 by and among Texas Commerce Bank National
Association, as trustee (the "Trustee") of the AVESTA Trust ("AVESTA Trust"),
a collective investment trust organized under the laws of the State of Texas
consisting of multiple investment portfolios including the Money Market Fund,
the Income Fund, the Intermediate Term Bond Fund, the Equity Growth Fund, the
Equity Income Fund, the Balanced Fund, the Short-Intermediate Term U.S.
Government Securities Fund, the U.S. Government Securities Fund, the Small
Capitalization Fund and the Core Equity Fund (collectively, the "Funds") and
Mutual Fund Investment Trust ("MFIT"), a Massachusetts business trust
consisting of multiple investment portfolios including the Money Market Fund,
the Income Fund, the Intermediate Term Bond Fund, the Equity Growth Fund, the
Equity Income Fund, the Balanced Fund, the Short-Intermediate Term U.S.
Government Securities Fund, the U.S. Government Securities Fund, the Small
Capitalization Fund and the Core Equity Fund (collectively, the "Avesta
Funds").
WHEREAS, the parties desire that all the assets of each of the Money
Market, Income, Intermediate Term Bond, Equity Growth, Equity Income,
Balanced, Short-Intermediate Term U.S. Government Securities, U.S. Government
Securities, Small Capitalization and Core Equity Funds of the AVESTA Trust be
transferred to, and acquired by, its corresponding Avesta Fund as stated
herein in exchange for Institutional Shares of such Avesta Fund, which shall
thereafter be distributed by AVESTA Trust to its unitholders as described in
this Agreement; and
WHEREAS, the parties intend that the Avesta Funds will have nominal assets
and liabilities before the transactions described above (the "Conversion")
and will continue the historic business and investment operations of the
Funds thereafter, and that in this regard certain additional actions shall be
taken as described in this Agreement; and
WHEREAS, the parties intend that in connection with the Conversion AVESTA
Trust shall be terminated and deregistered as described in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and subject to the terms and conditions thereof, the
parties hereto, intending to be legally bound, agree as follows:
1. Sales and Transfers of Assets.
(a) At the Effective Time (as defined in Section 9 of this Agreement),
all property of every description, and all interests, rights, privileges and
powers of each of the Funds (the "Assets") shall be transferred and conveyed
by each Fund to its corresponding Avesta Fund and shall be accepted by its
corresponding Avesta Fund, such that at and after the Effective Time, all
assets of each Fund shall become and be the assets of its corresponding
Avesta Fund.
<PAGE>
(b) In exchange for the transfer of the Assets from the following Funds,
each such Fund shall be entitled to have simultaneously issued to it by MFIT
at the Effective Time full and fractional Institutional Shares (to the third
decimal place) of the following Avesta Funds (the "Institutional Shares"),
which Institutional Shares be accepted by such Funds and shall represent all
of the outstanding shares of such Avesta Funds: (i) to the AVESTA Trust Money
Market Fund series, Institutional Shares of the Avesta Money Market Fund,
(ii) to the AVESTA Trust Income Fund series, Institutional Shares of the
Avesta Income Fund, (iii) to the AVESTA Trust Intermediate Term Bond Fund
series, Institutional Shares of the Avesta Intermediate Term Bond Fund, (iv)
to the AVESTA Trust Equity Growth Fund series, Institutional Shares of the
Avesta Equity Growth Fund, (v) to the AVESTA Trust Equity Income Fund series,
Institutional Shares of the Avesta Equity Income Fund, (vi) to the AVESTA
Trust Balanced Fund series, Institutional Shares of the Avesta Balanced Fund,
(vii) to the AVESTA Trust Short-Intermediate Term U.S. Government Securities
Fund series, Institutional Shares of the Avesta Short-Intermediate Term U.S.
Government Securities Fund, (viii) to the AVESTA Trust U.S. Government
Securities Fund series, Institutional Shares of the Avesta U.S. Government
Securities Fund, (ix) to the AVESTA Trust Small Capitalization Fund series,
Institutional Shares of the Avesta Small Capitalization Fund, and (x) to the
AVESTA Trust Core Equity Fund, Institutional Shares of the Avesta Core Equity
Fund.
Such Institutional Shares shall be issued subject to assumption by each
Avesta Fund of all liabilities and obligations of its corresponding Fund (the
"Liabilities"), whether accrued, absolute, contingent or otherwise, which
liabilities shall include, without limitation, all obligations of each of the
Funds to indemnify AVESTA Trust's Supervisory Committee and officers acting
in their capacity or capacities as such to the fullest extent permitted by
law and AVESTA Trust's Declaration of Trust as in effect on the date hereof,
such that at and after such issuance and assumption all debts, liabilities,
obligations and duties of each of the Funds shall become the debts,
liabilities, obligations and duties of the corresponding Avesta Fund and may
thenceforth be enforced against such Avesta Fund as if the same had been
incurred by it, and at and after such time the liabilities of each Fund shall
be enforceable against and be limited to the corresponding Avesta Fund and no
other person: (i) the liabilities of the AVESTA Trust Money Market Fund
series shall be transferred to and assumed by the Avesta Money Market Fund,
(ii) the liabilities of the AVESTA Trust Income Fund series shall be
transferred to and assumed by the Avesta Income Fund, (iii) the liabilities
of the AVESTA Trust Intermediate Term Bond Fund series shall be transferred
to and assumed by the Avesta Intermediate Term Bond Fund, (iv) the
liabilities of the AVESTA Trust Equity Growth Fund series shall be
transferred to and assumed by the Avesta Equity Growth Fund, (v) the
liabilities of the AVESTA Trust Equity Income fund series shall be
transferred to and assumed by the Avesta Equity Income Fund, (vi) the
liabilities of the AVESTA Trust Balanced Fund series shall be transferred to
and assumed by the Avesta Balanced Fund, (vii) the liabilities of the AVESTA
Trust Short-Intermediate Term U.S. Government Securities Fund series shall be
transferred to and assumed by the Avesta Short-Intermediate Term U.S.
Government Securities Fund, (viii) the liabilities of the AVESTA Trust U.S.
Government Securities Fund series shall be transferred to and assumed by the
<PAGE>
Avesta U.S. Government Securities Fund, (ix) the liabilities of the AVESTA
Trust Small Capitalization Fund series shall be transferred to and assumed by
the Avesta Small Capitalization Fund, and (x) the liabilities of the AVESTA
Trust Core Equity Fund series shall be transferred to and assumed by the
Avesta Core Equity Fund.
2. Liquidating Distributions of AVESTA Trust.
(a) At the Effective Time, the Trustee shall liquidate and distribute pro
rata to the holders of the Units of record of each Fund (the "Record
Holders") as of the close of business on the date of the Effective Time the
shares of the Fund's corresponding Avesta Fund which such Fund will receive
from MFIT pursuant to Section 1 of this Agreement. Each Record Holder of a
Fund shall be credited with a number of full and fractional shares of the
Fund's corresponding Avesta Fund that are issued by MFIT to such Fund in
connection with the Conversion, which number shall be equal in value to the
value of the proportionate share of the total number of the Units of such
Fund held by such Record Holder immediately prior to the Effective Time. In
addition, each Record Holder shall have the right to receive any unpaid
dividends or other distributions declared prior to the Effective Time with
respect to the Units held by the Record Holder at the Effective Time.
(b) In accordance with instructions it receives from AVESTA Trust, MFIT
shall record on its books the ownership of Institutional Shares by the Record
Holders of the Funds.
(c) All the issued and outstanding Units representing interests in AVESTA
Trust shall be cancelled on the books of AVESTA Trust and AVESTA Trust's
transfer books shall be closed permanently immediately after the Effective
Time. Exchange or redemption requests received after that time with respect
to the Funds shall be treated as requests for the exchange or redemption of
shares of the respective Avesta Funds to be distributed to its shareholders.
No Units shall be issued by AVESTA Trust after the Effective Time.
3. Termination of AVESTA Trust.
(a) As soon as practicable after the Effective Time, AVESTA Trust shall
be terminated pursuant to applicable Texas law and federal regulations, such
that: (i) its affairs are immediately wound up, its contracts discharged and
its business liquidated; and (ii) an instrument in writing setting forth the
fact of such termination is executed and lodged among the records of AVESTA
Trust by an appropriate officer of AVESTA Trust.
(b) As promptly as practicable after the Effective Time, the Trustee
shall file an application pursuant to Section 8(f) of the 1940 Act for an
order declaring that AVESTA Trust has ceased to be an investment company.
4. Certain Representations, Warranties and Agreements Regarding AVESTA
Trust. The Trustee, on behalf of AVESTA Trust and the Funds, represents and
warrants to, and agrees with, the other parties as follows (said
representations, warranties and agreements being made solely on behalf of
each Fund):
<PAGE>
(a) AVESTA Trust is a trust duly created and validly existing under the
laws of the State of Texas.
(b) This Agreement has been duly authorized, executed and delivered by
the Trustee on behalf of AVESTA Trust and, subject to the approvals of the
holders of Units of each Fund (the "Participating Trusts") pursuant to
Section 6 of this Agreement, represents a valid and binding contract,
enforceable against the assets of AVESTA Trust in accordance with its terms.
The execution and delivery of this Agreement does not, and, subject to the
approvals of Participating Trusts pursuant to Section 6 of this Agreement,
the consummation of the transactions contemplated by this Agreement will not,
violate AVESTA Trust's Amended and Restated Declaration of Trust, any
agreement or arrangement to which it is a party or by which it is bound, or
any order or decree to which it is subject.
(c) AVESTA Trust is duly registered under the 1940 Act as an open-end
management investment company and such registration has not been revoked or
rescinded and is in full force and effect.
(d) To the Trustee's best knowledge, there are no material legal,
administrative or other proceedings pending or threatened against AVESTA
Trust or the Funds which could result in liability on the part of the Funds.
(e) At the Effective Time, subject only to the delivery of the Assets as
contemplated by this Agreement, the Avesta Funds will acquire the Assets free
and clear of all liens, pledges, security interests, charges or other
encumbrances of any nature whatsoever and without any restrictions upon the
transfer thereof, except such liabilities as have been imposed by federal or
state securities laws.
(f) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by AVESTA Trust of
the transactions contemplated by this Agreement, except such as may be
required under the Securities Act of 1933, as amended ("1933 Act"), the
Securities Exchange Act of 1934, as amended ("1934 Act") or the 1940 Act, and
the rules and regulations thereunder, or state securities laws.
(g) Insofar as the following relate to AVESTA Trust, the proxy materials
of AVESTA Trust filed with the SEC pursuant to Section 14(a) of the 1934 Act
and Section 20(a) of the 1940 Act with respect to the transactions
contemplated by this Agreement, and any supplement or amendment thereto or
the documents appended thereto (the "Proxy Materials"), on the mailing date
of the Proxy Materials, at the time of the Participating Trusts' meeting to
be held pursuant to Section 6 of this Agreement and at the Effective Time
shall not contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, that the representations and
warranties made by AVESTA Trust in this subsection shall not apply to
statements in or omissions from the Proxy Materials made in reliance upon and
in conformity with information furnished by MFIT for use therein as provided
in Section 8 of this Agreement.
<PAGE>
(h) No Institutional Share to which AVESTA Trust is entitled or which is
to be received by AVESTA Trust in the transactions contemplated herein shall
be sold or otherwise disposed of by AVESTA Trust, except as contemplated
herein.
5. Certain Representations, Warranties and Agreements of MFIT. MFIT, on
behalf of itself and the Avesta Funds, represents and warrants to, and agrees
with, the other parties as follows (said representations, warranties and
agreements being made solely on behalf of each Avesta Fund):
(a) MFIT is a business trust duly organized, validly existing and in good
standing under laws of the State of Massachusetts.
(b) This Agreement has been duly authorized, executed and delivered by
MFIT, and represents a valid and binding contract, enforceable against MFIT
in accordance with its terms. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated by this
Agreement will not, violate its Declaration of Trust or By-laws, any
agreement or arrangement to which it is a party or by which it is bound, or
any order or decree to which it is subject.
(c) At the Effective Time, MFIT will be duly registered under the 1940
Act as an open-end management investment company and such registration will
not have been revoked or rescinded and will be in full force and effect.
(d) The Avesta Funds intend to qualify as regulated investment companies
under Part I of Subchapter M of Subtitle A, Chapter I of the Internal Revenue
Code of 1986, as amended (the "Code") after the Effective Time.
(e) To MFIT's best knowledge, there are no material legal, administrative
or other proceedings pending or threatened against MFIT or the Avesta Funds
which could result in liability on the part of the Avesta Funds.
(f) At the Effective Time, subject only to the delivery of the
Institutional Shares as contemplated by this Agreement and the initial
issuance of shares, such shares will be the only outstanding shares of MFIT,
all of which will be duly authorized, validly issued, fully paid and
nonassessable; no shareholder of MFIT has any preemptive right to
subscription or purchase in respect thereof; and AVESTA Trust will acquire
the Institutional Shares free and clear of all liens, pledges, security
interests, charges or other encumbrances of any nature whatsoever and without
any restrictions upon the transfer thereof (except as set forth in Section
4(h) hereof).
(g) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by MFIT of the
transactions contemplated by this Agreement, except such as may be required
under the 1933 Act, the 1934 Act, or the 1940 Act, the rules and regulations
thereunder, or state securities laws.
(h) The information provided by MFIT for inclusion in the Proxy Materials
shall not contain any untrue statement of a material fact or omit to state a
<PAGE>
material fact required to be stated therein or necessary to make the
statements therein not misleading; in the event that MFIT becomes aware of
any such untrue statement or omission, MFIT shall promptly notify AVESTA
Trust of such untrue statement or omission.
(i) As of the Effective Time, the Institutional Shares will be duly
qualified for offering to the public in all states of the United States in
which such qualification is required or an exemption to such requirement
shall have been obtained.
6. Meeting of AVESTA Trust's Participating Trusts.
(a) AVESTA Trust shall call a meeting of its Participating Trusts, as
soon as practicable after the clearance date of the proxy solicitation
materials to be prepared and filed pursuant to Section 7 of this Agreement,
for the purpose of considering and voting upon:
(i) Approval of this Agreement and the transactions contemplated
hereby, including (A) the transfer of the Assets to the Avesta Funds by
AVESTA Trust in exchange for which AVESTA Trust shall be entitled to have
issued to it by MFIT Institutional Shares and (B) the liquidation of
AVESTA Trust through the distributions to its Participating Trusts
described in this Agreement.
(ii) Approval of certain modifications to the investment objectives,
policies and restrictions of each of the Funds.
(iii) Authorization of the Funds, as the sole shareholders of the
Avesta Funds immediately prior to the Conversion, to approve (i) an
Investment Advisory Agreement between MFIT and The Chase Manhattan Bank
("Chase") and (ii) a Subadvisory Agreement between Chase and Texas
Commerce Bank National Association ("TCB"), in substantially the forms
attached to AVESTA Trust's definitive proxy statement with respect to such
shareholders meeting.
(iv) Authorization of the Funds, as the sole shareholders of the
Avesta Funds immediately prior to the Conversion, to elect two persons
chosen by MFIT to the Board of Trustees of MFIT.
(v) Such other matters as may be determined by the Supervisory
Committee of AVESTA Trust and the Board of Trustees of MFIT.
(b) Consummation of the Conversion is contingent upon approval by the
appropriate Participating Trusts of each of the matters set forth in Section
6(a)(i) and 6(a)(iii) and the approval of changes in the investment
objectives set forth in Section 6(a)(ii) of this Agreement.
7. Proxy Solicitation Materials. AVESTA Trust shall file Proxy Materials
with the SEC relating to the matters described in Section 6 as promptly as
practicable. MFIT and AVESTA Trust have cooperated and shall continue to
cooperate with each other, and each has furnished and shall continue to
furnish the others with the information relating to itself that is required
<PAGE>
by the 1933 Act, the 1934 Act, the 1940 Act, the rules and regulations under
each of such Acts and state securities laws, to be included in the Proxy
Materials.
8. Amendment to Registration Statement.
(a) AVESTA Trust shall file with the SEC as promptly as practicable a
post-effective amendment to its registration statement on Form N-1A
reflecting the proposed modifications of its investment restrictions and
shall use its best efforts to ensure that the SEC will declare effective such
amendment immediately prior to the Effective Time.
(b) MFIT shall file with the SEC, as promptly as practicable, a
registration statement on Form N-1A pursuant to Rule 414 under the 1933 Act
and 1940 Act adopting AVESTA Trust's registration statement on Form N-1A as
amended, and shall use its best efforts to ensure that the SEC will declare
effective such registration statement immediately prior to the Effective
Time.
9. Effective Time of the Conversion. Delivery of the Assets and the
Avesta Institutional Shares to be issued pursuant to Section 1 of this
Agreement, and the liquidation and termination of AVESTA Trust, shall occur
at _____ a.m., at the offices of AVESTA Trust on December 31, 1997, or at
such other place, time and date as may be agreed to by the Supervisory
Committee of the AVESTA Trust or Board of Trustees of MFIT. The date and
time at which such actions are taken are referred to herein as the "Effective
Time." To the extent any Assets are, for any reason, not transferred at the
Effective Time, the Trustee shall cause such Assets to be transferred in
accordance with this Agreement at the earliest practicable date thereafter.
10. Conditions Precedent of MFIT. The obligations of MFIT to consummate
the transactions contemplated hereby shall be subject to the following
conditions precedent:
(a) MFIT shall have received at the Effective Time a certificate of the
Principal Executive Officer or President and the Treasurer of AVESTA Trust
dated as of the Effective Time to the effect set forth in Sections 12(b) and
12(c) of this Agreement with respect to AVESTA Trust.
(b) MFIT shall have received an opinion of Simpson Thacher & Bartlett,
counsel to AVESTA Trust, substantially in the form attached hereto as Exhibit
___.
(c) The Assets to be transferred to the Avesta Funds under this Agreement
shall include no assets which the Avesta Funds may not properly acquire
pursuant to their respective investment limitations or objectives or may not
otherwise lawfully acquire, unless MFIT shall have received a written list of
such assets that are to be so transferred at least ten business days before
the Effective Date and MFIT fails to deliver to the Trustee an objection in
writing to such assets at least five business days before the Effective Date.
<PAGE>
(d) The Trustee shall have paid all of the then remaining unamortized
organizational expenses of AVESTA Trust reflected on its books and records,
except those expenses that are carried forward to, and assumed by, MFIT in
accordance with generally accepted accounting principles and the policies of
the SEC.
(e) The Trustee shall have furnished MFIT with a statement of Assets,
with values determined in accordance with the current policies and practices
of AVESTA Trust, and with their respective dates of acquisition and tax costs
and holding periods, all as of 4:00 p.m. Eastern time on the day preceding
the Effective Time, certified on its behalf by its President (or any Vice
President) and Treasurer.
(f) MFIT shall have received duly executed bills of sale, assignments,
certificates and other instruments to transfer ("Transfer Documents") as MFIT
may reasonably request to transfer all of AVESTA Trust's and each Fund's
right, title and interest in and to the Assets. The Assets shall be
accompanied by all necessary state stock transfer stamps or cash for the
appropriate purchase price therefor.
11. Conditions Precedent of AVESTA Trust. The obligations of the Trustee
to consummate the transactions contemplated hereby on behalf of AVESTA Trust
shall be subject to the following conditions precedent:
(a) MFIT shall have furnished the Trustee at the Effective Time with a
certificate of its President and Treasurer dated the Effective Time to the
effect set forth in Sections 12(b) and 12(c) of this Agreement.
(b) The Trustee shall have received an opinion of Simpson Thacher &
Bartlett, counsel to MFIT, substantially in the form attached hereto as
Exhibit ___.
(c) The Trustee shall have received from MFIT a duly executed instrument
whereby each Avesta Fund assumes all of the liabilities and obligations of
the corresponding Fund.
12. Conditions Precedent of Each Party. The obligations of each party to
this Agreement to consummate the transactions contemplated hereby shall be
subject to the following conditions precedent:
(a) Subject to Section 18 hereof, this Agreement shall have been adopted
and the transactions contemplated by this Agreement shall have been approved
by the Participating Trusts of AVESTA Trust, in the manner required by all
applicable laws.
(b) All representations and warranties of each other party made in this
Agreement shall be true and correct at and as of the Effective Time in all
material respects with the same effect as if made at and as of the Effective
Time.
<PAGE>
(c) Each other party shall have performed and complied in all material
respects with each of its agreements and covenants required by this Agreement
to be performed or complied with by it prior to or at the Effective Time.
(d) The parties shall have received all permits and other authorizations
necessary under state securities laws to consummate the transactions
contemplated by this Agreement.
(e) At the Effective Time, no action, suit or other proceeding shall be
threatened or pending before any court or governmental agency seeking to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
(f) MFIT shall have received the written agreement of Chase to reimburse
expenses of the Avesta Funds in excess of the levels referred to in the Proxy
Materials.
13. Announcements. Any announcements or similar publicity with respect
to this Agreement or the transactions contemplated herein shall be at such
time and in such manner as the parties shall agree; provided, that nothing
herein shall prevent any party upon notice to the other parties from making
such public announcements as such party counsel may consider advisable in
order to satisfy the party's legal and contractual obligations in such
regard.
14. Expenses. The parties understand that _____ has undertaken to assume
all of the legal, accounting, proxy solicitation and Participating Trusts'
meetings, printing, mailings, deregistration, termination and special Trustee
and Supervisory Committee meeting expenses and all other expenses arising in
connection with the Conversion, whether or not the Conversion is consummated.
15. Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its best efforts to take, or
cause to be taken, such actions, to execute and deliver, or cause to be
executed and delivered, such additional documents and instruments and to do,
or cause to be done, all things necessary, proper or advisable under the
provisions of this Agreement and under applicable law to consummate and make
effective the transactions contemplated by this Agreement, including without
limitation, delivering and/or causing to be delivered to MFIT each account,
book, record or other document of the Funds required to be maintained by
Section 31(a) of the 1940 Act and Rules 31a-1 to 31a-3 thereunder (regardless
of whose possession they are in).
16. Termination of Representations and Warranties. The representations
and warranties of the parties in this Agreement shall terminate upon the
issuance of the Institutional Shares to the Trustee on behalf of AVESTA
Trust.
17. Termination of Agreement. This Agreement may be terminated by a
party at any time at or prior to the Effective Time by a written notice of
the good faith determination of a majority of its Supervisory Committee or
<PAGE>
Board of Trustees, as the case may be, that the Conversion is no longer in
the interests of its respective unitholders or shareholders.
18. Amendment and Waiver. At any time prior to or (to the fullest extent
permitted by law) after approval of this Agreement by the Participating
Trusts of AVESTA Trust (a) the parties hereto may, by written agreement
authorized by their Supervisory Committee or Board of Trustees, as the case
may be, and with or without the approval of their respective unitholders or
shareholders, amend any of the provisions of this Agreement, if, in the
judgment of such Committee or Board, such amendment will not have a material
adverse effect on the interests of the Participating Trusts of AVESTA Trust
or the shareholders of MFIT, respectively, and (b) any party may waive any
breach by any other party or the failure to satisfy any of the conditions to
its obligations (such waiver to be in writing and authorized by the
Supervisory Committee or Board of Trustees, as the case may be, of the
waiving party with or without the approval of such party's unitholders or
shareholders).
19. Failure to Enforce. The failure of any party hereto to enforce at
any time any of the provisions of this Agreement shall in no way be construed
to be a waiver of any such provision, nor in any way to affect the validly of
this Agreement or any part hereof or the right of any party thereafter to
enforce each and every such provision. No waiver of any breach of this
Agreement shall be held to be a waiver of any other or subsequent breach.
20. Governing Law. This Agreement and the transactions contemplated
hereby shall be governed, construed and enforced in accordance with the laws
of the State of New York, without regard to principles of conflicts of law.
21. Successors and Assigns. This Agreement shall be binding upon the
respective successors and permitted assigns of the parties hereto. This
Agreement and the rights, obligations and liabilities hereunder may not be
assigned by any party without the consent of all other parties.
22. Beneficiaries. Nothing contained in this Agreement shall be deemed
to create rights in persons not parties hereto, other than the successors and
permitted assigns of the parties.
23. MFIT, AVESTA Trust and Trustee Liability. Each party acknowledges
and agrees that the obligations of MFIT, on the one hand, and the Trustee and
AVESTA Trust, on the other hand, under this Agreement are binding only with
respect to the Avesta Funds and Funds, respectively, and that any liability
of MFIT or AVESTA Trust under this Agreement with respect to an Avesta Fund
or Fund, respectively, or in connection with the transactions contemplated
herein with respect to such Avesta Fund or Fund, shall be discharged only out
of the assets of such Avesta Fund or Fund, and no other portfolio of MFIT or
AVESTA Trust shall be liable with respect to this Agreement or in connection
with the transactions contemplated herein.
24. Notices. All notices and other communications required or permitted
herein shall be in writing and shall be deemed to be properly given when
delivered personally or by telecopier (except for legal process) to the party
<PAGE>
entitled to receive the notice or communication or when sent by certified or
registered mail, postage prepaid, or delivered to an internationally
recognized overnight courier service, in each case properly addressed to the
party entitled to receive such notice or communication at the address or
telecopier number stated below or to such other address or telecopier number
as may hereafter be furnished in writing by notice similarly given by one
party to the other parties hereto:
If to MFIT: If to the Trustee or
AVESTA Trust:
101 Park Avenue P.O. Box 2558
New York, New York 10178 Houston, Texas 77252-8045
25. Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto and supersedes any and all prior
agreements, arrangements and understandings relating to matters provided for
herein.
26. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered shall be deemed to
be an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers designated below as of the date
first written above.
[SIGNATURE LINES OMITTED]
<PAGE>
EXHIBIT B-1
INVESTMENT ADVISORY AGREEMENT
BETWEEN
MUTUAL FUND INVESTMENT TRUST
AND
THE CHASE MANHATTAN BANK
AGREEMENT made as of the 1st day of January, 1998, by and
between Mutual Fund Investment Trust, a Massachusetts business trust which
may issue one or more series of shares (hereinafter the "Trust"), and The
Chase Manhattan Bank, a New York chartered bank (hereinafter the "Adviser").
WHEREAS, the Trust is registered as an open-end, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Trust desires to retain the Adviser to furnish
investment advisory services in connection with the series of the Trust
listed on Schedule A (each, a "Fund" and collectively, the "Funds"), and the
Adviser represents that it is willing and possesses legal authority to so
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as
follows:
1. Structure of Agreement. The Trust is entering into this
Agreement on behalf of the Funds severally and not jointly. The
responsibilities and benefits set forth in this Agreement shall refer to each
Fund severally and not jointly. No individual Fund shall have any
responsibility for any obligation with respect to any other Fund arising out
of this Agreement. Without otherwise limiting the generality of the
foregoing,
(a) any breach of any term of this Agreement regarding the
Trust with respect to any one Fund shall not create a right or obligation
with respect to any other Fund;
(b) under no circumstances shall the Adviser have the right to
set off claims relating to a Fund by applying property of any other Fund; and
(c) the business and contractual relationships created by this
Agreement, the consideration for entering into this Agreement, and the
consequences of such relationships and consideration relate solely to the
Trust and the particular Fund to which such relationship and consideration
applies.
2. Delivery of Documents. The Trust has delivered to the
Adviser copies of each of the following documents and will deliver to it all
future amendments and supplements thereto, if any:
<PAGE>
(a) The Trust's Declaration of Trust;
(b) The By-Laws of the Trust;
(c) Resolutions of the Board of Trustees of the Trust
authorizing the execution and delivery of this Agreement;
(d) The most recent Registration Statement under the
Securities Act of 1933, as amended (the "1933 Act"), and the Investment
Company Act of 1940, as amended (the "1940 Act"), on Form N-1A as filed with
the Securities and Exchange Commission (the "Commission") (the "Registration
Statement");
(e) Notification of Registration of the Trust under the 1940
Act on Form N-8A as filed with the Commission; and
(f) Prospectuses and Statements of Additional Information of
the Funds (collectively, the "Prospectuses").
3. Appointment.
(a) General. The Trust hereby appoints the Adviser to act as
investment adviser to the Funds for the period and on the terms set forth in
this Agreement. The Adviser accepts such appointment and agrees to furnish
the services herein set forth for the compensation herein provided.
(b) Employees of Affiliates. The Adviser may, in its
discretion, provide such services through its own employees or the employees
of one or more affiliated companies that are qualified to act as an
investment adviser to the Trust under applicable laws and are under the
control of the Adviser; provided that (i) all persons, when providing
services hereunder, are functioning as part of an organized group of persons,
and (ii) such organized group of persons is managed at all times by
authorized officers of the Adviser.
(c) Sub-Advisers. It is understood and agreed that the
Adviser may from time to time employ or associate with such other entities or
persons as the Adviser believes appropriate to assist in the performance of
this Agreement with respect to a particular Fund or Funds (each a "Sub-
Adviser"), and that any such Sub-Adviser shall have all of the rights and
powers of the Adviser set forth in this Agreement; provided that a Fund shall
not pay any additional compensation for any Sub-Adviser and the Adviser shall
be as fully responsible to the Trust for the acts and omissions of the Sub-
Adviser as it is for its own acts and omissions; and provided further that
the retention of any Sub-Adviser shall be approved in advance by (i) the
Board of Trustees of the Trust and (ii) the shareholders of the relevant Fund
if required under any applicable provisions of the 1940 Act. The Adviser
will review, monitor and report to the Trust's Board of Trustees regarding
the performance and investment procedures of any Sub-Adviser. In the event
that the services of any Sub-Adviser are terminated, the Adviser may provide
investment advisory services pursuant to this Agreement to the Fund without a
Sub-Adviser and without further shareholder approval, to the extent
<PAGE>
consistent with the 1940 Act. A Sub-Adviser may be an affiliate of the
Adviser.
4. Investment Advisory Services.
(a) Management of the Funds. The Adviser hereby undertakes to
act as investment adviser to the Funds. The Adviser shall regularly provide
investment advice to the Funds and continuously supervise the investment and
reinvestment of cash, securities and other property composing the assets of
the Funds and, in furtherance thereof, shall:
(i) supervise all aspects of the operations of the Trust and
each Fund;
(ii) obtain and evaluate pertinent economic, statistical and
financial data, as well as other significant events and developments, which
affect the economy generally, the Funds' investment programs, and the issuers
of securities included in the Funds' portfolios and the industries in which
they engage, or which may relate to securities or other investments which
the Adviser may deem desirable for inclusion in a Fund's portfolio;
(iii) determine which issuers and securities shall be included in
the portfolio of each Fund;
(iv) furnish a continuous investment program for each Fund;
(v) in its discretion and without prior consultation with the
Trust, buy, sell, lend and otherwise trade any stocks, bonds and other
securities and investment instruments on behalf of each Fund; and
(vi) take, on behalf of each Fund, all actions the Adviser may
deem necessary in order to carry into effect such investment program and the
Adviser's functions as provided above, including the making of appropriate
periodic reports to the Trust's Board of Trustees.
(b) Covenants. The Adviser shall carry out its investment
advisory and supervisory responsibilities in a manner consistent with the
investment objectives, policies, and restrictions provided in: (i) each
Fund's Prospectus and Statement of Additional Information as revised and in
effect from time to time; (ii) the Trust's Declaration of Trust, By-Laws or
other governing instruments, as amended from time to time; (iii) the 1940
Act; (iv) other applicable laws; and (v) such other investment policies,
procedures and/or limitations as may be adopted by the Trust with respect to
a Fund and provided to the Adviser in writing. The Adviser agrees to use
reasonable efforts to manage each Fund so that it will qualify, and continue
to qualify, as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended, and regulations issued thereunder
(the "Code"), except as may be authorized to the contrary by the Trust's
Board of Trustees. The management of the Funds by the Adviser shall at all
times be subject to the review of the Trust's Board of Trustees.
<PAGE>
(c) Books and Records. The Adviser shall keep each Fund's
books and records required by applicable law to be maintained by the Funds
with respect to advisory services. The Adviser agrees that all records which
it maintains for a Fund are the property of the Fund and it will promptly
surrender any of such records to the Fund upon the Fund's request. The
Adviser further agrees to preserve for the periods prescribed by the 1940 Act
any such records of the Fund required to be preserved by such Rule.
(d) Reports, Evaluations and other services. The Adviser
shall furnish reports, evaluations, information or analyses to the Trust with
respect to the Funds and in connection with the Adviser's services hereunder
as the Trust's Board of Trustees may request from time to time or as the
Adviser may otherwise deem to be desirable. The Adviser shall make
recommendations to the Trust's Board of Trustees with respect to Trust
policies, and shall carry out such policies as are adopted by the Board of
Trustees. The Adviser shall, subject to review by the Board of Trustees,
furnish such other services as the Adviser shall from time to time determine
to be necessary or useful to perform its obligations under this Agreement.
(e) Purchase and Sale of Securities. The Adviser shall place
all orders for the purchase and sale of portfolio securities for each Fund
with brokers or dealers selected by the Adviser, which may include brokers or
dealers affiliated with the Adviser to the extent permitted by the 1940 Act
and the Trust's policies and procedures applicable to the Funds. The Adviser
shall use its best efforts to seek to execute portfolio transactions at
prices which, under the circumstances, result in total costs or proceeds
being the most favorable to the Funds. In assessing the best overall terms
available for any transaction, the Adviser shall consider all factors it
deems relevant, including the breadth of the market in the security, the
price of the security, the financial condition and execution capability of
the broker or dealer, research services provided to the Adviser, and the
reasonableness of the commission, if any, both for the specific transaction
and on a continuing basis. In no event shall the Adviser be under any duty
to obtain the lowest commission or the best net price for any Fund on any
particular transaction, nor shall the Adviser be under any duty to execute
any order in a fashion either preferential to any Fund relative to other
accounts managed by the Adviser or otherwise materially adverse to such other
accounts.
(f) Selection of Brokers or Dealers. In selecting brokers or
dealers qualified to execute a particular transaction, brokers or dealers may
be selected who also provide brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934) to the
Adviser, the Funds and/or the other accounts over which the Adviser exercises
investment discretion. The Adviser is authorized to pay a broker or dealer
who provides such brokerage and research services a commission for executing
a portfolio transaction for a Fund which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Adviser determines in good faith that the total commission
is reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the overall responsibilities of the Adviser with respect to
<PAGE>
accounts over which it exercises investment discretion. The Adviser shall
report to the Board of Trustees of the Trust regarding overall commissions
paid by the Funds and their reasonableness in relation to the benefits to the
Funds.
(g) Aggregation of Securities Transactions. In executing
portfolio transactions for a Fund, the Adviser may, to the extent permitted
by applicable laws and regulations, but shall not be obligated to, aggregate
the securities to be sold or purchased with those of other Funds or its other
clients if, in the Adviser's reasonable judgment, such aggregation (i) will
result in an overall economic benefit to the Fund, taking into consideration
the advantageous selling or purchase price, brokerage commission and other
expenses, and trading requirements, and (ii) is not inconsistent with the
policies set forth in the Trust's registration statement and the Fund's
Prospectus and Statement of Additional Information. In such event, the
Adviser will allocate the securities so purchased or sold, and the expenses
incurred in the transaction, in an equitable manner, consistent with its
fiduciary obligations to the Fund and such other clients.
5. Expenses. (a) The Adviser shall, at its expense, provide
the Funds with office space, furnishings and equipment and personnel required
by it to perform the services to be provided by the Adviser pursuant to this
Agreement. The Adviser also hereby agrees that it will supply to any sub-
adviser or administrator (the "Administrator") of a Fund all necessary
financial information in connection with the Administrator's duties under any
Agreement between the Administrator and the Trust.
(b) Except as provided in subparagraph (a), the Trust shall be
responsible for all of the Funds' expenses and liabilities, including, but
not limited to, taxes; interest; fees (including fees paid to its trustees
who are not affiliated with the Adviser or any of its affiliates); fees
payable to the Securities and Exchange Commission; state securities
qualification fees; association membership dues; costs of preparing and
printing Prospectuses for regulatory purposes and for distribution to
existing shareholders; advisory and administration fees; charges of the
custodian and transfer agent; insurance premiums; auditing and legal
expenses; costs of shareholders' reports and shareholders' meetings; any
extraordinary expenses; and brokerage fees and commissions, if any, in
connection with the purchase or sale of portfolio securities.
6. Compensation. (a) In consideration of the services to be
rendered by the Adviser under this Agreement, the Trust shall pay the Adviser
monthly fees on the first Business Day (as defined in the Prospectuses) of
each month based upon the average daily net assets of each Fund during the
preceding month (as determined on the days and at the time set forth in the
Prospectuses for determining net asset value per share) at the annual rate
set forth opposite the Fund's name on Schedule A attached hereto. If the
fees payable to the Adviser pursuant to this paragraph begin to accrue before
the end of any month or if this Agreement terminates before the end of any
month, the fees for the period from such date to the end of such month or
from the beginning of such month to the date of termination, as the case may
be, shall be prorated according to the proportion which such period bears to
<PAGE>
the full month in which such effectiveness or termination occurs. For
purposes of calculating each such monthly fee, the value of the Funds' net
assets shall be computed in the manner specified in the Prospectuses and the
Declaration of Trust for the computation of the value of the Funds' net
assets in connection with the determination of the net asset value of the
Funds' shares of beneficial interest.
(b) If the aggregate expenses incurred by, or allocated to,
each Fund in any fiscal year shall exceed the lowest expense limitation, if
applicable to such Fund, imposed by state securities laws or regulations
thereunder, as such limitations may be raised or lowered from time to time,
the Adviser shall reduce its investment advisory fee, but not below zero, to
the extent of its share of such excess expenses; provided, however, there
shall be excluded from such expenses the amount of any interest, taxes,
brokerage commissions and extraordinary expenses (including but not limited
to legal claims and liabilities and litigation costs and any indemnification
related thereto) paid or payable by the Fund. Such reduction, if any, shall
be computed and accrued daily, shall be settled on a monthly basis and shall
be based upon the expense limitation applicable to the Fund as at the end of
the last business day of the month. Should two or more of such expense
limitations be applicable at the end of the last business day of the month,
that expense limitation which results in the largest reduction in the
Adviser's fee shall be applicable. For the purposes of this paragraph, the
Adviser's share of any excess expenses shall be computed by multiplying such
excess expenses by a fraction, the numerator of which is the amount of the
investment advisory fee which would otherwise be payable to the Adviser for
such fiscal year were it not for this subsection 6(b) and the denominator of
which is the sum of all investment advisory and administrative fees which
would otherwise be payable by the Fund were it not for the expense limitation
provisions of any investment advisory or administrative agreement to which
the Fund is a party.
(c) In consideration of the Adviser's undertaking to render
the services described in this Agreement, the Trust agrees that the Adviser
shall not be liable under this Agreement for any error of judgment or mistake
of law or for any act or omission or loss suffered by the Trust in connection
with the performance of this Agreement, provided that nothing in this
Agreement shall be deemed to protect or purport to protect the Investment
Adviser against any liability to the Trust or its stockholders to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of the Adviser's duties under
this Agreement or by reason of the Adviser's reckless disregard of its
obligations and duties hereunder or breach of fiduciary duty with respect to
receipt of compensation.
7. Non-Exclusive Services. Except to the extent necessary to
perform the Investment Adviser's obligations under this Agreement, nothing
herein shall be deemed to limit or restrict the right of the Adviser, or any
affiliate of the Adviser, including any employee of the Adviser, to engage in
any other business or to devote time and attention to the management or other
aspects of any other business, whether of a similar or dissimilar nature, or
<PAGE>
to render services of any kind to any other corporation, firm, individual or
association.
8. Interested Persons. It is understood that, to the extent
consistent with applicable laws, the Trustees, officers and investors of the
Trust are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and shareholders of the
Adviser are or may be or become similarly interested in the Trust.
9. Effective Date; Modifications; Termination. This Agreement
shall become effective on the date hereof (the "Effective Date") provided
that it shall have been approved by a majority of the outstanding voting
securities of each Fund, in accordance with the requirements of the 1940 Act,
or such later date as may be agreed by the parties following such shareholder
approval.
(a) This Agreement shall continue in force for two years from
the Effective Date and shall continue in effect from year to year thereafter
for successive annual periods, provided such continuance is specifically
approved at least annually (i) by a vote of the majority of the Trustees of
the Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by a vote of the Board of Trustees of the Trust or a
majority of the outstanding voting securities of each Fund.
(b) The modification of any of the non-material terms of this
Agreement may be approved by a vote of a majority of those Trustees of the
Trust who are not interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval.
(c) Notwithstanding the foregoing provisions of this Paragraph
8, either party hereto may terminate this Agreement at any time on sixty (60)
days' prior written notice to the other, without payment of any penalty. A
termination of this Agreement on behalf of a Fund may be effected by a vote
of the Trust's Board of Trustees or, with respect to a Fund, by vote of a
majority of the outstanding voting securities of that Fund. This Agreement
may remain in effect with respect to a Fund even if it has been terminated in
accordance with this paragraph with respect to the other Funds. This
Agreement shall terminate automatically in the event of its assignment as
that term is defined under the 1940 Act.
10. Board of Trustees Meetings. The Trust agrees that notice
of each meeting of the Board of Trustees of the Trust will be sent to the
Adviser and that the Trust will make appropriate arrangements for the
attendance (as persons present by invitation) of such person or persons as
the Adviser may designate.
11. Limitation of Liability of Trustees and Investors. The
Adviser acknowledges the following limitation of liability:
The terms "Mutual Fund Investment Trust" and "Trustees of
Mutual Fund Investment Trust" refer, respectively, to the trust created and
<PAGE>
the Trustees, as trustees but not individually or personally, acting from
time to time under the Declaration of Trust, to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State
of the State of Massachusetts, such reference being inclusive of any and all
amendments thereto so filed or hereafter filed. The obligations of "Mutual
Fund Investment Trust" entered into in the name or on behalf thereof by any
of the Trustees, representatives or agents are made not individually, but in
such capacities and are not binding upon any of the Trustees, investors or
representatives of the Trust personally, but bind only the assets of the
Trust, and all persons dealing with the Trust or a Fund must look solely to
the assets of the Trust or Fund for the enforcement of any claims against the
Trust or Fund.
12. Certain Definitions. The terms "vote of a majority of the
outstanding voting securities," "assignment," "control," and "interested
persons," when used herein, shall have the respective meanings specified in
the 1940 Act. References in this Agreement to the 1940 Act and the Advisers
Act shall be construed as references to such laws as now in effect or as
hereafter amended, and shall be understood as inclusive of any applicable
rules, interpretations and/or orders adopted or issued thereunder by the
Commission.
13. Independent Contractor. The Adviser shall for all
purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided herein or authorized by the Board of Trustees of
the Trust from time to time, have no authority to act for or represent the
Trust or any Fund in any way or otherwise be deemed an agent of the Trust.
14. Governing Law. This Agreement shall be governed by the
laws of the State of New York, provided that nothing herein shall be
construed in a manner inconsistent with the 1940 Act or the Advisers Act.
15. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby and, to this
extent, the provisions of this Agreement shall be deemed to be severable.
16. Notices. Notices of any kind to be given to the Adviser
hereunder by the Trust shall be in writing and shall be duly given if mailed
or delivered to the Adviser at 270 Park Avenue, New York, New York 10017 or
at such other address or to such individual as shall be so specified by the
Adviser to the Trust. Notices of any kind to be given to the Trust hereunder
by the Adviser shall be in writing and shall be duly given if mailed or
delivered to the Trust at 101 Park Avenue, New York, New York 10178 or at
such other address or to such individual as shall be so specified by the
Trust to the Adviser. Notices shall be effective upon delivery.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized, and their
respective seals to be hereunto affixed, all as of the date written above.
THE CHASE MANHATTAN BANK MUTUAL FUND INVESTMENT TRUST
By:_________________________ By:_______________________
Name: Name:
Title: Title:
<PAGE>
Schedule A
Fund: Fee:
1. Avesta Money Market Fund 0.30%
2. Avesta Short-Intermediate Term
U.S. Government Securities Fund 0.50%
3. Avesta U.S. Government Securities Fund 0.50%
4. Avesta Intermediate Term Bond Fund 0.50%
5. Avesta Income Fund 0.50%
6. Avesta Balanced Fund 0.75%
7. Avesta Equity Income Fund 0.75%
8. Avesta Core Equity Fund 0.75%
9. Avesta Equity Growth Fund 0.75%
10. Avesta Small Capitalization Fund 0.75%
<PAGE>
EXHIBIT B-2
INVESTMENT SUBADVISORY AGREEMENT
between
THE CHASE MANHATTAN BANK
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AGREEMENT made as of the 1st day of January, 1998, by and
between The Chase Manhattan Bank, a New York chartered bank (the "Adviser"),
and Texas Commerce Bank National Association, a national bank (the "Sub-
Adviser").
WHEREAS, the Adviser provides investment advisory services
to the series of Mutual Fund Investment Trust, a Massachusetts business trust
(the "Trust"), which is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940
Act"), pursuant to an Investment Advisory Agreement dated January 1, 1998
(the "Advisory Agreement"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser to
furnish investment subadvisory services in connection with the series of the
Trust listed on Schedule A (each, a "Fund" and collectively, the "Funds"),
and the Sub-Adviser represents that it is willing and possesses legal
authority to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as
follows:
1. Appointment.
(a) General. The Adviser hereby appoints the Sub-Adviser
to act as investment subadviser to the Funds for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts such appointment and
agrees to furnish the services herein set forth for the compensation herein
provided.
(b) Employees of Affiliates. The Sub-Adviser may, in its
discretion, provide such services through its own employees or the employees
of one or more affiliated companies that are qualified to act as an
investment subadviser to the Funds under applicable laws and are under the
control of Texas Commerce Bank; provided that (i) all persons, when providing
services hereunder, are functioning as part of an organized group of persons,
and (ii) such organized group of persons is managed at all times by
authorized officers of the Sub-Adviser.
2. Delivery of Documents. The Adviser has delivered to the
Sub-Adviser copies of each of the following documents along with all
amendments thereto through the date hereof, and will promptly deliver to it
all future amendments and supplements thereto, if any:
<PAGE>
(1) the Trust's Declaration of Trust;
(2) the By-Laws of the Trust;
(3) resolutions of the Board of Trustees of the Trust
authorizing the execution and delivery of the
Advisory Agreement and this Agreement;
(4) the most recent Post-Effective Amendment to the
Trust's Registration Statement under the Securities
Act of 1933, as amended (the "1933 Act"), and the
1940 Act, on Form N-1A as filed with the Securities
and Exchange Commission (the "Commission");
(5) Notification of Registration of the Trust under the
1940 Act on Form N-8A as filed with the Commission;
and
(6) the Prospectuses and Statements of Additional
Information of the Funds.
3. Investment Advisory Services.
(a) Management of the Funds. The Sub-Adviser hereby
undertakes to act as investment subadviser to the Funds. The Sub-Adviser
shall regularly provide investment advice to the Funds and continuously
supervise the investment and reinvestment of cash, securities and other
property composing the assets of the Funds and, in furtherance thereof,
shall:
(i) obtain and evaluate pertinent economic,
statistical and financial data, as well as other significant events and
developments, which affect the economy generally, the Funds' investment
programs, and the issuers of securities included in the Funds' portfolios and
the industries in which they engage, or which may relate to securities or
other investments which the Sub-Adviser may deem desirable for inclusion in
a Fund's portfolio;
(ii) determine which issuers and securities shall be
included in the portfolio of each Fund;
(iii) furnish a continuous investment program for each
Fund;
(iv) in its discretion, and without prior consultation,
buy, sell, lend and otherwise trade any stocks, bonds and other securities
and investment instruments on behalf of each Fund; and
(v) take, on behalf of each Fund, all actions the Sub-
Adviser may deem necessary in order to carry into effect such investment
program and the Sub-Adviser's functions as provided above, including the
<PAGE>
making of appropriate periodic reports to the Adviser and the Trust's Board
of Trustees.
(b) Covenants. The Sub-Adviser shall carry out its
investment subadvisory responsibilities in a manner consistent with the
investment objectives, policies, and restrictions provided in: (i) each
Fund's Prospectus and Statement of Additional Information as revised and in
effect from time to time; (ii) the Trust's Declaration of Trust, By-Laws or
other governing instruments, as amended from time to time; (iii) the 1940
Act; (iv) other applicable laws; and (v) such other investment policies,
procedures and/or limitations as may be adopted by the Trust or the Adviser
with respect to a Fund and provided to the Sub-Adviser in writing. The Sub-
Adviser agrees to use reasonable efforts to manage each Fund so that it will
qualify, and continue to qualify, as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended, and
regulations issued thereunder (the "Code"), except as may be authorized to
the contrary by the Trust's Board of Trustees. The management of the Funds
by the Sub-Adviser shall at all times be subject to the review of the Adviser
and the Trust's Board of Trustees.
(c) Books and Records. Pursuant to applicable law, the
Sub-Adviser shall keep each Fund's books and records required to be
maintained by, or on behalf of, the Funds with respect to subadvisory
services rendered hereunder. The Sub-Adviser agrees that all records which
it maintains for a Fund are the property of the Fund and it will promptly
surrender any of such records to the Fund upon the Fund's request. The Sub-
Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act any such records of the Fund required to be preserved by
such Rule.
(d) Reports, Evaluations and other services. The Sub-
Adviser shall furnish reports, evaluations, information or analyses to the
Adviser and the Trust with respect to the Funds and in connection with the
Sub-Adviser's services hereunder as the Adviser and/or the Trust's Board of
Trustees may request from time to time or as the Sub-Adviser may otherwise
deem to be desirable. The Sub-Adviser shall make recommendations to the
Adviser and the Trust's Board of Trustees with respect to the Trust's
policies, and shall carry out such policies as are adopted by the Board of
Trustees. The Sub-Adviser may, subject to review by the Adviser, furnish
such other services as the Sub-Adviser shall from time to time determine to
be necessary or useful to perform its obligations under this Agreement.
(e) Purchase and Sale of Securities. The Sub-Adviser shall
place all orders for the purchase and sale of portfolio securities for each
Fund with brokers or dealers selected by the Sub-Adviser, which may include
brokers or dealers affiliated with the Adviser or the Sub-Adviser to the
extent permitted by the 1940 Act and the Trust's policies and procedures
applicable to the Funds. The Sub-Adviser shall use its best efforts to seek
to execute portfolio transactions at prices which, under the circumstances,
result in total costs or proceeds being the most favorable to the Funds. In
assessing the best overall terms available for any transaction, the Sub-
Adviser shall consider all factors it deems relevant, including the breadth
<PAGE>
of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, research services
provided to the Sub-Adviser, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis. In no
event shall the Sub-Adviser be under any duty to obtain the lowest commission
or the best net price for any Fund on any particular transaction, nor shall
the Sub-Adviser be under any duty to execute any order in a fashion either
preferential to any Fund relative to other accounts managed by the Sub-
Adviser or otherwise materially adverse to such other accounts.
(f) Selection of Brokers or Dealers. In selecting brokers
or dealers qualified to execute a particular transaction, brokers or dealers
may be selected who also provide brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934) to
the Sub-Adviser, the Funds, and/or the other accounts over which the Sub-
Adviser exercises investment discretion. The Sub-Adviser is authorized to
pay a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for a Fund which is in
excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that the total commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the overall responsibilities
of the Sub-Adviser with respect to accounts over which it exercises
investment discretion. The Sub-Adviser shall report to the Board of Trustees
of the Trust regarding overall commissions paid by the Funds and their
reasonableness in relation to their benefits to the Funds.
(g) Aggregation of Securities Transactions. In executing
portfolio transactions for a Fund, the Sub-Adviser may, to the extent
permitted by applicable laws and regulations, but shall not be obligated to,
aggregate the securities to be sold or purchased with those of other Funds or
its other clients if, in the Sub-Adviser's reasonable judgment, such
aggregation (i) will result in an overall economic benefit to the Fund,
taking into consideration the advantageous selling or purchase price,
brokerage commission and other expenses, and trading requirements, and (ii)
is not inconsistent with the policies set forth in the Trust's registration
statement and the Fund's Prospectus and Statement of Additional Information.
In such event, the Sub-Adviser will allocate the securities so purchased or
sold, and the expenses incurred in the transaction, in an equitable manner,
consistent with its fiduciary obligations to the Fund and such other clients.
4. Representations and Warranties.
(a) The Sub-Adviser hereby represents and warrants to the
Adviser as follows:
(i) The Sub-Adviser is a national banking association
duly organized and validly existing under the laws of the United States and
is fully authorized to enter into this Agreement and carry out its duties and
obligations hereunder.
<PAGE>
(ii) The Sub-Adviser at all times shall provide its
best judgment and effort to the Adviser in carrying out the Sub-Adviser's
obligations hereunder.
(b) The Adviser hereby represents and warrants to the Sub-
Adviser as follows:
(i) The Adviser is a chartered bank duly organized and
in good standing under the laws of the State of New York and is fully
authorized to enter into this Agreement and carry out its duties and
obligations hereunder.
(ii) The Trust has been duly organized as a business
trust under the laws of the State of Massachusetts.
(iii) The Trust is registered as an investment company
with the Commission under the 1940 Act, and shares of the each Fund are
registered for offer and sale to the public under the 1933 Act and all
applicable state securities laws where currently sold. Such registrations
will be kept in effect during the term of this Agreement.
5. Compensation. (a) As compensation for the services
which the Sub-Adviser is to provide or cause to be provided pursuant to
Paragraph 3, with respect to each Fund, the Adviser shall pay to the Sub-
Adviser (or cause to be paid by the Trust directly to the Sub-Adviser) a fee,
which shall be accrued daily and paid in arrears on the first business day of
each month, at an annual rate set forth in Schedule A, as a percentage of the
average daily net assets of the Fund during the preceding month (computed in
the manner set forth in the Fund's most recent Prospectus and Statement of
Additional Information). Average daily net assets shall be based upon
determinations of net assets made as of the close of business on each
business day throughout such month. The fee for any partial month shall be
calculated on a proportionate basis, based upon average daily net assets for
such partial month.
(b) The Sub-Adviser shall have the right, but not the
obligation, to voluntarily waive any portion of the sub-advisory fee from
time to time. Any such voluntary waiver will be irrevocable and determined
in advance of rendering sub-investment advisory services by the Sub-Adviser,
and shall be in writing and signed by the parties hereto.
(c) If the aggregate expenses incurred by, or allocated to,
each Fund in any fiscal year shall exceed the lowest expense limitation, if
applicable to such Fund, imposed by state securities laws or regulations
thereunder, as such limitations may be raised or lowered from time to time,
the Sub-Adviser shall reduce its investment advisory fee, but not below zero,
to the extent of its share of such excess expenses; provided, however, there
shall be excluded from such expenses the amount of any interest, taxes,
brokerage commissions and extraordinary expenses (including but not limited
to legal claims and liabilities and litigation costs and any indemnification
related thereto) paid or payable by the Fund. Such reduction, if any, shall
be computed and accrued daily, shall be settled on a monthly basis and shall
<PAGE>
be based upon the expense limitation applicable to the Fund as at the end of
the last business day of the month. Should two or more of such expense
limitations be applicable at the end of the last business day of the month,
that expense limitation which results in the largest reduction in the Sub-
Adviser's fee shall be applicable. For the purposes of this paragraph, the
Sub-Adviser's share of any excess expenses shall be computed by multiplying
such excess expenses by a fraction, the numerator of which is the amount of
the investment advisory fee which would otherwise be payable to the Sub-
Adviser for such fiscal year were it not for this subsection 5(b) and the
denominator of which is the sum of all investment advisory and administrative
fees which would otherwise be payable by the Fund were it not for the expense
limitation provisions of any investment advisory or administrative agreement
to which the Fund is a party.
6. Interested Persons. It is understood that, to the
extent consistent with applicable laws, the Trustees, officers and
shareholders of the Trust or the Adviser are or may be or become interested
in the Sub-Adviser as directors, officers or otherwise and that directors,
officers and shareholders of the Sub-Adviser are or may be or become
similarly interested in the Trust or the Adviser.
7. Expenses. The Sub-Adviser will pay all expenses
incurred by it in connection with its activities under this Agreement other
than the cost of securities (including brokerage commissions) purchased for
or sold by the Funds.
8. Non-Exclusive Services; Limitation of Sub-Adviser's
Liability. The services of the Sub-Adviser hereunder are not to be deemed
exclusive, and the Sub-Adviser may render similar services to others and
engage in other activities. The Sub-Adviser and its affiliates may enter
into other agreements with the Funds, the Trust or the Adviser for providing
additional services to the Funds, the Trust or the Adviser which are not
covered by this Agreement, and to receive additional compensation for such
services. In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part of the
Sub-Adviser, or a breach of fiduciary duty with respect to receipt of
compensation, neither the Sub-Adviser nor any of its directors, officers,
shareholders, agents, or employees shall be liable or responsible to the
Adviser, the Trust, the Funds or to any shareholder of the Funds for any
error of judgment or mistake of law or for any act or omission in the course
of, or connected with, rendering services hereunder or for any loss suffered
by the Adviser, the Trust, a Fund, or any shareholder of a Fund in connection
with the performance of this Agreement.
9. Effective Date; Modifications; Termination. This
Agreement shall become effective on the date hereof (the "Effective Date")
provided that it shall have been approved by a majority of the outstanding
voting securities of each Fund, in accordance with the requirements of the
1940 Act, or such later date as may be agreed by the parties following such
shareholder approval.
<PAGE>
(a) This Agreement shall continue in force for two years
from the Effective Date and shall continue in effect from year to year
thereafter as to each Fund for successive annual periods, provided such
continuance is specifically approved at least annually (i) by a vote of the
majority of the Trustees of the Trust who are not parties to this Agreement
or interested persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by a vote of the Board
of Trustees of the Trust or a majority of the outstanding voting securities
of the Fund.
(b) The modification of any of the non-material terms of
this Agreement may be approved by a vote of a majority of those Trustees of
the Trust who are not interested persons of any party to this Agreement, cast
in person at a meeting called for the purpose of voting on such approval.
(c) Notwithstanding the foregoing provisions of this
Paragraph 9, either party hereto may terminate this Agreement as to any
Fund(s) at any time on sixty (60) days' prior written notice to the other,
without payment of any penalty. A termination of the Sub-Adviser may be
effected as to any particular Fund by the Adviser, by a vote of the Trust's
Board of Trustees, or by vote of a majority of the outstanding voting
securities of the Fund. This Agreement shall terminate automatically in the
event of its assignment.
10. Limitation of Liability of Trustees and Shareholders.
The Sub-Adviser acknowledges the following limitation of liability:
The terms "Mutual Fund Investment Trust" and "Trustees of
Mutual Fund Investment Trust" refer, respectively, to the trust created and
the Trustees, as trustees but not individually or personally, acting from
time to time under the Declaration of Trust, to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State
of the State of Massachusetts, such reference being inclusive of any and all
amendments thereto so filed or hereafter filed. The obligations of "Mutual
Fund Investment Trust" entered into in the name or on behalf thereof by any
of the Trustees, representatives or agents are made not individually, but in
such capacities and are not binding upon any of the Trustees, shareholders or
representatives of the Trust personally, but bind only the assets of the
Trust, and all persons dealing with the Trust or a Fund must look solely to
the assets of the Trust or Fund for the enforcement of any claims against the
Trust or Fund.
11. Certain Definitions. The terms "vote of a majority of
the outstanding voting securities," "assignment," "control," and "interested
persons," when used herein, shall have the respective meanings specified in
the 1940 Act. References in this Agreement to the 1940 Act and the Advisers
Act shall be construed as references to such laws as now in effect or as
hereafter amended, and shall be understood as inclusive of any applicable
rules, interpretations and/or orders adopted or issued thereunder by the
Commission.
<PAGE>
12. Independent Contractor. The Sub-Adviser shall for all
purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided herein or authorized by the Board of Trustees of
the Trust from time to time, have no authority to act for or represent a Fund
in any way or otherwise be deemed an agent of a Fund.
13. Structure of Agreement. The Adviser and Sub-Adviser
are entering into this Agreement with regard to the respective Funds
severally and not jointly. The responsibilities and benefits set forth in
this Agreement shall be deemed to be effective as between the Adviser and
Sub-Adviser in connection with each Fund severally and not jointly. This
Agreement is intended to govern only the relationships between the Adviser,
on the one hand, and the Sub-Adviser, on the other hand, and is not intended
to and shall not govern (i) the relationship between the Adviser or Sub-
Adviser and any Fund, or (ii) the relationships among the respective Funds.
14. Governing Law. This Agreement shall be governed by the
laws of the State of New York, provided that nothing herein shall be
construed in a manner inconsistent with the 1940 Act or the Advisers Act.
15. Severability. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby and, to this
extent, the provisions of this Agreement shall be deemed to be severable.
16. Notices. Notices of any kind to be given to the
Adviser hereunder by the Sub-Adviser shall be in writing and shall be duly
given if mailed or delivered to the Adviser at 270 Park Avenue, New York, New
York 10017 or at such other address or to such individual as shall be so
specified by the Adviser to the Sub-Adviser. Notices of any kind to be given
to the Sub-Adviser hereunder by the Adviser shall be in writing and shall be
duly given if mailed or delivered to the Sub-Adviser at 600 Travis Street,
Houston, Texas 77252 or at such other address or to such individual as shall
be so specified by the Sub-Adviser to the Adviser. Notices shall be
effective upon delivery.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of
the date written above.
THE CHASE MANHATTAN BANK TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By:_____________________________ By:______________________________
Name: Name:
Title: Title:
<PAGE>
Schedule A
Fund: Fee:
1. Avesta Money Market Fund 0.__%
2. Avesta Short-Intermediate Term U.S. Government 0.__%
Securities Fund
3. Avesta U.S. Government Securities Fund 0.__%
4. Avesta Intermediate Term Bond Fund 0.__%
5. Avesta Income Fund 0.__%
6. Avesta Balanced Fund 0.__%
7. Avesta Equity Income Fund 0.__%
8. Avesta Core Equity Fund 0.__%
9. Avesta Equity Growth Fund 0.__%
10. Avesta Small Capitalization Fund 0.__%
<PAGE>
[FORM OF PROXY]
[Preliminary Proxy Material]
AVESTA TRUST
[Name of Fund]
This proxy is solicited on behalf of the Supervisory Committee of the AVESTA
Trust for the Special Meeting of Participating Trusts to be held on December
2, 1997.
The undersigned hereby appoints ________, ________ AND ________, and each of
them, attorneys and proxies for the undersigned, with full power of
substitution, and revocation to represent the undersigned and to vote on
behalf of the undersigned all shares of [Name of Fund] which the undersigned
is entitled to vote at the Special Meeting of Participating Trusts to be held
at __________, Texas Commerce Tower, 600 Travis Street, Houton, Texas 77252
on December 2, 1997, at ____ a.m., and at any adjournments thereof. The
undersigned hereby acknowledges receipt of the Notice of the Special Meeting
of Participating Trusts and hereby instructs said attorneys and proxies to
vote said shares as indicated hereon. In their discretion, the proxies are
authorized to vote upon such other business as may properly come before the
Special Meeting of Participating Trusts. A majority of the proxies present
and acting at the Special Meeting of Participating Trusts in person or by
substitute (or, if only one shall be so present, then that one) shall have
and may exercise all of the power and authority of said proxies hereunder.
The undersigned hereby revokes any proxy previously given.
NOTE: Please sign exactly as your name appears on
this proxy. If joint owners, EITHER may sign this
proxy. When signing as attorney, executor,
administrator, trustee, guardian or corporate
officer, please give your full title.
Date ________ __, 1997
__________________________________
__________________________________
Signature(s), Title(s) (if applicable) PLEASE SIGN,
DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
<PAGE>
AVESTA TRUST
[Name of Fund]
Please indicate your vote by an "X" on the appropriate line below.
This proxy, if properly executed, will be voted in the manner directed by the
stockholder.
If no direction is made, this proxy will be voted FOR the Proposal.
Please refer to the Proxy Statement for a discussion of each Proposal.
THE SUPERVISORY COMMITTEE RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS.
1. To approve or disapprove the Plan of Conversion.
For _____ Against _____ Abstain _____
2 To approve or disapprove the proposed changes to the Fund's
fundamental investment objectives, policies and restrictions.
To vote against the proposed changes in one or more of the specific
fundamental objectives, policies or restrictions while approving the
others, place an "X" on the line marked "Against" and indicate the
letter(s) (as set forth in the proxy statement (e.g, 2(a), 2(b),
etc.)) of the investment objectives, policies and restrictions you do
not want to change on this line: ______________________
For _____ Against _____ Abstain _____
3(a) To approve or disapprove authorizing the Fund to approve a new
advisory agreement between Mutual Fund Investment Trust and The Chase
Manhattan Bank.
For _____ Against _____ Abstain _____
3(b) To approve or disapprove authorizing the Fund to approve a
subadvisory agreement between The Chase Manhattan Bank and Texas
Commerce Bank National Association.
For _____ Against _____ Abstain _____
4(a) To approve or disapprove authorizing AVESTA Trust to elect Sarah E.
Jones as a Trustee of Mutual Fund Investment Trust.
For _____ Against _____ Abstain _____
4(b) To approve or disapprove authorizing AVESTA Trust to elect Fergus
Reid III as a Trustee of Mutual Fund Investment Trust.
For _____ Against _____ Abstain _____
