<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 29, 1995
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
/ / PRE-EFFECTIVE AMENDMENT NO.
/ / POST-EFFECTIVE AMENDMENT NO.
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
MUTUAL FUND GROUP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1-800-34-VISTA
(AREA CODE AND TELEPHONE NUMBER)
125 WEST 55TH STREET
NEW YORK, NEW YORK 10019
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
NAME AND ADDRESS OF
AGENT FOR SERVICE:
ANN BERGIN
SECRETARY
MUTUAL FUND GROUP
125 WEST 55TH STREET
NEW YORK, NEW YORK 10019
COPIES TO:
<TABLE>
<S> <C> <C>
MARGUERITE SHEEHAN, ESQ. GARY S. SCHPERO, ESQ. SUSAN J. PENRY-WILLIAMS, ESQ.
CHEMICAL BANK SIMPSON THACHER & BARTLETT KRAMER, LEVIN, NAFTALIS,
270 PARK AVENUE 425 LEXINGTON AVENUE NESSEN, KAMIN & FRANKEL
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10017 919 THIRD AVENUE
NEW YORK, NEW YORK 10022
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon after the effective
date of this registration statement as is practicable.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The Registrant has previously registered an indefinite number or amount of
its shares pursuant to Rule 24f-2 under the Investment Company Act of 1940 on
July 16, 1987; accordingly, no fee is payable herewith. A Rule 24f-2 Notice for
Registrant's fiscal year ended October 31, 1995 was filed on November 27, 1995.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
MUTUAL FUND GROUP
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A) UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
FORM N-14 ITEM NO.
- ---------------------------------------------------
LOCATION
-----------------------------------------
PROSPECTUS/PROXY
STATEMENT CAPTION
-----------------------------------------
<S> <C> <C>
PART A
Item 1. Beginning of Registration Statement and
Outside Front Cover Page of Prospectus... Cover Page
Item 2. Beginning and Outside Back Cover Page of
Prospectus............................... Table of Contents
Item 3. Synopsis and Risk Factors................ Summary
Item 4. Information About the Transaction........ Summary; Reasons for the Reorganization;
Information About the Reorganization;
Comparative Information on Shareholder
Rights; Agreement and Plan of
Reorganization and Liquidation
Item 5. Information About the Registrant......... Summary; Comparison of Investment
Objectives and Policies; Additional
Information About Vista
Item 6. Information About the Company Being
Acquired................................. Summary; Comparison of Investment
Objectives and Policies; Information
About Hanover
Item 7. Voting Information....................... Voting Information
Item 8. Interest of Certain Persons and
Experts.................................. Financial Statements and Experts
Item 9. Additional Information Required for
Reoffering by Persons Deemed to be
Underwriters............................. Not Applicable
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
INFORMATION CAPTION
----------------------------------------
<S> <C> <C>
PART B
Item 10. Cover Page.............................. Cover Page
Item 11. Table of Contents....................... Cover Page
Item 12. Additional Information About the
Registrant.............................. Statement of Additional Information
Item 13. Additional Information About the Company
Being Acquired.......................... Not Applicable
Item 14. Financial Statements.................... Historical Financial Statements; Pro
Forma Financial Statements; The caption
"Information about Hanover" in the
Prospectus
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration Statement.
<PAGE> 3
PART A
<PAGE> 4
PRELIMINARY COPY -- FOR THE INFORMATION OF THE
SECURITIES AND EXCHANGE COMMISSION ONLY
THE HANOVER INVESTMENT FUNDS, INC.
237 PARK AVENUE
NEW YORK, NEW YORK 10017
January , 1996
Dear Shareholder:
It's an exciting time for mutual fund investors and, I believe, an
especially exciting time for you as a Hanover Investment Funds shareholder.
That's because, in conjunction with the proposed merger of The Chemical
Banking Corporation and The Chase Manhattan Corporation, the Board of Directors
of your fund has been seeking ways to enhance your investment relationship with
us. I am writing today to ask you to vote on a proposed reorganization that will
allow your fund to operate more efficiently and offer you substantial benefits
as a shareholder.
We've considered a proposal that will combine each of the five currently
operational Hanover funds with an existing or newly-created fund in Mutual Fund
Group, better known as the Vista Family of Mutual Funds, which is affiliated
with Chase Manhattan. Vista is comprised of a family of 30 funds ranging from
stock and bond to money market funds and including both domestic and
international fund offerings.
Through the reorganization, your investment would be in a larger combined
fund family, allowing you as a shareholder to take advantage of the many
benefits that size and a diverse array of products offer. In addition, the
resulting increase in the assets under management of the Vista Funds should
enhance the ability of the funds' portfolio managers to buy and sell securities
on a more favorable basis. Larger transactions can often be achieved at a better
price, while giving the portfolio manager greater flexibility and potentially
increasing the funds' diversification.
The entire impact of the proposed reorganization is spelled out in the
enclosed Prospectus/Proxy Statement. After carefully considering all the issues
involved, your Board of Directors has unanimously concluded that the proposal is
in the best interests of your fund and its shareholders. THEREFORE, WE RECOMMEND
THAT YOU VOTE IN FAVOR USING THE ENCLOSED PROXY CARD.
The value of your investment will not be affected by the reorganization.
Nor, in the opinion of legal counsel, will the transaction be subject to federal
income taxes.
I ENCOURAGE YOU TO COMPLETE AND RETURN YOUR PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE, AS YOUR VOTE IS IMPORTANT. Please be
advised that you may receive a mailing and proxy card on each Hanover account
you own, and that each proxy must be voted separately.
Thank you for your continuing support of The Hanover Investment Funds. We
look forward to serving you better in the near future as part of the Vista
Family of Mutual Funds. If you have any questions regarding the attached proxy,
please contact your investment representative or call your client services
representative at 1-800-821-2371.
Sincerely yours,
W. Perry Neff
Chairman of the Board of Directors
The Hanover Investment Funds, Inc.
<PAGE> 5
PRELIMINARY COPY -- FOR THE INFORMATION OF THE
SECURITIES AND EXCHANGE COMMISSION ONLY
THE HANOVER INVESTMENT FUNDS, INC.
237 PARK AVENUE
NEW YORK, NEW YORK 10019
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
January , 1996
Dear Shareholder:
A special meeting of shareholders of the portfolios of The Hanover
Investment Funds, Inc. ("Hanover") will be held on March 15, 1996 at at the
offices of , New York, New York for the following purposes:
1. To consider and act upon an Agreement and Plan of Reorganization
and Liquidation (the "Agreement") between Hanover and Mutual Fund Group
("Vista") providing for:
(a) the transfer of all of the assets and liabilities of The
Hanover Short Term U.S. Government Fund to the Vista Short Term Bond
Fund in exchange for Class A Shares of the Vista Short Term Bond Fund,
the distribution of such shares to the shareholders of The Hanover Short
Term U.S. Government Fund and the subsequent termination of The Hanover
Short Term U.S. Government Fund (to be voted on only by the shareholders
of The Hanover Short Term U.S. Government Fund);
(b) the transfer of all of the assets and liabilities of The
Hanover U.S. Government Securities Fund to the Vista U.S. Government
Securities Fund (a newly created portfolio of Vista) in exchange for
Institutional Shares of the Vista U.S. Government Securities Fund, the
distribution of such shares to the shareholders of The Hanover U.S.
Government Securities Fund and the subsequent termination of The Hanover
U.S. Government Securities Fund (to be voted on only by the shareholders
of The Hanover U.S. Government Securities Fund);
(c) the transfer of all of the assets and liabilities of The
Hanover Blue Chip Growth Fund to the Vista Large Cap Equity Fund
(currently known as the Vista Equity Fund) in exchange for Institutional
Shares of the Vista Large Cap Equity Fund, the distribution of such
shares to the shareholders of The Hanover Blue Chip Growth Fund and the
subsequent termination of The Hanover Blue Chip Growth Fund (to be voted
on only by the shareholders of The Hanover Blue Chip Growth Fund);
(d) the transfer of all of the assets and liabilities of The
Hanover Small Capitalization Growth Fund to the Vista Small Cap Equity
Fund in exchange for Class A Shares and Institutional Shares of the
Vista Small Cap Equity Fund, the distribution of such Class A Shares to
the shareholders of Investor Shares of The Hanover Small Capitalization
Growth Fund and such Institutional Shares to the shareholders of CBC
Benefit Shares of The Hanover Small Capitalization Growth Fund, and the
subsequent termination of The Hanover Small Capitalization Growth Fund
(to be voted on only by the shareholders of The Hanover Small
Capitalization Growth Fund); and
(e) the transfer of all of the assets and liabilities of The
Hanover American Value Fund to the Vista American Value Fund (a newly
created portfolio of Vista) in exchange for shares of the Vista American
Value Fund, the distribution of such shares to the shareholders of The
Hanover American Value Fund and the subsequent termination of The
Hanover American Value Fund (to be voted on only by the shareholders of
The Hanover American Value Fund).
2. Transaction of such other business as may properly come before the
meeting.
<PAGE> 6
The Board of Directors of Hanover has recently reviewed and unanimously
endorsed the proposals set forth in the accompanying Prospectus/Proxy Statement.
Approval of the Agreement will require the affirmative vote of the holders of at
least a majority of the outstanding shares of each portfolio of Hanover (other
than The Hanover Small Capitalization Growth Fund) entitled to vote on the
matter and, in the case of The Hanover Small Capitalization Growth Fund, the
affirmative vote of the holders of at least a majority of each of its
outstanding Investor Shares and CBC Benefit Shares entitled to vote on the
matter. By approving the Agreement, Hanover shareholders will be deemed to have
waived temporarily certain of Hanover's investment limitations insofar as they
might be deemed to apply to the transactions provided for therein. The Board of
Directors knows of no other business that will be acted upon at the meeting.
Each shareholder is invited to attend the Special Meeting in person.
Shareholders of record at the close of business on January , 1996 have the
right to vote at the Special Meeting.
A quorum for the Special Meeting for each Hanover portfolio will consist of
the presence in person or by proxy of shareholders entitled to cast a majority
of the votes of that portfolio entitled to be cast. In the event that a quorum
for any Hanover portfolio is not present at the Special Meeting, or in the event
that a quorum is present but sufficient votes to approve any of the matters to
be acted upon are not received, the persons named as proxies may propose one or
more adjournments of the Special Meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a majority of
those shares present or represented at the meeting in person or by proxy. The
persons named as proxies will vote those proxies which they are entitled to vote
FOR or AGAINST any such proposal in their discretion. A stockholder vote may be
taken on one or more of the matters to be acted upon as described in the
accompanying Prospectus/Proxy Statement prior to any such adjournment if
sufficient votes have been received for approval.
Detailed information about the proposed transaction and the reasons for it
are contained in the enclosed materials. Please exercise your right to vote by
attending the Special Meeting or completing, dating and signing the enclosed
proxy card. A self-addressed, postage-paid envelope has been enclosed for your
convenience. It is very important that you vote and that your voting
instructions be received prior to the Special Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, THE BOARD OF DIRECTORS
SOLICITS YOUR PROXY AND STRONGLY INVITES YOUR PARTICIPATION BY ASKING YOU TO
REVIEW, COMPLETE AND RETURN YOUR PROXY AS SOON AS POSSIBLE.
NOTE: You may receive more than one proxy package if you hold shares in
more than one account or if you own shares in more than one portfolio which is
being reorganized. You must return separate proxy cards for separate holdings.
We have provided postage-paid return envelopes for each.
By Order of the Board of Directors
W. Perry Neff
Chairman of the Board and President
<PAGE> 7
PRELIMINARY COPY -- FOR THE INFORMATION OF THE
SECURITIES AND EXCHANGE COMMISSION ONLY
PROSPECTUS/PROXY STATEMENT DATED , 1996
ACQUISITION OF THE ASSETS OF
THE HANOVER INVESTMENT FUNDS, INC.
237 PARK AVENUE
NEW YORK, NEW YORK 10017
1-800-821-2371
BY AND IN EXCHANGE FOR SHARES OF
MUTUAL FUND GROUP
125 WEST 55TH STREET
NEW YORK, NEW YORK 10019
1-800-34-VISTA
This Prospectus/Proxy Statement relates to the proposed transfer of all of
the assets and liabilities of each currently operational portfolio of The
Hanover Investment Funds, Inc. ("Hanover") to corresponding portfolios of Mutual
Fund Group ("Vista") having substantially similar investment objectives (except
as described herein) in exchange for shares of such portfolios of Vista. Vista
is an open-end investment company of the management type offering shares in
several portfolios, and, in some cases, multiple classes of shares in each such
portfolio. As a result of the proposed transaction, each shareholder of a
portfolio of Hanover will receive that number of shares of the corresponding
portfolio of Vista equal in value at the date of the exchange to the value of
such shareholder's shares of the portfolio of Hanover at such date. The terms
and conditions of these transactions are more fully described in this
Prospectus/Proxy Statement and in the Agreement and Plan of Reorganization and
Liquidation between Vista and Hanover attached hereto as Exhibit A.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about Vista and its portfolios
that a prospective investor should know before investing. A statement of
additional information dated , 1996 (the "Statement of Additional
Information") containing additional information about Vista has been filed with
the Securities and Exchange Commission (the "Commission") and is incorporated by
reference into this Prospectus/Proxy Statement. Copies of Hanover's current
prospectuses may be obtained without charge by writing to Hanover at its address
noted above or by calling 1-800-821-2371. A copy of the Statement of Additional
Information may be obtained without charge by writing to Vista at its address
noted above or by calling 1-800-34-VISTA.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED
HEREIN BY REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY VISTA OR HANOVER.
INVESTMENTS IN VISTA PORTFOLIOS ARE SUBJECT TO RISK -- INCLUDING POSSIBLE LOSS
OF PRINCIPAL -- AND WILL FLUCTUATE IN VALUE. SHARES OF THE VISTA PORTFOLIOS
ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
THE CHASE MANHATTAN BANK, N.A. OR ANY OF ITS AFFILIATES AND ARE NOT
FEDERALLY INSURED BY, OBLIGATIONS OF, OR OTHERWISE SUPPORTED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................................................................... 3
Reasons For the Reorganization........................................................ 11
Information About the Reorganization.................................................. 13
Voting Information.................................................................... 16
Comparison of Investment Objectives and Policies...................................... 17
Comparative Information on Shareholder Rights......................................... 34
Additional Information About Vista.................................................... 36
Information About Hanover............................................................. 62
Financial Statements and Experts...................................................... 62
Legal Matters......................................................................... 63
</TABLE>
EXHIBIT
A -- Agreement and Plan of Reorganization and Liquidation between Mutual
Fund Group and The Hanover Investment Funds, Inc.
2
<PAGE> 9
SUMMARY
This summary is qualified by reference to the more complete information
contained in this Prospectus/Proxy Statement, the prospectus of Hanover and the
Agreement and Plan of Reorganization and Liquidation attached to this
Prospectus/Proxy Statement as Exhibit A. The information concerning Hanover
contained or incorporated by reference into this Prospectus/Proxy Statement has
been furnished by Hanover, and the information concerning Vista contained or
incorporated by reference into this Prospectus/Proxy Statement has been
furnished by Vista.
Proposed Transaction. The Board of Directors of Hanover (the "Hanover
Board"), including the Directors who are not "interested persons" of Hanover
(the "Independent Directors"), has unanimously approved an Agreement and Plan of
Reorganization and Liquidation (the "Agreement") providing for the transfer of
all of the assets and liabilities (whether contingent or otherwise) of each
currently operational portfolio of Hanover (each, a "Hanover Portfolio") to a
corresponding portfolio of Vista (each, a "Vista Portfolio") having a
substantially similar investment objective (except as described herein) in
exchange for shares of the class or classes specified in the table below of such
Vista Portfolio. (The proposed transaction is referred to in this
Prospectus/Proxy Statement as the "Reorganization".) The total value of all
shares of each Vista Portfolio issued in the Reorganization shall equal the
total value of the net assets of the corresponding Hanover Portfolio being
acquired by such Vista Portfolio. In connection with the Reorganization, shares
of the class or classes of each Vista Portfolio specified in the table below
will be distributed to holders of the shares of the respective class or classes
of the corresponding Hanover Portfolio as specified in the table below in
liquidation of that Hanover Portfolio. The number of full and fractional shares
of a Vista Portfolio received by a shareholder of the corresponding Hanover
Portfolio will be equal in value to the value of that shareholder's shares of
the corresponding Hanover Portfolio as of 4:00 p.m. (Eastern time) on the
closing date of the Reorganization. Upon completion of such distribution,
Hanover will be dissolved and will then deregister as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), by filing
the appropriate application with the Commission and will also be terminated
under state law. As a result of the Reorganization, each holder of shares of the
Hanover Portfolio specified in the table below will become a holder of shares of
the specified class of the Vista Portfolio listed opposite the class of shares
held in such Hanover Portfolio (each Hanover or Vista Portfolio being referred
to herein as the "corresponding" Hanover or Vista Portfolio to the respective
Vista or Hanover Portfolio listed opposite its name). One of the currently
existing Vista Portfolios will be renamed in connection with the Reorganization,
as indicated in the table below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
HANOVER PORTFOLIO AND SHARE CLASS VISTA PORTFOLIO AND SHARE CLASS
- ------------------------------------------------------------------------------------------------
<S> <C>
Hanover Short Term U.S. Government Fund Vista Short Term Bond Fund
All Shares Class A Shares*
- ------------------------------------------------------------------------------------------------
Hanover U.S. Government Securities Fund Vista U.S. Government Securities Fund**
All Shares Institutional Shares
- ------------------------------------------------------------------------------------------------
Hanover Blue Chip Growth Fund Vista Large Cap Equity Fund***
All Shares Institutional Shares+
- ------------------------------------------------------------------------------------------------
Hanover Small Capitalization Growth Fund Vista Small Cap Equity Fund
Investor Shares Class A Shares
CBC Benefit Shares Institutional Shares
- ------------------------------------------------------------------------------------------------
Hanover American Value Fund Vista American Value Fund++
All Shares Shares
- ------------------------------------------------------------------------------------------------
</TABLE>
* A share class of a currently existing Vista Portfolio that will be newly
created in connection with the Reorganization.
** Vista U.S. Government Securities Fund is a newly organized portfolio of
Vista created for the purpose of operating as a successor to The Hanover
U.S. Government Securities Fund in connection with the Reorganization.
*** Currently known as the Vista Equity Fund.
+ Currently known as Shares.
++ Vista American Value Fund is a newly organized portfolio of Vista created
for the purpose of operating as a successor to The Hanover American Value
Fund in connection with the Reorganization.
3
<PAGE> 10
Under the proposed Reorganization, shareholders of each Hanover Portfolio
other than The Hanover U.S. Government Securities Fund will receive shares in a
Vista Portfolio with a substantially similar investment objective and, except
for certain differences between The Hanover Short Term U.S. Government Fund and
the Vista Short Term Bond Fund, similar investment policies and restrictions.
The Hanover U.S. Government Securities Fund and the Vista U.S. Government
Securities Fund have substantially similar investment policies, but the
objective of the Vista U.S Government Securities Fund has been revised to
reflect a desire to manage the fund to maximize total return, consisting of both
income and capital appreciation. The Vista Short Term Bond Fund is authorized to
invest in a broader range of securities than The Hanover Short Term U.S.
Government Fund. See "Comparison of Investment Objectives and Policies" below.
As set forth in the table above, pursuant to the proposed Reorganization,
the shareholders of each class of a Hanover Portfolio will receive shares of the
specified class of the corresponding Vista Portfolio. As used herein, the
"Shares" refers to the classes of shares of each Vista Portfolio to be received
by shareholders of the corresponding Hanover Portfolio pursuant to the
Reorganization, as set forth in the table above.
Under the proposed Reorganization, purchase, redemption and dividend
policies will remain substantially unchanged.
The investment advisers to the Hanover Portfolios are The Portfolio Group,
Inc. (with respect to The Hanover U.S. Government Securities Fund and The
Hanover Blue Chip Growth Fund), Texas Commerce Bank, National Association (with
respect to The Hanover Short Term U.S. Government Fund), Chemical Bank New
Jersey, National Association (with respect to The Hanover Small Capitalization
Growth Fund) and Van Deventer & Hoch ("VDH") (with respect to The Hanover
American Value Fund). The Portfolio Group, Inc., is a direct, wholly-owned
subsidiary of CBC and Texas Commerce Bank, National Association and Chemical
Bank New Jersey, National Association are each indirect, wholly-owned
subsidiaries of CBC. VDH is a 50%-owned indirect subsidiary of CBC. The Chase
Manhattan Bank, N.A. serves as the investment adviser to each of the existing
Vista Portfolios. Pursuant to the Bank Merger described below under "Reasons for
the Reorganization," The Chase Manhattan Bank, N.A. will be merged with and into
Chemical Bank, at which time Chemical Bank will assume the Chase Manhattan name
(as used herein, the term "Chase" refers to The Chase Manhattan Bank, N.A. and
its successor in the Bank Merger, and the term "Adviser" means Chase (including
its successor in the Bank Merger), in its capacity as investment adviser to the
Vista Portfolios). Following consummation of the Reorganization involving
Hanover and Vista, Chase will serve as investment adviser to each of the Vista
Portfolios. In addition, Chase Asset Management, Inc. ("CAM"), a wholly-owned
operating subsidiary of Chase, will serve as the sub-investment adviser to each
Vista Portfolio, other than the Vista American Value Fund, following the
consummation of the Reorganization pursuant to an agreement with Chase and will
manage each such portfolio on a day-to-day basis. VDH, which currently serves as
the investment adviser to The Hanover American Value Fund, will serve as the
sub-investment adviser to the Vista American Value Fund following the
consummation of the Reorganization pursuant to an agreement with Chase and will
manage that portfolio on a day-to-day basis.
For the reasons set forth above and those set forth below under "Reasons
for the Reorganization," the Hanover Board, including all of the independent
Directors, has unanimously concluded that the Reorganization would be in the
best interests of the shareholders of each Hanover Portfolio, and that the
interests of existing shareholders of each Hanover Portfolio would not be
diluted as a result of the transactions contemplated by the Reorganization. For
all of the reasons noted, the Hanover Board has unanimously recommended approval
of the Reorganization.
The consummation of the Reorganization is contingent on the satisfaction of
the conditions described below under "Information About the Reorganization."
Prior to or effective upon the consummation of the Reorganization, it is
anticipated that Vista will effect changes to certain of its procedures and
investment policies and limitations, as well as to the composition of Vista's
Board of Trustees (the "Vista Board") (collectively, the "Related Changes").
However, the failure to effect any or all of the Related Changes will not
prevent the Reorganization from occurring. Information contained herein with
respect to Vista and the Vista Portfolios describe the Related Changes where so
indicated.
4
<PAGE> 11
If the Reorganization were to have been consummated as of November 30,
1995, the approximate resulting aggregate net assets of the (1) Vista Short Term
Bond Fund would be $47,000,000, (2) Vista U.S. Government Securities Fund would
be $85,000,000, (3) Vista Large Cap Equity Fund would be $117,000,000, (4) Vista
Small Cap Equity Fund would be $113,000,000, and (5) Vista American Value Fund
would be $8,000,000.
Tax Consequences. Prior to the consummation of the Reorganization, counsel
to Hanover will issue an opinion that no gain or loss will be recognized by the
Vista Portfolios or the Hanover Portfolios or shareholders of the Hanover
Portfolios for federal income tax purposes as a result of the Reorganization.
The holding period and tax basis of the shares of a Vista Portfolio received by
a shareholder of the corresponding Hanover Portfolio will be the same as the
holding period and tax cost basis of the shareholder's shares of the
corresponding Hanover Portfolio. In addition, the holding period and tax basis
of the assets of a Hanover Portfolio transferred to the corresponding Vista
Portfolio as a result of the Reorganization will be the holding period and tax
basis of those assets in the hands of that Hanover Portfolio immediately prior
to the Reorganization. For further information about the tax consequences of the
Reorganization, see "Information about the Reorganization -- Federal Income Tax
Consequences."
Investment Objectives and Policies. The following table sets forth the
investment objective of each Hanover Portfolio and its corresponding Vista
Portfolio and their investment approach. Although each Hanover Portfolio and its
corresponding Vista Portfolio, except for the differences in the investment
objective between the Hanover U.S. Government Securities Fund and the Vista U.S.
Government Securities Fund and certain differences between The Hanover Short
Term U.S. Government Fund and the Vista Short Term Bond Fund, have substantially
similar investment objectives and similar policies, there are certain
differences in the investment policies and restrictions of the portfolios that
should be considered by shareholders of the Hanover Portfolios. See "Comparison
of Investment Objectives and Policies."
5
<PAGE> 12
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
HANOVER PORTFOLIO AND
CORRESPONDING VISTA PORTFOLIO INVESTMENT OBJECTIVE AND APPROACH
- ---------------------------------------------------------------------------------------------------------
<S> <C>
The Hanover Short Term U.S. Seeks to provide as high a level of current income as is consistent
Government Fund with the preservation of capital, by investing primarily in
shorter-term securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, and repurchase agreements with
respect thereto.
- ---------------------------------------------------------------------------------------------------------
Vista Short Term Bond Fund Seeks to provide a high level of current income, consistent with
preservation of capital, by investing primarily in a broad range of
short-term investment grade bonds and other fixed income securities.
- ---------------------------------------------------------------------------------------------------------
The Hanover U.S. Government Seeks to provide as high a level of current income as is consistent
Securities Fund with the preservation of capital, by investing primarily in securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements with respect thereto.
- ---------------------------------------------------------------------------------------------------------
Vista U.S. Government Seeks to provide as high a level of total return, consisting of income
Securities Fund and capital appreciation, as is consistent with the preservation of
capital, by investing primarily in securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, and repurchase
agreements with respect thereto.
- ---------------------------------------------------------------------------------------------------------
The Hanover Blue Chip Growth Seeks to provide capital appreciation, by investing primarily in the
Fund equity securities of large, well-established companies with
substantial capitalization.
- ---------------------------------------------------------------------------------------------------------
Vista Large Cap Equity Fund* Seeks to provide long-term growth of capital, by investing primarily
in the equity securities of established companies with substantial
capitalization.
- ---------------------------------------------------------------------------------------------------------
The Hanover Small Seeks to provide capital appreciation, by investing primarily in the
Capitalization Growth Fund common stocks of smaller companies.
- ---------------------------------------------------------------------------------------------------------
Vista Small Cap Equity Fund Seeks to provide long-term capital growth, by investing primarily in a
non-diversified portfolio of equity securities of smaller companies.
- ---------------------------------------------------------------------------------------------------------
The Hanover American Value Seek to maximize total return, consisting of capital appreciation and
Fund and Vista American income, by investing primarily in the equity securities of
Value Fund well-established U.S. companies which, in the opinion of the Fund's
investment adviser, are undervalued by the market.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Currently known as the Vista Equity Fund.
Additional Trust Portfolios. In addition to the Vista Portfolios referred
to above, Vista currently offers eleven additional portfolios, -- Vista U.S.
Government Income Fund, Vista Balanced Fund, Vista Bond Fund, Vista Equity
Income Fund, Vista Growth and Income Fund, Vista Capital Growth Fund, Vista
International Equity Fund, Vista Global Fixed Income Fund, Vista Southeast Asian
Fund, Vista European Fund and Vista Japan Fund. Vista may add additional
portfolios from time to time in the future.
Fees and Expenses. The table which follows sets forth ratios of expenses
to average net assets ("Expense Ratios") for the Hanover Portfolios for the year
ended November 30, 1995, as incurred after giving effect to certain voluntary
fee waivers and expense reimbursements during the period ("Current" --
6
<PAGE> 13
Column 1), as incurred without giving effect to such waivers and reimbursements
("Current Contractual" -- Column 2) and as are permitted to be incurred based
upon the maximum levels provided for under current contractual arrangements
("Maximum Contractual" -- Column 3), and the pro-forma expense ratios for the
Shares of the corresponding Vista Portfolios as if the Reorganization had
occurred at the commencement of the fiscal year ended October 31, 1995 based
upon the fee arrangements that will be in place upon the consummation of the
Reorganization, both reflecting the commitment by Chase, as described below,
voluntarily to waive fees and/or reimburse expenses in an amount sufficient to
maintain the expense ratios for the Shares of the Vista Portfolios at the levels
indicated for a period of at least one year period following consummation of the
Reorganization ("Committed" -- Column 4), and without giving effect to such
commitment based upon the maximum levels provided for under the contractual
arrangements to be in effect upon the consummation of the Reorganization
("Contractual" -- Column 5).
As indicated in the table below, after giving effect to certain voluntary
fee waivers that will be in effect with respect to the Vista Portfolios for a
period of at least one year following the consummation of the Reorganization,
the Committed expense ratio for Shares of each Vista Portfolio for such one year
period is lower than the Maximum Contractual expense ratio for the corresponding
Hanover Portfolio shares for the respective periods presented.
<TABLE>
<CAPTION>
CORRESPONDING VISTA
PORTFOLIOS
PRO-FORMA COMBINED
HANOVER EXPENSE RATIOS* EXPENSE RATIOS**
(UNAUDITED) (UNAUDITED)
------------------------------------- --------------------------
(1) (2) (3) (4) (5)
CURRENT MAXIMUM
HANOVER PORTFOLIOS CURRENT CONTRACTUAL CONTRACTUAL COMMITTED CONTRACTUAL
- ---------------------------------------- ------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
The Hanover Short Term
U.S. Government Fund
Investor Shares+...................... 0.71% 1.57% 1.67% 0.75% 1.25%
The Hanover U.S. Government
Securities Fund
Investor Shares++..................... 0.85 1.17 1.27 0.85 0.90
The Hanover Blue Chip
Growth Fund
Investor Shares++..................... 1.00 1.43 1.53 0.60 1.00
The Hanover Small Capitalization Growth
Fund
Investor Shares+...................... 1.30 1.41 1.51 1.50 1.50
CBC Benefit Shares++.................. 1.05 1.16 1.16 1.10 1.35
The Hanover American Value Fund+++
Investor Shares....................... 1.25 2.03 2.13 1.32 2.50
------------ ------------
</TABLE>
- ---------------
* The Current expense ratios presented in Column 1 above give effect to
certain voluntary fee waivers and expense reimbursements by certain service
providers to the respective Hanover Portfolios during the periods presented.
Absent such voluntary waivers and reimbursements, the expense ratios would
be the Current Contractual expense ratios presented in Column 2 above. Had
Hanover's distributor incurred and sought reimbursement for distribution
expenses at the maximum level permitted under Hanover's plan of distribution
applicable to its Investor Shares, as more fully described below, the
expense ratios would be the Maximum Contractual expense ratios presented in
Column 3 above.
** The Committed expense ratios presented in Column 4 above reflect the
agreement by Chase voluntarily to waive fees payable to it and/or reimburse
expenses for a period of at least one year following the consummation of the
Reorganization to the extent necessary to prevent the annualized expense
ratio for Shares of each Vista Portfolio for such period from exceeding the
amount indicated in Column 4. Absent such agreement, the pro-forma expense
ratios would be the Contractual expense ratios presented in Column 5 above.
In addition, Chase has agreed to waive fees payable to it and/or reimburse
expenses for a two year period following consummation of the Reorganization
to the extent necessary to prevent the annualized expense ratios for
Institutional Shares of the Vista Small Cap Equity Fund and for shares of
the Vista American Value Fund from exceeding 1.15% and 2.12%, respectively,
of average net assets during such period.
7
<PAGE> 14
+ Ratios for the corresponding Vista Portfolio are for its Class A Shares.
++ Ratios for the corresponding Vista Portfolio are for its Institutional
Shares.
+++ The Hanover American Value Fund commenced operations on February 3, 1995;
the expense ratios presented are annualized.
There can be no assurance that the foregoing pro-forma expense ratios would
have been the actual expense ratios for the Shares of the corresponding Vista
Portfolios had the Reorganization been consummated when assumed above, or that
the foregoing pro-forma Contractual expense ratios reflect the actual expense
ratios, absent waivers and reimbursements, that would be incurred by the Shares
of the corresponding Vista Portfolios indicated above if the Reorganization is
consummated.
The fee payable for investment advisory services by the Hanover Portfolios
is a monthly fee at the following annual rate of average daily net assets: The
Hanover Short Term U.S. Government Fund -- .35%; The Hanover U.S. Government
Securities Fund -- .50%; The Hanover Blue Chip Growth Fund -- .70%; The Hanover
Small Capitalization Growth Fund -- .75%; and The Hanover American Value
Fund -- .70%. The fee which will be payable by each Vista Portfolio for
investment advisory services upon consummation of the Reorganization will be a
monthly fee at the following annual rate of average daily net assets: Vista
Short Term Bond Fund -- .25%; Vista U.S. Government Securities Fund -- .30%;
Vista Large Cap Equity Fund -- .40%; Vista Small Cap Equity Fund -- .65% and
Vista American Value Fund -- .70%.
Hanover has adopted a plan of distribution pursuant to Rule 12b-1 under the
1940 Act for the Investor Shares of the Hanover Portfolios which provides that
each Hanover Portfolio may pay to the distributor of Hanover's shares an annual
distribution fee of up to .10% of average net assets attributable to Investor
Shares as reimbursement for distribution expenses incurred. To date, the
distributor of Hanover's shares has not collected distribution fees under the
plan. The Institutional Shares of the Vista U.S. Government Securities Fund, the
Vista Large Cap Equity Fund, and the Vista Small Cap Equity Fund, following the
consummation of the Reorganization, will not be subject to a Rule 12b-1 plan or
any related distribution fees. Pursuant to Rule 12b-1 plans adopted by Vista,
the Shares of the Vista American Value Fund and the Class A Shares of the Vista
Short Term Bond Fund and the Vista Small Cap Equity Fund, following the
consummation of the Reorganization, will each be subject to an annual
distribution fee of up to .25% of average net assets as compensation for
distribution expenses incurred without regard to expenses actually incurred. The
shares of the Hanover Portfolios are currently subject to an annual shareholder
servicing fee payable monthly at an annual rate of up to .30% of average net
assets, while the Shares of the Vista Portfolios, other than the Class A Shares
of the Vista Small Cap Equity Fund, after the consummation of the
Reorganization, will be subject to an annual shareholder servicing fee of up to
.25% of average net assets. The Class A Shares of the Vista Small Cap Equity
Fund do not bear any shareholder servicing fees.
The aggregate fees payable by Hanover for administration and fund
accounting services are a monthly fee at an annual rate of .09% of the first
$500 million of average daily net assets of the Hanover Portfolios, 0.08% of the
next $500 million of such assets, and 0.07% of such assets in excess of $1
billion, plus $30,000 per year for each Hanover Portfolio. In contrast, the
aggregate fees that will be payable by Vista for administration and fund
accounting services upon consummation of the Reorganization will be a monthly
fee at an annual rate of .15% of average daily net assets of the Vista
Portfolios, plus $45,000 per year for each Vista Portfolio and a quotation fee
of 50c per quote per day. Hanover and Vista each pay fees for transfer agency
services on a per account basis, which may vary depending on the type of account
involved. The fees payable by Hanover for custody services are a monthly fee at
an annual rate of .020% of the first $250 million of the aggregate average daily
net assets of the Hanover Portfolios, .015% of the next $250 million of such
assets and .005% of such assets in excess of $500 million, plus a fee of $25.00
for each transaction involving a security which is not book-entry, $15.00 for
each transaction involving a book-entry security, and $22.00 for each
transaction involving an option or futures contract. The fees that will be in
effect for each Vista Portfolio for custody services upon consummation of the
Reorganization are a monthly fee at an annual rate of .010% of the first $500
million of the aggregate average daily net assets, .0075% of the next $250
million of such assets and .005% of such assets in excess of $750 million, plus
a fee of $10.00 for each transaction involving a book-entry security, $20.00 for
each transaction involving a physical security and $10 for income collections.
8
<PAGE> 15
In addition to the fees described above, each of the Hanover Portfolios and
Vista Portfolios bears certain additional fees and expenses relating to, among
other things, printing and audit, legal and other professional services.
For more complete information regarding the historical and projected
expenses of the Vista Portfolios, see "Additional Information about Vista -- A.
Expenses."
Distribution and Shareholder Servicing Arrangements. Hanover Funds
Distributor, Inc. acts as distributor for Hanover (the "Hanover Distributor")
and Vista Broker-Dealer Services, Inc. acts as distributor for Vista (the "Vista
Distributor"). Hanover has adopted a plan (the "Hanover Distribution Plan")
pursuant to Rule 12b-1 under the 1940 Act for the Investor Shares of the Hanover
Portfolios. Under the Hanover Distribution Plan, each Hanover Portfolio may,
solely for the purpose of reimbursing the Hanover Distributor for activities
primarily intended to result in the sale of its Investor Shares, spend up to
.10% annually of its net assets attributable to Investor Shares in accordance
with the Hanover Distribution Plan. Activities for which the Hanover Distributor
may be reimbursed under the Hanover Distribution Plan include (but are not
limited to) the development and implementation of direct mail promotions and
advertising for the Hanover Portfolios and the preparation, printing and
distribution of prospectuses for Investor Shares of the Hanover Portfolios to
recipients other than existing shareholders.
Vista has also adopted plans of distribution (each, a "Vista Distribution
Plan") under Rule 12b-1 under the 1940 Act with respect to certain classes of
the Vista Portfolios. Under the Vista Distribution Plans, following the
consummation of the Reorganization, the Vista Short Term Bond Fund, the Vista
Small Cap Equity Fund and the Vista American Value Fund will each be authorized
to spend up to .25% annually of their respective average net assets attributable
to the Class A Shares thereof (or, in the case of the Vista American Value Fund,
up to .25% of the average net assets thereof) as compensation to the Vista
Distributor for distribution services provided by it. A substantial portion of
the distribution fees payable to the Vista Distributor under the Vista
Distribution Plans is paid by Vista Distributor to non-affiliated broker-dealers
for distribution services that they provide. The fees payable to Vista
Distributor under the Vista Distribution Plans will be payable without regard to
actual expenses incurred. As noted above, following the consummation of the
Reorganization, the Institutional Shares of the Vista U.S. Government Securities
Fund, the Vista Large Cap Equity Fund and the Vista Small Cap Equity Fund will
not be subject to a Rule 12b-1 distribution plan and will therefore bear no
distribution fees.
Hanover and Vista are each authorized to enter into Shareholder Servicing
Agreements with financial institutions and selected dealers ("Shareholder
Servicing Agents") which provide certain shareholder administrative support
services. Chemical and certain of its affiliates, among others, currently act as
Shareholder Servicing Agents for the Hanover Portfolios. Each Hanover
Shareholder Servicing Agent is paid a fee at an annual rate of up to .30% of the
average daily net asset value of shares in each Hanover Portfolio for which it
acts as Shareholder Servicing Agent. Chase and certain of its affiliates, among
others, currently act as Shareholder Servicing Agents for Vista. The fees
payable by the Shares of the Vista Portfolios, other than the Class A Shares of
the Vista Small Cap Equity Fund, for shareholder servicing following the
Reorganization will be paid at an annual rate of up to .25% of average net
assets. The Class A Shares of the Vista Small Cap Equity are not subject to any
shareholder servicing fees.
Purchase and Redemption. All purchase orders for shares of Hanover
Portfolios must be placed through a Hanover Shareholder Servicing Agent or the
Hanover Distributor in accordance with procedures established by such Hanover
Shareholder Servicing Agents or the Hanover Distributor in connection with
requirements of the accounts of customers. Investor Shares and CBC Benefit
Shares of the Hanover Portfolios are not subject to any front-end or contingent
deferred sales charges.
All purchase orders for Shares of Vista Portfolios must be placed through a
Vista Shareholder Servicing Agent, brokers or certain financial institutions
which have entered into Selected Dealer Agreements with the Vista Distributor
("Selected Dealers"), or the Vista Distributor in accordance with procedures
established by
9
<PAGE> 16
such Vista Shareholder Servicing Agents, Selected Dealers or the Vista
Distributor in connection with requirements of the accounts of customers. The
Institutional Shares of the Vista Portfolios and the Shares of the Vista
American Value Fund will not be subject to any front-end or contingent deferred
sales charges. The Class A Shares of the Vista Short Term Bond Fund will be
subject to a sales charge at the time of purchase of up to 1.50% of the offering
price, which will be reduced for purchases in an amount greater than $100,000.
The Class A Shares of the Vista Small Cap Equity Fund are subject to a sales
charge at the time of purchase of up to 4.75% of the offering price, which is
also reduced for purchases in excess of $100,000. The sales charge applicable to
purchases of Class A Shares of the Vista Short Term Bond Fund and the Vista
Small Cap Equity Fund may also be waived or reduced in certain other instances.
There will be no such front-end sales charges assessed in connection with the
Reorganization. In addition, shareholders of The Hanover Short Term U.S.
Government Fund and The Hanover Small Capitalization Growth Fund that receive
Class A Shares of the Vista Short Term Bond Fund and the Vista Small Cap Equity
Fund, respectively, in connection with the Reorganization, will not be assessed
any front-end sales charges on subsequent purchases of the Class A Shares of the
respective Vista Portfolio for as long as they remain shareholders in the
respective Vista Portfolio.
The Hanover Portfolios do not have a minimum purchase amount. The minimum
initial purchase for Institutional Shares of the Vista Portfolios is $1,000,000,
and shareholders must maintain a minimum balance in Institutional Shares of the
Vista Portfolios of $1,000,000 at all times. The minimum initial purchase for
individuals for Class A Shares of the Vista Short Term Bond Fund and the Vista
Small Cap Equity Fund and for Shares of the Vista American Value Fund is $2,500.
These minimums will be waived for Hanover Portfolio shareholders that receive
Vista Portfolio shares in connection with the Reorganization. Each Hanover and
Vista Shareholder Servicing Agent may establish its own terms, conditions and
charges with respect to the services provided by it.
Hanover shares may be redeemed in accordance with instructions and
limitations established by a Shareholder Servicing Agent or through the Hanover
Distributor. Vista Portfolio shares may be redeemed either through a Shareholder
Servicing Agent or through the Vista Distributor. Redemption orders for each
Hanover Portfolio and the Shares of each Vista Portfolio are effected at the net
asset value per share next determined after the order is received by the Hanover
Distributor or Vista's transfer agent, as the case may be. Each Hanover
Portfolio and Vista Portfolio may suspend the right of redemption or postpone
the date of payment for shares for more than seven days during any period when
(i) trading on the New York Stock Exchange is restricted; (ii) the Exchange is
closed for other than customary weekend and holiday closings; or (iii) an
emergency exists as determined by the Commission.
Dividends and Distributions. The Hanover Short Term U.S. Government Fund
and The Hanover U.S. Government Securities Fund declare dividends from available
net investment income daily and pay them monthly. The Hanover Blue Chip Growth
Fund, The Hanover Small Capitalization Growth Fund and The Hanover American
Value Fund pay dividends available from net investment income annually. After
the consummation of the Reorganization, the Vista Short Term Bond Fund and the
Vista U.S. Government will declare dividends available from net investment
income daily and pay them monthly, the Vista Large Cap Equity Fund will pay
dividends available from net investment income quarterly, and the Vista Small
Cap Equity Fund and the Vista American Value Fund will pay dividends available
from net investment income annually. Each Hanover Portfolio and each Vista
Portfolio distributes all of its net capital gains, if any, at least annually.
Risk Factors. Because of the similarities of investment objectives and
policies of the Hanover Portfolios and the corresponding Vista Portfolios, the
risks associated with an investment in a Hanover Portfolio are generally the
same as those associated with an investment in the corresponding Vista
Portfolio, with the exception of investments in The Hanover Short Term U.S.
Government Fund and the Vista Short Term Bond Fund, as described below. These
investment risks, in general, are those typically associated with investing in a
managed portfolio of the specific types of instruments that each Hanover
Portfolio and each corresponding Vista Portfolio invests in. The risks of
investment in The Hanover U.S. Government Securities Fund and the Vista U.S.
Government Securities Fund relate primarily to exposure to interest rate risk
and risks associated with investment in certain instruments such as
mortgage-related securities. The risks of investment in The
10
<PAGE> 17
Hanover Blue Chip Growth Fund and the Vista Equity Fund relate primarily to
fluctuations in stock prices. The risks of investment in The Hanover Small
Capitalization Growth Fund and the Vista Small Cap Equity Fund relate to the
foregoing risk, as well as to the risks associated with investments in the
securities of smaller, less seasoned companies, which generally exhibit greater
volatility and are otherwise subject to greater risks than the securities of
larger, more established companies. The risks of investment in The Hanover
American Value Fund and the Vista American Value Fund relate to fluctuations in
stock prices and, since these portfolios may invest in companies without regard
to market capitalization, the foregoing risks of investing in smaller, less
seasoned companies. All of the foregoing portfolios may invest to varying
degrees in the securities of foreign issuers and certain of the portfolios may
invest in derivatives, which entail certain additional risks.
Both The Hanover Short Term U.S. Government Fund and the Vista Short Term
Bond Fund portfolios invest primarily in obligations with short maturities and
are therefore subject to certain associated interest rate risks. However, as
discussed under "Comparison of Investment Objectives and Policies," The Hanover
Short Term U.S. Government Fund invests primarily in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, and
repurchase agreements with respect thereto, while the Vista Short Term Bond Fund
invests primarily in investment grade fixed income securities of all types,
issued by a broad range of issuers. The Vista Short Term Bond Fund is subject to
the additional risks associated with investment grade issuers other than the
U.S. Government. In addition, the Vista Short Term Bond Fund, unlike The Hanover
Short Term U.S. Government Fund, has the ability to invest in the securities of
foreign issuers, which entail certain risks.
The Vista Small Cap Equity Fund is a non-diversified portfolio, unlike The
Hanover Small Capitalization Growth Fund, and therefore also bears the risks
related to its non-diversified status.
Further information relating to the risks associated with an investment in
these portfolios is set forth below under "Comparison of Investment Objectives
and Policies."
REASONS FOR THE REORGANIZATION
The Reorganization has been proposed by the Vista Board and the Hanover
Board as a result of the consequences of the merger (such merger being referred
to herein as the "Parent Merger"), announced in August 1995, of The Chase
Manhattan Corporation ("CMC") with and into Chemical Banking Corporation
("CBC"). Pursuant to the merger agreement entered into between CMC and CBC on
August 27, 1995, the effectiveness of the Parent Merger is subject to certain
conditions, including the receipt of certain regulatory approvals and the
approval of the shareholders of CMC and CBC. Following the Parent Merger, Chase,
the principal operating subsidiary of CMC and the investment adviser to each of
the Vista Portfolios, will be merged (such merger being referred to herein as
the "Bank Merger") with and into Chemical, a principal operating subsidiary of
CBC, with the surviving entity being renamed The Chase Manhattan Bank. CMC and
CBC anticipate that the Parent Merger may occur as early as January 31, 1996 and
that the Bank Merger will occur during July 1996. On December 11, 1995, the
respective shareholders of CMC and CBC voted to approve the Parent Merger.
In determining whether to recommend approval of the Reorganization to
shareholders of Hanover, the Hanover Board (including the independent Directors,
with the advice and assistance of independent legal counsel) made an inquiry
into a number of matters and considered the following factors, among others: (1)
the advantages to each Hanover Portfolio and corresponding Vista Portfolio as
well as to CBC and its affiliates following the Parent Merger of eliminating the
unnecessary competition and duplication of effort inherent in marketing funds
having similar investment objectives; (2) the compatibility of the investment
objectives, policies, restrictions and portfolios, as well as service features
available to shareholders of each Hanover Portfolio and each corresponding Vista
Portfolio; (3) the capabilities and resources of Chase (including Chemical as
its successor in the Bank Merger), its affiliates and other Vista service
providers in the areas of investment management, administration, fund
accounting, transfer agency, custody, marketing and shareholder servicing; (4)
expense ratios and available information regarding the fees and expenses of each
Hanover Portfolio, each corresponding Vista Portfolio and the relevant share
class thereof (historical and pro forma) as well as similar funds; (5) the
historical performance of the Vista Portfolios and the Hanover
11
<PAGE> 18
Portfolios; (6) portfolio transaction policies of the Hanover Portfolios and the
Vista Portfolios; (7) the terms and conditions of the Reorganization and whether
the Reorganization would result in dilution of shareholder interests; (8) costs
incurred by each Hanover Portfolio and each corresponding Vista Portfolio as a
result of the Reorganization; (9) tax consequences of the Reorganization; (10)
possible alternatives to the Reorganization; and (11) the commitment of CBC and
its affiliates following the Parent Merger to maintain and enhance its position
in the mutual fund business and the prospects that the combination of the
respective portfolios will ensure the continued strength of the mutual fund
efforts of CBC and its affiliates for the benefit of shareholders of the Vista
Portfolios, including former shareholders of the Hanover Portfolios.
In reaching the decision to recommend that the shareholders of each Hanover
Portfolio vote to approve the Reorganization, the Hanover Board concluded that
the participation of each Hanover Portfolio in the Reorganization is in the best
interests of its respective shareholders and would not result in the dilution of
such shareholders' interests. Their conclusion was based on a number of factors,
including the following:
1. The Reorganization would permit the shareholders of The Hanover
Short Term U.S. Government Fund, The Hanover Blue Chip Growth Fund and The
Hanover Small Capitalization Growth Fund to pursue their investment goals
in respectively larger funds. Such larger funds should enhance the ability
of portfolio managers to effect their portfolio transactions on more
favorable terms and give portfolio managers greater investment flexibility
and the ability to select a larger number of portfolio securities, with the
attendant benefits of increased diversification. In addition, the
shareholders of The Hanover Short Term U.S. Government Fund will have the
opportunity, through the Reorganization, to become part of a portfolio that
allows the portfolio manager to select from a broader range of securities
in order to pursue the portfolio's objective of high current income
consistent with the preservation of capital. Because the Vista U.S.
Government Securities Fund and Vista American Value Fund have been newly
organized to acquire the assets of The Hanover U.S. Government Securities
Fund and Hanover American Value Fund, respectively, and will not commence
operations until the consummation of the Reorganization, the Vista U.S.
Government Securities Fund and the Vista American Value Fund, immediately
following the Reorganization, will not be larger than The Hanover U.S.
Government Securities Fund and The Hanover American Value Fund,
respectively, but should nonetheless benefit from being part of a larger,
combined fund group.
2. Under the Reorganization, current shareholders of each of the
Hanover Portfolios would receive the investment advisory services of Chase
(including Chemical as its successor in the Bank Merger) and day-to-day
management by CAM (in the case of all Hanover Portfolios other than the
Hanover American Value Fund) or VDH (in the case of the Hanover American
Value Fund). Chase, including its predecessor organizations, has over 100
years of money management experience. Chase currently manages 30 mutual
fund portfolios, which invest in a broad array of assets and include money
market, debt and equity, and domestic as well as international, portfolios.
Also included among Chase's accounts are commingled trust funds and a broad
spectrum of individual trust and investment management portfolios with
varying investment objectives. CAM is registered with the Commission as an
investment adviser and was formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function, and the same
individuals who serve as portfolio managers for CAM also serve as portfolio
managers for Chase. Current shareholders of The Hanover American Value Fund
would continue, under the Reorganization, to receive the day-to-day
investment management services of VDH. VDH was organized in 1969 and is a
general partnership which is equally owned by individuals who serve VDH in
key professional capacities and CBC Holdings (California), a wholly-owned
subsidiary of CBC. VDH provides a wide range of asset management services
to individuals, corporations, private and charitable trusts, endowments,
foundations and retirement funds.
3. Through the Reorganization, shareholders of the Hanover Portfolios
would become shareholders in a larger combined fund family consisting of a
wide range of stock, bond and money market funds, including both domestic
and international portfolios.
12
<PAGE> 19
4. It is expected that the Reorganization will lead to a more focused
marketing and distribution effort with respect to the Vista Portfolios,
thereby reducing potential investor confusion and promoting asset growth in
such portfolios.
INFORMATION ABOUT THE REORGANIZATION
Agreement and Plan of Reorganization and Liquidation. The following
summary of the Agreement is qualified in its entirety by reference to the form
of the Agreement attached to this Prospectus/Proxy Statement as Exhibit A. The
Agreement, to which Vista and Hanover are parties, provides that the Vista Short
Term Bond Fund will acquire all of the assets and liabilities of The Hanover
Short Term U.S. Government Fund in exchange for Class A Shares of the Vista
Short Term Bond Fund, the Vista U.S. Government Securities Fund will acquire all
of the assets and liabilities of The Hanover U.S. Government Securities Fund in
exchange for Institutional Shares of the Vista U.S. Government Securities Fund,
the Vista Large Cap Equity Fund will acquire all of the assets and liabilities
of The Hanover Blue Chip Growth Fund in exchange for Institutional Shares of the
Vista Large Cap Equity Fund, the Vista Small Cap Equity Fund will acquire all of
the assets and liabilities of The Hanover Small Capitalization Growth Fund in
exchange for Class A Shares and Institutional Shares of the Vista Small Cap
Equity Fund, and the Vista American Value Fund will acquire all of the assets
and liabilities of The Hanover American Value Fund in exchange for shares of the
Vista American Value Fund. Subject to the satisfaction of the conditions
described below, such acquisitions shall take place on March , 1996 or such
later date as may be agreed upon by the parties (the "Closing Date"). The net
asset value per Share for each Vista Portfolio will be determined by dividing
each portfolio's net assets attributable to such class of its shares by the
total number of its outstanding shares of such class.
Vista Portfolio securities will be valued in accordance with the valuation
practices of the Vista Portfolios, which are described below under "Additional
Information About Vista -- F. Other Information Concerning Shares of Vista."
As promptly as practicable after the Closing Date, each Hanover Portfolio
will liquidate and distribute pro rata to its shareholders of record as of 4:00
p.m. (New York time) on the Closing Date the shares of the corresponding Vista
Portfolio received by that Hanover Portfolio in the Reorganization as follows:
holders of Investor Shares of The Hanover Short Term U.S. Government Fund will
receive Class A Shares of the Vista Short Term Bond Fund, holders of Investor
Shares of The Hanover U.S. Government Securities Fund will receive Institutional
Shares of the Vista U.S. Government Securities Fund, holders of Investor Shares
of The Hanover Blue Chip Growth Fund will receive Institutional Shares of the
Vista Large Cap Equity Fund, holders of Investor Shares of The Hanover Small
Capitalization Growth Fund will receive Class A Shares of the Vista Small Cap
Equity Fund, holders of CBC Benefit Shares of The Hanover Small Capitalization
Growth Fund will receive Institutional Shares of the Vista Small Cap Equity
Fund, and holders of Investor Shares of The Hanover American Value Fund will
receive shares of the Vista American Value Fund. Such liquidation and
distribution will be accomplished by the establishment of accounts on the share
records of the Vista Portfolios in the names of the shareholders of the
corresponding Hanover Portfolio, each account representing the respective pro
rata number of shares of such Vista Portfolio due the shareholder. After such
distribution and the winding up of its affairs, the Hanover Portfolios will be
terminated and Hanover will be dissolved and will be deregistered as an
investment company under the 1940 Act.
The Vista Board and the Hanover Board have each determined, with respect to
their respective portfolios that are parties to the Reorganization, that the
interests of existing shareholders of such portfolios will not be diluted as a
result of the transactions contemplated by the Reorganization and that
participation in the Reorganization is in the best interests of each such
portfolio's shareholders.
Certain of the existing investment limitations of the Hanover Portfolios
that require shareholder approval for amendment prohibit the Hanover Portfolios
from purchasing common stock or investing more than a stated percentage of its
assets in an issuer's securities. By approving the Agreement, the shareholders
of the Hanover Portfolios will be deemed to have agreed to waive temporarily
these limitations insofar as they might be deemed to apply to the
Reorganization.
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<PAGE> 20
The consummation of the Reorganization is subject to the conditions set
forth in the Agreement, including that the Parent Merger be consummated and that
the majority of the shareholders of each Hanover Portfolio approve the
Reorganization. The Agreement may be terminated and the Reorganization abandoned
at any time prior to the Closing Date, before or after approval by the
shareholders of the Hanover Portfolios, by either Hanover or Vista if (i) any
condition or covenant set forth in the Agreement has not been fulfilled or
waived by the party entitled to its benefits, (ii) there has been a material
breach by the other party or (iii) the Vista Board or the Hanover Board, as the
case may be, determines that proceeding with the Reorganization is not in the
best interests of that party's shareholders. The Agreement provides that either
party may waive compliance with any of the covenants or conditions made therein
for its benefit, except for certain conditions regarding the receipt of
regulatory approvals.
The expenses of the Reorganization, including the cost of a proxy
soliciting agent that has been retained (see "Voting Information"), will be
borne by CBC and/or CMC.
Approval of the Agreement will require the affirmative vote of the holders
of at least a majority of the outstanding shares of each portfolio of Hanover
(other than The Hanover Small Capitalization Growth Fund) entitled to vote on
the matter and, in the case of The Hanover Small Capitalization Growth Fund, the
affirmative vote of the holders of at least a majority of each of its
outstanding Investor Shares and CBC Benefit Shares entitled to vote on the
matter. If the Reorganization is not approved by the shareholders of each
Hanover Portfolio or is not consummated for any other reason, the Hanover Board
will consider other possible courses of action. Approval of the Agreement by the
shareholders of each Hanover Portfolio will also constitute approval of
Hanover's dissolution and deregistration under the 1940 Act following
consummation of the Reorganization. See "Voting Information" below.
THE HANOVER BOARD HAS UNANIMOUSLY RECOMMENDED
APPROVAL OF THE AGREEMENT.
Description of Shares of Vista. Shareholders of each Hanover Portfolio
will be issued Shares of the corresponding Vista Portfolio in accordance with
the procedures provided for in the Agreement as described above. Each such share
will be fully paid and non-assessable when issued with no personal liability
attaching to the ownership thereof and transferable without restrictions and
will have no preemptive or conversion rights.
Federal Income Tax Consequences. As a condition to the consummation of the
Reorganization, Hanover and Vista will each receive an opinion from Simpson
Thacher & Bartlett to the effect that, on the basis of existing provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), current
administrative rules and court decisions, for federal income tax purposes: (1)
the Reorganization will constitute a reorganization within the meaning of
Section 368(a)(1) of the Code with respect to each Hanover Portfolio and its
corresponding Vista Portfolio; (2) no gain or loss will be recognized by any of
the Hanover Portfolios or the corresponding Vista Portfolios upon the transfer
of all of the assets and liabilities, if any, of each Hanover Portfolio to its
corresponding Vista Portfolio solely in exchange for corresponding Vista
Portfolio shares or upon the distribution of the shares of the corresponding
Vista Portfolios to the shareholders of the Hanover Portfolios solely in
exchange for all of their shares of the Hanover Portfolios; (3) no gain or loss
will be recognized by shareholders of any of the Hanover Portfolios upon the
exchange of such Hanover Portfolio's shares solely for shares of its
corresponding Vista Portfolio; (4) the holding period and tax basis of the
corresponding Vista Portfolio shares received by each shareholder of each
Hanover Portfolio pursuant to the Reorganization will be the same as the holding
period (provided the shares of the Hanover Portfolios were held as a capital
asset on the date of the Reorganization) and tax basis of the shares of the
Hanover Portfolio held by the shareholder immediately prior to the
Reorganization; and (5) the holding period and tax basis of the assets of each
of the Hanover Portfolios acquired by its corresponding Vista Portfolio will be
the same as the holding period and tax basis of those assets to each of the
Hanover Portfolios immediately prior to the Reorganization. The payment by CBC
and/or CMC of certain expenses of Hanover and Vista which are directly related
to the Reorganization will not affect such opinion. However, no opinion will be
given as to any other federal income tax consequences of the payment of such
expenses.
14
<PAGE> 21
Capitalization. The following tables show the capitalization (unaudited)
of each Hanover Portfolio and the corresponding Vista Portfolio as of November
30, 1995, and on a pro forma combined basis as of that date for the
Reorganization giving effect to the proposed acquisition of assets at net asset
value.
<TABLE>
<CAPTION>
VISTA SHORT TERM THE HANOVER SHORT TERM PRO FORMA
BOND FUND GOVERNMENT FUND COMBINED
---------------- ---------------------- -----------
<S> <C> <C> <C>
Net Assets........................
Class A Shares(1)............... $ 0 $ 9,738,073 $ 9,738,073
Institutional Shares............ $ 36,898,821 $ 0 $36,898,821
Net Asset Value per Share
Class A Shares.................. -- $ 9.82 $ 10.10
Institutional Shares............ $ 10.10 -- $ 10.10
Shares Outstanding
Class A Shares(1)............... 0 991,301 964,166
Institutional Shares............ 3,653,349 -- 3,653,349
</TABLE>
<TABLE>
<CAPTION>
VISTA
U.S. GOVERNMENT THE HANOVER
SECURITIES U.S. GOVERNMENT PRO FORMA
FUND(2) SECURITIES FUND COMBINED
---------------- ---------------------- -----------
<S> <C> <C> <C>
Net Assets
Class A Shares.................. $ 0 -- $ 0
Institutional Shares(1)......... $ 0 $ 84,796,897 $84,796,897
Net Asset Value per Share
Class A Shares.................. -- -- --
Institutional Shares(1)......... -- $ 10.18 $ 10.18
Shares Outstanding
Class A Shares.................. 0 -- 0
Institutional Shares(1)......... 0 8,333,486 8,333,486
</TABLE>
<TABLE>
<CAPTION>
VISTA LARGE CAP THE HANOVER PRO FORMA
EQUITY FUND BLUE CHIP FUND COMBINED
---------------- ---------------------- -----------
<S> <C> <C> <C>
Net Assets
Class A Shares.................. $ 0 -- $ 0
Class B Shares.................. $ 0 -- $ 0
Institutional Shares(1)......... $ 56,354,677 $ 60,419,411 $116,774,088
Net Asset Value per Share
Class A Shares.................. -- -- --
Class B Shares.................. -- -- --
Institutional Shares(1)......... $ 12.81 $ 13.01 $ 12.81
Shares Outstanding
Class A Shares.................. 0 -- 0
Class B Shares.................. 0 -- 0
Institutional Shares(1)......... 4,399,272 4,645,789 9,115,854
</TABLE>
15
<PAGE> 22
<TABLE>
<CAPTION>
THE HANOVER
VISTA SMALL CAP SMALL CAPITALIZATION PRO FORMA
EQUITY FUND GROWTH FUND COMBINED
---------------- ---------------------- -----------
<S> <C> <C> <C>
Net Assets
Class A Shares(1)............... $ 49,508,702 $ 10,570,541 $60,079,243
Class B Shares.................. $ 24,631,588 -- $24,631,588
Institutional Shares(1)......... 0 $ 28,298,137 $28,298,137
Net Asset Value per Share
Class A Shares(1)............... $ 15.07 $ 11.19 $ 15.07
Class B Shares.................. $ 15.82 -- $ 15.82
Institutional Shares(1)......... -- $ 11.19 $ 15.07
Shares Outstanding
Class A Shares.................. 3,285,249 944,997 3,986,678
Class B Shares.................. 1,556,990 -- 1,556,990
Institutional Shares............ 0 2,529,829 1,877,779
</TABLE>
<TABLE>
<CAPTION>
VISTA AMERICAN HANOVER AMERICAN PRO FORMA
VALUE FUND(3) VALUE FUND COMBINED
---------------- ---------------------- -----------
<S> <C> <C> <C>
Net Assets........................ $ 0 $ 8,396,346 $ 8,396,346
Net Asset Value per Share......... -- $ 12.10 $ 12.10
Shares Outstanding................ 0 693,774 693,774
</TABLE>
- ---------------
(1) Information presented for the corresponding Hanover Portfolio is for the
class or classes of shares that will receive the class of shares of the
corresponding Vista Portfolio indicated pursuant to the Reorganization.
(2) The Vista U.S. Government Securities Fund has been newly organized to
acquire the assets of The Hanover U.S. Government Securities Fund; no shares
are outstanding at November 30, 1995.
(3) The Vista American Value Fund has been newly organized to acquire the assets
of The Hanover American Value Fund; no shares are outstanding at November
30, 1995.
VOTING INFORMATION
Proxies from the shareholders of each Hanover Portfolio are being solicited
by the Hanover Board for the Special Meeting of Shareholders to be held on March
15, 1996 at the offices of , New York, New York
, at .M. or at such later time as necessary by adjournment. A
proxy may be revoked at any time before the meeting by oral or written notice to
Hanover. Unless revoked, all valid proxies will be voted in accordance with the
specification thereon, or in the absence of specification, for approval of the
Agreement. Approval of the Agreement will require the affirmative vote of the
holders of at least a majority of the outstanding shares of each portfolio of
Hanover (other than The Hanover Small Capitalization Growth Fund) entitled to
vote thereon and, in the case of The Hanover Small Capitalization Growth Fund,
the affirmative vote of the holders of at least a majority of each of its
outstanding Investor Shares and CBC Benefit Shares entitled to vote thereon.
Approval of the Agreement by the shareholders of each Hanover Portfolio will
also constitute approval of Hanover's dissolution and deregistration under the
1940 Act following consummation of the Reorganization.
Proxies are to be solicited by mail. Additional solicitations may be made
by telephone, telegram or personal contact by officers, employees or agents of
CBC and its affiliates. Each Hanover Portfolio has retained
to assist in the solicitation of proxies in connection with the
Reorganization. The cost of solicitation, including a fee of $ will be
paid by CBC and/or CMC.
Under the Agreement, shareholders of each Hanover Portfolio will receive
shares of a particular class of the corresponding Vista Portfolio, as described
above, with an aggregate net asset value equal to the value of the shareholder's
investment in each Hanover Portfolio at the effective time of the transaction.
This method of
16
<PAGE> 23
valuation is also consistent with interpretations of Rule 22c-1 under the 1940
Act by the Commission's Division of Investment Management. Any shareholder of a
Hanover Portfolio may redeem his or her shares at the then-current net asset
value prior to the Closing Date.
Shareholders of the Hanover Portfolios of record at the close of business
on January , 1996 will be entitled to vote at the Special Meeting or any
adjournment of the meeting. The holders of a majority of the shares outstanding
of each such Hanover Portfolio at the close of business on that date present in
person or represented by proxy will constitute a quorum for the meeting;
however, as noted above, the affirmative vote of at least a majority of the
shares outstanding of each Hanover Portfolio (including, in the case of The
Hanover Small Capitalization Growth Fund, a majority of each of the Investor
Shares and CBC Benefit Shares outstanding) at the close of business on that date
is required to approve the Reorganization. Shareholders are entitled to one vote
for each share held and fractional votes the fractional shares held. As of
January , 1996, as shown on the books of Hanover, there were issued and
outstanding shares of The Hanover Short Term U.S. Government Fund,
shares of The Hanover U.S. Government Securities Fund, shares of The
Hanover Blue Chip Growth Fund, shares of The Hanover Small Capitalization
Growth Fund (consisting of Investor Shares and CBC Benefit Shares), and
shares of The Hanover American Value Fund. The votes of the shareholders of the
corresponding Vista Portfolios are not being solicited to approve the
Reorganization, since their approval or consent is not required with respect to
the Reorganization. Their votes are being solicited, however, in connection with
the approval of certain of the Related Changes.
The Agreement was approved for Hanover by unanimous vote of the Hanover
Board, including all of the Directors then serving who were not interested
persons of Hanover or Vista (other than in their capacity as Trustees or
Directors of Vista or Hanover, as the case may be).
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Vista Portfolio and the corresponding
Hanover Portfolio are substantially similar except as described below. In
seeking to achieve its investment objective, each Vista Portfolio is guided by
investment policies and restrictions that are substantially similar, except as
otherwise noted below, as those of the corresponding Hanover Portfolio.
The investment objective and policies of each of the Vista Portfolios,
after giving effect to the Related Changes except where otherwise indicated, are
set forth below, together with a discussion of the primary differences, if any,
from those of the respective corresponding Hanover Portfolios.
Because the value of securities and the income derived therefrom may
fluctuate according to the earnings of the issuers and changes in economic and
market conditions, there can be no assurance that the investment objective of
any of the Vista Portfolios will be achieved.
A. VISTA SHORT TERM BOND FUND
The investment objective of the Vista Short Term Bond Fund is to provide a
high level of current income, consistent with preservation of capital. The
investment objective of the Vista Short Term Bond Fund may not be changed unless
approved by the holders of a majority of the Vista Short Term Bond Fund's
outstanding shares.
The Vista Short Term Bond Fund seeks to provide a high level of current
income, consistent with preservation of capital, by investing primarily in a
broad range of short-term, investment-grade bonds and other fixed-income
securities. The Vista Short Term Bond Fund will invest at least 65% of its net
assets in bonds which have a maturity of less than three years. In addition, all
of the Vista Short Term Bond Fund's assets will have dollar weighted average
maturities which do not exceed three years. Securities with put features will
measure their maturity based on the next put date, which must fall within the
three year limit.
The Vista Short Term Bond Fund normally will invest substantially all of
its assets in investment-grade, fixed-income securities of all types.
Investment-grade, fixed-income securities are considered to be securities rated
in the category Baa or higher by Moody's Investors Service, Inc. ("Moody's"),
BBB or higher by
17
<PAGE> 24
Standard & Poor's Corporation ("S&P) or the equivalent by another nationally
recognized statistical rating organization ("NRSRO"), and unrated securities
that are of equivalent quality in the Adviser's opinion. Securities rated in the
category Baa by Moody's or BBB by S&P lack certain investment characteristics
and may be deemed to be "speculative" in nature. Fixed-income securities in the
Vista Short Term Bond Fund's portfolio may include, in any proportion, bonds,
notes, mortgage-backed securities, asset-backed securities, government and
government agency obligations, zero coupon securities and convertible
securities, and short-term obligations such as bankers' acceptances,
certificates of deposit, repurchase agreements and commercial paper. For a
description of these types of securities, see "F. Additional Information on
Investment Policies and Techniques" below and "Investment Objectives, Policies
and Restrictions" in the statement of additional information relating to the
Vista Short Term Bond Fund (as well as the Vista Large Cap Equity Fund) dated
March 1, 1995 (the "Vista Equity/Bond SAI"), which is incorporated into the
Statement of Additional Information by reference.
Fixed-income securities (except for securities with floating or variable
interest rates) are generally considered to be interest rate sensitive, which
means that their value (and the Vista Short Term Bond Fund's share prices) will
tend to decrease when interest rates rise and increase when interest rates fall.
Securities with shorter maturities generally provide greater price stability
than longer-term securities and are less affected by changes in interest rates.
Mortgage-backed securities issued or guaranteed by certain agencies of the
U.S. Government such as the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA") or the Federal Home Loan
Mortgage Association ("FHLMC") typically may be prepaid by the issuer without
penalty; thus, when prevailing interest rates decline, the value of these
securities is not likely to rise on a comparable basis with other debt
securities that are not so prepayable. The proceeds of prepayments and scheduled
payments of principal of these securities will be reinvested by the Vista Short
Term Bond Fund at then prevailing interest rates, which may be lower than the
rate of interest on the securities on which these payments are received. See "F.
Additional Information on Investment Policies and Techniques -- Mortgage-Related
Securities" below.
In making investment decisions for the Vista Short Term Bond Fund, the
Adviser will consider many factors in addition to current yield, including the
preservation of capital, maturity and yield to maturity. The Adviser will adjust
the Vista Short Term Bond Fund's investments in particular securities or in
types of debt securities in response to its appraisal of changing economic
conditions and trends. The Adviser may sell securities in anticipation of a
market decline or purchase securities in anticipation of a market rise. In
addition, the Adviser may sell one security and purchase another security of
comparable quality and maturity to take advantage of what the Adviser believes
to be short-term differentials in market values or yield disparities. See "F.
Additional Information on Investment Policies and Techniques -- Portfolio
Management and Turnover." The Vista Short Term Bond Fund's investments, other
than those backed by the U.S. Government, are subject to the ability of the
issuer to make payment at maturity.
The Vista Short Term Bond Fund may invest without limitation in high
quality, short-term money market instruments, as described below under "F.
Additional Information on Investment Policies and Techniques."
The Vista Short Term Bond Fund may enter into transactions in derivatives
and related instruments. The information presented below under "F. Additional
Information on Investment Policies and Techniques" contains a more complete
description of these instruments, as well as further information concerning the
investment policies and techniques of the Vista Short Term Bond Fund. In
addition, the Vista Equity/Debt SAI includes a further discussion of these
instruments which may be entered into by the Vista Short Term Bond Fund. The use
of such instruments involves transaction costs and certain risks, which are
discussed in the Vista Equity/Bond SAI.
Although the Vista Short Term Bond Fund's investment objective may not be
changed without shareholder approval, such approval is not required to change
any of the other investment policies described above, or any of the investment
policies described below in "F. Additional Information on Investment Policies
and Techniques" other than policies identified as fundamental.
18
<PAGE> 25
Differences with The Hanover Short Term U.S. Government Fund.
The Vista Short Term Bond Fund is permitted to invest without limitation in
investment-grade, fixed-income securities of all types. In contrast, The Hanover
Short Term U.S. Government Fund is required under normal circumstances to invest
at least 65% of its assets in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, and repurchase agreements with
respect to such securities and expects that substantially all of its assets will
be so invested. Accordingly, the Vista Short Term Bond Fund is permitted to
invest in a broader range of securities which, while of investment-grade
quality, may be of lesser credit quality than the securities in which The
Hanover Short Term U.S. Government Fund is permitted to invest.
Although the Vista Short Term Bond Fund invests at least 65% of its assets
in bonds which have a maturity of less than three years, The Hanover Short Term
U.S. Government Fund has no restriction on the maturity of any individual asset
it acquires. However, both the Vista Short Term Bond Fund and The Hanover Short
Term U.S. Government Fund maintain dollar-weighted average portfolio maturities
of three years or less.
For a discussion of certain additional differences between the Vista Short
Term Bond Fund and The Hanover Short Term U.S. Government Fund, see "F.
Additional Information on Investment Policies and Techniques" and "G. Investment
Limitations."
B. VISTA U.S. GOVERNMENT SECURITIES FUND
The investment objective of the Vista U.S. Government Securities Fund is to
provide investors with as high a level of total return, consisting of income and
capital appreciation, as is consistent with the preservation of capital. The
investment objective of the Vista Short Term Bond Fund may not be changed unless
approved by the holders of a majority of the Vista U.S. Government Securities
Fund's outstanding shares.
Under normal circumstances, at least 65% of the value of the Vista U.S.
Government Securities Fund's total assets will be invested in securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, as
described below ("U.S. Government Securities"), and repurchase agreements with
respect thereto. Guarantees of principal and interest on obligations that may be
purchased by the Vista U.S. Government Securities Fund are not guarantees of the
market value of such obligations, nor do they extend to the value of shares of
the Vista U.S. Government Securities Fund. There is no restriction on the
maturity of the Vista U.S. Government Securities Fund's portfolio or any
individual portfolio security. The Adviser will be free to take advantage of the
entire range of maturities of securities eligible for inclusion in the Vista
U.S. Government Securities Fund's portfolio and may adjust the average maturity
of the Vista U.S. Government Securities Fund's portfolio from time to time,
depending on its assessment of the relative yields available on securities of
different maturities and its expectations of future changes in interest rates.
Since the Vista U.S. Government Securities Fund invests extensively in U.S.
Government Securities, certain of which have less credit risk than that
associated with other securities, the level of income achieved by the Vista U.S.
Government Securities Fund may not be as high as that of other funds which
invest in lower quality securities.
The Vista U.S. Government Securities Fund may invest in U.S. Treasury
obligations, which are backed by the full faith and credit of the U.S.
Government as to payment of principal and interest. U.S. Treasury obligations
consist of bills, notes and bonds, which generally differ in their interest
rates and maturities.
The Vista U.S. Government Securities Fund may invest in securities issued
or guaranteed by U.S. Government agencies and instrumentalities, including
obligations that are supported by: (i) the full faith and credit of the U.S.
Treasury (e.g., direct pass-through certificates of GNMA); (ii) the limited
authority of the issuer or guarantor to borrow from the U.S. Treasury (e.g.,
obligations of Federal Home Loan Banks); or (iii) only the credit of the issuer
or guarantor (e.g., obligations of FHLMC). In the case of obligations not backed
by the full faith and credit of the U.S. Treasury, the agency issuing or
guaranteeing the obligation is principally responsible for ultimate repayment.
Other agencies and instrumentalities that issue or guarantee debt securities and
that have been established or sponsored by the U.S. Government include the Banks
for Cooperatives, the Export-Import Bank, the Federal Farm Credit System, the
Federal Intermediate Credit
19
<PAGE> 26
Banks, the Federal Land Banks, the Student Loan Marketing Association and
Resolution Funding Corporation.
The Vista U.S. Government Securities Fund may invest extensively in
mortgage-backed securities issued or guaranteed by certain agencies of the U.S.
Government such as GNMA, FNMA or FHLMC. Mortgage-backed securities typically may
be prepaid by the issuer without penalty; thus, when prevailing interest rates
decline, the value of these securities is not likely to rise on a comparable
basis with other debt securities that are not so prepayable. The proceeds of
prepayments and scheduled payments of principal of these securities will be
reinvested by the Vista U.S. Government Securities Fund at then prevailing
interest rates, which may be lower than the rate of interest on the securities
on which these payments are received. The Vista U.S. Government Securities Fund
will not invest in principal-only or interest-only stripped mortgage-backed
securities. See "F. Additional Information on Investment Policies and
Techniques -- Mortgage-Related Securities" below.
The Vista U.S. Government Securities Fund may invest the portion of its
assets not invested in U.S. Government Securities and repurchase agreements with
respect thereto in non-convertible corporate debt securities of domestic and
foreign issuers, such as bonds and debentures. Such securities must be rated, at
the time of investment, at least in the category A or the equivalent by Moody's,
S&P, Fitch, Duff & Phelps ("D&P") or another NRSRO, or if unrated, such
securities must be of comparable quality as determined by the Adviser.
Fixed-income securities (except for securities with floating or variable
interest rates) are generally considered to be interest rate sensitive, which
means that their value (and the Vista U.S. Government Securities Fund's share
prices) will tend to decrease when interest rates rise and increase when
interest rates fall. Securities with shorter maturities generally provide
greater price stability than longer-term securities and are less affected by
changes in interest rates. There is no restriction on the maturity of the Vista
U.S. Government Securities Fund's portfolio or any individual portfolio
security, and to the extent the Vista U.S. Government Securities Fund invests in
securities with longer maturities, the volatility of the Vista U.S. Government
Securities Fund in response to changes in interest rates can be expected to be
greater than if the Vista U.S. Government Securities Fund had invested in
comparable securities with shorter maturities.
The Vista U.S. Government Securities Fund may, at any time, hold up to 35%
of the value of its total assets in high quality, short-term money market
instruments, as described below under "F. Additional Information on Investment
Policies and Techniques." When a temporary defensive posture in the market is
appropriate in the Adviser's opinion, the Vista U.S. Government Securities Fund
may invest without limitation in these instruments.
The Vista U.S. Government Securities Fund may enter into transactions in
derivatives and related instruments. The information presented below under "F.
Additional Information on Investment Policies and Techniques" contains a more
complete description of these instruments, as well as further information
concerning the investment policies and techniques of the Vista U.S. Government
Securities Fund. In addition, the preliminary statement of additional
information relating to the Vista U.S. Government Securities Fund dated December
28, 1995 (the "Vista U.S. Government SAI"), which is incorporated into the
Statement of Additional Information by reference, includes a further discussion
of these instruments which may be entered into by the Vista U.S. Government
Securities Fund. The use of such instruments involves transaction costs and
certain risks, which are discussed in the New Vista SAI.
Although the Vista U.S. Government Securities Fund's investment objective
may not be changed without shareholder approval, such approval is not required
to change any of the other investment policies described above, or any of the
investment policies described below in "F. Additional Information on Investment
Policies and Techniques" other than policies identified as fundamental.
Differences with The Hanover U.S. Government Securities Fund
The investment objective of the Vista U.S. Government Securities Fund is
oriented towards total return, consisting of income and capital appreciation,
while the investment objective of The Hanover U.S.
20
<PAGE> 27
Government Securities Fund is oriented towards current income. This difference
reflects a desire to manage the new portfolio with a view towards capital
appreciation opportunities in addition to current income.
In contrast to the Vista U.S. Government Securities Fund, The Hanover U.S.
Government Securities Fund has a stated current intention not to engage in
certain derivatives transactions, although it is authorized to engage in a broad
range of such transactions.
Because the Vista U.S. Government Securities Fund has been created for the
purpose of operating as a successor to The Hanover U.S. Government Securities
Fund in connection with the Reorganization, the investment policies and
restrictions of the Vista U.S. Government Securities Fund and The Hanover U.S.
Government Securities Fund are otherwise substantially identical, except for
certain differences discussed below under "F. Additional Information on
Investment Policies and Techniques" and "G. Investment Limitations."
C. VISTA LARGE CAP EQUITY FUND
The investment objective of the Vista Large Cap Equity Fund is to provide
its shareholders with long-term growth of capital. The Vista Large Cap Equity
Fund seeks to provide long-term growth of capital by investing primarily in a
diversified portfolio of equity securities of established companies with
substantial market capitalizations. Under normal market conditions, the Vista
Large Cap Equity Fund will invest at least 80% of its total assets in equity
securities and at least 65% of its total assets in equity securities of
established companies with substantial market capitalizations. Such companies
typically have a large number of publicly held shares and high trading volume,
resulting in a high degree of liquidity.
The Adviser seeks to purchase the equity securities of companies that are
expected to demonstrate greater long-term earnings growth than either their
industry competitors or the average company included in the S&P 500 Composite
Stock Index. These companies generally tend to have strong management
organizations. The Adviser will evaluate such well-known and established
companies by assessing the strongest sectors of the market over the economic
cycle, identifying those companies with favorable earnings prospects, and then
selecting the most attractive values. The Adviser will consider industry
diversification as an important factor and will try to maintain representation
in a variety of market sectors, although sector emphasis will shift as a result
of changes in the outlook for earnings among market sectors.
The Vista Large Cap Equity Fund may invest up to 20% of its net assets in
convertible securities. In addition, the Vista Large Cap Equity Fund may invest
up to 20% of its total assets in the equity securities of foreign issuers,
including Depositary Receipts. Investment in foreign securities and Depositary
Receipts involves certain risks. See "F. Additional Information on Investment
Policies and Techniques -- Foreign Securities" below.
The Vista Large Cap Equity Fund may invest the portion of its assets not
invested in equity securities in high quality, short-term money market
instruments and repurchase agreements, as described below under "F. Additional
Information on Investment Policies and Techniques." When a temporary defensive
posture in the market is appropriate in the Adviser's opinion, the Vista Large
Cap Equity Fund may invest without limitation in these instruments. To the
extent that the Vista Large Cap Equity Fund deviates from its investment
policies during temporary defensive periods, its investment objective may not be
achieved.
The Vista Large Cap Equity Fund may enter into transactions in derivatives
and related instruments. The information presented below under "F. Additional
Information on Investment Policies and Techniques" contains a more complete
description of these instruments, as well as further information concerning the
investment policies and techniques of the Vista Large Cap Equity Fund. In
addition, the Vista Equity/Debt SAI includes a further discussion of these
instruments which may be entered into by the Vista Large Cap Equity Fund. The
use of such instruments involves transaction costs and certain risks, which are
discussed in the Vista Equity/Bond SAI.
Shareholder approval is not required to change the investment objective or
any of the investment policies described above, or any of the investment
policies described below in "F. Additional Information on Investment Policies
and Techniques" other than policies identified as fundamental.
21
<PAGE> 28
The Vista Large Cap Equity Fund, which invests primarily in equity
securities, is designed for investors who are able to accept fluctuations in
equity values and the resulting fluctuation in the Vista Large Cap Equity Fund's
net asset value.
Differences with The Hanover Blue Chip Growth Fund
The stated investment objective of the Vista Large Cap Equity Fund refers
to long-term growth of capital, while the stated investment objective of The
Hanover Blue Chip Growth Fund refers simply to capital appreciation. The
differences in language, however, do not reflect an actual difference in the
objectives for which the respective funds are managed. The Vista Large Cap
Equity Fund's investment objective is a non-fundamental policy, and therefore
may be changed without shareholder approval, while The Hanover Blue Chip Growth
Fund's investment objective is a fundamental policy, and therefore may not be
changed without shareholder approval.
Although the Vista Large Cap Equity Fund has a stated policy to invest at
least 80% of its total assets in equity securities under normal market
conditions, The Hanover Blue Chip Growth Fund has no similar stated policy.
However, like the Vista Large Cap Equity Fund, under normal circumstances The
Hanover Blue Chip Growth Fund invests at least 65% of its total assets in equity
securities of established companies with substantial market capitalizations.
The Hanover Blue Chip Growth Fund has a stated policy of investing
primarily in companies with at least a five-year operating history, while the
Vista Large Cap Equity Fund has no comparable stated policy. However, both the
Hanover Blue Chip Growth Fund and the Vista Large Cap Equity Fund limit their
investments in equity securities of companies with less than a three-year
operating history to no more than 10% of their respective total assets.
In contrast to the Vista Large Cap Equity Fund's 20% limitation on
investment in convertible securities, The Hanover Blue Chip Growth Fund may
invest without limitation in convertible securities.
The Vista Large Cap Equity Fund's investments in securities of foreign
issuers are limited to 20% of its total assets, while The Hanover Blue Chip
Growth Fund's investments in equity securities of foreign issuers are limited to
35% of its total assets.
In contrast to the Vista Large Cap Equity Fund, The Hanover Blue Chip
Growth Fund has a stated current intention not to engage in certain derivatives
transactions, although it is authorized to engage in a broad range of such
transactions.
For a discussion of certain additional differences between the Vista Large
Cap Equity Fund and The Hanover Blue Chip Growth Fund, see "F. Additional
Information on Investment Policies and Techniques" and "G. Investment
Limitations."
D. VISTA SMALL CAP EQUITY FUND
The investment objective of the Vista Small Cap Equity Fund is to provide
its shareholders with long-term capital growth. Current income, if any, is a
consideration incidental to the Vista Small Cap Equity Fund's objective of
growth of capital. The investment objective of the Vista Small Cap Equity Fund
may not be changed unless approved by the holders of a majority of the Vista
Small Cap Equity Fund's outstanding shares.
Under normal market conditions, the Vista Small Cap Equity Fund will invest
at least 80% of its total assets in equity securities and at least 65% of its
total assets in equity securities of smaller companies (i.e., those with market
capitalizations of $750 million or less at the time of purchase).
The Adviser intends to utilize both quantitative and fundamental research
to identify undervalued equity securities with a catalyst for positive change.
Dividend income, if any, is a consideration incidental to the Vista Small Cap
Equity Fund's objective of growth of capital. There can be no assurance that the
methodology employed will satisfy the Vista Small Cap Equity Fund's objective of
long term capital growth. An investor should be aware that investment in small
capitalization issuers may be more volatile than investments in
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issuers with larger market capitalizations due to the lack of diversification in
the business activities, limited product lines, markets or financial resources,
and corresponding greater susceptibility to changes in the business cycle of
small capitalization issuers. The equity securities of small capitalization
companies as a group may not respond to general market rallies or downturns as
much as other types of equity securities. This investment policy involves the
risks that the changes or trends identified by the Adviser will not occur or
will not be as significant as projected and that, even if the changes or trends
develop, the particular issues held by the Vista Small Cap Equity Fund will not
benefit as anticipated from such changes or trends.
The Vista Small Cap Equity Fund may invest up to 20% of its total assets in
the equity securities of foreign issuers, including Depositary Receipts.
Investment in foreign securities and Depositary Receipts involves certain risks.
See "F. Additional Information on Investment Policies and Techniques -- Foreign
Securities" below.
The Vista Small Cap Equity Fund may invest the portion of its assets not
invested in equity securities in high quality, short-term money market
instruments and repurchase agreements, as described below under "F. Additional
Information on Investment Policies and Techniques." When a temporary defensive
posture in the market is appropriate in the Adviser's opinion, the Vista Small
Cap Equity Fund may invest without limitation in these instruments. To the
extent that the Vista Small Cap Equity Fund deviates from its investment
policies during temporary defensive periods, its investment objective may not be
achieved.
The Vista Small Cap Equity Fund may enter into transactions in derivatives
and related instruments. The information presented below under "F. Additional
Information on Investment Policies and Techniques" contains a more complete
description of these instruments, as well as further information concerning the
investment policies and techniques of the Vista Small Cap Equity Fund. In
addition, the statement of additional information relating to Class A Shares of
the Vista Small Cap Equity Fund, dated June 19, 1995, and the statement of
additional information relating to Institutional Shares of the Vista Small Cap
Equity Fund, dated December 27, 1995 (collectively, the "Vista Small Cap SAI"),
which are each incorporated into the Statement of Additional Information by
reference, include a further discussion of these instruments which may be
entered into by the Vista Small Cap Equity Fund. The use of such instruments
involves transaction costs and certain risks, which are discussed in the Vista
Small Cap SAI.
Although the Vista Small Cap Equity Fund's investment objective may not be
changed without shareholder approval, such approval is not required to change
any of the other investment policies described above, or any of the investment
policies described below in "F. Additional Information on Investment Policies
and Techniques" other than policies identified as fundamental.
THE VISTA SMALL CAP EQUITY FUND IS AGGRESSIVELY MANAGED AND, THEREFORE, THE
VALUE OF ITS SHARES IS SUBJECT TO GREATER FLUCTUATION AND AN INVESTMENT IN ITS
SHARES INVOLVES THE ASSUMPTION OF A HIGHER DEGREE OF RISK THAN WOULD BE THE CASE
WITH AN INVESTMENT IN A CONSERVATIVE EQUITY FUND OR A GROWTH FUND INVESTING
ENTIRELY IN PROVEN GROWTH EQUITIES. GIVEN THE ABOVE-AVERAGE INVESTMENT RISK
INHERENT IN THE VISTA SMALL CAP EQUITY FUND, INVESTMENT IN SHARES OF THE VISTA
SMALL CAP EQUITY FUND SHOULD NOT BE CONSIDERED A COMPLETE INVESTMENT PROGRAM AND
MAY NOT BE APPROPRIATE FOR ALL INVESTORS.
Differences with The Hanover Small Capitalization Growth Fund
The stated investment objective of the Vista Small Cap Equity Fund is
long-term capital appreciation, while the stated investment objective of The
Hanover Small Capitalization Growth Fund refers simply to capital appreciation.
The differences in language, however, do not reflect an actual difference in the
objectives for which the respective funds are managed.
The Vista Small Cap Equity Fund is non-diversified and, as such, is not
subject to the diversification requirements set forth in the 1940 Act, and may
have a larger position in a single issuer than would be the case if the Vista
Small Cap Equity Fund were diversified. In contrast, The Hanover Small
Capitalization Growth Fund is diversified, and is subject to a fundamental
investment limitation that, with respect to 75% of its total assets, no more
than 5% may be invested in the securities of any one issuer, subject to certain
exceptions. The investment return on a non-diversified portfolio typically is
dependent upon the performance of a smaller
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number of securities relative to the number of securities held in a diversified
portfolio. The Vista Small Cap Equity Fund's ability to assume large positions
in the obligations of a small number of issuers may affect the value of the
Vista Small Cap Equity Fund's portfolio to a greater extent than that of a
diversified portfolio like The Hanover Small Capitalization Growth Fund in the
event of changes in the financial condition or in the market's assessment of the
issuers, and the Vista Small Cap Equity Fund's shares may be more susceptible to
any single economic, political or regulatory occurrence than the shares of The
Hanover Small Capitalization Growth Fund.
In contrast to the Vista Small Cap Equity Fund, which has a stated policy
to invest at least 80% of its total assets in equity securities and at least 65%
of its total assets in equity securities of companies with market
capitalizations of $750 million or less under normal market conditions, The
Hanover Small Capitalization Growth Fund has a stated policy to invest at least
65% of its total assets in common stocks of companies with market
capitalizations of less than $800 million and a majority of its total assets in
common stocks of companies with market capitalizations of $500 million or less
under normal market conditions.
In contrast to the Vista Small Cap Equity Fund's policy which allows it to
invest up to 20% of its total assets in equity securities of foreign issuers,
including Depositary Receipts, The Hanover Small Capitalization Growth Fund's
comparable policy provides only that it may invest up to 20% of its total assets
in certain types of Depositary Receipts.
In contrast to the Vista Small Cap Equity Fund, The Hanover Small
Capitalization Growth Fund is not authorized to engage in any derivatives
transactions.
For a discussion of certain additional differences between the Vista Small
Cap Equity Fund and The Hanover Small Capitalization Growth Fund, see "F.
Additional Information on Investment Policies and Techniques" and "G. Investment
Limitations."
E. VISTA AMERICAN VALUE FUND
The investment objective of the Vista American Value Fund is to maximize
total return, consisting of capital appreciation (both realized and unrealized)
and income, by investing primarily in the equity securities of well established
U.S. companies (i.e., companies with at least a five-year operating history)
which, in the opinion of VDH, are undervalued by the market. The investment
objective of the Vista American Value Fund may not be changed unless approved by
the holders of the Vista American Value Fund's outstanding shares.
The equity securities in which the Vista American Value Fund invests
generally consist of common stock, preferred stock and securities convertible
into or exchangeable for common or preferred stock. Under normal market
conditions, at least 65% of the value of the Vista American Value Fund's total
assets will be invested in the equity securities of U.S. companies. The Vista
American Value Fund may invest in companies without regard to market
capitalization, although it generally does not expect to invest in companies
with market capitalizations of less than $200 million. The securities in which
the Vista American Value Fund invests are expected to be either listed on an
exchange or traded in an over-the-counter market. The Vista American Value Fund
may invest up to 20% of the value of its total assets in the equity securities
of foreign issuers, including American Depositary Receipts ("ADRs"), which are
described under "F. Additional Information on Investment Policies and
Techniques -- Foreign Securities." The Vista American Value Fund expects that
investments in foreign issuers, if any, will generally be in companies which
generate substantial revenues from U.S. operations and which are listed on U.S.
securities exchanges. Investment in foreign securities and ADRs involves certain
risks, as described under "F. Additional Information on Investment Policies and
Techniques -- Foreign Securities" below.
In selecting investments for the Vista American Value Fund, VDH generally
seeks companies which it believes exhibit characteristics of financial soundness
and are undervalued by the market. In seeking to identify financially sound
companies, VDH looks for companies with strongly capitalized balance sheets, an
ability to generate substantial cash flow, relatively low levels of leverage, an
ability to meet debt service requirements and a history of paying dividends. In
seeking to identify undervalued companies, VDH looks for companies with
substantial tangible assets such as land, timber, oil and other natural
resources, or important
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brand names, patents, franchises or other intangible assets which may have
greater value than what is reflected in the company's financial statements. VDH
will often select investments for the Vista American Value Fund which are
considered to be unattractive by other investors or are unpopular with the
financial press.
Although the Vista American Value Fund invests primarily in equity
securities, it may invest up to 25% of the value of its total assets in high
quality, short-term money market instruments, repurchase agreements and cash. In
addition, the Vista American Value Fund may make substantial temporary
investments in investment grade U.S. debt securities and invest without limit in
money market instruments when VDH believes a defensive posture is warranted. See
"F. Additional Information on Investment Policies and Techniques -- Money Market
Instruments" below. To the extent that the Vista American Value Fund deviates
from its investment policies during temporary defensive periods, its investment
objective may not be achieved.
The Vista American Value Fund may invest up to 5% of the value of its total
assets (at the time of investment) in warrants or rights (other than those
acquired in units or attached to other securities) which entitle the holder to
buy equity securities at a specific price during or at the end of a specific
period of time. The Vista American Value Fund will not invest more than 2% of
the value of its total assets in warrants or rights which are not listed on the
New York or American Stock Exchanges.
The Vista American Value Fund may also engage in certain other activities
and utilize certain other strategies, as described and subject to the
limitations and risks described under "F. Additional Information on Investment
Policies and Techniques." The Vista American Value Fund has no current intention
to engage in the various investment strategies described under "F. Additional
Information on Investment Policies and Techniques -- Derivatives and Related
Instruments," but it is authorized to engage in all of those strategies. A
description of these investment strategies and certain risks associated
therewith is contained under the caption "F. Additional Information on
Investment Policies and Techniques" in this prospectus and in the preliminary
statement of additional information relating to the Vista American Value Fund
dated December 28, 1995 (the "Vista American Value SAI"), which is incorporated
into the Statement of Additional Information by reference.
Although the Vista American Value Fund's investment objective may not be
changed without shareholder approval, such approval is not required to change
any of the other investment policies described above, or any of the investment
policies described below in "F. Additional Information on Investment Policies
and Techniques" other than policies identified as fundamental.
Differences with The Hanover American Value Fund
Because the Vista American Value Fund has been created for the purpose of
operating as a successor to The Hanover American Value Fund in connection with
the Reorganization, the investment objective, policies and restrictions of the
Vista American Value Fund and The Hanover American Value Fund are substantially
identical.
F. ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND TECHNIQUES
Money Market Instruments. Subject to the limitations set forth above, the
Vista Portfolios may invest in cash or high quality, short-term money market
instruments. Such instruments may include U.S. Government Securities; commercial
paper of domestic and, except with respect to the Vista American Value Fund,
foreign issuers rated, at the time of purchase, at least in the category P-1 by
Moody's, A-1 by S&P, F-1 by Fitch or D-1 by D&P, rated comparably by another
NRSRO, or, if not rated, of comparable quality as determined by their investment
adviser; certificates of deposits, banker's acceptances or time deposits and
repurchase agreements. See "Investment Objectives, Policies and Restrictions" in
the Vista Equity/Bond SAI and the Vista Small Cap SAI. The Vista Portfolios
limit their investments in U.S. bank obligations to obligations of U.S. banks
that have more than $1 billion in total assets at the time of investment and are
subject to regulation by the U.S. Government. The Vista Portfolios, other than
the Vista American Value Fund, limit their investments in foreign bank
obligations to obligations of foreign banks that at the time of investment have
more than $10 billion, or the equivalent in other currencies, in total assets,
and have branches or agencies in
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the United States. The Vista American Value Fund does not invest in foreign bank
obligations. Each Vista Portfolio may also invest in obligations of foreign
branches of U.S. banks, as well as obligations of U.S. branches of foreign
banks, if such Vista Portfolio is permitted to invest directly in obligations of
the U.S. bank or foreign bank, respectively, in accordance with the foregoing
limitations. Investments in foreign securities involve certain risks which are
described under "Foreign Securities" below.
Repurchase Agreements. When appropriate, each Vista Portfolio may, like
the Hanover Portfolios, enter into repurchase agreements (a purchase of and
simultaneous commitment to resell a security at an agreed-upon price and date
which is usually not more than seven days from the date of purchase). The Vista
Portfolios will enter into repurchase agreements only with counterparties which
are member banks of the Federal Reserve System and security dealers believed
creditworthy and only if fully collateralized by U.S. Government obligations or
other securities in which the Vista Portfolio is permitted to invest. In the
event the seller fails to pay the agreed-to sum on the agreed-upon delivery
date, the underlying security could be sold by the Vista Portfolio, but the
Vista Portfolio might incur a loss in doing so, and in certain cases may not be
permitted to sell the security. As an operating policy, each Vista Portfolio,
through its custodian bank, takes constructive possession of the collateral
underlying repurchase agreements. Additionally, procedures have been established
for each Vista Portfolio to monitor, on a daily basis, the market value of the
collateral underlying all repurchase agreements to ensure that the collateral is
at least 102% of the value of the repurchase agreements. Investments by a Vista
Portfolio in repurchase agreements maturing in more than seven days are subject
to the restrictions on investments in illiquid securities discussed below under
"Illiquid Securities."
Reverse Repurchase Agreements. The Vista U.S. Government Securities Fund
and the Vista American Value Fund, like each Hanover Portfolio, may enter into
reverse repurchase agreements to avoid selling securities during unfavorable
market conditions to meet redemptions. Pursuant to a reverse repurchase
agreement, the Vista U.S. Government Securities Fund or the Vista American Value
Fund will sell portfolio securities and agree to repurchase them from the buyer
at a particular date and price. Whenever a Vista Portfolio enters into a reverse
repurchase agreement, it will establish a segregated account in which it will
maintain liquid assets in an amount at least equal to the repurchase price
marked to market daily (including accrued interest), and will subsequently
monitor the account to ensure that such equivalent value is maintained. A Vista
Portfolio pays interest on amounts obtained pursuant to reverse repurchase
agreements. Reverse repurchase agreements are considered to be borrowings by a
Vista Portfolio under the 1940 Act and are subject to the limitations with
respect to entering reverse repurchase agreements included in the investment
limitations discussed under "G. Investment Restrictions" below.
The Vista Short Term Bond Fund, Vista Large Cap Equity Fund and Vista Small
Cap Equity Fund currently are not permitted to enter into reverse repurchase
agreements. Upon consummation of the Reorganization, each of these Vista
Portfolios will have the ability to enter into reverse repurchase agreements as
described above if approval is obtained from the shareholders of such Vista
Portfolio.
Zero Coupon Securities. The Vista Short Term Bond Fund and Vista U.S.
Government Securities Fund, like the corresponding Hanover Portfolios, each may
invest without limitation in zero coupon securities, subject to their respective
investment objectives and policies. Zero coupon securities may be issued by both
governmental and private issuers. Zero coupon securities are debt securities
that do not pay regular interest payments. Instead, zero coupon securities are
sold at substantial discounts from their value at maturity. When a zero coupon
security is held to maturity, its entire return, which consists of the
amortization of discount, comes from the difference between its purchase price
and maturity value. Because interest on a zero coupon security is not
distributed on a current basis, it tends to be subject to greater price
fluctuations in response to changes in interest rates than are ordinary
interest-paying debt securities with similar maturities. The risk is greater
when the period to maturity is longer. The value of zero coupon securities
appreciates more during periods of declining interest rates and depreciates more
during periods of rising interest rates. Under the stripped bond rules of the
Code, investments by the Fund in zero coupon securities will result in the
accrual of interest income on such investments in advance of the receipt of the
cash corresponding to such income. Among the zero coupon securities in which
such Vista Portfolios may invest are STRIPS. See "STRIPS" below.
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Zero coupon securities may also be created when a dealer deposits a U.S.
Treasury security or a federal agency security with a custodian for and then
sells the coupon payments and principal payment that will be generated by this
security separately. Proprietary receipts, such as Certificates of Accrual on
Treasury Securities ("CATS"), Treasury Investment Growth Receipts ("TIGRs") and
generic Treasury Receipts ("TRs") are stripped U.S. Treasury securities
separated into their component parts through custodial arrangement established
by their broker sponsors. Vista has been advised that the staff of the Division
of Investment Management of the Securities and Exchange Commission does not
consider privately stripped obligations to be U.S. Government securities, as
defined in the 1940 Act. Therefore the Vista U.S. Government Securities Fund
will not treat such obligations as U.S. Government Securities.
STRIPS. Each Vista Portfolio other than the Vista American Value Fund may,
subject to its investment objective and policies, invest up to 20% of its total
assets in separately traded principal and interest components of securities
backed by the full faith and credit of the United States Treasury. The principal
and interest components of United States Treasury bonds with remaining
maturities of longer than ten years are eligible to be traded independently
under the Separate Trading of Registered Interest and Principal of Securities
("STRIPS") program. Under the STRIPS program, the principal and interest
components are separately issued by the United States Treasury at the request of
depository financial institutions, which then trade the component parts
separately. The interest component of STRIPS may be more volatile than that of
United States Treasury bills with comparable maturities. Bonds issued by the
Resolution Funding Corporation and other U.S. Government agencies may also be
stripped.
In contrast to the Vista Short Term Bond Fund and the Vista U.S. Government
Securities Fund, The Hanover Short Term U.S. Government Fund and The Hanover
U.S. Government Securities Fund each may invest without limitation in STRIPS.
The prospectuses for the other Hanover Portfolios do not refer to an ability to
invest in STRIPS.
When-Issued or Forward Delivery Purchases. Each of the Vista Portfolios,
like the Hanover Portfolios, may purchase new issues of securities in which it
is permitted to invest on a "when-issued" or, with respect to existing issues,
on a "forward delivery" basis, which means that the securities will be delivered
at a future date beyond the customary settlement time. There is no limit as to
the amount of the commitments which may be made by a Vista Portfolio to purchase
securities on a "when-issued" or "forward-delivery" basis. A Vista Portfolio
does not pay for such obligations or start earning interest on them until the
contractual settlement date. Although commitments to purchase "when-issued" or
"forward delivery" securities will only be made with the intention of actually
acquiring them, these securities may be sold before the settlement date if
deemed advisable by a Vista Portfolio's investment adviser.
While it is not intended that such purchases would be made for speculative
purposes, purchases of securities on a "when-issued" or "forward delivery" basis
can involve more risk than other types of purchases. For example, when the time
comes to pay for a "when-issued" or "forward delivery" security, a Vista
Portfolio's portfolio securities may have to be sold in order to meet payment
obligations, and a sale of securities to meet such obligations carries with it a
greater potential for the realization of capital gain or loss. Also, if it is
necessary to sell the "when-issued" or "forward delivery" security before
delivery, a Vista Portfolio may incur a loss because of market fluctuations
since the time the commitment to purchase the "when-issued" or "forward
delivery" security was made. For additional information concerning these risks
and other risks associated with the purchase of "when-issued" or "forward
delivery" securities as well as other aspects of the purchase of securities on a
"when-issued" or "forward delivery" basis, see "Investment Objective, Policies
and Restrictions -- Investment Policies: When-Issued and Forward Delivery
Purchases" in the Vista Equity/Bond SAI, the Vista Small Cap SAI, the Vista U.S.
Government SAI and the Vista American Value SAI.
Stand-By Commitments. The Vista U.S. Government Securities Fund and the
Vista Small Cap Equity Fund each may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities held in their portfolios. In a put transaction, a Vista Portfolio
acquires the right to sell a security at an agreed upon price within a specified
period prior to its maturity date, and a stand-by commitment entitles a Vista
Portfolio to same-day settlement and to receive an exercise price equal
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to the amortized cost of the underlying security plus accrued interest, if any,
at the time of exercise. In the event that the party obligated to purchase the
underlying security from a Vista Portfolio defaults on its obligation to
purchase the underlying security, then the Vista Portfolio might be unable to
recover all or a portion of any loss sustained from having to sell the security
elsewhere. Acquisition of puts will have the effect of increasing the cost of
the securities subject to the put and thereby reducing the yields otherwise
available from such securities. The Vista Short Term Bond Fund and Vista Large
Cap Equity Fund currently are not permitted to enter into put transactions
except with respect to U.S. Government securities. Upon consummation of the
Reorganization, each of these Vista Portfolios will have the ability to enter
into put transactions, including stand-by commitments, with respect to any
securities held in their portfolios if approval is obtained from the
shareholders of such Vista Portfolio.
The Hanover Short Term U.S. Government Fund and The Hanover U.S. Government
Securities Fund each may enter into put transactions, including stand-by
commitments, with respect to securities held in their portfolios. The Hanover
Blue Chip Growth Fund, The Hanover Small Capitalization Growth Fund and The
Hanover American Value Fund do not enter into such transactions.
Variable Rate Securities and Participation Certificates. The variable rate
demand instruments that may be purchased by the Vista U.S. Government Securities
Fund and the Vista Short Term Bond Fund are obligations (including bonds, notes,
certificates of deposit and commercial paper) that provide for a periodic
adjustment in the interest rate paid on the instrument and/or permit the holder
to demand payment upon a specified number of days' notice of the principal
balance plus accrued interest either from the issuer or by drawing on a bank
letter of credit, a guarantee or insurance issued with respect to such
instrument. Such variable rate securities include participation certificates
issued by a bank, insurance company or other financial institution, and in
variable rate securities owned by such institutions or affiliated organizations.
Participation certificates are pro rata interests in securities held by others;
certificates of indebtedness or safekeeping are documentary receipts for such
original securities held in custody by others. Participation certificates may be
deemed illiquid securities (see "Investment Objectives, Policies and
Restrictions -- Investment Policies: Variable Rate Securities and Participation
Certificates" in the Vista Equity/Bond SAI and the Vista U.S. Government SAI).
The Adviser will monitor on an on-going basis the ability of the underlying
issuers to meet their demand obligations. Although variable rate securities may
be sold, it is intended that they be held until an interest reset date, except
under certain specified circumstances (see "Investment Objectives, Policies and
Restrictions -- Investment Policies: Variable Rate Securities and Participation
Certificates" in the Vista Equity/Bond SAI and the Vista U.S. Government SAI).
As a result of the variable rate nature of these investments, a Vista
Portfolio's yield will decline and its shareholders will forego the opportunity
for capital appreciation during periods when prevailing interest rates have
declined. Conversely, during periods where prevailing interest rates have
increased, the Vista Portfolio's yield will increase and its shareholders will
have reduced risk of capital depreciation.
In contrast, neither The Hanover Short Term U.S. Government Fund's
prospectus nor the Hanover U.S. Government Securities Fund's prospectus refers
to an ability to invest in variable rate securities or participation
certificates.
Illiquid Securities. As a matter of fundamental policy, not more than 10%
of the total assets of the Vista Short Term Bond Fund or Vista Large Cap Equity
Fund, and not more than 15% of the total assets of the Vista Small Cap Equity
Fund, may be invested in securities which are subject to legal or contractual
restrictions on resale, including securities that are not readily marketable and
repurchase agreements maturing in more than seven days. Upon consummation of the
Reorganization, as a matter of fundamental policy, each of these Vista
Portfolios instead will be prohibited from investing 15% or more of its total
assets in illiquid securities if approval of such change is obtained from the
shareholders of such Vista Portfolio. In addition, as a matter of fundamental
policy, the Vista U.S. Government Securities Fund and Vista American Value Fund
may not invest 15% or more of their respective total assets in illiquid
securities. As a matter of fundamental policy, each Hanover Portfolio may not
invest 15% or more of its total assets in illiquid securities.
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In addition, the Hanover Portfolios, as well as the Vista U.S. Government
Securities Fund and the Vista American Value Fund, may elect to treat as liquid,
in accordance with procedures established by the Hanover Board and the Vista
Board, respectively, certain investments in restricted securities for which
there may be a secondary market of qualified institutional buyers as
contemplated by Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act") and commercial obligations issued in reliance on the so-called
"private placement" exemption from registration afforded by Section 4(2) of the
Securities Act. Upon consummation of the Reorganization, the Vista Short Term
Bond Fund, Vista Small Cap Equity Fund and Vista Large Cap Equity Fund each will
be permitted to treat as liquid the foregoing instruments in accordance with the
procedures established by the Vista Board, subject to shareholder approval of
the changes with respect to each such Vista Portfolio described in the preceding
paragraph.
Mortgage-Related Securities. The Vista Short Term Bond Fund and the Vista
U.S. Government Securities Fund, like The Hanover Short Term U.S. Government
Fund and The Hanover U.S. Government Securities Fund, may invest without
limitation in mortgage-related securities. Mortgage pass-through securities are
securities representing interests in "pools" of mortgages in which payments of
both interest and principal on the securities are made monthly, in effect
"passing through" monthly payments made by the individual borrowers on the
residential mortgage loans which underlie the securities (net of fees paid to
the issuer or guarantor of the securities). Early repayment of principal on
mortgage pass-through securities (arising from prepayments of principal due to
sale of the underlying property, refinancing, or foreclosure, net of fees and
costs which may be incurred) may expose the Vista Short Term Bond Fund or Vista
U.S. Government Securities Fund to a lower rate of return upon reinvestment of
principal. Also, if a security subject to prepayment has been purchased at a
premium, in the event of prepayment the value of the premium would be lost. Like
other fixed-income securities, when interest rates rise, the value of a
mortgage-related security generally will decline; however, when interest rates
decline, the value of mortgage-related securities with prepayment features may
not increase as much as other fixed-income securities.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. Government (in the case of securities
guaranteed by GNMA); or guaranteed by agencies or instrumentalities of the U.S.
Government (in the case of securities guaranteed by FNMA or FHLMC, which are
supported only by the discretionary authority of the U.S. Government to purchase
the agency's obligations). Mortgage-related securities issued by FNMA include
Guaranteed Mortgage Pass-Through Certificates, also known as "Fannie Maes,"
which are guaranteed as to timely payment of principal and interest by FNMA, and
mortgage-related securities issued by the FHLMC include Mortgage Participation
Certificates, also known as "Freddie Macs," which are guaranteed as to timely
payment of interest and timely or ultimate payment of principal on the
underlying mortgage loans by FHLMC. Mortgage pass-through securities created by
non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance, and
letters of credit, which may be issued by governmental entities, private
insurers or the mortgage poolers.
The Vista U.S. Government Securities Fund, like The Hanover U.S. Government
Securities Fund, and the Vista Short Term Bond Fund, unlike The Hanover Short
Term U.S. Government Fund, may also invest in investment grade Collateralized
Mortgage Obligations ("CMOs") which are hybrid instruments with characteristics
of both mortgage-backed bonds and mortgage pass-through securities. Similar to a
bond, interest and prepaid principal on a CMO are paid, in most cases, monthly.
CMOs may be collateralized by whole mortgage loans but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
GNMA, FHLMC or FNMA. CMOs may be issued through real estate mortgage investment
conduits or REMICs. CMOs are structured into multiple classes, with each class
bearing a different expected average life or stated maturity. Monthly payments
of principal, including prepayments, are first returned to investors holding the
shortest maturity class; investors holding the longer maturity classes receive
principal only after the first class has been retired. To the extent a
particular CMO is issued by an investment company, the Vista U.S. Government
Securities Fund's ability to invest in such CMOs will be limited. See "Limiting
Investment Risks" in the Vista U.S. Government SAI.
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The Vista Short Term Bond Fund and the Vista U.S. Government Securities
Fund expect that governmental, government-related or private entities may create
mortgage loan pools and other mortgage-related securities offering mortgage
pass-through and mortgage-collateralized investments in addition to those
described above. As new types of mortgage-related securities are developed and
offered to investors, the Vista Short Term Bond Fund's and the Vista U.S.
Government Securities Fund's investment adviser will, consistent with their
investment objectives, policies and quality standards, consider making
investments in such new types of mortgage-related securities.
Unlike the Vista Short Term Bond Fund, The Hanover Short Term U.S.
Government Fund's investments in mortgage-related securities are limited to
mortgage-related U.S. Government Securities.
Asset-Backed Securities. The Vista U.S. Government Securities Fund, like
The Hanover U.S. Government Securities Fund, and the Vista Short Term Bond Fund,
unlike The Hanover Short Term U.S. Government Fund, may purchase asset-backed
securities, subject to the Vista Short Term Bond Fund's and the Vista U.S.
Government Securities Fund's respective investment objectives and policies.
Asset-backed securities represent a participation in, or are secured by and
payable from, a stream of payments generated by particular assets, most often a
pool of assets similar to one another, such as motor vehicle receivables and
credit card receivables.
Corporate Reorganizations. The Vista American Value Fund, like the Hanover
American Value Fund, may invest without limitation in securities for which a
tender or exchange offer has been made or announced and in securities of
companies for which a merger, consolidation, liquidation or similar
reorganization proposal has been announced if, in the judgment of the relevant
investment adviser, there is a reasonable prospect of capital appreciation
significantly greater than the added portfolio turnover expenses inherent in the
short-term nature of such transactions. The principal risk is that such offers
or proposals may not be consummated within the time and under the terms
contemplated at the time of the investment, in which case, unless such offers or
proposals are replaced by equivalent or increased offers or proposals which are
consummated, the Vista American Value Fund may sustain a loss.
Portfolio Management and Turnover. It is intended that the portfolio of
each Vista Portfolio will be fully managed by buying and selling securities and,
in the case of Vista Portfolios that invest in fixed-income securities, holding
certain securities to maturity. The frequency of a Vista Portfolio's portfolio
transactions -- the Vista Portfolio's portfolio turnover rate -- will vary from
year to year depending upon market conditions. Each Vista Portfolio will engage
in portfolio trading if its investment adviser believes a transaction, net of
costs (including custodian charges), will help it achieve its investment
objective. The investment policies of the Vista Portfolios may lead to frequent
changes in investments, particularly in periods of rapidly changing market
conditions or interest rates. High portfolio turnover rates would generally
result in higher transaction costs, including brokerage commissions or dealer
mark-ups and other transaction costs on the sale of securities and reinvestment
in other securities. High portfolio turnover rates would also make it more
difficult for the relevant Vista Portfolios to satisfy the requirement for
qualification as a regulated investment company under the Code, that less than
30% of a Vista Portfolio's gross income in any tax year be derived from gains on
the sale of securities held for less than three months. For a description of the
strategies that may be used by the Adviser (or VDH, with respect to the Vista
American Value Fund) in managing the portfolios of the Vista Portfolios, which
may include adjusting the average maturity of the Vista Short Term Bond Fund's
or the Vista U.S. Government Securities Fund's portfolio in anticipation of a
change in interest rates, see "Investment Objectives, Policies and
Restrictions -- Investment Policies: Portfolio Management" in the Vista
Equity/Bond SAI, the Vista Small Cap SAI, the Vista U.S. Government SAI and the
Vista American Value SAI.
Generally, the primary consideration in placing the Vista Portfolios'
portfolio securities transactions with broker-dealers for execution is to
obtain, and maintain the availability of, execution at the most favorable prices
and in the most effective manner possible. For a complete discussion of
portfolio transactions and brokerage allocation, see "Investment Objectives,
Policies and Restrictions -- Investment Policies; Portfolio Transactions and
Brokerage Allocation" in the Vista Equity/Bond SAI, the Vista Small Cap SAI, the
Vista U.S. Government SAI and the Vista AmericanValue SAI.
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Portfolio Securities Lending. Although the Vista Portfolios do not intend
to engage in such activity in the ordinary course of business, each Vista
Portfolio is permitted to lend its securities to broker-dealers and other
institutional investors in order to generate additional income. Such loans of
portfolio securities may not exceed 30% of the value of a Vista Portfolio's
total assets. In connection with such loans, a Vista Portfolio will receive
collateral consisting of cash, cash equivalents, U.S. Government securities or
irrevocable letters of credit issued by financial institutions. Such collateral
will be maintained at all times in an amount equal to at least 102% of the
current market value of the securities loaned plus accrued interest. A Vista
Portfolio can earn income through the investment of such collateral. A Vista
Portfolio continues to be entitled to the interest payable or any
dividend-equivalent payments received on a loaned security and, in addition,
receive interest on the amount of the loan. However, the receipt of any
dividend-equivalent payments by a Vista Portfolio on a loaned security from the
borrower will not qualify for the dividends-received deduction. Such loans will
be terminable at any time upon specified notice. A Vista Portfolio might
experience risk of loss if the institutions with which it has engaged in
portfolio loan transactions breach their agreements with such Vista Portfolio.
The risk in lending portfolio securities, as with other extensions of secured
credit, consist of possible delays in receiving additional collateral or in the
recovery of the securities or possible loss of rights in the collateral should
the borrower experience financial difficulty. Loans will be made only to firms
deemed by the relevant Vista Portfolio's investment adviser to be of good
standing and will not be made unless, in the judgment of the investment adviser,
the consideration to be earned from such loans justifies the risk.
Each Hanover Portfolio is similarly authorized to lend portfolio securities
with a value not in excess of one-third of the value of its respective total
assets.
Foreign Securities. Among the securities in which the Vista Large Cap
Equity Fund, Vista Small Cap Equity Fund and Vista American Value Fund may
invest are securities of foreign issuers, although none of such Vista Portfolios
currently intends to invest more than 20% of its total assets in such
securities. The Vista U.S. Government Securities Fund may invest in foreign
obligations issued or guaranteed by foreign governments and supranational
entities, to the extent consistent with its investment policies described above.
In addition, each Vista Portfolio (other than the Vista American Value Fund) may
invest the portion of its assets not invested as described above in commercial
paper of foreign issuers and foreign bank obligations, as described under "Money
Market Instruments." Foreign securities may represent a greater degree of risk
(e.g., risk related to exchange rate fluctuation, tax provisions, war or
expropriation) than do securities of domestic issuers.
Investing in securities issued by foreign corporations and governments
involves considerations and possible risks not typically associated with
investing in securities issued by domestic corporations and the U.S. Government.
The values of foreign investments are affected by changes in currency rates or
exchange control regulations, application of foreign tax laws, including
withholding taxes, changes in governmental administration or economic or
monetary policy (in the U.S. or other countries) or changed circumstances in
dealings between countries. Costs are incurred in connection with conversions
between various currencies. In addition, foreign brokerage commissions are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision than
in the United States. Investments in foreign countries could be affected by
other factors not present in the United States, including expropriation,
confiscatory taxation, lack of uniform accounting and auditing standards and
potential difficulties in enforcing contractual obligations and could be subject
to extended settlement periods.
The Vista U.S. Government Securities Fund may invest in securities issued
by supranational organizations such as: The World Bank, which was chartered to
finance development projects in developing member countries; the European
Community, which is a twelve-nation organization engaged in cooperative economic
activities; the European Coal and Steel Community, which is an economic union of
various European nations steel and coal industries; and the Asian Development
Bank, which is an international development bank established to lend funds,
promote investment and provide technical assistance to member nations of the
Asian and Pacific regions.
The Vista Large Cap Equity Fund and the Vista Small Cap Equity Fund may
invest their assets in securities of foreign issuers in the form of ADRs,
European Depositary Receipts ("EDRs"), or other similar
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securities representing securities of foreign issuers (collectively, "Depositary
Receipts"), and the Vista American Value Fund may invest its assets in ADRs.
ADRs are receipts typically issued by an American bank or trust company
evidencing ownership of the underlying foreign securities. EDRs are receipts
issued by a European financial institution evidencing a similar arrangement.
Generally, ADRs, in registered form, are designed for use in U.S. securities
markets and EDRs, in bearer form, are designed for use in European securities
markets. The Vista Portfolios treat Depositary Receipts as interests in the
underlying securities for purposes of their investment policies. The Vista
Portfolios will limit their investment in Depositary Receipts not sponsored by
the issuer of the underlying securities to no more than 5% of the value of their
respective net assets (at the time of investment). See the Vista American Value
SAI for certain risks related to unsponsored Depositary Receipts.
Other Investment Companies. Each Vista Portfolio, like each Hanover
Portfolio, may invest up to 10% of the value of its total assets in shares of
other investment companies, subject to such investments being consistent with
its overall objective and policies, and subject to the limitations of the 1940
Act and the Vista Portfolios' respective investment limitations as described in
the Vista Equity/Bond SAI, the Vista Small Cap SAI, the Vista U.S. Government
SAI and the Vista American Value SAI.
Derivatives and Related Instruments. Each Vista Portfolio may invest its
assets in derivative and related instruments subject only to the Vista
Portfolio's investment objective and polices and the requirement that, to avoid
leveraging the Vista Portfolio, the Vista Portfolio maintains segregated
accounts consisting of liquid assets, such as cash, U.S. Government securities,
or other high-grade debt obligations (or, as permitted by applicable regulation,
enter into certain offsetting positions) to cover its obligations under such
instruments with respect to positions where there is no underlying portfolio
asset.
The value of some derivative or similar instrument in which the Vista
Portfolios invest may be particularly sensitive to changes in prevailing
interest rates or other economic factors, and -- like other investment of the
Vista Portfolios -- the ability of a Vista Portfolio to successfully utilize
these instruments may depend in part upon the ability of its investment adviser
to forecast interest rates and other economic factors correctly. If a Vista
Portfolio's investment adviser incorrectly forecasts such factors and has taken
positions in derivative or similar instruments contrary to prevailing market
trends, the Vista Portfolios could be exposed to the risk of a loss. The Vista
Portfolios might not employ any or all of the instruments described herein, and
no assurance can be given that any strategy used will succeed.
To the extent permitted by the investment objective and policies of each
Vista Portfolio, and as described more fully in the Vista Equity/Bond SAI, the
Vista Small Cap SAI, the Vista U.S. Government SAI and the Vista American Value
SAI, a Vista Portfolio may (i) purchase, write and exercise call and put options
on securities, securities indexes and foreign currencies (including using
options in combination with securities, other options or derivative
instruments); (ii) enter into futures contracts and options on futures
contracts; (iii) employ forward currency and interest-rate contracts; (iv)
purchase and sell mortgage-backed and asset backed securities; and (v) purchase
and sell structured products.
Risk Factors. As explained more fully in the Vista Equity/Bond SAI, the
Vista Small Cap SAI and the New Vista SAI, there are a number of risks
associated with the use of derivatives and related instruments. There can be no
guarantee that there will be a correlation between price movements in a hedging
vehicle and in the portfolio assets being hedged. An incorrect correlation could
result in a loss on both the hedged assets in a Vista Portfolio and the hedging
vehicle so that the Vista Portfolio return might have been greater had hedging
not been attempted. This risk is particularly acute in the case of
"cross-hedges" between currencies. The investment adviser may incorrectly
forecast interest rates, market values or other economic factors in utilizing a
derivatives strategy. In such a case, the Vista Portfolio may have been in a
better position had it not entered into such strategy. Hedging strategies, while
reducing risk of loss, can also reduce the opportunity for gain. In other words,
hedging usually limits both potential losses as well as potential gains.
Strategies not involving hedging may increase the risk to a Vista Portfolio.
Certain strategies, such as yield enhancement, can have speculative
characteristics and may result in more risk to a Vista Portfolio than hedging
strategies using the same instruments. There can be no assurance that a liquid
market will exist at a time when a Vista Portfolio seeks to close out an option,
futures contract or other derivative or related position. Many exchanges
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and boards of trade limit the amount of fluctuation permitted in option or
futures contract prices during a single day; once the daily limit has been
reached on a particular contract, no trades may be made that day at a price
beyond that limit. In addition, certain instruments are relatively new and
without a significant trading history. As a result, there is no assurance that
an active secondary market will develop or continue to exist. Activities of
large traders in the futures and securities markets involving arbitrage,
"program trading," and other investment strategies may cause price distortions
in these markets. In certain instances, particularly those involving
over-the-counter transactions, forward contracts, foreign exchanges or foreign
boards of trade, there is a greater potential that a counterparty or broker may
default or be unable to perform on its commitments. In the event of such a
default, a Vista Portfolio may experience a loss. In transactions involving
currencies, the value of the currency underlying an instrument may fluctuate due
to many factors, including economic conditions, interest rates, governmental
policies and market forces.
G. INVESTMENT RESTRICTIONS
In addition to the investment restrictions discussed above, each Vista
Portfolio has adopted certain fundamental investment restrictions which are set
forth in the Vista Equity/Bond SAI and the Vista Small Cap SAI. Such investment
restrictions are substantially similar to those of the corresponding Hanover
Portfolio, except to the extent otherwise noted in the preceding discussion or
below.
The Hanover Short Term U.S. Government Fund, The Hanover Blue Chip Growth
Fund and The Hanover Small Capitalization Growth Fund, each of which is a
diversified fund, each have a fundamental investment restriction prohibiting it,
with respect to 75% of its total assets, from investing more than 5% of its
total assets in the securities of any one issuer, other than obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities. The
corresponding Vista Portfolios have no similar fundamental policies. However, as
diversified funds, each of the Vista Short Term Bond Fund and Vista Large Cap
Equity Fund is required by the 1940 Act to comply with the same issuer
diversification requirements applicable to the corresponding Hanover Portfolios.
The Vista Small Cap Equity Fund, which unlike The Hanover Small Capitalization
Growth Fund is a non-diversified fund, is not subject to a fundamental issuer
diversification policy. However, the Vista Small Cap Equity Fund must
nonetheless satisfy certain issuer diversification requirements in order to
qualify as a regulated investment company under Subchapter M of the Code, which
are more fully described under "Tax Matters -- Qualification as a Regulated
Investment Company" in the Vista Small Cap SAI.
While the Vista Short Term Bond Fund, Vista Large Cap Equity Fund and Vista
Small Cap Equity Fund each have a fundamental investment restriction which
states an intention to borrow only from banks and only to meet redemptions, the
Hanover Portfolios, as well as the Vista U.S. Government Securities Fund and the
Vista American Value Fund, each have a fundamental investment restriction with
respect to borrowing which permits them to enter into reverse repurchase
agreements in accordance with their respective investment policies in amounts
not in excess of one-third of the value of their assets, less bank borrowings
outstanding for temporary purposes. However, the Hanover Portfolios, as well as
the Vista U.S. Government Securities Fund and the Vista American Value Fund,
each have a non-fundamental policy stating that they will enter into reverse
repurchase agreements only to avoid selling portfolio securities to meet
redemptions. Both the Vista and Hanover restrictions provide that the relevant
Portfolios may not purchase additional portfolio securities while borrowings and
reverse repurchase agreements exceed 5% of the value of its total assets. Upon
consummation of the Reorganization, as a matter of fundamental policy, the Vista
Short Term Bond Fund, Vista Large Cap Equity Fund and Vista Small Cap Equity
Fund each will have the same ability to enter into reverse repurchase agreements
as described above for the Hanover Portfolios if approval of such change is
obtained from the shareholders of such Vista Portfolio.
The Hanover Portfolios and the Vista Portfolios each have a fundamental
investment restriction prohibiting them from engaging in short sales of
securities. However, The Hanover Blue Chip Growth Fund and Hanover Small
Capitalization Growth Fund are subject to an exception which permits them to
engage in short sales against the box, subject to certain limitations, while of
the Vista Portfolios, only the Vista Small Cap Equity Fund is subject to a
similar exception. In addition, the Vista Small Cap Equity Fund also states that
it has no current intention of engaging in short sales. Upon consummation of the
Reorganization, each
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Vista Portfolio, as a matter of fundamental policy, will be prohibited from
engaging in short sales other than short sales "against the box," provided that
such restriction will not be applied to limit otherwise permissible derivatives
and related transactions, if approval of the foregoing revised policy is
obtained from the shareholders of such Vista Portfolio.
While the Hanover Portfolios each have a fundamental investment restriction
limiting the ability to purchase securities of other investment companies, the
Vista Portfolios have no corresponding fundamental investment restriction.
However, each Vista Portfolio, as a matter of law, is subject to the same
limitations. In addition, while the Vista Portfolios each have a fundamental
investment restriction prohibiting them from purchasing securities of any issuer
if such purchase would cause more than 10% of the voting securities of such
issuer to be held by such Vista Portfolio, the Hanover Portfolios have no
corresponding fundamental investment restriction. However, each Hanover
Portfolio, as a diversified portfolio, is subject to the same limitation as a
matter of law. Upon consummation of the Reorganization, each Vista Portfolio, as
a matter of fundamental policy, will be prohibited with respect to 75% of its
assets from holding more than 10% of the outstanding voting securities of an
issuer if shareholder approval of the foregoing revised policy is obtained from
the shareholders of such Vista Portfolio.
Following consummation of the Reorganization, each Vista Portfolio, as a
matter of fundamental policy, will be permitted to invest all or a part of its
assets in an investment company having substantially the same investment
objective and policies as such Vista Portfolio, if approval is obtained from the
shareholders of such Vista Portfolio with respect to the adoption of such new
fundamental policy. The Hanover Portfolios have no similar fundamental policy.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS
General. As a Massachusetts business trust, the operation of Vista will be
governed by the Declaration of Trust of Vista (the "Declaration of Trust") and
applicable Massachusetts law rather than by the Articles of Incorporation (the
"Articles") of Hanover and applicable Maryland law. Certain differences between
the two forms of organization are summarized below.
Shares of Portfolios. Interests in Hanover are represented by transferable
shares of stock, par value $.001 per share. The Articles authorize Hanover to
issue 200 million shares of stock. The Hanover Board may, without shareholder
approval, increase the number of authorized shares and divide authorized but
unissued stock into an unlimited number of separate portfolios or series, and
classes thereof. Currently, all the authorized stock of Hanover is divided into
ten separate series (corresponding to the five Hanover Portfolios and five
additional portfolios that have not to date commenced investment operations).
The Hanover Board has authorized each Hanover Portfolio to issue multiple
classes of shares. Shares of each class of a Hanover Portfolio represent
interests in such portfolio in proportion to each share's net asset value. All
shares of Hanover have equal voting rights and will be voted in the aggregate,
and not by series or class, except where voting by series or class is required
by law or where the matter involved affects only one series or class. Each share
of a Hanover Portfolio is entitled to dividends and distributions out of the
assets of that Hanover Portfolio, as declared by the Hanover Board in its
discretion. Maryland law does not require a registered investment company to
hold annual meetings of shareholders in any year in which the election of
directors is not required under the 1940 Act, and it is anticipated that annual
shareholder meetings will be held only when specifically required by the 1940
Act. There are no conversion or preemptive rights in connection with shares of
Hanover.
Vista has an unlimited number of authorized shares of beneficial interest,
currently without par value, which may be divided into portfolios or series and
classes thereof. Upon consummation of the Reorganization, the par value of the
shares of Vista will be $.001, subject to shareholder approval of such change.
Each Vista Portfolio is one portfolio of Vista, and may issue multiple classes
of shares. The Vista Small Cap Equity Fund currently issues two classes of
shares. Upon consummation of the Reorganization, each of the Vista Portfolios,
other than the Vista American Value Fund, will offer multiple classes of shares
to the public. Each share of a portfolio or class of Vista 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 Vista participate
equally in the earnings,
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dividends and assets of the particular portfolio or class. Fractional shares
have proportionate rights to full shares. Expenses of Vista which are not
attributable to a specific portfolio or class are allocated to all the
portfolios of Vista in a manner believed by management of Vista to be fair and
equitable. Generally, shares of each portfolio or class will be voted
separately, for example to approve an investment advisory agreement or
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. Vista 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 Vista.
Shareholder Voting Rights. Each Director of Hanover holds office, unless
sooner removed, until his successor is elected and qualified. Any Director may
be removed, with or without cause, by the affirmative vote of a majority of the
shares entitled to vote, at any meeting of the shareholders, and the vacancy
caused by such removal may be filled by the shareholders at any meeting called
for the purpose. A vacancy in the Hanover Board resulting from the resignation
of a Director or otherwise may be filled by a vote of a majority of the
remaining Directors then in office. However, under the 1940 Act, no vacancy may
be filled by Directors unless immediately thereafter at least two-thirds of the
Directors holding office shall have been elected to such office by the
shareholders. Special meetings of shareholders for any purpose or purposes may
be called by Hanover's chairman, president or a majority of the Hanover Board,
and upon the written request of the shareholders holding at least 10% of the
shares of Hanover outstanding and entitled to vote at such meeting. Business
transacted at any special meeting of shareholders shall be limited to the
purposes stated in the notice of such meeting sent to shareholders.
Vista is not required to hold annual meetings of shareholders but will hold
special meetings of shareholders of a portfolio or class when the Trustees deem
such a meeting to be necessary or desirable. A vacancy in the Vista Board
resulting from the resignation of a Trustee or otherwise may be filled by a vote
of a majority of the remaining Trustees then in office. However, under the 1940
Act, no vacancy may be filled by Trustees unless immediately thereafter at least
two-thirds of the Trustees holding office shall have been elected to such office
by the shareholders. 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 Vista 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 Vista
stating that such shareholders wish to communicate with the other shareholders
for the purpose 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 Maryland law, Hanover shareholders have no
personal liability for Hanover's acts or obligations. Under Massachusetts law,
shareholders of Vista could, under certain circumstances, be held personally
liable as partners for the obligations of Vista. However, Vista Agreement
disclaims shareholder liability for acts or obligations of Vista and provides
for indemnification and reimbursement of expenses out of Vista property for any
shareholder held personally liable for the obligations of Vista. The Declaration
of Trust also provides that Vista shall maintain appropriate insurance (for
example, fidelity bonding and errors and omissions insurance) for the protection
of Vista, 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 Vista itself was unable to meet
its obligations.
Liability of Directors and Trustees. Under Maryland law and the Articles,
directors and officers of Hanover are not liable to the corporation or its
stockholders for money damages, except to the extent that (1) it is proved that
such person actually received an improper benefit or profit in money, property,
or services
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for the amount of the benefit for profit in money, property, or services
actually received, or (2) a judgment or other final adjudication adverse to such
person is entered in a proceeding based on a finding that the person's action,
or failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated. However, a director or officer of
Hanover is liable to the extent his actions are the result of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office ("Disabling Conduct"). In the event of any
litigation against the Directors or officers of Hanover, Hanover's By-Laws
require that Hanover indemnify a Director or officer for certain expenses and to
advance money for such expenses provided that (a) the court or other body before
whom the proceeding to which the Director or officer is a party was brought (i)
dismisses the proceeding for insufficiency of evidence of any Disabling Conduct
or (ii) reaches a final decision on the merits that the Director or officer was
not liable by reason of Disabling Conduct; or (b) in the absence of such a
decision, there is a reasonable determination, based upon a review of the facts,
that the Director or officer was not liable by reason of Disabling Conduct,
which determination shall be made by: (i) the vote of a majority of a quorum of
the Directors who are neither "interested persons" of Hanover as defined in the
1940 Act nor parties to the proceeding; or (ii) an independent legal counsel in
a written opinion. Under the Declaration of Trust, the Trustees of Vista are
personally liable only for bad faith, willful misfeasance, gross negligence or
reckless disregard of their duties as Trustees. Under the Declaration of Trust,
a Trustee or officer of Vista 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 differences between
Hanover, its Articles and By-Laws and Maryland law and Vista, its Declaration of
Trust and By-Laws and Massachusetts law. Shareholders may wish to refer directly
to the provisions of Hanover's Articles and By-Laws, Maryland law and Vista's
Declaration of Trust and By-Laws and Massachusetts law for a more thorough
comparison.
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ADDITIONAL INFORMATION ABOUT VISTA
A. EXPENSES
The following expense tables are provided to assist investors in
understanding the various costs and expenses that an investor will indirectly
incur as a beneficial owner of Shares in each of the Vista Portfolios. The table
reflects information for the twelve months ended October 31, 1995 for the Vista
Short Term Bond Fund, the Vista Large Cap Equity Fund and the Vista Small Cap
Equity Fund, in each case restated to reflect the fee arrangements that will be
in effect commencing on the Closing Date as if these arrangements had been in
effect during that period and assuming that the Reorganization had occurred at
the beginning of that period. Because the Vista U.S. Government Securities Fund
and the Vista American Value Fund will not commence operations until the Closing
Date, information for those portfolios reflects estimated annual expenses for
the 1996 fiscal year.
<TABLE>
<CAPTION>
VISTA VISTA U.S. VISTA VISTA VISTA
SHORT TERM GOVERNMENT LARGE CAP SMALL CAP SMALL CAP
BOND FUND SECURITIES FUND EQUITY FUND EQUITY FUND EQUITY FUND VISTA
(CLASS A (INSTITUTIONAL (INSTITUTIONAL (CLASS A (INSTITUTIONAL AMERICAN
SHARES) SHARES) SHARES) SHARES) SHARES) VALUE FUND
---------- --------------- ----------- ----------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Initial Sales Charge Imposed on
Purchases (as a percentage of offering
price)................................. 1.50% 0.00% 0.00% 4.75% 0.00% 0.00%
Maximum Contingent Deferred Sales Charge
(as a percentage of redemption
proceeds).............................. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET
ASSETS)
Investment Advisory Fee (after estimated
waivers, where indicated).............. 0.00%* 0.30% 0.00%* 0.65% 0.65% 0.00%*
Rule 12b-1 Distribution Plan fee (after
estimated waivers, where indicated).... 0.08%** 0.00% 0.00% 0.25% 0.00% 0.00%**
Administration Fee (after estimated
waivers, where indicated).............. 0.02%*** 0.10% 0.10% 0.10% 0.10% 0.00%***
OTHER EXPENSES
Sub-Administration Fee................. 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%
Shareholder Servicing Fee (after
estimated waivers, where
indicated)........................... 0.25% 0.20%+ 0.25% 0.00% 0.00%+ 0.12%+
Other Operating Expenses++............. 0.35% 0.20% 0.20% 0.45% 0.30% 1.15%
TOTAL OTHER EXPENSES..................... 0.65% 0.45% 0.50% 0.50% 0.35% 1.32%
TOTAL FUND OPERATING EXPENSES (AFTER
WAIVERS OF FEES)+++.................... 0.75% 0.85% 0.60% 1.50% 1.10% 1.32%
</TABLE>
- ---------------
* "Advisory Fees" for the Vista Short Term Bond Fund, Vista Large Cap Equity
Fund and Vista American Value Fund reflect estimated fee waivers pursuant to
the agreement described below; absent such waivers, "Advisory Fees" would be
0.25% for Vista Short Term Bond Fund, 0.40% for Vista Large Cap Equity Fund
and 0.70% for Vista American Value Fund.
** "Rule 12b-1 Distribution Plan Fees" for the Vista Short Term Bond Fund Class
A Shares and Vista American Value Fund reflect estimated fee waivers
pursuant to the agreement described below; absent such waivers, "Rule 12b-1
Distribution Plan Fees" would be 0.25% for each such class of each such
Vista Portfolio. Vista Large Cap Equity Fund Institutional Shares, Vista
Small Cap Equity Fund Institutional Shares and Vista U.S. Government
Securities Fund Institutional Shares do not bear Rule 12b-1 Distribution
Plan Fees.
*** "Administration Fees" for Vista Short Term Bond Fund and the Vista American
Value Fund reflect estimated fee waivers pursuant to the agreement described
below; absent such waivers, "Administration Fees" would be 0.10% for such
Vista Portfolios.
+ "Shareholder Servicing Fees" for the Vista U.S. Government Securities Fund
and the Vista Small Cap Equity Fund Institutional Shares and the Vista
American Value Fund reflect estimated fee waivers pursuant to the agreement
described below; absent such waivers, "Shareholder Servicing Fees" would be
0.25% for such classes of such Vista Portfolios.
37
<PAGE> 44
++ "Other Operating Expenses" include custody fees, transfer agency fees,
registration fees, legal fees, audit fees, directors' fees, insurance fees,
and other miscellaneous expenses. A shareholder may incur a $10.00 charge
for certain wire redemptions.
+++ "Total Fund Operating Expenses" reflect the agreement by Chase and certain
other service providers to the Vista Portfolios voluntarily to waive fees
payable to them and/or reimburse expenses for a period of at least one year
following the consummation of the Reorganization to the extent necessary to
prevent Total Fund Operating Expenses of Shares of each Vista Portfolio for
such period from exceeding the amounts indicated in the table. In addition,
Chase has agreed to waive fees payable to it and/or reimburse expenses for a
two year period following consummation of the Reorganization to the extent
necessary to prevent "Total Fund Operating Expenses" for Institutional
Shares of the Vista Small Cap Equity Fund and for shares of the Vista
American Value Fund from exceeding 1.15% and 2.12%, respectively, of average
net assets during such period.
Example: You would pay the following expenses on a $1,000 investment in the
Shares of the Vista Portfolio indicated based upon payment by the Vista
Portfolios of operating expenses at the levels set forth in the table above,
assuming (1) 5% annual return and (2) redemption at the end of each time period,
based upon estimated actual expenses. In the case of Class A Shares of the Vista
Short Term Bond Fund and the Vista Small Cap Equity Fund, the figures assume the
deduction at the time of purchase of the maximum initial sales charge.
<TABLE>
<CAPTION>
VISTA
VISTA U.S. GOVERNMENT VISTA
SHORT TERM SECURITIES FUND LARGE CAP
BOND FUND (INSTITUTIONAL EQUITY FUND
(CLASS A SHARES) SHARES) (INSTITUTIONAL SHARES)
---------------- --------------------- ----------------------
<S> <C> <C> <C>
1 Year........................... $ 23 $ 9 $ 6
3 Years.......................... 39 27 19
5 Years.......................... 56 47 33
10 Years......................... 107 105 75
</TABLE>
<TABLE>
<CAPTION>
VISTA SMALL
VISTA SMALL CAP CAP EQUITY FUND
EQUITY FUND (INSTITUTIONAL VISTA AMERICAN
(CLASS A SHARES) SHARES) VALUE FUND
---------------- --------------------- ---------------------
<S> <C> <C> <C>
1 Year.......................... $ 62 $ 11 $ 13
3 Years......................... 93 35 42
5 Years......................... 125 61 72
10 Years........................ 218 134 159
</TABLE>
THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
FUTURE EXPENSES OF SHARES OF A VISTA PORTFOLIO; ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN.
A long-term shareholder in shares of a mutual fund with 12b-1 fees, such as
the Class A Shares of the Vista Short Term Bond Fund and the Vista Small Cap
Equity Fund, and the Shares of the Vista American Value Fund, may pay more than
the economic equivalent of the maximum front-end sales charge permitted by rules
of the National Association of Securities Dealers, Inc.
B. FINANCIAL HIGHLIGHTS
The following financial highlights for Vista Small Cap Equity Fund and
Vista Large Cap Equity Fund are supplemented by financial statements and
accompanying notes appearing in Vista's Annual Reports to shareholders for the
fiscal year ended October 31, 1995, which are incorporated by reference into the
Vista SAI. The financial statements and notes thereto, as well as the financial
information set forth in the tables below with respect to each of the periods
commencing after June 30, 1992, for Visa Small Cap Equity Fund and Vista Large
Cap Equity Fund, have been audited by Price Waterhouse LLP, independent
accountants, whose reports expressed an unqualified opinion thereon. The
information on selected per share data and ratios with respect to the fiscal
year ended June 30, 1992 and the period November 30, 1990 to June 30, 1991 have
been audited by other independent accountants whose report expressed an
unqualified opinion thereon.
38
<PAGE> 45
The financial highlights for The Hanover U.S. Government Securities Fund
and the related financial statements have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, whose report expressed an unqualified
opinion thereon.
The following information should be read in conjunction with the related
financial statements and notes thereto which are incorporated by reference into
the Statement of Additional Information.
The information presented below for the Vista Large Cap Equity Fund relates
to the single class of shares thereof being offered prior to the Closing Date.
Such shares will be denominated Institutional Shares as of the Closing Date.
Investors are advised that the Financial Highlights presented below should
not be viewed as indicative of future financial results of the Vista Portfolios.
39
<PAGE> 46
VISTA LARGE CAP EQUITY FUND(1)
<TABLE>
<CAPTION>
JULY 1, NOVEMBER 30,
YEAR YEAR YEAR 1992** YEAR 1990*
ENDED ENDED ENDED TO ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, JUNE 30, JUNE 30,
1995 1994 1993 1992 1992 1991
----------- ----------- ----------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period.......................... $ 13.16 $ 13.65 $ 12.56 $ 12.50 $ 11.43 $ 10.00
Income from Investment Operations:
Net investment income........... 0.277 0.298 0.302 0.080 0.240 0.170
Net gains (losses) on Securities
(both realized and
unrealized)................... 1.744 0.263 1.153 0.500 1.230 1.350
------- ------- ------- ------- ------- -------
Total from Investment
Operations.................... 2.021 0.561 1.455 0.580 1.470 1.520
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income........................ 0.282 0.290 0.304 0.140 0.290 0.090
Distributions from capital
gains......................... 2.659 0.761 0.062 0.380 0.110 0.000
------- ------- ------- ------- ------- -------
Total Distributions............. 2.941 1.051 0.366 0.520 0.400 0.090
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period.... $ 12.24 $ 13.16 $ 13.65 $ 12.56 $ 12.50 $ 11.43
======= ======= ======= ======= ======= =======
Total Return...................... 20.41% 4.37% 11.73% 4.78% 12.99 % 15.25%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted)................. $55,417 $67,818 $ 120,635 $ 106,088 $92,261 $ 95,440
Ratio of expenses to average net
assets#....................... 0.31% 0.31% 0.31% 0.30% 0.30 % 0.28%
Ratio of net Investment Income
to Average Net Assets#........ 2.41% 2.30% 2.30% 1.96% 2.29 % 2.81%
Ratio of expenses without
waivers and assumption of
expenses to Average Net
Assets#....................... 0.90% 0.95% 0.88% 0.80% 1.02 % 1.13%
Ratio of net investment income
without waivers and assumption
of expenses to Average Net
Assets#....................... 1.82% 1.66% 1.73% 1.46% 1.57 % 1.96%
Portfolio turnover rate......... 45% 53% 33% 5% 14 % 19%
</TABLE>
- ---------------
(1) Currently known as the Vista Equity Fund.
* Commencement of operations.
# Short periods have been annualized.
** In 1992, the Vista Large Cap Equity Fund's fiscal year-end was changed from
June 30 to October 31.
40
<PAGE> 47
VISTA SMALL CAP EQUITY FUND
<TABLE>
<CAPTION>
DECEMBER 20, 1994*
THROUGH
OCTOBER 31, 1995
------------------
CLASS A SHARES
------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period........................................ $ 10.00
Income from Investment Operations:
Net investment income..................................................... 0.060
Net gains (losses) on Securities (both realized and unrealized)........... 5.056
------
Total from Investment Operations:......................................... 5.116
------
Less Distributions:
Dividends from net investment income...................................... 0.042
Distributions from capital gains.......................................... 0.004
------
Total Distributions....................................................... 0.046
------
Net Asset Value, End of Period.............................................. $ 15.07
======
Total Return(1)............................................................. 51.25%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)................................... $ 43,739
Ratio of expenses to average net assets#.................................. 1.51%
Ratio of net Investment Income to Average Net Assets#..................... 0.52%
Ratio of expenses without waivers and assumption of expenses to
Average Net Assets#.................................................... 2.67%
Ratio of net investment income without waivers and assumption of expenses
to Average Net Assets#................................................. (0.64)%
Portfolio turnover rate................................................... 75%
</TABLE>
- ---------------
# Annualized.
* Commencement of operations.
(1) Total rates of return are calculated before taking into account any sales
load for Class A shares.
41
<PAGE> 48
THE HANOVER U.S. GOVERNMENT SECURITIES FUND
(FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1995 1994 1993*
------------ ------------ ------------
INVESTOR INVESTOR INVESTOR
SHARES SHARES SHARES
------------ ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $ 10.27 $ 10.00
------- -------
Income from Investment Operations:
Net investment income (loss).................... 0.50 0.34
Net gains (losses) on Securities (both realized
and unrealized).............................. (0.94) 0.27
------- -------
Total from Investment Operations................ (0.44) 0.61
Less Distributions:
Dividends from net investment income............ (0.50) (0.34)
Distributions from capital gains................ (0.10) --
------- -------
Total Distributions............................... (0.60) (0.34)
------- -------
Net Asset Value, End of Period.................... $ 9.23 $ 10.27
======= =======
Total Return**.................................... (4.41)% 6.16%+
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)........ $ 83,649 $ 86,089
Ratio of expenses to Average Net Assets++....... 0.85% 0.85%+++
Ratio of net investment income to Average
Net Assets................................... 5.15% 4.26%+++
Portfolio turnover rate........................... 134.29% 37.45%
</TABLE>
- ---------------
* The Hanover U.S. Government Securities Fund commenced operations on February
19, 1993.
** Until February 28, 1994, Investor Shares of the U.S. Government Securities
Fund of Hanover were sold subject to the imposition of a sales load, which
is not reflected in the total return figures.
+ Total Return not annualized.
++ Ratios of expenses before effect of waivers were 1.04% and 1.04%
(annualized), respectively.
+++ Annualized.
42
<PAGE> 49
THE HANOVER AMERICAN VALUE FUND
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1995*
-------------
INVESTOR
SHARES
-------------
<S> <C>
Net asset value, beginning of period............................................
Income from Investment Operations:
Net investment income (loss)..................................................
Net gains (losses) on Securities (both realized and unrealized)...............
Total from Investment Operations..............................................
Less Distributions:
Dividends from net investment income..........................................
Distributions from capital gains..............................................
Total Distributions.............................................................
Net Asset Value, End of Period..................................................
Total Return+...................................................................
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)......................................
Ratio of expenses to Average Net Assets++.....................................
Ratio of net investment income to Average Net Assets..........................
Portfolio turnover rate.........................................................
</TABLE>
- ---------------
* The Hanover American Value Fund commenced operations on February 3, 1995.
+ Total Return not annualized.
++ Annualized.
C. MANAGEMENT OF THE PORTFOLIOS
ADVISER AND SUB-ADVISERS
Chase acts as investment adviser to each existing Vista Portfolio and will
act as investment adviser to each Vista Portfolio effective upon the Closing
Date. Upon consummation of the Bank Merger, Chase's successor will continue to
act as investment adviser to each Vista Portfolio. As used herein, the term
"Adviser" means Chase (including its successor in the Bank Merger), in its
capacity as investment adviser to the Vista Portfolios. Under the Investment
Advisory Agreement between the Adviser and Vista with respect to each Vista
Portfolio that will take effect as of the Closing Date, the Adviser will have
responsibility for investment decisions for each such Vista Portfolio. For its
services under each such Investment Advisory Agreement, the Adviser will receive
an annual fee computed daily and paid monthly at an annual rate equal to .25%
for the Vista Short Term Bond Fund, .30% for the Vista U.S. Government
Securities Fund, .40% for the Vista Large Cap Equity Fund, .65% for the Vista
Small Cap Equity Fund and .60% for the Vista American Value Fund.
Effective upon the Closing Date, CAM will act as the sub-investment adviser
to each Vista Portfolio, other than the Vista American Value Fund, pursuant to a
separate Sub-Investment Advisory Agreement between CAM and Chase. Under the
Sub-Investment Advisory Agreement, CAM will make investment decisions for, and
be responsible for the day-to-day management of, each such portfolio. For its
services under such Sub-Investment Advisory Agreement, CAM will be entitled to
receive, with respect to each such Vista Portfolio, such compensation, payable
by the Adviser out of its advisory fee, as shall be agreed to from time to time
between the Adviser and CAM.
Effective upon the Closing Date, VDH will act as the sub-investment adviser
to the Vista American Value Fund pursuant to a separate Sub-Investment Advisory
Agreement between Chase and VDH. Under the
43
<PAGE> 50
Sub-Investment Advisory Agreement, VDH will make investment decisions for, and
be responsible for the day-to-day management of, the Vista American Value Fund.
For its services under the Sub-Investment Advisory Agreement relating to the
Vista American Value Fund, VDH will be entitled to receive such compensation,
payable by the Adviser out of its advisory fee, as shall be agreed to from time
to time between the Adviser and VDH.
The Adviser, CAM and VDH may each, from time to time, voluntarily waive all
or a portion of the fees payable to it under an Investment Advisory Agreement or
a Sub-Investment Advisory Agreement, as the case may be.
The Adviser is currently a wholly-owned subsidiary of CMC, a registered
bank holding company, and is a commercial bank offering a wide range of banking
and investment services to customers throughout the United States and around the
world. Effective upon consummation of the Parent Merger, the Adviser will be a
wholly-owned subsidiary of CBC, and CBC will be renamed "The Chase Manhattan
Corporation". Upon consummation of the Bank Merger, the Adviser will continue to
be a wholly-owned subsidiary of CBC. The Adviser's headquarters is currently
located at One Chase Manhattan Plaza, New York, New York 10081. The Adviser,
including its predecessor organizations, has over 100 years of money management
experience and renders investment advisory services to others. Also included
among the Adviser's accounts are commingled trust funds and a broad spectrum of
individual trust and investment management portfolios. These accounts have
varying investment objectives.
CAM is a wholly-owned operating subsidiary of Chase, and upon consummation
of the Bank Merger, will be a wholly-owned operating subsidiary of the Adviser.
CAM is registered with the Commission as an investment adviser and was formed
for the purpose of providing discretionary investment advisory services to
institutional clients and to consolidate Chase's investment management function,
and the same individuals who serve as portfolio managers for CAM also serve as
portfolio managers for Chase. CAM is located at 1211 Avenue of the Americas, New
York, New York 10036.
Linda Struble is responsible for the day-to-day management of the Vista
Short Term Bond Fund for the Adviser and, effective upon consummation of the
Reorganization, will continue to manage such Vista Portfolio for CAM. Ms.
Struble is the manager of the Adviser's fixed income trading unit, and in such
capacity she also manages fixed income assets for fiduciary accounts at the
Chase Manhattan Regional Bank. Ms. Struble has 27 years of experience in banking
and investment management, and began her financial career with Lincoln First
Bank in 1968. Ms. Struble managed several of the Lincoln First Bank's Trinity
mutual funds and joined Vista as a portfolio manager when the Trinity funds
merged with Vista in 1993. In addition to her portfolio management duties, Ms.
Struble is a contributor to several investment policy committees including the
Chase Asset Management Investment Policy Committee, the Chase Regional Bank
Investment Policy Committee and the Regional Bank Credit Policy Committee.
Effective upon consummation of the Reorganization, John Schmucker will be
responsible for the day-to-day management of the Vista U.S. Government
Securities Fund for CAM. Mr. Schmucker currently manages The Hanover U.S.
Government Securities Fund and is a Vice President and Senior Fixed Income
Portfolio Manager at The Portfolio Group (the investment adviser for The Hanover
U.S. Government Securities Fund). Prior to joining the Portfolio Group in 1992,
Mr. Schmucker was the Chief Investment Officer of Chemical Bank's Official
Institutions Group. Previously, he was a portfolio manager with Henry Kaufman &
Company, Inc.
Effective upon consummation of the Reorganization, Karen L. Shapiro will be
responsible for the day-to-day management of the Vista Large Cap Equity Fund.
Ms. Shapiro currently manages The Hanover Blue Chip Growth Fund and is a Vice
President and Senior Portfolio Manager at The Portfolio Group (the investment
adviser for The Hanover Blue Chip Growth Fund) and a member of its Investment
Committee. Prior to joining The Portfolio Group in 1992, Ms. Shapiro was a
Portfolio Manager in the Personal Investment Consulting Department at
Manufacturers Hanover Trust Company.
David Klassen and Jill Greenwald are responsible for the day-to-day
management of the Vista Small Cap Equity Fund for the Adviser and, effective
upon consummation of the Reorganization, will continue to
44
<PAGE> 51
co-manage such Vista Portfolio for CAM. Mr. Klassen joined the Vista management
team in 1992 and was named head of Vista equity management in 1995. He also
co-manages the Vista Capital Growth Fund and manages the Vista Growth and Income
Fund. Prior to his association with Vista, Mr. Klassen held investment
management positions at Dean Witter Reynolds, Inc. for 11 years. Ms. Greenwald
joined Vista in 1992 and has concentrated on fundamental research for small-cap
companies in numerous industries. Prior to joining Vista, Ms. Greenwald had
management responsibility for a pool of small-cap equities at Prudential Equity
Investors. Before her tenure at Prudential, Ms. Greenwald was an equity analyst
and senior analyst at Fred Alger Management, Inc. for six years.
VDH was organized in 1969. The firm is a general partnership which is
equally owned by individuals who serve VDH in key professional capacities and
CBC Holdings (California), a wholly-owned subsidiary of CBC. VDH provides a wide
range of asset management services to individuals, corporations, private and
charitable trusts, endowments, foundations and retirement funds. The principal
business address of VDH is 800 North Brand Boulevard, Suite 300, Glendale,
California 91203.
Richard D. Trautwein serves as executive Vice President at VDH and,
effective upon the Closing Date, will be primarily responsible for the
day-to-day management of the Vista American Value Fund's portfolio. Mr.
Trautwein joined VDH in 1972, heads the firm's portfolio strategy group and is a
member of the firm's investment policy committee. He has been primarily
responsible for day-to-day management of The Hanover American Value Fund since
its inception.
CERTAIN RELATIONSHIPS AND ACTIVITIES. Chase and its affiliates may have
deposit, loan and other commercial banking relationships with the issuers of
securities purchased on behalf of any of the Vista Portfolios, including
outstanding loans to such issuers which may be repaid in whole or in part with
the proceeds of securities so purchased. Chase and its affiliates deal, trade
and invest for their own accounts in U.S. Government obligations, and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations and
municipal obligations to, and purchase them from, other investment companies
sponsored by the Vista Distributor or affiliates of the Vista Distributor. The
Adviser will not invest any Vista Portfolio assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself or
any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which the Adviser
or an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be purchased on behalf of any Vista Portfolio. The Adviser
has informed Vista that in making its investment decisions, it does not obtain
or use material inside information in the possession of any other division or
department of such Adviser or in the possession of any affiliate of such
Adviser, including the division of Chase that performs services for Vista as
Custodian. Shareholders of the Vista Portfolios should be aware that, subject to
applicable legal or regulatory restrictions, Chase and its affiliates may
exchange among themselves certain information about the shareholders and their
accounts.
ADMINISTRATOR
Pursuant to an Administration Agreement (the "Administration Agreement"),
Chase serves as administrator of Vista (in such capacity, the "Administrator").
The Administrator provides certain administrative services, including, among
other responsibilities, coordinating relationships with independent contractors
and agents, preparing for signature by officers and filing of certain documents
required for compliance with applicable laws and regulations excluding those of
the securities laws of the various states; preparing financial statements;
arranging for the maintenance of books and records; and providing office
facilities necessary to carry out the duties thereunder. The Administrator is
entitled to receive from each existing Vista Portfolio, and will be entitled to
receive from each Vista Portfolio effective upon the Closing Date, a fee
computed daily and paid monthly at an annual rate equal to .10% of such Vista
Portfolio's average daily net assets. However, the Administrator may, from time
to time, voluntarily waive all or a portion of its fees payable under the
Administration Agreement. The Administrator, pursuant to the terms of the
Administration Agreement, shall not have any responsibility or authority for
each Vista Portfolio's investments, the determination of investment policy, or
for any matter pertaining to the distribution of Vista Portfolio shares.
45
<PAGE> 52
REGULATORY MATTERS. Banking laws and regulations, including the
Glass-Steagall Act as currently interpreted by the Board of Governors of the
Federal Reserve System, prohibit a bank holding company registered under the
Bank Holding Company Act of 1956, as amended, or any affiliate thereof from
sponsoring, organizing, controlling, or distributing the shares of a registered,
open-end investment company continuously engaged in the issuance of its shares,
and prohibit banks generally from issuing, underwriting, selling or distributing
securities, but do not prohibit such a bank holding company or affiliate from
acting as investment adviser, administrator, transfer agent, or custodian to
such an investment company or from purchasing shares of such a company as agent
for and upon the order of a customer. Chemical, Chase, Hanover and Vista believe
that Chase, VDH, or any other affiliate of Chemical or Chase, may perform the
investment advisory, administrative, custody and transfer agency services for
Vista, as the case may be, described in this Prospectus/Proxy Statement, and
that Chase, VDH or any other affiliate of Chemical or Chase, subject to such
banking laws and regulations, may perform the shareholder services contemplated
by this Prospectus/Proxy Statement, without violation of such banking laws or
regulations. However, future changes in legal requirements relating to the
permissible activities of banks and their affiliates, as well as future
interpretations of present requirements, could prevent Chase, VDH or any other
affiliate of Chemical or Chase from continuing to perform investment advisory,
administrative or custody services for Vista, as the case may be, or require
Chase, VDH or any other affiliate of Chemical or Chase to alter or discontinue
the services provided by it to shareholders of Vista Portfolios.
If Chase, VDH or any other affiliate of Chemical or Chase were prohibited
from performing investment advisory, administrative, custody or transfer agency
services for Vista, as the case may be, it is expected that the Vista Board
would recommend to Vista's shareholders that they approve new agreements with
another entity or entities qualified to perform such services and selected by
the Board of Trustees. If Chase, VDH or any other affiliate of Chemical or Chase
were required to discontinue all or part of its shareholder servicing
activities, its customers would be permitted to remain the beneficial owners of
Trust shares and alternative means for continuing the servicing of such
customers would be sought. Vista does not anticipate that investors would suffer
any adverse financial consequences as a result of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state laws.
D. PURCHASES AND REDEMPTIONS OF SHARES
PURCHASES
INSTITUTIONAL SHARES OF THE VISTA U.S. GOVERNMENT SECURITIES FUND, THE
VISTA LARGE CAP EQUITY FUND AND THE VISTA SMALL CAP EQUITY FUND AND SHARES OF
THE VISTA AMERICAN VALUE FUND. The Institutional Shares of the Vista U.S.
Government Securities Fund, the Vista Large Cap Equity Fund and the Vista Small
Cap Equity Fund and the shares of the Vista American Value Fund are continuously
offered for sale without a sales load at the net asset value next determined
through the Vista Distributor after an order is received and accepted by a
Shareholder Servicing Agent if it is transmitted by the Vista Distributor prior
to 4:00 p.m., Eastern time, on any business day during which the New York Stock
Exchange is open for trading ("Fund Business Day"). (See "Other Information
Concerning Shares of Vista -- Net Asset Value.") Shares of these Vista
Portfolios are offered exclusively to customers of a Shareholder Servicing Agent
(i.e., a financial institution, such as a federal or state-chartered bank, trust
company or savings and loan association that has entered into a shareholder
servicing agreement with Vista) or to customers of brokers or certain financial
institutions which have entered into Shareholder Servicing Agreements with the
Vista Distributor. An investor may purchase Shares of the Vista Portfolios by
authorizing his or her Shareholder Servicing Agent, broker or financial
institution to purchase such shares on his behalf through the Vista Distributor,
which the Shareholder Servicing Agent, broker or financial institution must do
promptly.
CLASS A SHARES OF THE VISTA SHORT TERM BOND FUND AND THE VISTA SMALL CAP
EQUITY FUND. Class A Shares are sold to investors subject to an initial sales
charge, and may be purchased through Shareholder Servicing Agents and through
selected financial service firms, such as broker-dealer firms and banks
("Dealers") who have entered into a selected dealer agreement with the Vista
Distributor, at the public
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offering price which is computed once daily as of 4:00 p.m., Eastern time, on
any Fund Business Day. (See "Other Information Concerning Shares of Vista -- Net
Asset Value.") The public offering price of Class A Shares is the next
determined net asset value, plus the applicable initial sales charge. Orders
received by Dealers prior to 4:00 p.m. are confirmed at the offering price
effective at such time, provided the order is received by the Transfer Agent
prior to its close of business.
The Vista Small Cap Equity Fund also offers Class B shares in addition to
the Class A Shares. The principal difference between these share classes is that
the Class A Shares are subject to a front-end sales charge, as described above,
while the Class B shares are offered for sale at net asset value without the
imposition of a sales charge, but are subject to a contingent deferred sales
charge upon certain redemptions. In addition, the ongoing distribution fees
payable by the Class B shares are higher than those payable by the Class A
Shares. Investors may call Vista at 1-800-34-VISTA to obtain additional
information concerning the Class B Shares.
GENERAL. Shareholder Servicing Agents may offer services to their
customers, including specialized procedures for the purchase and redemption of
Shares of the Vista Portfolios, such as pre-authorized or systematic purchase
and redemption programs and "sweep" checking programs. Each Shareholder
Servicing Agent may establish its own terms, conditions and charges, including
limitations on the amounts of transactions, with respect to such services.
Charges for these services may include fixed annual fees, transaction fees,
account maintenance fees and minimum account balance requirements. The effect of
any such fees will be to reduce the yield on the investment of customers of that
Shareholder Servicing Agent. Conversely, certain Shareholder Servicing Agents
may (although they are not required by Vista to do so) credit to the accounts of
their customers from whom they are already receiving other fees an amount not
exceeding the fees for their services as Shareholder Servicing Agents if they
receive such fees (see "Shareholder Servicing Agents, Transfer Agent and
Custodian"), which will have the effect of increasing the yield on the
investment of customers of that Shareholder Servicing Agent. Shareholder
Servicing Agents may also increase or reduce the minimum dollar amount required
to invest in a Vista Portfolio and waive any applicable holding periods.
Orders for shares received and accepted prior to 4:00 p.m., will be
entitled to all dividends declared on such day. All share purchases must be paid
for in U.S. dollars, and checks must be drawn on U.S. banks. In the event a
check used to pay for shares purchased is not honored by the bank on which it is
drawn, the purchase order will be cancelled and the shareholder will be liable
for any losses or expenses incurred by Vista or its agents. Dealers and
Shareholder Servicing Agents are responsible for forwarding orders for the
purchase of shares on a timely basis.
Vista reserves the right to cease offering its shares for sale at any time,
to reject any order for the purchase of shares and to cease offering any
services provided by a Shareholder Servicing Agent. Shares of the Vista
Portfolios will be maintained in book entry form, and no certificates
representing shares owned will be issued to shareholders, except that Vista
Short Term Bond Fund and Vista Small Cap Equity Fund Class A Share certificates
will be issued upon request.
The minimum initial purchase for Institutional Shares of the Vista
Portfolios is $1,000,000, and shareholders must maintain a minimum balance in
Institutional Shares of the Vista Portfolios of $1,000,000 at all times. The
minimum initial purchase for individuals for Class A Shares of the Vista Short
Term Bond Fund and the Vista Small Cap Equity Fund and for Shares of the Vista
American Value Fund is $2,500. These minimums will be waived for Hanover
Portfolio shareholders that receive Vista Portfolio shares in connection with
the Reorganization. In contrast, the Hanover Portfolios do not have a minimum
purchase amount.
SYSTEMATIC INVESTMENT PLAN. A shareholder may establish a monthly
investment plan by which investments are automatically made to his/her Vista
account through Automatic Clearing House (ACH) deductions from a checking
account. The minimum monthly investment through this plan is $100. Shareholders
may choose either to have these investments made during the first or third week
each month. Please note that your initial ACH transactions may take up to 10
days from the receipt of your request to be established.
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Shareholders electing to start this Systematic Investment Plan when opening
an account should complete Section 8 of the account application. Current
shareholders may begin a Systematic Investment Plan at any time by sending a
signed letter with signature guarantee to the Vista Service Center, P.O. Box
419392, Kansas City, MO 64141-6392. This letter should contain your Vista
account number, the desired amount and cycle of the systematic investment, and
must include a voided check from the checking account for which debits are to be
made. A signature guarantee may be obtained from a bank, trust company,
broker-dealer or other member of the national securities exchange. Please note
that a notary public cannot provide signature guarantees.
INITIAL SALES CHARGES -- CLASS A SHARES
VISTA SHORT TERM BOND FUND. The public offering price of Class A Shares of
the Vista Short Term Bond Fund is the next determined net asset value, plus any
applicable initial sales charge, which will vary with the size of the purchase
as shown in the following table:
<TABLE>
<CAPTION>
CONCESSION
SALES CHARGE TO DEALERS
--------------------- ----------
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
------------------------------------------------------- -------- -------- ----------
<S> <C> <C> <C>
Less than $100,000..................................... 1.50 1.52 1.00
$100,000 to $249,999................................... 1.00 1.00 0.50
$250,000 to $499,999................................... 0.50 0.50 0.25
$500,000 to $999,999................................... 0.25 .25 0.25
$1,000,000 and over.................................... -- -- --
</TABLE>
VISTA SMALL CAP EQUITY FUND. The public offering price of Class A Shares
of the Vista Small Cap Equity Fund is the next determined net asset value, plus
any applicable initial sales charge, which will vary with the size of the
purchase as shown in the following table:
<TABLE>
<CAPTION>
CONCESSION
SALES CHARGE TO DEALERS
--------------------- ----------
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
------------------------------------------------------- -------- -------- ----------
<S> <C> <C> <C>
Less than $100,000..................................... 4.75 4.98 4.00
$100,000 to $249,999................................... 3.75 3.90 3.25
$250,000 to $499,999................................... 2.50 2.56 2.25
$500,000 to $999,999................................... 2.00 2.04 1.75
$1,000,000 to $2,499,999............................... -- -- 1.00
$2,500,000 to $9,999,999............................... -- -- 0.75
$10,000,000 to $49,999,999............................. -- -- 0.50
$50,000,000 and over................................... -- -- 0.20
</TABLE>
The initial sales charge on Class A Shares of the Vista Short Term Bond
Fund and the Vista Small Cap Equity Fund varies with the size of the purchase as
shown in the tables above. The reduced charges apply to the aggregate of
purchases of Class A Shares made at one time by "any person", which term
includes, among others, an individual, spouse and children under the age of 21,
or a Trustee or other fiduciary of a Trust estate or fiduciary account. The
Vista Distributor may compensate Dealers for sales of $1,000,000 or more from
its own resources and/or the Rule 12b-1 distribution plan applicable to Class A
Shares.
Upon notice to Dealers with whom it has sales agreements, Vista Distributor
may reallow up to the full applicable initial sales charge on Class A shares of
the Vista Short Term Bond Fund and the Vista Small Cap Equity Fund and such
Dealer may therefore be deemed an "underwriter" under the Securities Act of
1933, as amended, during such periods. For a three-year period concluding July
19, 1996 for activities in maintaining and servicing accounts of customers
invested in the Vista Small Cap Equity Fund, Associated Securities Corp.
("Associated Securities") may receive payments from Chase based, in part, on the
amount of the aggregate
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asset values of the Vista Small Cap Equity Fund (and other Vista funds) in the
accounts of shareholders attributable to Associated Securities and the length of
time such assets are in such accounts.
In addition, under an arrangement between Associated Securities and the
Vista Distributor, Associated Securities will be entitled to receive either 50%
or 70% of the difference between the total front-end sales load and that portion
paid to selling group member broker-dealers.
The Vista Distributor may, from time to time, provide promotional
incentives to certain Dealers whose representatives have sold or are expected to
sell significant amounts of the Vista Short Term Bond Fund and the Vista Small
Cap Equity Fund or other portfolios of Vista. At various times the Vista
Distributor may implement programs under which a Dealer's sales force may be
eligible to win cash awards for certain sales efforts or under which the Vista
Distributor will reallow an amount not exceeding the total applicable initial
sales charges on the sales of Class A Shares generated by the Dealer during such
programs to any Dealer that sponsors sales contests or recognition programs
conforming to criteria established by the Vista Distributor or participates in
sales programs sponsored by the Vista Distributor. The Vista Distributor may
provide marketing services to Dealers with whom it has sales agreements,
consisting of written informational material relating to sales incentive
campaigns conducted by such Dealers for their representatives.
PURCHASES OF CLASS A SHARES OF THE VISTA SHORT TERM BOND FUND
AND THE VISTA SMALL CAP EQUITY FUND AT NET ASSET VALUE
SHAREHOLDERS AS OF NOVEMBER 30, 1990
Shareholders of record of any portfolio of Vista as of November 30, 1990,
may purchase Class A Shares of the Vista Short Term Bond Fund and the Vista
Small Cap Equity Fund at Net Asset Value without an initial sales charge for as
long as they continue to own Class A Shares of any portfolio of Vista, provided
there is no change in account registration. However, once a shareholder closes
his or her account by redeeming all shares, he or she will lose this privilege
after 30 days. This provision applies to accounts registered in the name of the
shareholder and his or her spouse and children under 21 and for IRAs in their
names.
SHAREHOLDERS OF CERTAIN HANOVER PORTFOLIOS
Holders of Investor Shares of The Hanover Short Term U.S. Government Fund
and The Hanover Small Capitalization Growth Fund at the time of the consummation
of the Reorganization may thereafter purchase Class A Shares of the Vista Short
Term Bond Fund and the Vista Small Cap Equity Fund, respectively, at Net Asset
Value without an initial sales charge for as long as they continue to own Class
A shares of the Vista Short Term Bond Fund or the Vista Small Cap Equity Fund,
respectively, provided there is no change in account registration. However, once
a shareholder closes his or her account by redeeming all shares, he or she will
lose this privilege after 30 days. This provision applies to accounts registered
in the name of the shareholder and his or her spouse and children under 21 and
for IRAs in their names.
SHAREHOLDERS WHO ARE ELIGIBLE PERSONS
There is no initial sales charge on Class A Shares purchased by the
following "Eligible Persons": (a) Active or retired Trustees, Directors,
officers, partners or employees (including their spouses, children, siblings and
parents) of the Adviser, Vista Distributor, Vista's Transfer Agent or any
affiliates or subsidiaries thereof; (b) employees (including their spouses and
children under 21) of Dealers having a selected dealer agreement with the Vista
Distributor; or (c) any qualified retirement plan or IRA established for the
benefit of a person in (a) or (b).
QUALIFIED AND OTHER RETIREMENT PLANS
No initial sales charge will apply to the purchase of Class A Shares by: An
investor seeking to invest the proceeds of a qualified retirement plan, where a
portion of the plan was invested in Vista; any qualified retirement plan with 50
or more participants; or an individual participant in a tax-qualified plan
making a tax-
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free rollover or transfer of assets from the plan in which the Adviser serves as
Trustee or custodian of the plan or manages some portion of the plan's assets.
PURCHASES THROUGH INVESTMENT ADVISERS, BROKERS OR FINANCIAL PLANNERS
Purchases of Class A Shares may be made with no initial sales charge
applied through an investment adviser, broker, or financial planner who charges
a fee for their services. Purchases of Class A Shares may be made with no
initial sales charge by an investment adviser, broker or financial planner,
provided such purchases are preapproved and are placed through an omnibus
account with Vista.
PURCHASES THROUGH A BANK AS FIDUCIARY
Purchases of Class A Shares may be made with no initial sales charge in
accounts opened by a bank, trust company or thrift institution which is acting
as a fiduciary (i.e., exercises investment authority with respect to such
accounts), provided that appropriate notification of such fiduciary relationship
is reported at the time of the investment to Vista, the Vista Distributor or the
Transfer Agent.
Vista reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
REDUCED INITIAL SALES CHARGES ON CLASS A SHARES
OF THE VISTA SHORT TERM BOND FUND AND THE VISTA SMALL CAP EQUITY FUND
CUMULATIVE QUANTITY DISCOUNT. Class A Shares may be purchased by any
person at a reduced initial sales charge which is determined by (a) aggregating
the dollar amount of the new purchase and the greater of the purchaser's total
(i) net asset value or (ii) cost of any shares acquired and still held in the
Vista Short Term Bond Fund or the Vista Small Cap Equity Fund, respectively, or
any other Vista portfolio, including any Vista-affiliated money market portfolio
acquired by exchange for which a sales charge had been incurred and (b) applying
the initial sales charge applicable to such aggregate dollar value. The
privilege of the cumulative quantity discount is subject to modification or
discontinuance at any time with respect to all Class A Shares purchased
thereafter.
GROUP PURCHASES. An individual who is a member of a qualified group (as
hereinafter defined) may also purchase Class A Shares at the reduced sales
charge applicable to the group taken as a whole. The reduced initial sales
charge is based upon the aggregate dollar value of Class A Shares of the related
portfolio previously purchased and still owned by the group plus the securities
currently being purchased and is determined as stated above under "Cumulative
Quantity Discount". For example, if members of the group had previously invested
and still held $90,000 of Class A Shares of the Vista Small Cap Equity Fund and
now were investing $15,000, the initial sales charge would be 3.75%. In order to
obtain such discount, the purchaser or investment dealer must provide the
Transfer Agent with sufficient information, including the purchaser's total
cost, at the time of purchase to permit verification that the purchaser
qualifies for a cumulative quantity discount, and confirmation of the order is
subject to such verification. Information concerning the current initial sales
charge applicable to a group may be obtained by contacting the Transfer Agent.
A "qualified group" is one which (i) has been in existence for more than
six months, (ii) has a purpose other than acquiring Class A Shares at a discount
and (iii) satisfies uniform criteria which enables the Vista Distributor to
realize economies of scale in its costs of distributing Class A Shares. A
qualified group must have more than 10 members, must be available to arrange for
group meetings between representatives of Vista and the members, must agree to
include sales and other materials related to Vista in its publications and
mailings to members at reduced or no cost to the Vista Distributor, and must
seek to arrange for payroll deduction or other bulk transmission of investments
of Vista. This privilege is subject to modification or discontinuance at any
time with respect to all Class A Shares purchased thereafter.
STATEMENT OF INTENTION. Investors in Class A Shares of the Vista Short
Term Bond Fund and the Vista Small Cap Equity Fund may also qualify for reduced
sales charges by signing a Statement of Intention (the "Statement"). This
enables the investor to aggregate purchases of Class A Shares in the related
portfolio with
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purchases of Class A Shares of any other portfolio of Vista (or if a portfolio
has only one class, shares of such portfolio), including shares of any
Vista-affiliated money market portfolio, acquired by exchange, during a 13-month
period. The sales charge is based on the total amount to be invested in Class A
Shares during the 13-month period. All Class A Shares or other qualifying shares
of these portfolios currently owned by the investor will be credited as
purchases (at their current offering prices on the date the Statement is signed)
toward completion of the Statement. A 90-day back-dating period can be used to
include earlier purchases at the investor's cost. The 13-month period would then
begin on the date of the first purchase during the 90-day period. No retroactive
adjustment will be made if purchases exceed the amount indicated in the
Statement. A shareholder must notify the Transfer Agent or the Vista Distributor
whenever a purchase is being made pursuant to a Statement.
The Statement is not a binding obligation on the investor to purchase the
full amount indicated; however, on the initial purchase, if required (or
subsequent purchases if necessary), 5% of the dollar amount specified in the
Statement will be held in escrow by the Transfer Agent in Class A Shares
registered in the shareholder's name in order to assure payment of the proper
sales charge. If total purchases pursuant to the Statement (less any
dispositions and exclusive of any distributions on such shares automatically
reinvested) are less than the amount specified, the investor will be requested
to remit to the Transfer Agent an amount equal to the difference between the
sales charge paid and the sales charge applicable to the aggregate purchases
actually made. If not remitted within 20 days after written request, an
appropriate number of escrowed shares will be redeemed in order to realize the
difference. This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereunder.
REINSTATEMENT PRIVILEGE. Class A shareholders of the Vista Short Term Bond
Fund and the Vista Small Cap Equity Fund have a one time privilege of
reinstating their investment in the applicable portfolio, subject to the terms
of exchange (see "Exchange Privilege") at net asset value next determined. A
written request for reinstatement must be received by the Transfer Agent within
90 calendar days of the redemption, accompanied by payment for the shares (not
in excess of the redemption). This privilege is subject to modification or
discontinuance at any time with respect to all shares purchased thereafter.
REDEMPTIONS
A shareholder may redeem all or any portion of the Shares in his account on
any Fund Business Day at the net asset value next determined after a redemption
request in proper form is furnished by the shareholder to his Shareholder
Servicing Agent (in the case of Class A Shares of the Vista Short Term Bond
Fund, the request may also be made to the shareholder's Dealer, and in the case
of Class A Shares of the Vista Small Cap Equity Fund, such request must be made
to the shareholder's Dealer) and transmitted by it to and received by Vista's
Transfer Agent. Therefore, redemptions will be effected on the same day the
redemption order is received only if such order is received prior to 4:00 p.m.,
Eastern time, on any Fund Business Day. The proceeds of a redemption normally
will be paid on the next Fund Business Day after the redemption is effected, but
in any event within seven days. The forwarding of proceeds from redemption of
shares which were recently purchased by check may be delayed up to 15 days. A
shareholder who is a customer of a Shareholder Servicing Agent, or, in the case
of Class A Shares of the Vista Short Term U.S. Government Fund and the Vista
Small Cap Equity Fund, a Dealer, may redeem his Fund shares by authorizing his
Shareholder Servicing Agent, his Dealer (if applicable), their respective
agents, or, except in the case of Class A Shares of the Vista Short Term Bond
Fund and the Vista Small Cap Equity Fund, the Transfer Agent, to redeem such
shares. The signature of both shareholders is required for any written
redemption requests (other than those by check) from a joint account. In
addition, a redemption request may be deferred for up to 15 calendar days if the
Transfer Agent has been notified of a change in either the address or the bank
account registration previously listed in Vista's records.
The value of Shares of a Vista Portfolio redeemed may be more or less than
the shareholder's cost, depending on portfolio performance during the period the
shareholder owned his shares. Redemptions of shares are taxable events on which
the shareholder may recognize a gain or loss. Although Vista generally retains
the right to pay the redemption price of shares in kind with securities (instead
of cash), Vista has filed
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an election under Rule 18f-1 committing to pay in cash all redemptions by a
shareholder of record up to the amounts specified in the rule (approximately
$250,000).
The payment of redemption requests may be wired directly to a previously
designated domestic commercial bank account or mailed to the shareholder's
address of record. However, all telephone redemption requests in excess of
$25,000 will be wired directly to such previously designated bank account, for
the protection of shareholders. Normally, redemption payments will be
transmitted on the next business day following receipt of the request (provided
it is made prior to 4:00 p.m., Eastern time on any day redemptions may be made).
Redemption payments requested by telephone may not be available in a previously
deposited bank account for up to four days. For telephone redemptions, call the
Vista Service Center at 1-800-34-VISTA.
The right of any shareholder to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
If a redeeming shareholder of the Vista Small Cap Equity Fund owns both
Class A or Class B Shares of such portfolio (the Class B Shares are subject to a
contingent deferred sales charge upon certain redemptions), unless the
shareholder specifically requests otherwise, the Class A Shares will be redeemed
before any Class B Shares.
AUTOMATIC REDEMPTION PLAN. A shareholder owning $10,000 or more of the
Shares of a Vista Portfolio as determined by the then current net asset value
may provide for the payment monthly or quarterly of any requested dollar amount
(subject to limits) from his account to his order. A sufficient number of full
and fractional shares will be redeemed so that the designated payment is
received on approximately the 1st day of the month following the end of the
selected payment period.
REDEMPTION OF ACCOUNTS OF LESS THAN $500. Vista may redeem the shares of
any shareholder, if at such time, the aggregate net asset value of the shares in
such shareholder's account is less than $500. In the event of any such
redemption, a shareholder will receive at least 60 days' notice prior to the
redemption.
EXCHANGE PRIVILEGES
Subject to certain conditions, Institutional Shares of the Vista U.S.
Government Securities Fund, the Vista Large Cap Equity Fund and the Vista Small
Cap Equity Fund, are exchangeable for shares of the same class of other Vista
portfolios at the then current net asset value.
Shareholders of Class A Shares of the Vista Short Term Bond Fund and the
Vista Small Cap Equity Fund may exchange, at respective net asset value, Class A
Shares for Class A shares of the other Vista portfolios which have a similar
class of shares, in accordance with the terms of the then current prospectus of
the portfolio being acquired. No initial sales charge is imposed on the Class A
shares being acquired through an exchange, except that to the extent that a
shareholder paid a lower initial sales charge for the shares being tendered for
exchange than the sales charge that was applicable, at the time the exchanged
shares were purchased, to the shares being acquired in the exchange, then the
shareholder will be charged the difference as a sales charge upon such exchange.
Class A Shares may only be exchanged into the same class of another Vista
portfolio and only if the account registrations are identical.
With respect to exchanges from any Vista-affiliated money market portfolio,
shareholders must have acquired their shares in such money market portfolio by
exchange from one of the other portfolios in Vista, or any exchange directly
from one of such money market portfolios will be done at relative net asset
value plus the appropriate sales charge.
The Prospectus relating to the portfolio shares being acquired in an
exchange should be reviewed before effecting any exchange and retained for
future reference. You should note that any such exchange, which may only be made
in states where shares of the other portfolios are qualified for sale, may
create a gain or loss to be recognized for federal income tax purposes.
Arrangements have been made for the acceptance of instructions
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by telephone to exchange shares if certain preauthorizations or indemnifications
are accepted and on file. The exchange privilege may be modified or discontinued
at any time without notice.
MARKET TIMING. The exchange privilege is not intended as a vehicle for
short-term trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. In order to limit
excessive exchange activity and other circumstances where the Trustees or
relevant investment adviser believes doing so would be in the best interest of a
Vista Portfolio, Vista reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges or reject any exchange. In
addition, any shareholder who makes more than ten exchanges of shares involving
a Vista Portfolio in a year or three in a calendar quarter will be charged a
$5.00 administration fee for each such exchange.
GENERAL
The Vista Portfolios have established certain procedures and restrictions,
subject to change from time to time, for purchase, redemption, and exchange
orders, including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. Vista's Transfer Agent may defer acting
on a shareholder's instructions until it has received them in proper form. In
addition, the privileges described in this Prospectus/Proxy Statement are not
available until a completed and signed account application has been received by
the Transfer Agent. Telephone transaction privileges are made available to
shareholders automatically upon opening an account unless the privilege is
declined in section 6 of the Account Application. To provide evidence of
telephone instructions, the Transfer Agent will record telephone conversations
with shareholders. Vista will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. In the event Vista does not
employ such reasonable procedures, it may be liable for losses due to
unauthorized or fraudulent instructions.
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, Vista or its agent is authorized, without
notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest account
application or other written request for services, including purchasing,
exchanging, or redeeming shares of Vista and depositing and withdrawing monies
from the bank account specified in the Bank Account Registration section of the
shareholder's latest account application or as otherwise properly specified to
Vista in writing. Shareholders agree to release and hold harmless Vista, the
Adviser, the Administrator, any Shareholder Servicing Agent or sub-agent and
broker-dealer, and the officers, directors, employees and agents thereof against
any claim, liability, loss, damage and expense for any act or failure to act in
connection with Vista shares, any related investment account, any privileges or
services selected in connection with such investment account, or any written or
oral instructions or requests with respect thereto, or any written or oral
instructions or requests from someone claiming to be a shareholder if Vista or
any of the above-described parties follow instructions which they reasonably
believe to be genuine and act in good faith by complying with the procedures
that have been established for fund accounts and services.
Shareholders purchasing their shares through a Shareholder Servicing Agent
may not assign, transfer or pledge any rights or interest in any Vista Portfolio
Shares or any investment account established with a Shareholder Servicing Agent
to any other person without the prior written consent of such Shareholder
Servicing Agent, and any attempted assignment, transfer or pledge without such
consent may be disregarded.
Vista may require signature guarantees for changes that shareholders
request be made in Vista records with respect to their accounts, including but
not limited to, changes in the bank account specified in the Bank Account
Registration, or for any written requests for additional account services made
after a shareholder has submitted an initial account application to Vista. Vista
may also refuse to accept or carry out any transaction that does not satisfy any
restrictions then in effect.
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E. TAX MATTERS
The following discussion is addressed primarily to noncorporate investors
and is for general information only. A prospective investor including a
corporate investor should also review the more detailed discussion of federal
income tax considerations relevant to each Vista Portfolio that is contained in
the Vista Equity/Bond SAI and the Vista Small Cap SAI. In addition, each
prospective investor should consult with his own tax advisers as to the tax
consequences of an investment in the Vista Portfolios, including the status of
distributions from a Vista Portfolio in his or her own state and locality.
Vista intends to qualify each Vista Portfolio each year and elect that each
Vista Portfolio be treated as a separate "regulated investment company" under
Subchapter M of the Code. If a Vista Portfolio qualifies as a "regulated
investment company" and all of its taxable income, if any, is distributed to its
shareholders in accordance with the timing requirements imposed by the Code, it
will not be subject to federal income tax on the amounts so distributed. If for
any taxable year a Vista Portfolio does not qualify for the treatment as a
regulated investment company, all of its taxable income will be subject to tax
at regular corporate rates without any deduction for distributions to its
shareholders, and such distributions will be taxable to shareholders to the
extent of each Vista Portfolio's current and accumulated earnings and profits.
Vista is organized as a Massachusetts business trust and, under current
law, Vista is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as each Vista Portfolio (and each other series of Vista)
qualifies as a regulated investment company under the Code.
Distributions by a Vista Portfolio of its taxable ordinary income (net of
expenses) and the excess, if any, of its net short-term capital gain over its
net long-term capital loss are generally taxable to shareholders as ordinary
income. Such distributions are treated as dividends for federal income tax
purposes. A portion of the ordinary income dividends paid by each Vista
Portfolio with respect to a year (which cannot exceed the aggregate amount of
its share of qualifying dividends received by such Vista Portfolio from domestic
corporations during the year) may qualify for the 70% dividends-received
deduction for corporate shareholders, but any such dividends-received deduction
will not be allowed in computing a corporate shareholder's adjusted current
earnings, upon which is based a corporate preference item which may be subject
to an alternative minimum tax or to the environmental superfund tax.
Distributions by each Vista Portfolio of the excess, if any, of its net
long-term capital gain over its net short-term capital loss are designated as
capital gain dividends and are taxable to shareholders as long-term capital
gains, regardless of the length of time a shareholder has held his shares.
Ordinary income dividends and capital gain dividends from each Vista Portfolio
may also be subject to state and local taxes.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend or
capital gain dividend. Those investors purchasing shares just prior to an
ordinary income dividend or capital gain dividend will be taxed on the entire
amount of the dividend received, even though the net asset value per share on
the date of such purchase reflected the amount of such dividend.
Distributions to shareholders will be treated in the same manner for
federal income tax purposes whether received in cash or reinvested in additional
shares of a Vista Portfolio. In general, distributions by a Vista Portfolio are
taken into account by shareholders in the year in which they are made. However,
certain distributions made during January will be treated as having been paid by
a Vista Portfolio and received by the shareholders on December 31 of the
preceding year. A statement setting forth the federal income tax status of all
distributions made (or deemed made) during the calendar year, including any
portions which constitute ordinary income dividends, capital gains dividends and
exempt interest dividends will be sent to each shareholder of a Vista Portfolio
promptly after the end of each calendar year.
Any loss realized upon a taxable disposition of shares within six months
from the date of their purchase will be treated as a long-term capital loss to
the extent of any capital gain dividends received on such shares. All or a
portion of any loss realized upon a taxable disposition of shares of a Vista
Portfolio may be disallowed if other shares of such portfolio are purchased
within 30 days before or after such disposition.
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Under the backup withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and redemption
payments made by a Vista Portfolio. Generally, shareholders are subject to
backup withholding if they have not provided a Vista Portfolio with a correct
taxpayer identification number and certain required certifications.
F. OTHER INFORMATION CONCERNING SHARES OF VISTA
NET ASSET VALUE
The net asset value of each class of each Vista Portfolio is determined as
of the close of regular trading on the New York Stock Exchange (normally 4:00
p.m. Eastern time, however, options are priced at 4:15 p.m.), on each Fund
Business Day, by dividing the net assets of the portfolio attributable to such
class by the total number of the portfolio's outstanding shares of such class.
Values of assets held by a Vista Portfolio (i.e., the value of its investment in
such portfolio and in other assets) are determined on the basis of their market
or other fair value, as described in the Vista Equity/Bond SAI and the Vista
Small Cap SAI. A share's net asset value is effective for orders received by a
Shareholder Servicing Agent (or Dealer, if applicable) prior to its calculation
and received by the Vista Distributor prior to the close of business, usually
4:00 p.m. Eastern time, on the Fund Business Day on which such net asset value
is determined.
The net asset values per share of each class of a Vista Portfolio may
differ slightly due to differing class-specific expenses, and are calculated
separately.
NET INCOME, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Substantially all of the available net investment income of the Vista Short
Term Bond Fund and the Vista U.S. Government Securities Fund is declared daily
and paid monthly as a dividend to the respective shareholders. Substantially all
of the available net investment income of the Vista Large Cap Equity Fund is
paid to shareholders quarterly (in the months of March, June, September and
December) and substantially all of the available net investment income of the
Vista Small Cap Equity Fund and the Vista American Value Fund is paid annually
to the respective shareholders. Each Vista Portfolio will distribute its net
realized short-term and long-term capital gains, if any, to its shareholders at
least annually. Each Vista Portfolio's net investment income consists of the
interest income earned on its portfolio, less expenses. Dividends paid on each
class of a Vista Portfolio's shares are calculated at the same time.
Each Vista Portfolio intends to make additional distributions to the extent
necessary to avoid application of the 4% nondeductible excise tax on certain
undistributed income and net capital gains of mutual funds imposed by Section
4982 of the Code.
Subject to the policies of the shareholder's Shareholder Servicing Agent, a
shareholder may elect to receive dividends and capital gains distributions from
a Vista Portfolio in either cash or additional shares of the same class (if
applicable).
DISTRIBUTION PLANS AND DISTRIBUTION AND
SUB-ADMINISTRATION AGREEMENT
The Trustees have adopted the Vista Distribution Plans applicable to the
Shares of the Vista American Value Fund and the Class A Shares of the Vista
Short Term Bond Fund and the Vista Small Cap Equity Fund in accordance with Rule
12b-1 under the 1940 Act, and, effective upon the Closing Date, a Vista
Distribution Plan will be in effect for such Shares of the Vista Portfolios. The
Vista Trustees have concluded that there is a reasonable likelihood that the
Vista Distribution Plans will benefit Vista and its shareholders. Effective upon
consummation of the Reorganization, the Institutional Shares of the Vista U.S.
Government Securities Fund, the Vista Large Cap Equity Fund and the Vista Small
Cap Equity Fund will not be subject to a Rule 12b-1 plan and will therefore not
be subject to any related distribution fees.
The Vista Distribution Plans applicable to Class A Shares of the Vista
Short Term Bond Fund, Class A Shares of the Vista Small Cap Equity Fund and
shares of the Vista American Value Fund, as in effect upon consummation of the
Reorganization, will provide that the applicable shares of each such Vista
Portfolio may
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pay distribution fees (the "Distribution Fee"), including payments to the Vista
Distributor, at an annual rate not to exceed .25% of such shares' average daily
net assets for distribution services. The Vista Distributor may use all or a
portion of such Distribution Fee to pay for the expenses of printing
prospectuses and reports used for sales purposes, expenses related to the
preparation and printing of sales literature and other such distribution-related
expenses. The Distribution Fee is not directly tied to the Vista Distributor's
expenses, therefore the amount of the Distribution Fee paid by the Class A
Shares of the Vista Short Term Bond Fund, the Class A Shares of the Vista Small
Cap Equity Fund and the shares of the Vista American Value Fund during any year
may be more or less than actual expenses incurred pursuant to the applicable
Vista Distribution Plan. For this reason, this type of distribution fee
arrangement is characterized by the staff of the Commission as being of the
"compensation variety" (in contrast to "reimbursement" arrangements, by which a
distributor's compensation is directly linked to its expenses). The Vista Short
Term Bond Fund (with respect to its Class A Shares), the Vista Small Cap Equity
Fund (with respect to its Class A Shares) and the Vista American Value Fund are
not liable for any distribution expenses incurred in excess of the Distribution
Fee paid. Each class of shares of the Vista Short Term Bond Fund and the Vista
Small Cap Equity Fund is entitled to exclusive voting rights with respect to
matters concerning its respective Vista Distribution Plan (if any).
The Distribution and Sub-Administration Agreement (the "Distribution
Agreement") provides that the Vista Distributor acts as the principal
underwriter of shares of each existing Vista Portfolio and will act in such
capacity for each Vista Portfolio effective upon the Closing Date. Under the
Distribution Agreement, the Vista Distributor bears the expenses of printing,
distributing and filing prospectuses and statements of additional information
and reports used for sales purposes, and of preparing and printing sales
literature and advertisements not paid for by the Distribution Plans. In
addition, the Vista Distributor provides certain sub-administration services,
including providing officers, clerical staff and office space. The Vista
Distributor receives a fee for sub-administration from each Vista Portfolio at
an annual rate equal to 0.05% of such portfolio's average daily net assets, on
an annualized basis for Vista's then-current fiscal year. Other funds which have
investment objectives similar to those of each Vista Portfolio, but which do not
pay some or all of such fees from their assets, may offer a higher return,
although investors would, in some cases, be required to pay a sales charge or a
redemption fee.
The Vista Distributor has agreed to use a portion of its distribution and
sub-administration fee to pay for certain expenses of Vista incurred in
connection with organizing new series of Vista and certain other ongoing
expenses of Vista. The Vista Distributor may, from time to time, waive all or a
portion of the fees payable to it under the Distribution Agreement.
EXPENSES
Each of the Vista Portfolios intends to pay all of its pro rata share of
Vista's expenses, including the compensation of the Trustees; all fees under the
Distribution Plans for that Vista Portfolio (see "Purchases and Redemptions of
Shares -- Distribution Plan and Agreement"); governmental fees; interest
charges; taxes; membership dues in the Investment Company Institute; fees and
expenses of independent accountants, of legal counsel and of any transfer agent
and dividend disbursing agent; expenses of distributing and redeeming shares and
servicing shareholder accounts; expenses of preparing, printing and mailing
prospectuses, reports, notices, proxy statements and reports to shareholders and
to governmental officers and commissions; expenses connected with the execution,
recording and settlement of portfolio security transactions; insurance premiums;
fees and expenses of the Custodian, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of calculating
the net asset value of such portfolio; expenses of shareholder meetings; and the
advisory fee payable to the relevant investment adviser under the related
Investment Advisory Agreement, the administrative fee payable to the
Administrator under the Administration Agreement and the sub-administration fee
payable to the Vista Distributor under the Distribution Agreement. Expenses
relating to the issuance, registration and qualification of shares of a Vista
Portfolio and the preparation, printing and mailing of prospectuses for such
purposes are borne by such portfolio except that the Distribution Agreement
requires the Vista Distributor to pay for prospectuses which are to be used for
sales to prospective investors.
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With respect to the Vista Portfolios that offer multiple classes of shares,
each class thereof will pay those expenses allocable to the class, including:
distribution fees, shareholder servicing fees and expenses; expenses of
preparing, printing and mailing prospectuses, reports, notices, and proxy
statements to shareholders and government offices or agencies; expenses of
shareholder meetings; expenses relating to the registration and qualification of
shares of the particular class and the preparation, printing and mailing of
prospectuses for such purposes (except that the Distribution Agreement requires
the Vista Distributor to pay for prospectuses which are to be used for sales to
prospective investors).
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Vista is an open-end management investment company organized as a
Massachusetts business trust under the laws of the Commonwealth of Massachusetts
in 1994.
Vista has reserved the right to create and issue additional series and
classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or class.
The shares of each series or class participate equally in the earnings,
dividends and assets of the particular series or class. Expenses of Vista which
are not attributable to a specific series or class are allocated among all the
series in a manner believed by management of Vista to be fair and equitable.
Shares have no preemptive or conversion rights. Shares when issued are fully
paid and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be entitled
to a proportionate fractional vote, except that trust shares held in the
treasury of Vista shall not be voted. Shares of each series or class generally
vote separately, for example to approve an investment advisory agreement or
distribution plan, but shares of all series and classes vote together, to the
extent required under the 1940 Act, in the election or selection of Trustees and
independent accountants.
The categories of investors that are eligible to purchase shares may be
different for each class of a Vista Portfolio's shares. In addition, classes of
Vista Portfolio shares may be subject to differences in sales charge
arrangements, ongoing distribution and service fee levels, and levels of certain
other expenses, which may affect the relative performance of the different
classes of a Vista Portfolio's shares. Investors may call Vista at
1-800-34-VISTA to obtain additional information about the classes of shares of
the Vista Portfolios that are offered. Any person entitled receive compensation
for selling or servicing shares of a Vista Portfolio may receive different
levels of compensation with respect to one class of shares of such Vista
Portfolio over another.
Vista is not required to hold annual meetings of shareholders but will hold
special meetings of shareholders of a series or class or of all series and
classes when in the judgment of the Trustees it is necessary or desirable to
submit matters for a shareholder vote. A Trustee of Vista may in accordance with
certain rules of the Commission be removed from office when the holders of
record of not less than two-thirds of the outstanding shares either present a
written declaration to Vista's Custodian or vote in person or by proxy at a
meeting called for this purpose. In addition, the Trustees will promptly call a
meeting of shareholders to remove a Trustee(s) when requested to do so in
writing by record holders of not less than 10% of the outstanding shares of
Vista. Finally, the Trustees shall, in certain circumstances, give such
shareholders access to a list of the names and addresses of all other
shareholders or inform them of the number of shareholders and the cost of
mailing their request. Vista's Declaration of Trust provides that, at any
meeting of shareholders, a Shareholder Servicing Agent may vote any shares as to
which such Shareholder Servicing Agent is the agent of record and which are
otherwise not represented in person or by proxy at the meeting, proportionately
in accordance with the votes cast by holders of all shares of the same series
otherwise represented at the meeting in person or by proxy as to which such
Shareholder Servicing Agent is the agent of record. Any shares so voted by a
Shareholder Servicing Agent will be deemed represented at the meeting for
purposes of quorum requirements. Shareholders of each series or class would be
entitled to share pro rata in the net assets of that series or class available
for distribution to shareholders upon liquidation of that series or class.
Vista is an entity of the type commonly known as a "Massachusetts business
trust". Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of
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shareholder liability is limited to circumstances in which both inadequate
insurance exists and Vista itself is unable to meet its obligations.
G. SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
SHAREHOLDER SERVICING AGENTS
The shareholder servicing agreement with each Shareholder Servicing Agent
for Vista provides that such Shareholder Servicing Agent will, as agent for its
customers, perform various services, including but not limited to the following:
answer customer inquiries regarding account status and history, the manner in
which purchases and redemptions of shares may be effected for each Vista
Portfolio or class of shares as to which the Shareholder Servicing Agent is so
acting and certain other matters pertaining to a Vista Portfolio or class of
shares; assist shareholders in designating and changing dividend options,
account designations and addresses; provide necessary personnel and facilities
to establish and maintain shareholder accounts and records; assist in processing
purchase and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase or redeem
shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
furnish (either separately or on an integrated basis with other reports sent to
a shareholder by a Shareholder Servicing Agent) monthly and year-end statements
and confirmations of purchases and redemptions; transmit, on behalf of each
Vista Portfolio or class of shares, proxy statements, annual reports, updated
prospectuses and other communications to shareholders; receive, tabulate and
transmit to the Vista Portfolios proxies executed by shareholders with respect
to meetings of shareholders of each Vista Portfolio or class of shares; vote the
outstanding shares of each Vista Portfolio or class of shares whose shareholders
do not transmit executed proxies or attend shareholder meetings in the same
proportion as the votes cast by other shareholders of such Vista Portfolio or
class represented at the shareholder meeting as to which such Shareholder
Servicing Agent is the agent of record and provide such other related services
as the Vista Portfolios or a shareholder may request. For performing these
services, each Shareholder Servicing Agent will be entitled to receive,
effective upon the Closing Date, an annual fee of up to .25% of the average
daily net assets represented by shares owned during the period for which payment
is being made by investors for whom such Shareholder Servicing Agent maintains a
servicing relationship. Each Shareholder Servicing Agent may, from time to time,
voluntarily waive a portion of the fees payable to it. In addition, Chase may
provide other related services to Vista for which it may receive compensation.
There are no shareholder servicing agreements in effect with respect to the
Class A Shares of the Vista Small Cap Equity Fund, and such shares therefore
bear no shareholder servicing fees.
The Shareholder Servicing Agent, and its affiliates, agents and
representatives acting as Shareholder Servicing Agents, may establish custodial
investment accounts ("Accounts"), known as Chase Investment Accounts or by any
other name designated by a Shareholder Servicing Agent. Through such Accounts,
customers can purchase, exchange and redeem Vista Portfolio shares, receive
dividends and distributions on Vista Portfolio investments, and take advantage
of any services related to an Account offered by such Shareholder Servicing
Agent from time to time. All Accounts and any related privileges or services
shall be governed by the laws of the State of New York, without regard to its
conflicts of laws provisions.
The Glass-Steagall Act and other applicable laws generally prohibit
federally chartered or supervised banks from publicly underwriting or
distributing certain securities such as each Vista Portfolio's shares. Vista, on
behalf of the Vista Portfolios, will engage banks, including Chase and its
affiliates, as Shareholder Servicing Agents only to perform advisory, custodian,
administrative and shareholder servicing functions as described above. While the
matter is not free from doubt, the management of Vista believes that such laws
should not preclude a bank, including a bank which acts as investment adviser,
custodian or administrator, or in all such capacities for Vista, from acting as
a Shareholder Servicing Agent. However, possible future changes in federal law
or administrative or judicial interpretations of current or future law, could
prevent a bank from continuing to perform all or a part of its servicing
activities. If that occurred, the bank's shareholder clients would be permitted
to remain as shareholders and alternative means for continuing the servicing of
such shareholders would be sought. In such event, changes in the operation of
each Vista Portfolio might occur and
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a shareholder serviced by such bank might no longer be able to avail himself of
any automatic investment or other services then being provided by such bank.
Vista does not expect that shareholders would suffer any adverse financial
consequences as a result of these occurrences.
TRANSFER AGENT AND CUSTODIAN
DST Systems, Inc. ("DST") acts as transfer agent and dividend disbursing
agent (the "Transfer Agent") for Vista. In this capacity, DST maintains the
account records of all shareholders in the existing Vista Portfolios and will
maintain such records for each Vista Portfolio effective upon the Closing Date,
including statement preparation and mailing. DST also is responsible for
disbursing dividend distributions to shareholders. From time to time, DST and/or
the Vista Portfolios may contract with other entities to perform certain
services for the Transfer Agent. For its services as Transfer Agent, DST
receives such compensation as is from time to time agreed upon by Vista and DST.
DST's address is 127 W. 10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the
assets of each existing Vista Portfolio, and will act as the custodian for each
Vista Portfolio effective upon the Closing Date. For its services as Custodian,
Chase receives compensation as is from time to time agreed upon by Vista and
Chase. The Custodian's responsibilities include safeguarding and controlling
each Vista Portfolio's cash and securities, handling the receipt and delivery of
securities, determining income and collecting interest on each Vista Portfolio's
investments, maintaining books of original entry for portfolio and fund
accounting and other required books and accounts, and calculating the daily net
asset value of shares of each Vista Portfolio. Portfolio securities and cash may
be held by sub-custodian banks if such arrangements are reviewed and approved by
the Trustees. The internal division of Chase which serves as Vista's Custodian
does not determine the investment policies of the Vista Portfolios or decide
which securities will be bought or sold on behalf of the Vista Portfolios or
otherwise have access to or share material inside information with the internal
division that performs advisory services for the Vista Portfolios.
TAX SHELTERED RETIREMENT PLANS
Shares of the Vista Portfolios are offered in connection with the following
qualified prototype retirement plans: IRA, Rollover IRA, SEP-IRA,
Profit-Sharing, and Money Purchase Pension Plans which can be adopted by
self-employed persons ("Keogh") and by corporations, and 403(b) Retirement
Plans. Call or write the Transfer Agent for more information.
H. YIELD AND PERFORMANCE INFORMATION
From time to time, each Vista Portfolio may use hypothetical investment
examples and performance information in advertisements, shareholder reports or
other communications to shareholders. Because such performance information is
based on historical earnings, it should not be considered as an indication or
representation of the performance of any Vista Portfolio, or class thereof, in
the future. From time to time, the performance and yield of the Vista
Portfolios, and classes thereof, may be quoted and compared to those of other
mutual funds with similar investment objectives, unmanaged investment accounts,
including savings accounts, or other similar products and to stock or other
relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual funds.
For example, the performance of a Vista Portfolio or its classes may be compared
to data prepared by Lipper Analytical Services, Inc. or Morningstar Mutual Funds
on Disc, widely recognized independent services which monitor the performance of
mutual funds. Performance and yield data as reported in national financial
publications including, but not limited to, Money Magazine, Forbes, Barron's,
The Wall Street Journal and The New York Times, or in local or regional
publications, may also be used in comparing the performance and yield of a Vista
Portfolio or its classes. Additionally, Vista may, with proper authorization,
reprint articles written about Vista and provide them to prospective
shareholders.
Each Vista Portfolio may provide period and average annual "total rates of
return." The "total rate of return" refers to the change in the value of an
investment in a Vista Portfolio or class thereof over a period
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(which period shall be stated in any advertisement or communication with a
shareholder) based on any change in net asset value per share including the
value of any shares purchased through the reinvestment of any dividends or
capital gains distributions declared during such period. Period total rates of
return may be annualized. An annualized total rate of return assumes that the
period total rate of return is generated over a 52-week period, and that all
dividends and capital gains are reinvested; annualized total rates of return
will be slightly higher than period total rates of return (if the periods are
shorter than one year) because of the compounding effect of the assumed
investment. For Class A Shares of the Vista Short Term Bond Fund and the Vista
Small Cap Equity Fund, the average annual total rate of return figures will
assume payment of the maximum initial sales load at the time of purchase. For a
class of shares, one-, five-, and ten-year periods will be shown, unless the
class has been in existence for a shorter period.
Unlike some bank deposits or other investments which pay a fixed yield for
a stated period of time, the yield (where applicable) and the net asset value of
a Vista Portfolio, or class of shares thereof, will vary based on a number of
factors including interest rates (for certain Vista Portfolios), the current
market value of the securities held by the portfolio and changes in the
portfolio's expenses. The Adviser, the Shareholder Servicing Agent, the
Administrator and the Vista Distributor may voluntarily waive a portion of their
fees on a month-to-month basis. In addition, the Vista Distributor may assume a
portion of a Vista Portfolio's operating expenses on a month-to-month basis.
These actions would have the effect of increasing the net income (and therefore
the yield and total rate of return) of the Vista Portfolio or class of shares
thereof during the period such waivers are in effect. These factors and possible
differences in the methods used to calculate the yields and total rates of
return should be considered when comparing the yields or total rates of return
of the Vista Portfolios and classes of shares thereof to yields and total rates
of return published for other investment companies and other investment vehicles
(including different classes of shares). Vista is advised that certain
Shareholder Servicing Agents may credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding the Shareholder
Servicing Agent fees received (see "Purchases and Redemptions of
Shares -- Purchases"), which will have the effect of increasing the net return
on the investment of customers of those Shareholder Servicing Agents. Such
customers may be able to obtain through their Shareholder Servicing Agents
quotations reflecting such increased return. See the Vista Equity/Bond SAI and
the Vista Small Cap SAI for further information concerning the calculation of
the yields or total rates of return quotations for the Vista Portfolios and
classes of shares thereof.
I. ADDITIONAL INFORMATION
Each Vista Portfolio has adopted a Code of Ethics which prohibits all
affiliated personnel from engaging in personal investment activities which
compete with or attempt to take advantage of such Vista Portfolio's planned
portfolio transactions. The objective of each Vista Portfolio's Code of Ethics
is that such Vista Portfolio's operations be carried out for the exclusive
benefit of its shareholders. Each Vista Portfolio maintains careful monitoring
of compliance with its Code of Ethics.
The Vista Equity/Bond SAI and the Vista Small Cap SAI contain more detailed
information about Vista and the Shares, including information related to (i)
each Vista Portfolio's investment policies and restrictions, (ii) risk factors
associated with each Vista Portfolio's policies and investments, (iii) Vista's
Trustees, officers and the Administrator and the Adviser, (iv) portfolio
transactions and brokerage allocation, (v) the Vista Portfolio's shares,
including rights and liabilities of shareholders, and (vi) additional
performance information, including the method used to calculate yield or total
rate of return quotations of such shares. The audited financial statements for
the existing Vista Portfolios for their last fiscal year end are incorporated by
reference into the Statement of Additional Information.
The Vista Equity/Bond SAI and the Vista Small Cap SAI each have been filed
with the Commission and are incorporated by reference into the Statement of
Additional Information. A copy of the Vista Equity/Bond SAI or the Vista Small
Cap SAI may be obtained without charge by writing or calling Vista at the
address and telephone number shown on the cover page of this Prospectus/Proxy
Statement. These Reports and other information filed by Vista can be inspected
and copied at the Public Reference Facilities maintained by the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
New York regional office of the Securities and Exchange Commission at 26 Federal
Plaza,
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Room 1028, New York, New York 10007. Copies of such material can also be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, D.C. 20549
at prescribed rates.
As of December 19, 1995, the officers and Trustees of Vista as a group
owned less than 1% of any of its portfolios and [5% holder information to be
provided]. As of December 19, 1995, the officers and Directors of Hanover as a
group owned less than 1% of any of its portfolios. For information regarding
persons owning 5% or more of the outstanding shares of the Hanover Portfolios,
see the Hanover SAI (as defined below).
INFORMATION ABOUT HANOVER
Information concerning the operations and management of Hanover is
incorporated herein by reference from its current prospectuses and its current
statement of additional information (the "Hanover SAI") each dated March 30,
1995 (except for the prospectus for The Hanover American Value Fund, which is
dated November 1, 1994), copies of which may be obtained without charge by
writing or calling Hanover at the address and telephone number shown on the
cover page of this Prospectus/Proxy Statement. Reports and other information
filed by Hanover can be inspected and copied at the Public Reference Facilities
maintained by the Securities and Exchange Commission, located at 450 Fifth
Street, N.W., Washington, D.C., and copies of such material can be obtained from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, Washington, D.C. 20549 at
prescribed rates.
Hanover will furnish, without charge, a copy of Hanover's Annual Report for
the fiscal year ended November 30, 1995 to a shareholder upon request. Such
requests may be made to the Secretary, The Hanover Investment Funds, Inc., 237
Park Avenue, New York, New York 10017 (1-800-821-2371).
FINANCIAL STATEMENTS AND EXPERTS
The financial statements for Vista Short Term Bond Fund, Vista Large Cap
Equity Fund and Vista Small Cap Equity Fund incorporated by reference into this
Prospectus/Proxy Statement have been so incorporated in reliance on the reports
of Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in accounting and auditing.
The financial statements of The Hanover Short Term U.S. Government Fund,
The Hanover U.S. Government Securities Fund, The Hanover Blue Chip Growth Fund
and The Hanover Small Capitalization Growth Fund as of November 30, 1994
incorporated by reference into this Prospectus/Proxy Statement, have been
incorporated herein in reliance on the report of KPMG Peat Marwick LLP,
independent certified public accountants, given on the authority of said firm as
experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the Vista
Portfolios will be passed upon by Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, New York, New York.
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EXHIBIT A
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AGREEMENT AND PLAN OF REORGANIZATION
AND LIQUIDATION
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION, dated as of December
18, 1995 (this "Agreement") between THE HANOVER INVESTMENT FUNDS, INC.
("Hanover"), a Maryland corporation comprised of separate investment portfolios
which include The Hanover Short Term U.S. Government Fund, The Hanover U.S.
Government Securities Fund, The Hanover Blue Chip Growth Fund, The Hanover Small
Capitalization Growth Fund and The Hanover American Value Fund (each, a "Hanover
Portfolio") and MUTUAL FUND GROUP ("MFG"), a Massachusetts business trust
comprised of separate investment portfolios which include Vista Short Term Bond
Fund, Vista Equity Fund and Vista Small Cap Equity Fund, and which is expected
to include, at the Effective Time of the Reorganization (as defined herein),
Vista U.S. Government Securities Fund and Vista American Value Fund (each, an
"MFG Portfolio").
In consideration of the mutual promises herein contained, the parties
hereto agree as follows:
SECTION 1. SHAREHOLDER APPROVAL
(a) Hanover Meeting of Shareholders. A meeting of the shareholders of
each Hanover Portfolio shall be called and held for the purpose of acting
upon this Agreement and the transactions contemplated herein. MFG shall
furnish to Hanover such data and information relating to MFG as shall be
reasonably requested by Hanover for inclusion in the information to be
furnished to such shareholders in connection with the meeting for the
purpose of acting upon this Agreement and the transactions contemplated
herein.
(b) MFG Meeting of Shareholders. A meeting of the shareholders of MFG
shall be called and held for the purpose of all of the shareholders of MFG
acting upon the matters referred to in clause (i) of Section 7(f) of this
Agreement, the shareholders of each MFG Portfolio acting upon the matters
referred to in clauses (ii) and (v) of Section 7(f) of this Agreement, and
the shareholders (or sole shareholder, in the case of Vista American Value
Fund) of the MFG Portfolios referred to in each of clauses (iii) and/or
(iv) of this Agreement acting upon the matters referred to therein.
SECTION 2. REORGANIZATION
The transactions described in this section are hereinafter referred to as
the "Reorganization." For the avoidance of doubt, MFG's investment portfolios
other than the MFG Portfolios (consisting of Vista U.S. Government Income Fund,
Vista Balanced Fund, Vista Bond Fund, Vista Equity Income Fund, Vista IEEE
Balanced Fund, Vista Growth and Income Fund, Vista Capital Growth Fund, Vista
International Equity Fund, Vista Global Fixed Income Fund, Vista Southeast Asian
Fund, Vista European Fund and Vista Japan Fund) and Hanover's investment
portfolios other than the Hanover Portfolios (consisting of The Tax Free Income
Fund, The New York Tax Free Income Fund, The New Jersey Tax Free Income Fund,
The International Equity Fund and The International Bond Fund, each of which has
not to date commenced investment operations) are not parties to the
Reorganization.
(a) Plan of Reorganization and Liquidation.
(1) Hanover will cause each Hanover Portfolio to convey, transfer
and deliver to the MFG Portfolio set forth opposite its name in the
table attached hereto as Schedule I (each such MFG Portfolio being the
"Corresponding MFG Portfolio" of the Hanover Portfolio set forth
opposite its name, and each such Hanover Portfolio being the
"Corresponding Hanover Portfolio" of the MFG Portfolio set forth
opposite its name) at the closing provided for in Section 2(b) hereof
(the "Closing") all of the then existing assets of such Hanover
Portfolio. In consideration thereof, MFG
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agrees at the Closing to cause each MFG Portfolio (i) to assume and pay,
to the extent that they exist on or after the Effective Time of the
Reorganization (as defined in Section 2(b) hereof), all of the
obligations and liabilities of its Corresponding Hanover Portfolio and
(ii) to issue and deliver to the Corresponding Hanover Portfolio, full
and fractional shares of beneficial interest of the Corresponding MFG
Portfolio as follows: (1) to The Hanover Short Term U.S. Government
Fund, Class A shares of Vista Short Term Bond Fund; (2) to The Hanover
U.S. Government Fund, Institutional Class shares of Vista U.S.
Government Fund; (3) to the Hanover Blue Chip Growth Fund, Institutional
Class shares of Vista Equity Fund (to be renamed Vista Large Cap Equity
Fund in connection with the Reorganization); (4) to The Hanover Small
Capitalization Growth Fund, Class A Shares and Institutional Class
shares, as described in paragraph (2) below, of Vista Small Cap Equity
Fund; and (5) to the Hanover American Value Fund, shares of Vista
American Value Fund (the shares of the MFG Portfolios to be received by
the Hanover Portfolios in connection with the Reorganization are
referred to collectively as the "MFG Portfolio Shares"), with respect to
each class of each MFG Portfolio equal to that number of full and
fractional MFG Portfolio Shares as determined in Section 2(c) hereof.
Any shares of capital stock, par value $.001 per share, of the Hanover
Portfolios ("Hanover Portfolio Shares") held in the treasury of Hanover
on the Effective Time of the Reorganization (as defined in Section 2(b)
hereof) shall thereupon be retired.
(2) At the Effective Time of the Reorganization, each Hanover
Portfolio will liquidate and distribute pro rata to its holders of
Hanover Portfolio Shares as of the Effective Time of the Reorganization
the MFG Portfolio Shares of the Corresponding MFG Portfolio received by
such Hanover Portfolio pursuant to this Section 2(a). In the case of
each Hanover Portfolio other than The Hanover Small Capitalization
Growth Fund, all shareholders of such Hanover Portfolios will receive
the MFG Portfolio Shares of the Corresponding MFG Portfolio identified
in Section 2(a)(1) above. In the case of the Hanover Small
Capitalization Growth Fund, shareholders of both the "Investor Shares"
and the "Advisor Shares" thereof will receive Class A shares of the
Vista Small Cap Equity Fund and shareholders of "CBC Benefit Shares"
thereof will receive Institutional Class shares of the Vista Small Cap
Equity Fund. Such liquidation and distribution will be accompanied by
the establishment of an account on the respective share records of each
MFG Portfolio in the name of each record holder of Hanover Portfolio
Shares of the Corresponding Hanover Portfolio and representing the
respective pro rata number of MFG Portfolio Shares due such shareholder.
Fractional MFG Portfolio Shares will be carried to the third decimal
place. Simultaneously with such crediting of MFG Portfolio Shares to the
shareholders, the Hanover Portfolio Shares held by such shareholders
shall be cancelled.
(3) As soon as practicable after the Effective Time of the
Reorganization, Hanover shall take all the necessary steps under
Maryland law and Hanover's Articles of Incorporation, as amended and
supplemented, to effect a complete dissolution of Hanover and to
deregister Hanover under the Investment Company Act of 1940, as amended
(the "Act").
(b) Closing and Effective Time of the Reorganization. Subject to the
satisfaction of the conditions to the Closing specified in this Agreement,
the Closing shall occur at 4:00 p.m., New York City time, on the day which
is the later of (i) the final adjournment of the meeting of the holders of
Hanover Portfolio Shares at which this Agreement will be considered, (ii)
the declaration by the Securities and Exchange Commission (the
"Commission") of the effectiveness of the First N-1A Amendment and the
Second N-1A Amendment (each as defined in Section 5(b) hereof), (iii) July
31, 1996, and (iv) such later day as the parties may mutually agree (the
"Effective Time of the Reorganization").
(c) Valuation. The number of full and fractional shares of each class
of an MFG Portfolio to be issued pursuant to Section 2(a) hereof to holders
of shares of each class of the Corresponding Hanover Portfolio that will be
exchanged for such MFG Portfolio Shares shall be determined by multiplying
the number of shares of such class of the Corresponding Hanover Portfolio
that will be exchanged for such MFG Portfolio Shares by the appropriate
exchange ratio computed as set forth below, the product of such
multiplication to be rounded to the nearest one thousandth of a full share.
For each class of shares of each Hanover Portfolio and the class of shares
of the Corresponding MFG Portfolio that will be issued to
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the holders of such Hanover Portfolio Shares in connection with the
Reorganization, the exchange ratio shall be the number determined by
dividing the net asset value per share of the class of Hanover shares being
surrendered by the net asset value per share of the class of shares of the
Corresponding MFG Portfolio being issued to the holders of such class of
such Hanover Portfolio, in each case such values to be determined on a
consistent basis by the valuation procedures that have been adopted by the
Board of Trustees of MFG, as of the Effective Time of the Reorganization;
provided, that in the case of Vista U.S. Government Securities Fund and
Vista American Value Fund, and The Hanover U.S. Government Securities Fund
and The Hanover American Value Fund, respectively, the exchange ratio shall
be one. Each such exchange ratio shall be rounded to the nearest ten
thousandth.
All computations of value shall be made in accordance with the regular
practice of the MFG Portfolios as of the Effective Time by the agent then
responsible for pricing shares of the MFG Portfolios.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF MFG
MFG represents and warrants to Hanover as follows:
(a) Organization, Existence, etc. MFG is a business trust duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has the power to carry on its business as
it is now being conducted, and each MFG Portfolio is a validly existing
series of shares of such business trust representing interests therein
under the laws of Massachusetts. MFG has all necessary federal, state and
local authorization to own all of its properties and assets and to carry on
its business as now being conducted.
(b) Registration as Investment Company. MFG is registered under the
Act as an open-end investment company of the management type; such
registration has not been revoked or rescinded and is in full force and
effect.
(c) Current Offering Documents. The current prospectuses and
statements of additional information of MFG, dated March 1, 1995 with
respect to each of Vista Equity Fund and Vista Short Term Bond Fund and
June 19, 1995 with respect to Vista Small Cap Equity Fund, and included in
MFG's registration statement on Form N-1A filed with Commission, comply in
all material respects with the requirements of the Securities Act of 1933,
as amended (the "Securities Act") and the Act, and do not contain an untrue
statement of a material fact or omit to state a material fact necessary to
make the statements herein, in light of the circumstances under which they
were made, not misleading.
(d) Capitalization. MFG has an unlimited number of authorized shares
of beneficial interest, currently without par value, of which as of
December 15, 1995 there were outstanding the following numbers of shares of
the MFG Portfolios: 3,650,761 shares of Vista Short Term Bond Fund
(consisting of a single class of shares), 4,401,525 shares of Vista Equity
Fund (consisting of a single class of shares) and 5,006,123 shares of Vista
Small Cap Equity Fund (consisting of 3,293,243 "Class A" shares, 1,712,880
"Class B" Shares and zero "Institutional" Shares) and no shares were held
in the treasury of MFG. There are no outstanding shares of Vista U.S.
Government Securities Fund and Vista American Value Fund. All of the
outstanding shares of MFG have been duly authorized and are validly issued,
fully paid and nonassessable. Because MFG is an open-end investment company
engaged in the continuous offering and redemption of its shares, the number
of outstanding shares may change prior to the Effective Time of the
Reorganization. All of each MFG Portfolio's issued and outstanding shares
have been offered and sold in compliance in all material respects with
applicable registration requirements of the Securities Act and applicable
state securities laws.
(e) Financial Statements. The financial statements of MFG for the
fiscal year ended October 31, 1995, which have been audited by Price
Waterhouse LLP, (the "MFG Financial Statements"), previously delivered to
Hanover, fairly present the financial position of MFG as of the dates
thereof and the results of its operations and changes in its net assets for
each of the periods indicated, in accordance with GAAP.
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(f) Shares to be Issued Upon Reorganization. The MFG Portfolio Shares
to be issued in connection with the Reorganization will be duly authorized
and upon consummation of the Reorganization will be validly issued, fully
paid and nonassessable (except as disclosed in the MFG Portfolios'
Prospectuses and recognizing that under Massachusetts law, shareholders of
an MFG Portfolio could, under certain circumstances, be held personally
liable for the obligations of such MFG Portfolio).
(g) Authority Relative to this Agreement. MFG has the power to enter
into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by MFG's Board
of Trustees and no other proceedings by MFG other than those contemplated
under this Agreement are necessary to authorize its officers to effectuate
this Agreement and the transactions contemplated hereby. MFG is not a party
to or obligated under any charter, by-law, indenture or contract provision
or any other commitment or obligation, or subject to any order or decree,
which would be violated by or which would prevent its execution and
performance of this Agreement in accordance with its terms.
(h) Liabilities. There are no liabilities of MFG or the MFG
Portfolios, whether actual or contingent and whether or not determined or
determinable, other than liabilities disclosed or provided for in the MFG
Financial Statements and liabilities incurred in the ordinary course of
business subsequent to October 31, 1995 or otherwise previously disclosed
to Hanover, none of which has been materially adverse to the business,
assets or results of operations of MFG.
(i) No Material Adverse Change. Since October 31, 1995, there has
been no material adverse change in the financial condition, results of
operations, business, properties or assets of MFG, other than those
occurring in the ordinary course of business (for these purposes, a decline
in net asset value and a decline in net assets due to redemptions do not
constitute a material adverse change).
(j) Litigation. There are no claims, actions, suits or proceedings
pending or, to the knowledge of MFG, threatened which would adversely
affect MFG or the MFG Portfolios or MFG's assets or business or which would
prevent or hinder consummation of the transactions contemplated hereby,
there are no facts which would form the basis for the institution of
administrative proceedings against MFG and, to the knowledge of MFG, there
are no regulatory investigations of MFG pending or threatened, other than
routine inspections and audits.
(k) Contracts. Except for contracts and agreements disclosed to
Hanover on Schedule II hereto under which no default exists, MFG is not a
party to or subject to any material contract, debt instrument, plan, lease,
franchise, license or permit of any kind or nature whatsoever with respect
to the MFG Portfolios. As of the Effective Time of the Reorganization, MFG
will have no liability in respect of any of the contracts referred to in
Section 5(f) with respect to which MFG is to receive releases.
(l) Taxes. The federal income tax returns of MFG and each MFG
Portfolio, and all other income tax returns required to be filed by MFG and
any MFG Portfolio, have been filed for all taxable years to and including
October 31, 1995, and all taxes payable pursuant to such returns have been
paid. To the knowledge of MFG, no such return is under audit and no
assessment has been asserted in respect of any such return. All federal and
other taxes owed by MFG or any MFG Portfolio have been paid so far as due.
Each portfolio of MFG, other than Vista U.S. Government Securities Fund and
Vista American Value Fund, which have not yet commenced operations, is
qualified as a regulated investment company under the Internal Revenue Code
of 1986, as amended (the "Code"), in respect of each taxable year since
commencement of its operations.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF HANOVER
Hanover represents and warrants to MFG as follows:
(a) Organization, Existence, etc. Hanover is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Maryland and has the power to carry on its business as it is now
being conducted, and each Hanover Portfolio is a validly existing series of
shares of such corporation representing interests therein under the laws of
Maryland. Hanover has all necessary federal, state and
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local authorization to own all of its properties and assets and to carry on
its business as now being conducted.
(b) Registration as Investment Company. Hanover is registered under
the Act as an open-end diversified investment company of the management
type; such registration has not been revoked or rescinded and is in full
force and effect.
(c) Current Offering Documents. The current prospectuses and
statement of additional information of Hanover, each dated March 30, 1995
(except for the current prospectus and statement of additional information
of The American Value Fund which is dated November 1, 1994) and included in
Hanover's registration statement on Form N-1A filed with the Commission,
comply in all material respects with the requirements of the Securities Act
and the Act, and do not contain an untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(d) Capitalization. The authorized capital stock of Hanover consists
of 200,000,000 shares of Common Stock, each having a par value $.001 per
share. As of December 15, 1995, there were outstanding 1,032,104 shares of
The Hanover Short Term U.S. Government Fund (consisting of 1,032,099
"Investor Shares" and 5 "Advisor Shares"), 8,327,159 shares of The Hanover
U.S. Government Securities Fund (consisting of 8,324,278 "Investor Shares"
and 2,881 "Advisor Shares"), 4,657,159 shares of The Hanover Blue Chip
Growth Fund (consisting of 4,652,389 "Investor Shares" and 5,224 "Advisor
Shares"), 3,475,729 shares of The Hanover Small Capitalization Growth Fund
(consisting of 883,003 "Investor Shares", 1,002 "Advisor Shares" and
2,591,724 "CBC Benefit" Shares) and 698,326 shares of The Hanover American
Value Fund (consisting of 698,117 "Investor Shares" and 209 "Advisor
Shares"), and no shares were held in the treasury of Hanover. All of the
outstanding shares of Hanover have been duly authorized and are validly
issued, fully paid and nonassessable. Because Hanover is an open-end
investment company engaged in the continuous offering and redemption of its
shares, the number of outstanding shares may change prior to the Effective
Time of the Reorganization. All such shares will, at the time of the
Closing, be held by the shareholders of record of the Hanover Portfolios as
set forth on the books and records of Hanover's transfer agent (and in the
amounts set forth therein) and as set forth in any list of shareholders of
record provided to MFG for purposes of the Closing, and no such
shareholders of record will have any preemptive rights to purchase any of
such shares, and Hanover does not have outstanding any options, warrants or
other rights to subscribe for or purchase any shares (other than dividend
reinvestment plans of the Hanover Portfolios or as set forth in this
Agreement), nor are there outstanding any securities convertible into any
shares of the Hanover Portfolios (except pursuant to exchange privileges
described in the current Prospectus and Statement of Additional Information
of Hanover). All of each Hanover Portfolio's issued and outstanding shares
have been offered and sold in compliance in all material respects with
applicable registration requirements of the Securities Act and applicable
state securities laws.
(e) Financial Statements. The financial statements of Hanover for the
year ended November 30, 1994, which have been audited by KPMG Peat Marwick
LLP, and the unaudited financial statements of Hanover for the six months
ended May 31, 1995 (collectively, the "Hanover Financial Statements"),
previously delivered to MFG, fairly present the financial position of
Hanover as of the date thereof, and the results of its operations and
changes in its net assets for the periods indicated, in accordance with
GAAP.
(f) Authority Relative to this Agreement. Hanover has the power to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by its Board of
Directors, and, except for approval by the shareholders of Hanover, no
other proceedings by Hanover are necessary other than those contemplated by
this Agreement to authorize its officers to effectuate this Agreement and
the transactions contemplated hereby. Hanover is not a party to or
obligated under any charter, by-law, indenture or contract provision or any
other commitment or obligation, or subject to any order or decree,
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which would be violated by or which would prevent its execution and
performance of this Agreement in accordance with its terms.
(g) Liabilities. There are no liabilities of Hanover, whether actual
or contingent and whether or not determined or determinable, other than
liabilities disclosed or provided for in the Hanover Financial Statements
and liabilities incurred in the ordinary course of business subsequent to
May 31, 1995 or otherwise previously disclosed to MFG, none of which has
been materially adverse to the business, assets or results of Hanover.
(h) No Material Adverse Change. Since May 31, 1995, there has been no
material adverse change in the financial condition, results of operations,
business, properties or assets of Hanover, other than those occurring in
the ordinary course of business (for these purposes, a decline in net asset
value and a decline in net assets due to redemptions do not constitute a
material adverse change).
(i) Litigation. There are no claims, actions, suits or proceedings
pending or, to the knowledge of Hanover, threatened which would adversely
affect Hanover or its assets or business or which would prevent or hinder
consummation of the transactions contemplated hereby, there are no facts
which would form the basis for the institution of administrative
proceedings against Hanover and, to the knowledge of Hanover, there are no
regulatory investigations of Hanover pending or threatened, other than
routine inspections and audits.
(j) Contracts. Except for contracts and agreements disclosed to MFG
on Schedule II hereto under which no default exists, Hanover is not a party
to or subject to any material contract, debt instrument, plan, lease,
franchise, license or permit of any kind or nature whatsoever. As of the
Effective Time of the Reorganization, Hanover will have no liability in
respect of any of the contracts referred to in Section 6(e) with respect to
which Hanover is to receive releases.
(k) Taxes. The federal income tax returns of Hanover and each Hanover
Portfolio, and all other income tax returns required to be filed by
Hanover, have been filed for all taxable years to and including the taxable
year ended November 30, 1994, and all taxes payable pursuant to such
returns have been paid. To the knowledge of Hanover, no such return is
under audit and no assessment has been asserted in respect of any such
return. All federal and other taxes owed by Hanover or any Hanover
Portfolio have been paid so far as due. Each Hanover Portfolio has
qualified as a regulated investment company under the Code in respect of
each taxable year since commencement of its operations.
SECTION 5. COVENANTS OF MFG
MFG covenants to Hanover as follows:
(a) Portfolio Securities. All securities owned by MFG as of the
Effective Time of the Reorganization will be owned by MFG free and clear of
any liens, claims, charges, options and encumbrances, except as may be
indicated in a schedule delivered by MFG to Hanover immediately prior to
the Effective Time of the Reorganization or as may be permitted under the
Act.
(b) Formation of New Portfolios; Amendment of Registration Statement
on Form N-1A. Prior to the Effective Time of the Reorganization, MFG will
take all steps necessary to cause the formation and registration of Vista
U.S. Government Securities Fund and Vista American Value Fund, including
filing an amendment or amendments to MFG's registration statement on Form
N-1A (collectively, the "First N-1A Amendment") with the Commission
relating to the registration of shares of Vista U.S. Government Securities
Fund and Vista American Value Fund. The investment objective and policies
of Vista U.S. Government Securities Fund and Vista American Value Fund will
conform with the descriptions thereof contained in the Prospectus and
Statement of Additional Information in the form presented to the Hanover
Board of Directors. MFG will not issue any shares of Vista U.S. Government
Securities Fund and Vista American Value Fund prior to the Effective Time
of the Reorganization except as contemplated by this Agreement. Prior to
the Effective Time of the Reorganization, MFG will also file an amendment
to MFG's registration statement on Form N-1A (the "Second N-1A Amendment")
with the Commission to conform the descriptions of the MFG Portfolios in
such registration
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statement with the descriptions of the MFG Portfolios in the Registration
Statement (as defined in Section 5(c) hereof), as the Registration
Statement may be amended or supplemented prior to the Effective Time of the
Reorganization.
(c) Registration Statement. MFG shall file with the Commission a
Registration Statement on Form N-14 (the "Registration Statement") under
the Securities Act relating to the MFG Portfolio Shares issuable hereunder.
At the time the Registration Statement becomes effective, the Registration
Statement (i) will comply in all material respects with the provisions of
the Securities Act and the rules and regulations of the Commission
thereunder (the "Regulations") and (ii) will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; and at the time the Registration Statement becomes effective,
at the time of the shareholders' meeting referred to in Section 1(a)
hereof, and at the Effective Time of the Reorganization, the
prospectus/proxy statement (the "Prospectus") and statement of additional
information included therein (the "Statement of Additional Information"),
as amended or supplemented by any amendments or supplements filed by MFG,
will not contain an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that none of the representations and warranties in this subsection
shall apply to statements in or omissions from a Registration Statement,
Prospectus or Statement of Additional Information made in reliance upon and
in conformity with information furnished by Hanover for use in the
Registration Statement, Prospectus or Statement of Additional Information
as provided in Section 6(b) hereof.
(d) Cooperation in Effecting Reorganization. MFG agrees to use all
reasonable efforts (by taking such actions as may be necessary or
advisable) to effectuate the Reorganization, to continue in operation
thereafter, and to obtain any necessary regulatory approvals. MFG will
cooperate fully with Hanover in preparing and effecting any filings with
the Federal Trade Commission required under federal antitrust laws with
respect to the proposed Reorganization.
(e) Operations in the Ordinary Course. Except as otherwise
contemplated by this Agreement, MFG shall conduct its business in the
ordinary course until the consummation of the Reorganization.
(f) Interim Advisory Arrangements. Each portfolio of MFG shall enter
into an interim advisory agreement with The Chase Manhattan Bank, N.A. that
will be effective beginning at the time the merger of Chemical Banking
Corporation and The Chase Manhattan Corporation is consummated, and each
such agreement shall have been approved by the Board of Trustees of MFG.
MFG shall have obtained from the Commission exemptive relief from Section
15(a) of the Act enabling it to enter into the interim advisory agreements
referred to above without obtaining prior shareholder approval, and shall
comply with all representations and conditions contained in the
Commission's order issued in connection therewith.
SECTION 6. COVENANTS OF HANOVER
Hanover covenants to MFG as follows:
(a) Portfolio Securities. With respect to the assets to be
transferred in accordance with Section 1(a), each Hanover Portfolio's
assets shall consist of all property and assets of any nature whatsoever,
including, without limitation, all cash, cash equivalents, securities,
claims and receivables (including dividend and interest receivables) owned,
and any deferred or prepaid expenses shown as an asset on Hanover's books.
At least five (5) business days prior to the Closing, each Hanover
Portfolio will provide MFG with a list of its assets and a list of its
stated Liabilities. Each Hanover Portfolio shall have the right to sell any
of the securities or other assets shown on the list of assets prior to the
Closing but will not, without the prior approval of MFG, acquire any
additional securities other than securities which the Corresponding MFG
Portfolio is permitted to purchase, pursuant to its investment objective
and policies or otherwise (taking into consideration its own portfolio
composition as of such date). In the event that MFG informs Hanover that a
Hanover Portfolio holds any investments that its Corresponding MFG
Portfolio would not be permitted to hold, the Hanover Portfolio will
dispose of such securities prior to the
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Closing to the extent practicable and to the extent that its shareholders
would not be materially affected in an adverse manner by such a
disposition. In addition, Hanover will prepare and deliver to MFG,
immediately prior to the Effective Time of the Reorganization, a Schedule
of Investments (the "Schedule") listing all the securities owned by each
Hanover Portfolio as of the Effective Time of the Reorganization. All
securities to be listed in the Schedule as of the Effective Time of the
Reorganization will be owned by Hanover free and clear of any liens,
claims, charges, options and encumbrances, except as indicated in the
Schedule or as permitted by the Act, and, except as so indicated, none of
such securities is or, after the Reorganization as contemplated hereby,
will be subject to any restrictions, legal or contractual, on the
disposition thereof (including restrictions as to the public offering or
sale thereof under the Securities Act) and, except as so indicated, all
such securities are or will be readily marketable.
(b) Registration Statement. In connection with the Registration
Statement, Hanover will cooperate with MFG and will furnish to MFG the
information relating to Hanover required by the Securities Act and the
Regulations to be set forth in the Registration Statement (including the
Prospectuses and Statements of Additional Information). At the time the
Registration Statement becomes effective, the Registration Statement,
insofar as it relates to Hanover, (i) will comply in all material respects
with the provisions of the Securities Act and the Regulations and (ii) will
not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and at the time the Registration
Statement becomes effective, at the time of the shareholders' meeting
referred to in Section 1(a) hereof and at the Effective Time of the
Reorganization, the Prospectus and Statement of Additional Information, as
amended or supplemented by any amendments or supplements filed by MFG,
insofar as they relate to Hanover, will not contain an untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the representations and
warranties in this subsection shall apply only to statements in or
omissions from the Registration Statement, Prospectus or Statement of
Additional Information made in reliance upon and in conformity with
information furnished by Hanover for use in the Registration Statement,
Prospectus or Statement of Additional Information as provided in this
Section 6(b).
(c) Cooperation in Effecting Reorganization. Hanover agrees to use
all reasonable efforts (by taking such actions as may be necessary or
advisable) to effectuate the Reorganization, including calling the meeting
of shareholders referred to in Section 1(a) of this Agreement, and to
obtain any necessary regulatory approvals. Hanover will cooperate fully
with MFG in preparing and effecting any filings with the Federal Trade
Commission required under federal antitrust laws with respect to the
proposed Reorganization. Hanover will assist MFG in obtaining such
information as MFG reasonably requests concerning the beneficial ownership
of the shares of the Hanover Portfolios.
(d) Operations in the Ordinary Course. Except as otherwise
contemplated by this Agreement, Hanover shall conduct its business in the
ordinary course until the consummation of the Reorganization.
(e) Contract Terminations. Hanover shall, prior to the consummation
of the Reorganization, terminate its agreements with The Portfolio Group,
Inc. (with respect to The Hanover U.S. Government Securities Fund and The
Hanover Blue Chip Growth Fund), Chemical Bank New Jersey, National
Association (with respect to The Hanover Small Capitalization Growth Fund),
Texas Commerce Bank, National Association (with respect to The Hanover
Short Term U.S. Government Fund) and Van Deventer & Hoch (with respect to
The Hanover American Value Fund), Chemical Bank, Furman Selz Incorporated,
Hanover Funds Distributor, Inc., and each of the financial institutions
with whom Hanover has entered into a shareholder servicing agreement (as
set forth in Schedule II hereto) for Investment Advisory, Administration,
Administration and Fund Accounting, Custody, Distribution, Transfer Agency,
Sub-Transfer Agency and Shareholder Servicing services, as the case may be,
such terminations to be effective as of the Effective Time of the
Reorganization.
9
<PAGE> 77
SECTION 7. CONDITIONS TO OBLIGATIONS OF HANOVER
The obligations of Hanover hereunder with respect to the consummation of
the Reorganization as it relates to each Hanover Portfolio are subject to the
satisfaction of the following conditions:
(a) Approval by Hanover Shareholders. This Agreement and the
transactions contemplated by the Reorganization, including, when necessary,
a temporary amendment of the investment restrictions that might otherwise
preclude the consummation of the Reorganization, shall have been approved
by the requisite vote of the shares of each Hanover Portfolio entitled to
vote in the matter.
(b) Covenants, Warranties and Representations. MFG shall have
complied with each of its covenants contained herein, each of the
representations and warranties contained herein shall be true in all
material respects as of the Effective Time of the Reorganization (except as
otherwise contemplated herein), there shall have been no material adverse
change (as defined in Section 3(i) in the financial condition, results of
operations, business, properties or assets of the MFG Portfolios since
October 31, 1995, and Hanover shall have received a certificate of the
President of MFG satisfactory in form and substance to Hanover so stating.
Hanover shall also have received certificates of (i) The Chase Manhattan
Bank, N.A., in its capacity as investment adviser to MFG and as MFG's
administrator, and (ii) Vista Broker-Dealer Services, Inc., in its capacity
as MFG's distributor, in each case to the effect that, as of the Effective
Time of the Reorganization, such entity is not aware that any of the
representations and warranties of MFG herein is not true in all material
respects.
(c) Regulatory Approval. The Registration Statement, the First N-1A
Amendment and the Second N-1A Amendment shall each have been declared
effective by the Commission, no stop orders under the Securities Act
pertaining thereto shall have been issued and all approvals, registrations,
and exemptions under federal and state laws considered to be necessary
shall have been obtained.
(d) Tax Opinion. Hanover shall have received the opinion of Simpson
Thacher & Bartlett dated on or before the date of the Closing, addressed to
and in form and substance satisfactory to Hanover, as to certain of the
federal income tax consequences under the Code of the Reorganization,
insofar as it relates to each Hanover Portfolio and its Corresponding MFG
Portfolio, and to shareholders of each Hanover Portfolio. For purposes of
rendering their opinion, Simpson Thacher & Bartlett may rely exclusively
and without independent verification, as to factual matters, upon the
statements made in this Agreement, the prospectus/proxy statement which
will be distributed to the shareholders of the Hanover Portfolios in
connection with the Reorganization, and upon such other written
representations as the President of each of Hanover and MFG will have
verified as of the Effective Time of the Reorganization. The opinion of
Simpson Thacher & Bartlett will be to the effect that, based on the facts
and assumptions stated therein, for federal income tax purposes: (i) the
Reorganization will constitute a reorganization within the meaning of
section 368(a)(1) of the Code with respect to each Hanover Portfolio and
its Corresponding MFG Portfolio; (ii) no gain or loss will be recognized by
any of the Hanover Portfolios or the Corresponding MFG Portfolios upon the
transfer of all the assets and liabilities, if any, of each Hanover
Portfolio to its Corresponding MFG Portfolio solely in exchange for MFG
Portfolio Shares or upon the distribution of the MFG Portfolio Shares to
the holders of Hanover Portfolio Shares solely in exchange for all of their
Hanover Portfolio Shares; (iii) no gain or loss will be recognized by
shareholders of any of the Hanover Portfolios upon the exchange of such
Hanover Portfolio Shares solely for MFG Portfolio Shares; (iv) the holding
period and tax basis of the MFG Portfolio Shares received by each holder of
Hanover Portfolio Shares pursuant to the Reorganization will be the same as
the holding period (provided the Hanover Portfolio Shares were held as a
capital asset on the date of the Reorganization) and tax basis of the
Hanover Portfolio Shares held by the shareholder immediately prior to the
Reorganization; and (v) the holding period and tax basis of the assets of
each of the Hanover Portfolios acquired by its Corresponding MFG Portfolio
will be the same as the holding period and tax basis of those assets to
each of the Hanover Portfolios immediately prior to the Reorganization.
The payment by Chemical Banking Corporation and/or The Chase Manhattan
Corporation of the related Reorganization expenses referred to in Section
10 hereof will not affect the opinions set forth above regarding the tax
consequences of the exchanges by Hanover and the shareholders of Hanover;
10
<PAGE> 78
however, Simpson Thacher & Bartlett will express no opinion as to any
federal income tax consequences to any of the parties of the payment of
such expenses by Chemical Banking Corporation and/or The Chase Manhattan
Corporation.
(e) Opinion of Counsel. Hanover shall have received the opinion of
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as counsel for MFG, dated
as of the Date of the Closing, addressed to and in form and substance
satisfactory to Hanover, to the effect that: (i) MFG is a business trust
duly organized and existing under the laws of the Commonwealth of
Massachusetts, and each MFG Portfolio is a validly existing series of
shares of such business trust; (ii) MFG is an open-end investment company
of the management type registered under the Act; (iii) this Agreement and
the Reorganization provided for herein and the execution of this Agreement
have been duly authorized and approved by all requisite action of MFG and
this Agreement has been duly executed and delivered by MFG and is a valid
and binding obligation of MFG enforceable against MFG in accordance with
its terms, except as affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing; (iv) the Registration Statement
has been declared effective under the Securities Act and to such counsel's
knowledge after reasonable investigation no stop order has been issued or
threatened suspending its effectiveness; (v) to such counsel's knowledge,
no consent, approval, order or other authorization of any federal or New
York state or Massachusetts state court or administrative or regulatory
agency is required for MFG to enter into this Agreement or carry out its
terms that has not already been obtained, other than where the failure to
obtain any such consent, approval, order or authorization would not have a
material adverse effect on the operations of MFG; (vi) to such counsel's
knowledge, MFG is not in breach or violation of any material contract
listed on Schedule II hereto to which it is a party, which breach or
violation would (a) affect the ability of MFG to enter into this Agreement
or consummate the transactions contemplated hereby, including the
Reorganization, or (b) have a material adverse effect on the business or
financial condition of MFG; (vii) to such counsel's knowledge, no federal
or New York state or Massachusetts state administrative or regulatory
proceeding is pending or threatened against MFG which would (a) affect the
ability of MFG to enter into this Agreement or consummate the transactions
contemplated hereby, including the Reorganization, or (b) have a material
adverse effect on the business or financial condition of MFG; and (viii)
the MFG Portfolio Shares to be issued in the Reorganization have been duly
authorized and upon issuance thereof in accordance with this Agreement,
will be validly issued, fully paid and nonassessable. In rendering such
opinion, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel may rely on the
opinion of Massachusetts counsel as to matters relating to Massachusetts
law and on certificates of officers and/or trustees of MFG as to factual
matters.
(f) Board of Trustees Approvals. The Board of Trustees of MFG shall
have taken the following action with respect to MFG or the MFG Portfolios,
as the case may be, at a meeting duly called for such purposes:
(i) approval of the selection of Price Waterhouse LLP as MFG's
independent auditors for the fiscal year ending October 31, 1996, on
terms acceptable to the Hanover Board of Directors;
(ii) approval of an investment advisory agreement with The Chase
Manhattan Bank, N.A. with respect to each MFG Portfolio, in each case in
the form presented to the Hanover Board of Directors;
(iii) approval of sub-investment advisory agreements between The
Chase Manhattan Bank, N.A. and Van Deventer & Hoch with respect to Vista
American Value Fund, and between The Chase Manhattan Bank, N.A. and
Chase Asset Management, Inc., with respect to each other MFG Portfolio,
in each case in the form presented to the Hanover Board of Directors;
(iv) approval of the application of MFG's distribution plan(s)
pursuant to Rule 12b-1 under the Act to Class A shares of Vista Short
Term Bond Fund and shares of Vista American Value Fund, to conform with
the Prospectus and Statement of Additional Information in the form
11
<PAGE> 79
presented to the Hanover Board of Directors, as the Prospectus and
Statement of Additional Information may be amended or supplemented at
the time of the shareholders' meeting referred to in Section 1(a)
hereof;
(v) approval of the modification of certain fundamental investment
limitations of the MFG Portfolios and certain other investment policies
to conform with the descriptions thereof contained in the Prospectus and
Statement of Additional Information in the form presented to the Hanover
Board of Directors or as may be amended or supplemented at the time of
the shareholders' meeting referred to in Section 1(a) hereof; and
(vi) creation of Class A shares in Vista Short Term Bond Fund, and
creation of Institutional Class shares in Vista U.S. Government
Securities Fund, Vista Equity Fund and Vista Small Cap Equity Fund, and
authorization of the issuance by MFG, immediately prior to the Effective
Time of the Reorganization, of one Institutional Class share of Vista
U.S. Government Securities Fund of MFG and one share of Vista American
Value Fund of MFG to Vista Broker Dealer Services ("VBDS") in
consideration for payment equal to the net asset value per Investor
Share of The Hanover U.S. Government Securities Fund and The Hanover
American Value Fund, respectively, for the purpose of enabling VBDS to
vote on the matters referred to in paragraph (g) of Section 8.
(g) Trustees and Officers Insurance. Chemical Banking Corporation
and/or The Chase Manhattan Corporation shall have purchased trustees and
officers liability insurance coverage referred to in Section 10(b) of this
Agreement.
(h) Contract Terminations. Hanover shall have terminated the
agreements referred to in Section 6(e) of this Agreement as provided
therein.
(i) Bank Holding Company Merger. The merger of The Chase Manhattan
Corporation with and into Chemical Banking Corporation shall have been
consummated.
SECTION 8. CONDITIONS TO OBLIGATIONS OF MFG
The obligations of MFG hereunder with respect to the consummation of the
Reorganization as it relates to each MFG Portfolio are subject to the
satisfaction of the following conditions:
(a) Approval by Shareholders. This Agreement and the transactions
contemplated by the Reorganization, including, when necessary, a temporary
amendment of the investment restrictions that might otherwise preclude the
consummation of the Reorganization, shall have been approved by the
requisite vote of the shares of each Hanover Portfolio entitled to vote on
the matter.
(b) Covenants, Warranties and Representations. Hanover shall have
complied with each of its covenants contained herein, each of the
representations and warranties contained herein shall be true in all
material respects as of the Effective Time of the Reorganization (except as
otherwise contemplated herein), there shall have been no material adverse
change (as defined in Section 4(h)) in the financial condition, results of
operations, business, properties or assets of the Hanover Portfolios since
November, 1995, and MFG shall have received a certificate of the President
of Hanover satisfactory in form and substance to MFG so stating. MFG shall
also have received certificates of (i) The Portfolio Group, Inc., in its
capacity as investment adviser to The Hanover U.S. Government Securities
Fund and The Hanover Blue Chip Growth Fund, (ii) Chemical Bank New Jersey,
National Association (formerly known as Princeton Bank and Trust, National
Association) in its capacity as investment adviser to The Hanover Small
Capitalization Growth Fund, (iii) Texas Commerce Bank, National Association
in its capacity as investment adviser to The Hanover Short Term U.S.
Government Fund, (iv) Van Deventer & Hoch in its capacity as investment
advisor to The Hanover American Value Fund, (v) Furman Selz Incorporated,
in its capacity as Hanover's administrator and (vi) Hanover Funds
Distributor, Inc., in its capacity as Hanover's distributor, in each case
to the effect that, as of the Effective Time of the Reorganization, such
entity is not aware that any of the representations and warranties of
Hanover herein is not true in all material respects.
12
<PAGE> 80
(c) Portfolio Securities. All securities to be acquired by each MFG
Portfolio in the Reorganization shall have been approved for acquisition by
the investment adviser of such MFG Portfolio as consistent with the
investment policies of such MFG Portfolio and all such securities on the
books of the Corresponding Portfolio that are not readily marketable shall
be valued on the basis of an evaluation by an independent appraiser
acceptable to both Hanover and MFG at the expense of Chemical Banking
Corporation and/or The Chase Manhattan Corporation, taking into account the
information contained in the Schedule.
(d) Regulatory Approval. The Registration Statement, the First N-1A
Amendment and the Second N-1A Amendment shall each have been declared
effective by the Commission, no stop orders under the Securities Act
pertaining thereto shall have been issued and all approvals, registrations,
and exemptions under federal and state laws considered to be necessary
shall have been obtained.
(e) Tax Opinion. MFG shall have received the opinion of Simpson
Thacher & Bartlett, dated on or before the date of the Closing, addressed
to and in form and substance satisfactory to MFG, as to certain of the
federal income tax consequences under the Code of the Reorganization
insofar as it relates to each Hanover Portfolio and its Corresponding MFG
Portfolio, and to shareholders of each Hanover Portfolio. For purposes of
rendering their opinion, Simpson Thacher & Bartlett may rely exclusively
and without independent verification as to factual matters, upon the
statements made in this Agreement, the prospectus/proxy statement which
will be distributed to the shareholders of the Hanover Portfolios in
connection with the Reorganization, and upon such other written
representations as the President of each of Hanover and MFG will have
verified as of the Effective Time of the Reorganization. The opinion of
Simpson Thacher & Bartlett will be to the effect that, based on the facts
and assumptions stated therein, for federal income tax purposes: (i) the
Reorganization will constitute a reorganization within the meaning of
section 368(a)(1) of Code with respect to each Hanover Portfolio and its
Corresponding MFG Portfolio; (ii) no gain or loss will be recognized by any
of the Hanover Portfolios or the Corresponding MFG Portfolios upon the
transfer of all the assets and liabilities, if any, of each Hanover
Portfolio to its Corresponding MFG Portfolio solely in exchange for MFG
Portfolio Shares or upon the distribution of the MFG Portfolios Shares to
the holders of Hanover Portfolio Shares solely in exchange for all of their
Hanover Portfolios Shares; (iii) no gain or loss will be recognized by
shareholders of any of the Hanover Portfolios upon the exchange of such
Hanover Portfolio Shares solely for MFG Portfolio Shares; (iv) the holding
period and tax basis of the MFG Portfolio Shares received by each holder of
Hanover Portfolio Shares pursuant to the Reorganization will be the same as
the holding period (provided the Hanover Portfolio Shares were held as a
capital asset on the date of the Reorganization) and tax basis of the
Hanover Portfolio Shares held by the shareholder immediately prior to the
Reorganization; and (v) the holding period and tax basis of the assets of
each of the Hanover Portfolios acquired by its Corresponding MFG Portfolio
will be the same as the holding period and tax basis of those assets to
each of the Hanover Portfolios immediately prior to the Reorganization.
The payment by Chemical Banking Corporation and/or The Chase Manhattan
Corporation of the related Reorganization expenses referred to in Section
10 hereof will not affect the opinions set forth above regarding the tax
consequences of the exchanges by Hanover and the shareholders of Hanover;
however, Simpson Thacher & Bartlett will express no opinion as to any
federal income tax consequences to any of the parties of the payment of
such expenses by Chemical Banking Corporation and/or The Chase Manhattan
Corporation.
(f) Opinion of Counsel. MFG shall have received the opinion of
Simpson Thacher & Bartlett, as counsel for Hanover, dated as of the date of
the Closing, addressed to and in form and substance satisfactory to MFG, to
the effect that (i) Hanover is a corporation duly organized and validly
existing under the laws of the State of Maryland and each Hanover Portfolio
is a validly existing series of shares of such corporation; (ii) Hanover is
an open-end investment company of the management type registered under the
Act; (iii) this Agreement and the Reorganization provided for herein and
the execution of this Agreement have been duly authorized and approved by
all requisite corporate action of Hanover and this Agreement has been duly
executed and delivered by Hanover and is a valid and binding obligation of
Hanover enforceable against Hanover in accordance with its terms, except as
affected by bankruptcy,
13
<PAGE> 81
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing; (iv) to such
counsel's knowledge, no consent, approval, order or other authorization of
any federal or New York state or Maryland state court or administrative or
regulatory agency is required for Hanover to enter into this Agreement or
carry out its terms that has not already been obtained other than where the
failure to obtain any such consent, approval, order or authorization would
not have a material adverse effect on the operations of Hanover; (v) to
such counsel's knowledge, Hanover is not in breach or violation of any
material contract listed on Schedule II hereto to which it is a party,
which breach or violation would (a) affect the ability of Hanover to enter
into this Agreement or consummate the transactions contemplated hereby,
including the Reorganization, or (b) have a material adverse effect on the
business or financial condition of Hanover; and (vi) to such counsel's
knowledge, no federal or New York state or Maryland state administrative or
regulatory proceeding is pending or threatened against Hanover which would
(a) affect the ability of Hanover to enter into this Agreement or
consummate the transactions contemplated hereby, including the
Reorganization, or (b) have a material adverse effect on the business or
financial condition of Hanover. In rendering such opinion, Simpson Thacher
& Bartlett may rely on the opinion of Maryland counsel as to matters
relating to Maryland law, and on certificates of officers and/or trustees
of Hanover as to factual matters.
(g) Vote by the Sole Shareholder of Vista U.S. Government Securities
Fund and Vista American Value Fund. VBDS shall have voted, immediately
after becoming the sole shareholder of Institutional Class shares of Vista
U.S. Government Securities Fund of MFG, and prior to the receipt by Hanover
of any Vista U.S. Government Securities Fund shares and VBDS shall have
voted, immediately after becoming the sole shareholder of shares of Vista
American Value Fund of MFG, and prior to the receipt by Hanover of any of
Vista American Value Fund shares, to:
(i) approve the investment advisory agreement between MFG and The
Chase Manhattan Bank, N.A. with respect to Vista U.S. Government
Securities Fund and Vista American Value Fund as contemplated by Section
7(f) hereof;
(ii) approve the investment sub-advisory agreement between The
Chase Manhattan Bank, N.A. and Van Deventer & Hoch as contemplated by
Section 7(f) hereof (to be voted on only in the case of the sole
shareholder of Vista American Value Fund) or the investment sub-advisory
agreement between The Chase Manhattan Bank, N.A. and Chase Asset
Management, Inc. as contemplated by Section 7(f) hereof (to be voted on
only in the case of the sole shareholder of Vista U.S. Government
Securities Fund);
(iii) approve MFG's distribution plan pursuant to Rule 12b-1 under
the Act for shares of Vista American Value Fund as contemplated by
Section 7(f) hereof (to be voted on only in the case of the sole
shareholder of Vista American Value Fund);
(iv) approve all persons who are to be Trustees of MFG effective
upon consummation of the Reorganization as Trustees of MFG; and
(v) approve the selection of Price Waterhouse LLP as MFG's
independent auditors for the fiscal year ending October 31, 1996.
(h) Contract Terminations. Hanover shall have terminated the
agreements referred to in Section 6(e) of this Agreement as provided
therein.
(i) Bank Holding Company Merger. The merger of The Chase Manhattan
Corporation with and into Chemical Banking Corporation shall have been
consummated.
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SECTION 9. AMENDMENTS; TERMINATIONS; NO SURVIVAL OF COVENANTS,
WARRANTIES AND REPRESENTATIONS
(a) Amendments. The parties hereto may, by agreement in writing
authorized by their respective Board of Trustees or Board of Directors,
amend this Agreement at any time before or after approval hereof by the
shareholders of Hanover or MFG or both, but after such approval, no
amendment shall be made which substantially changes the terms hereof.
(b) Waivers. At any time prior to the Effective Time of the
Reorganization, either of the parties hereto may by written instrument
signed by it (i) waive any inaccuracies in the representations and
warranties made to it contained herein and (ii) waive compliance with any
of the covenants or conditions made for its benefit contained herein,
except that neither party may waive the conditions set forth in Sections
7(c) or 8(d) hereof.
(c) Termination by Hanover. Hanover may terminate this Agreement at
any time prior to the Effective Time of the Reorganization by notice to MFG
and Chemical Banking Corporation if (i) a material condition to its
performance hereunder or a material covenant of MFG contained herein shall
not be fulfilled on or before the date specified for the fulfillment
thereof or (ii) a material default or material breach of this Agreement
shall be made by MFG.
(d) Termination by MFG. MFG may terminate this Agreement at any time
prior to the Effective Time of the Reorganization by notice to Hanover and
Chemical Banking Corporation if (i) a material condition to its performance
hereunder or a material covenant of Hanover contained herein shall not be
fulfilled on or before the date specified for the fulfillment thereof or
(ii) a material default or material breach of this Agreement shall be made
by Hanover.
(e) Termination by Either Hanover or MFG. This Agreement may be
terminated by Hanover or MFG at any time prior to the Effective Time of the
Reorganization, whether before or after approval of this Agreement by the
shareholders of Hanover, without liability on the part of either party
hereto, its respective Directors, Trustees, officers or shareholders, or
Chemical Banking Corporation, on notice to the other parties in the event
that such party's Board of Directors or Board of Trustees, as the case may
be, determines that proceeding with this Agreement is not in the best
interest of that party's shareholders. Unless the parties hereto shall
otherwise agree in writing, this Agreement shall terminate without
liability as of the close of business on July 31, 1996 if the Effective
Time of the Reorganization is not on or prior to such date.
(f) Survival. No representations, warranties or covenants in or
pursuant to this Agreement (including certificates of officers), except for
the provisions of Section 10 of this Agreement, shall survive the
Reorganization.
SECTION 10. EXPENSES; INSURANCE
(a) Except as otherwise specified in this Section 10, the expenses of
the Reorganization will be borne by Chemical Banking Corporation and/or The
Chase Manhattan Corporation. Such expenses include, without limitation, (i)
expenses incurred in connection with the entering into and the carrying out
of the provisions of this Agreement; (ii) expenses associated with the
preparation and filing of the Registration Statement under the Securities
Act covering the MFG Portfolio Shares to be issued pursuant to the
provisions of this Agreement (other than registration fees payable to the
Commission in respect of the registration of such shares, which shall be
payable by the respective MFG Portfolios in which such shares represent
interests); (iii) registration or qualification fees and expenses of
preparing and filing such forms as are necessary under applicable state
securities laws to qualify the Corresponding MFG Portfolio Shares to be
issued in connection herewith in each state in which shareholders of the
Corresponding Hanover Portfolios are resident as of the date of the mailing
of the Prospectus to such shareholders; (iv) postage; (v) printing; (vi)
accounting fees; (vii) legal fees and (viii) solicitation costs relating to
the Reorganization.
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<PAGE> 83
(b) Chemical Banking Corporation and/or The Chase Manhattan
Corporation agrees to purchase, prior to the Effective Time of the
Reorganization, trustee and officers liability insurance coverage for the
benefit of the Board of Directors of Hanover for a period of one year
following the Closing, the coverage and policy limits to be no less
favorable than those of the Hanover insurance coverage currently in
existence.
SECTION 11. NOTICES
Any notice, report, statement or demand required or permitted by any
provision of this Agreement shall be in writing and shall be given by hand,
certified mail or by facsimile transmission, shall be deemed given when received
and shall be addressed to the parties hereto at their respective addresses
listed below or to such other persons or addresses as the relevant party shall
designate as to itself from time to time in writing delivered in like manner:
(a) if to Hanover, to it at:
237 Park Avenue
New York, New York 10017
Attention: Joan V. Fiore, Esq.
Facsimile: (212) 808-3980
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Gary S. Schpero, Esq.
Facsimile: (212) 455-2502
(b) if to MFG, to it at:
125 West 55th Street
New York, New York 10019
Attention: Ann Bergin
Facsimile: (212)
with a copy to:
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue
New York, New York 10022
Attention: Carl Frischling, Esq.
Facsimile: (212) 715-8000
(c) if to Chemical Banking Corporation, to it at:
270 Park Avenue
48th Floor
New York, New York 10017
Attention: Gary N. Gordon
Facsimile: (212) 270-4173
with a copy to:
c/o Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Molly Sheehan, Esq.
Facsimile: (212) 270-1224
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<PAGE> 84
(d) if to The Chase Manhattan Corporation, to it at:
c/o Vista Capital Management
101 Park Avenue
New York, New York 10178
Attention: Leonard M. Spalding, Jr.
Facsimile: (212) 907-6123
c/o The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081
Attention: Deborah B. Oliver, Esq.
Facsimile: (212) 552-4786
SECTION 12. GENERAL
This Agreement supersedes all prior agreements between the parties (written
or oral), is intended as a complete and exclusive statement of the terms of the
Agreement between the parties and may not be changed or terminated orally. This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one or
more counterparts have been executed by Hanover and MFG and delivered to each of
the parties hereto. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Nothing in this Agreement, expressed or implied, is intended to
confer upon any other person any rights or remedies under or by reason of this
Agreement.
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<PAGE> 85
Copies of the Declaration of Trust, as amended, establishing MFG are on
file with the Secretary of the Commonwealth of Massachusetts and with the City
Clerk for the City of Boston, and notice is hereby given that this Agreement and
Plan of Reorganization and Liquidation is executed on behalf of MFG by officers
of MFG as officers and not individually and that the obligations of or arising
out of this Agreement are not binding upon any of the Trustees, officers,
shareholders, employees or agents of MFG individually but are binding only upon
the assets and property of MFG.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
<TABLE>
<S> <C>
Attest: MUTUAL FUND GROUP
By: By --------------------------------------------
- ------------------------------------------
Attest: THE HANOVER INVESTMENT FUNDS, INC.
By: By --------------------------------------------
- ------------------------------------------
</TABLE>
Accepted and agreed to as to Sections 8(c) and 10:
CHEMICAL BANKING CORPORATION
By:
- -------------------------------------------
[ ]
Attorney-in-fact
THE CHASE MANHATTAN CORPORATION
By:
- -------------------------------------------
[ ]
Attorney-in-fact
18
<PAGE> 86
SCHEDULE I
TO AGREEMENT
CORRESPONDING PORTFOLIOS OF THE HANOVER INVESTMENT FUNDS, INC.
AND MUTUAL FUND GROUP
<TABLE>
<CAPTION>
HANOVER PORTFOLIOS CORRESPONDING MFG PORTFOLIOS
- -------------------------------------------- --------------------------------------
<S> <C>
The Hanover Short Term U.S. Government Fund Vista Short Term Bond Fund
The Hanover U.S. Government Securities Fund Vista U.S. Government Securities Fund
The Hanover Blue Chip Growth Fund Vista Equity Fund
The Hanover Small Capitalization Growth Fund Vista Small Cap Equity Fund
The Hanover American Value Fund Vista American Value Fund
</TABLE>
<PAGE> 87
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 304 of Regulation S-T, the following table presents fair
and accurate narrative descriptions of graphic and image material omitted from
this EDGAR Submission File due to ASCII-incompatibility and cross-references
this material to the location of each occurrence in the text.
<TABLE>
<CAPTION>
DESCRIPTION OF OMITTED LOCATION OF GRAPHIC OR IMAGE
GRAPHIC OR IMAGE IN TEXT
- -------------------------------------------- --------------------------------------------
<S> <C>
Gray shading in table Page 7 of prospectus, at third and fourth
columns of table
</TABLE>
<PAGE> 88
PART B
<PAGE> 89
STATEMENT OF ADDITIONAL INFORMATION
MUTUAL FUND GROUP
This Statement of Additional Information is not a prospectus. A
Prospectus/Proxy Statement, dated , 1996 may be obtained by
writing or calling Mutual Fund Group at 12 W. 55th Street, New York, New York
10022 (1-800-34-VISTA). Further information about Mutual Fund Group is contained
in and incorporated by reference into its Statement of Additional Information
relating to the Vista Large Cap Equity Fund and the Vista Short Term Bond Fund,
dated March 1, 1995, its Statement of Additional Information relating to Class A
Shares of the Vista Small Cap Equity Fund, dated June 19, 1995, its Statement of
Additional Information relating to Institutional Shares of the Vista Small Cap
Equity Fund, dated December 27, 1995, its preliminary Statement of Additional
Information relating to the Vista U.S. Government Securities Fund, dated
December 28, 1995, and its preliminary Statement of Additional Information
relating to the Vista American Value Fund, dated December 28, 1995, each of
which is incorporated herein by reference. Also incorporated herein by reference
are the audited financial statements of Mutual Fund Group relating to the Vista
Short Term Bond Fund, the Vista Large Cap Equity Fund (currently known as the
Vista Equity Fund) and the Vista Small Cap Equity Fund included in the Annual
Report to Shareholders of Mutual Fund Group for the fiscal year ended October
31, 1995, and the audited financial statements of The Hanover Investment Funds,
Inc. relating to The Hanover U.S. Government Securities Fund for the fiscal year
ended November 30, 1994.
, 1996
<PAGE> 90
MUTUAL FUND GROUP
PRO FORMA FINANCIAL STATEMENTS
PF-1
<PAGE> 91
VISTA SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
UNAUDITED
<TABLE>
<CAPTION>
VISTA VISTA HANOVER HANOVER
SHORT-TERM SHORT-TERM SHORT-TERM SHORT-TERM
BOND BOND U.S. GOV'T U.S. GOV'T
ISSUER PRINCIPAL VALUE PRINCIPAL VALUE
- ---------------------------------------------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
LONG-TERM INVESTMENTS
CORPORATE BONDS AND NOTES
Financial Services --
Associates Corp., N.A............................... 6.000%, due 12/01/95 $1,000,000 $ 999,400 $ -- $ --
CNA Financial....................................... 8.625%, due 03/01/96 500,000 503,685 -- --
Dow Capital BV...................................... 5.750%, due 09/15/97 250,000 248,470 -- --
Dow Capital BV...................................... 8.250%, due 02/15/96 500,000 502,820 -- --
Ford Motor Credit Corp.............................. 9.850%, due 02/27/96 1,000,000 1,011,430 -- --
General Motors Acceptance Corp...................... 7.750%, due 12/10/96 200,000 203,698 -- --
Household Finance Corp.............................. 7.500%, due 03/15/97 500,000 510,160 -- --
Lehman Brothers Holdings............................ 5.890%, due 01/12/99 1,000,000 977,290 -- --
Merrill Lynch....................................... 5.875%, due 12/01/95 900,000 899,298 -- --
Morgan Stanley Group................................ 8.875%, due 04/01/96 475,000 480,154 -- --
PACCAR Financial Corp............................... 4.530%, due 10/21/96 1,400,000 1,380,750 -- --
----------- -----------
7,717,155 --
----------- -----------
Food and Beverage Products --
PepsiCo, Inc.,...................................... 5.000%, due 02/24/97 215,000 212,439 -- --
PepsiCo, Inc........................................ 7.875%, due 08/15/96 500,000 506,930 -- --
----------- -----------
719,369 --
----------- -----------
Telecommunications --
Pacific Northwest Bell Telephone Corp............... 7.500%, due 12/01/96 1,000,000 1,015,160 -- --
Southwestern Bell Telephone Corp.................... 8.300%, due 06/01/96 500,000 506,440 -- --
----------- -----------
1,521,600 --
----------- -----------
TOTAL CORPORATE BONDS AND NOTES..................... 9,958,124 --
----------- -----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS
U.S. Treasury Notes 4.000%, due 01/31/96 -- -- 722,000 719,278
4.375%, due 08/15/96 2,000,000 1,981,240 -- --
5.375%, due 05/31/98 -- -- 1,747,000 1,733,845
5.625%, due 10/31/97 500,000 500,155 -- --
5.875%, due 05/31/96 2,000,000 2,003,120 -- --
6.000%, due 11/30/97 2,000,000 2,014,680 -- --
6.000%, due 12/31/97 750,000 755,505 -- --
6.125%, due 05/31/97 -- -- 1,429,000 1,439,260
6.125%, due 05/31/97 1,000,000 1,007,190 -- --
6.125%, due 05/15/98 1,000,000 1,010,470 -- --
6.250%, due 08/31/00 -- -- 1,497,000 1,527,105
6.500%, due 04/30/97 -- -- 764,000 773,519
6.500%, due 08/15/97 -- -- 1,640,000 1,663,780
6.500%, due 08/15/97 1,400,000 1,420,342 -- --
6.750%, due 05/31/97 2,000,000 2,032,820 -- --
6.875%, due 10/31/96 -- -- 266,000 269,253
7.000%, due 09/30/96 1,500,000 1,518,285 -- --
7.250%, due 02/15/98 500,000 516,560 -- --
7.375%, due 11/15/97 2,500,000 2,581,650 -- --
7.500%, due 01/31/97 1,000,000 1,022,340 -- --
8.750%, due 10/15/97 1,000,000 1,056,870 -- --
----------- -----------
19,421,227 8,126,040
----------- -----------
<CAPTION>
PRO-FORMA PRO-FORMA
COMBINED COMBINED
ISSUER PRINCIPAL VALUE
- ---------------------------------------------------- ---------- -----------
<S> <C> <C>
LONG-TERM INVESTMENTS
CORPORATE BONDS AND NOTES
Financial Services --
Associates Corp., N.A............................... $1,000,000 $ 999,400
CNA Financial....................................... 500,000 503,685
Dow Capital BV...................................... 250,000 248,470
Dow Capital BV...................................... 500,000 502,820
Ford Motor Credit Corp.............................. 1,000,000 1,011,430
General Motors Acceptance Corp...................... 200,000 203,698
Household Finance Corp.............................. 500,000 510,160
Lehman Brothers Holdings............................ 1,000,000 977,290
Merrill Lynch....................................... 900,000 899,298
Morgan Stanley Group................................ 475,000 480,154
PACCAR Financial Corp............................... 1,400,000 1,380,750
-----------
7,717,155
-----------
Food and Beverage Products --
PepsiCo, Inc.,...................................... 215,000 212,439
PepsiCo, Inc........................................ 500,000 506,930
-----------
719,369
-----------
Telecommunications --
Pacific Northwest Bell Telephone Corp............... 1,000,000 1,015,160
Southwestern Bell Telephone Corp.................... 500,000 506,440
-----------
1,521,600
-----------
TOTAL CORPORATE BONDS AND NOTES..................... 9,958,124
-----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS
U.S. Treasury Notes 722,000 719,278
2,000,000 1,981,240
1,747,000 1,733,845
500,000 500,155
2,000,000 2,003,120
2,000,000 2,014,680
750,000 755,505
1,429,000 1,439,260
1,000,000 1,007,190
1,000,000 1,010,470
1,497,000 1,527,105
764,000 773,519
1,640,000 1,663,780
1,400,000 1,420,342
2,000,000 2,032,820
266,000 269,253
1,500,000 1,518,285
500,000 516,560
2,500,000 2,581,650
1,000,000 1,022,340
1,000,000 1,056,870
-----------
27,547,267
-----------
</TABLE>
See notes to financial statements.
PF-2
<PAGE> 92
<TABLE>
<CAPTION>
VISTA VISTA HANOVER HANOVER
SHORT-TERM SHORT-TERM SHORT-TERM SHORT-TERM
BOND BOND U.S. GOV'T U.S. GOV'T
ISSUER PRINCIPAL VALUE PRINCIPAL VALUE
- ---------------------------------------------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Federal Home Loan Bank.............................. 4.444%, due 10/22/96 $1,000,000 $ 973,740 $ -- $ --
----------- -----------
Federal National Mortgage Association............... 5.680%, due 10/07/96 1,000,000 999,690 -- --
("FNMA")............................................ 6.270%, due 04/03/96 1,000,000 1,002,600 -- --
----------- -----------
2,002,290 --
----------- -----------
Federal National Mortgage Association Series
1991-131 Class G TAC CMO REMIC..................... 7.600% due 10/25/98 -- -- 2,041,740 2,106,323
----------- -----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS........ 22,397,257 10,232,363
----------- -----------
TOTAL LONG-TERM INVESTMENTS......................... 32,355,381 10,232,363
----------- -----------
SHORT-TERM INVESTMENTS
REPURCHASE AGREEMENT
Morgan Stanley & Co., Inc........................... 5.850%, due 11/01/95
Dated 10/31/95; Proceeds $3,230,525, Secured by
FNMA REMIC; $223,444 at 5.70%, due 3/25/08; FNMA
REMIC, Interest Only, $88,398,000, due 8/25/20;
Market Value $3,534,388
TOTAL SHORT-TERM INVESTMENTS........................ 3,230,000 3,230,000 -- --
----------- -----------
TOTAL INVESTMENTS................................... $35,585,381 $10,232,363
=========== ===========
<CAPTION>
PRO-FORMA PRO-FORMA
COMBINED COMBINED
ISSUER PRINCIPAL VALUE
- ---------------------------------------------------- ---------- -----------
<S> <C> <C>
Federal Home Loan Bank.............................. $1,000,000 $ 973,740
-----------
Federal National Mortgage Association............... 1,000,000 999,690
("FNMA")............................................ 1,000,000 1,002,600
-----------
2,002,290
-----------
Federal National Mortgage Association Series
1991-131 Class G TAC CMO REMIC..................... 2,041,740 2,106,323
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS........ 32,629,620
-----------
TOTAL LONG-TERM INVESTMENTS......................... 42,587,744
-----------
SHORT-TERM INVESTMENTS
REPURCHASE AGREEMENT
Morgan Stanley & Co., Inc...........................
Dated 10/31/95; Proceeds $3,230,525, Secured by
FNMA REMIC; $223,444 at 5.70%, due 3/25/08; FNMA
REMIC, Interest Only, $88,398,000, due 8/25/20;
Market Value $3,534,388
TOTAL SHORT-TERM INVESTMENTS........................ 3,230,000 3,230,000
-----------
TOTAL INVESTMENTS................................... $45,817,744
===========
</TABLE>
- ---------------
REMIC = Real Estate Mortgage Investment Conduit
See notes to financial statements.
PF-3
<PAGE> 93
VISTA SHORT TERM BOND FUND
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
10/31/95
UNAUDITED
<TABLE>
<CAPTION>
VISTA HANOVER
SHORT-TERM SHORT-TERM PRO FORMA PRO FORMA
BOND US GOV'T ADJUSTMENTS COMBINED
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment securities, at value............ $35,585,381 $ 10,232,363 $ 0 $ 45,817,744
Cash....................................... 60 14,289 0 14,349
Receivables
Interest................................. 556,618 171,003 0 727,621
Shares of beneficial interest sold....... 197,584 0 0 197,584
Other receivables........................ 0 44,989 0 44,989
Other Assets............................... 553 0 0 553
--------- --------- -------- ------------
Total assets........................ 36,340,196 10,462,644 0 46,802,840
--------- --------- -------- ------------
LIABILITIES:
Dividends payable.......................... 9,779 46,903 0 56,682
Other liabilities.......................... 0 904 0 904
Accrued liabilities:
Distribution fee......................... 907 0 0 907
Fund accounting fees..................... 0 2,747 0 2,747
Shareholder servicing fees............... 0 2,214 0 2,214
Sub-administration fee................... 1,512 0 0 1,512
Payable to custodian..................... 0 2,106 0 2,106
Other.................................... 82,250 8,282 0 90,532
--------- --------- -------- ------------
Total liabilities................... 94,448 63,156 0 157,604
--------- --------- -------- ------------
NET ASSETS
Paid in capital............................ 36,437,682 11,160,201 0 47,597,883
Accumulated undistributed net investment
income................................... 41,697 0 0 41,697
Accumulated undistributed net realized gain
(loss) on investment transactions........ (398,582) (834,554) 0 (1,233,136)
Net unrealized appreciation of
investments............................ 164,951 73,841 0 238,792
--------- --------- -------- ------------
Net assets.......................... $36,245,748 $ 10,399,488 0 $ 46,645,236
========= ========= ======== ============
Net assets by class
A........................................ $ 0 $ 10,399,488 0 $ 10,399,488
--------- --------- -------- ------------
I........................................ 36,245,748 0 0 36,245,748
--------- --------- -------- ------------
Total combined net assets by
class............................. $36,245,748 $ 10,399,488 0 $ 46,645,236
========= ========= ======== ============
Shares of beneficial interest outstanding
(no par value; unlimited number of shares
authorized):
A........................................ 0 1,064,431 (32,735)(11) 1,031,695
========= ========= ======== ============
I........................................ 3,595,666 0 0 3,595,666
========= ========= ======== ============
Net asset value and redemption price per
share Class A (net assets/shares
outstanding)............................. $ 0.00 $ 9.77 $ 0.00 $ 10.08
========= ========= ======== ============
Net asset value and redemption price per
share Class I (net assets/shares
outstanding)............................. $ 10.08 $ 0.00 $ 0.00 $ 10.08
========= ========= ======== ============
Cost of Investments........................ $35,420,430 $1,473,003,982 $ 0 $1,508,424,412
========= ========= ======== ============
</TABLE>
See notes to financial statements.
PF-4
<PAGE> 94
VISTA SHORT TERM BOND FUND
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED 10/31/95
UNAUDITED
<TABLE>
<CAPTION>
VISTA SHORT-TERM HANOVER SHORT-TERM PRO FORMA PRO FORMA
BOND US GOV'T ADJUSTMENTS COMBINED
---------------- ------------------ ----------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME................. $1,956,373 $783,165 $ 0 $2,739,538
---------- -------- --------- ----------
EXPENSES
Distribution fees
A.......................... 0 0 25,999(1),(5) 25,999
I.......................... 85,353 0 (85,353)(4) 0
Fund Accounting............... 0 30,602 (30,602)(8) 0
Insurance..................... 0 581 0 581
Shareholder Servicing fees
A.......................... 0 26,198 (199)(5) 25,999
I.......................... 0 0 90,614(3) 90,614
Administration fees........... 34,141 5,615 4,784(1) 44,540
Advisory fees................. 85,353 43,674 (17,675)(1) 111,352
Sub-Administration fees....... 17,071 3,744 1,456(1) 22,271
Professional fees............. 31,804 10,450 (10,450)(8) 31,804
Custodian fees................ 0 7,687 48,978(6) 56,665
Printing and postage.......... 2,646 7,305 0 9,951
Registration costs............ 496 14,454 0 14,950
Transfer agent fees
A.......................... 0 6,694 1,434(7) 8,128
I.......................... 37,383 0 (18,513)(7) 18,870
Trustee fees.................. 1,874 1,047 (595)(9) 2,326
Amortization of organizational
costs...................... 6,730 16,334 (16,334)(8) 6,730
Other......................... 3,614 2,822 0 6,436
---------- -------- --------- ----------
Total expenses........ 306,465 177,207 (6,457) 477,215
---------- -------- --------- ----------
Less net amounts
waived/borne by the
Administrator,
Shareholder Servicing
Agents, Adviser and
Distributor.............. 197,311 87,138 (22,226)(10) 262,223
---------- -------- --------- ----------
Net expenses............. 109,154 90,069 15,770 214,993
---------- -------- --------- ----------
Net investment
income.............. 1,847,219 693,096 (15,770) 2,524,545
---------- -------- --------- ----------
REALIZED AND UNREALIZED GAIN/
(LOSS) ON INVESTMENTS
Realized gain (loss) on
investment transactions.... (1,467) 12,101 0 10,634
Change in net unrealized
appreciation/depreciation
of investments............. 556,820 218,793 0 775,613
---------- -------- --------- ----------
Net realized and unrealized gain
on investments................ 555,353 230,894 0 786,247
---------- -------- --------- ----------
Net increase in net
assets from
operations.......... $2,402,572 $923,990 $ (15,770) $3,310,792
========== ======== ========= ==========
</TABLE>
See notes to financial statements.
PF-5
<PAGE> 95
VISTA LARGE CAP EQUITY
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
UNAUDITED
<TABLE>
<CAPTION>
VISTA VISTA HANOVER HANOVER PRO-FORMA PRO-FORMA
EQUITY EQUITY BLUE CHIP BLUE CHIP COMBINED COMBINED
ISSUER SHARES VALUE SHARES VALUE SHARES VALUE
- ------------------------------------------------ ------ ----------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
LONG-TERM INVESTMENTS --
COMMON STOCK --
Advertising --
Katz Media Group, Inc.*......................... -- $ -- 28,000 $ 504,000 28,000 $ 504,000
----------- ----------- ------------
Aerospace --
AlliedSignal, Inc.,............................. 9,400 399,500 -- -- 9,400 399,500
General Dynamics Corp........................... -- -- 20,000 1,107,500 20,000 1,107,500
General Motors Class H.......................... 14,500 609,000
Loral Corp...................................... 16,800 497,700 -- -- 16,800 497,700
United Technologies, Corp....................... 4,800 426,000 -- -- 4,800 426,000
----------- ----------- ------------
1,932,200 1,107,500 3,039,700
----------- ----------- ------------
Agriculture --
Case Corp....................................... 10,500 400,312 -- -- 10,500 400,312
Deere & Co...................................... 5,400 482,625 -- -- 5,400 482,625
----------- ----------- ------------
882,937 -- 882,937
----------- ----------- ------------
Airlines --
AMR Corp.,*..................................... 4,300 283,800 -- -- 4,300 283,800
----------- ----------- ------------
Automotive --
Chrysler Corp................................... 7,602 392,453 -- -- 7,602 392,453
Echlin, Inc..................................... 16,300 582,725 -- -- 16,300 582,725
Ford Motor Company.............................. 16,500 474,375 -- -- 16,500 474,375
General Motors Corp............................. 7,300 319,375 -- -- 7,300 319,375
----------- ----------- ------------
1,768,928 -- 1,768,928
----------- ----------- ------------
Banking --
Bank of New York Company, Inc................... 14,400 604,800 -- -- 14,400 604,800
BayBanks, Inc................................... -- -- 13,000 1,053,000 13,000 1,053,000
Citicorp........................................ 14,200 921,225 -- 14,200 921,225
Fifth Third Bancorp............................. -- -- 25,000 1,681,250 25,000 1,681,250
First Bank System Inc........................... 7,800 388,050 -- -- 7,800 388,050
First Interstate Bankcorp....................... 3,500 451,500 -- -- 3,500 451,500
Great Western Financial Corp.................... -- -- 51,200 1,158,400 51,200 1,158,400
NationsBank Corp................................ 5,400 355,050 -- -- 5,400 355,050
Norwest Corp.................................... 8,500 250,750 -- -- 8,500 250,750
----------- ----------- ------------
2,971,375 3,892,650 6,864,025
----------- ----------- ------------
Chemicals --
Air Products & Chemicals, Inc................... 10,000 516,250 -- -- 10,000 516,250
duPont (EI) deNemours and Co.................... 12,800 798,400 -- -- 12,800 798,400
Eastman Chemical Co............................. 6,700 398,650 -- -- 6,700 398,650
Union Carbide Corp. Holding Co.................. -- -- 44,900 1,700,588 44,900 1,700,588
----------- ----------- ------------
1,713,300 1,700,588 3,413,888
----------- ----------- ------------
</TABLE>
See notes to financial statements.
PF-6
<PAGE> 96
VISTA LARGE CAP EQUITY
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
UNAUDITED -- (CONTINUED)
<TABLE>
<CAPTION>
VISTA VISTA HANOVER HANOVER PRO-FORMA PRO-FORMA
EQUITY EQUITY BLUE CHIP BLUE CHIP COMBINED COMBINED
ISSUER SHARES VALUE SHARES VALUE SHARES VALUE
- ------------------------------------------------ ------ ----------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Computer Software --
Automatic Data Processing, Inc.................. -- $ -- 20,000 $ 1,430,000 20,000 $ 1,430,000
Cisco Systems, Inc.*............................ -- -- 18,100 1,402,750 18,100 1,402,750
Computer Associates International Inc........... 12,750 701,250 -- -- 12,750 701,250
First Data Corp................................. -- -- 17,700 1,170,412 17,700 1,170,412
General Motors Corp., Class E................... 10,600 499,525 -- -- 10,600 499,525
----------- ----------- ------------
1,200,775 4,003,162 5,203,937
----------- ----------- ------------
Computers/Computer Hardware --
Apple Computer Inc.,............................ 9,400 341,338 -- -- 9,400 341,338
Compaq Computer Corp.*.......................... 22,400 1,248,800 -- -- 22,400 1,248,800
Seagate Technology, Inc.*....................... -- -- 25,800 1,154,550 25,800 1,154,550
Sun Microsystems, Inc.*......................... 21,700 1,692,600 -- -- 21,700 1,692,600
----------- ----------- ------------
3,282,738 1,154,550 4,437,288
----------- ----------- ------------
Construction Machinery --
Caterpillar Inc................................. 12,500 701,563 -- -- 12,500 701,563
----------- ----------- ------------
Consumer Products --
Black & Decker Corp............................. 17,100 579,262 -- -- 17,100 579,262
Philip Morris Companies, Inc.................... 5,300 447,850 -- -- 5,300 447,850
Procter & Gamble Co............................. 4,600 372,600 18,000 1,458,000 22,600 1,830,600
Whirlpool Corp.................................. 8,000 424,000 -- -- 8,000 424,000
----------- ----------- ------------
1,823,712 1,458,000 3,281,712
----------- ----------- ------------
Diversified --
ITT Corp........................................ 2,600 318,500 -- -- 2,600 318,500
Textron, Inc.................................... 6,500 446,875 -- -- 6,500 446,875
----------- ----------- ------------
765,375 -- 765,375
----------- ----------- ------------
Electronics/Electrical Equipment --
AMP, Inc........................................ -- -- 33,000 1,295,250 33,000 1,295,250
Eaton Corp...................................... 5,300 271,625 -- -- 5,300 271,625
Emerson Electric Co............................. -- -- 18,200 1,296,750 18,200 1,296,750
General Electric Co............................. 5,400 341,550 22,000 1,391,500 27,400 1,733,050
Hewlett-Packard Co.............................. 4,000 370,500 15,000 1,389,375 19,000 1,759,875
Lattice Semiconductor Corp.*.................... -- -- 29,000 1,138,250 29,000 1,138,250
Littelfuse, Inc. *.............................. -- -- 37,000 1,202,500 37,000 1,202,500
Texas Instruments Inc........................... 16,300 1,112,475 -- -- 16,300 1,112,475
----------- ----------- ------------
2,096,150 7,713,625 9,809,775
----------- ----------- ------------
Environmental Services --
Browning-Ferris Industries, Inc................. 12,800 372,800 -- -- 12,800 372,800
WMX Technologies, Inc........................... -- -- 34,000 956,250 34,000 956,250
----------- ----------- ------------
372,800 956,250 1,329,050
----------- ----------- ------------
Entertainment --
Time Warner, Inc................................ -- -- 30,000 1,095,000 30,000 1,095,000
----------- ----------- ------------
Federal Credit Agencies --
Federal National Mortgage Association........... -- -- 10,000 1,048,750 10,000 1,048,750
----------- ----------- ------------
</TABLE>
See notes to financial statements.
PF-7
<PAGE> 97
VISTA LARGE CAP EQUITY
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
UNAUDITED -- (CONTINUED)
<TABLE>
<CAPTION>
VISTA VISTA HANOVER HANOVER PRO-FORMA PRO-FORMA
EQUITY EQUITY BLUE CHIP BLUE CHIP COMBINED COMBINED
ISSUER SHARES VALUE SHARES VALUE SHARES VALUE
- ------------------------------------------------ ------ ----------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Financial Services --
American General Delaware....................... 17,000 $ 558,875 -- $ -- 17,000 $ 558,875
Countrywide Credit Industries, Inc.............. -- -- 45,000 995,625 45,000 995,625
Dean Witter, Discover & Co...................... 9,300 462,675 -- -- 9,300 462,675
Donaldson Lufkin & Jenrette Inc.*............... 10,000 297,500 -- -- 10,000 297,500
Federal Home Loan Mortgage Corp................. 5,000 346,250 -- -- 5,000 346,250
Federal National Mortgage Assoc................. 6,900 723,638 -- -- 6,900 723,638
----------- ----------- ------------
2,388,938 995,625 3,384,563
----------- ----------- ------------
Food/Beverages --
Anheuser-Busch Companies, Inc................... 5,000 330,000 -- -- 5,000 330,000
Archer Daniels-Midland Corp..................... 16,275 262,434 -- -- 16,275 262,434
Coca-Cola Co.................................... 4,800 345,000 -- -- 4,800 345,000
Coca-Cola Enterprises, Inc...................... 11,000 292,875 -- -- 11,000 292,875
ConAgra, Inc.................................... 11,500 444,188 -- -- 11,500 444,188
PepsiCo., Inc................................... 9,200 485,300 25,000 1,318,750 34,200 1,804,050
Quaker Oats Co.................................. 8,300 283,238 -- -- 8,300 283,238
Sara Lee Corp................................... 10,700 314,313 -- -- 10,700 314,313
----------- ----------- ------------
2,757,348 1,318,750 4,076,098
----------- ----------- ------------
Health Care --
Abbott Laboratories............................. -- -- 26,000 1,033,500 26,000 1,033,500
Amgen, Inc.*.................................... -- -- 20,000 960,000 20,000 960,000
Baxter International Inc........................ 14,000 540,750 -- -- 14,000 540,750
Bristol-Myers Squibb Co......................... -- -- 15,000 1,143,750 15,000 1,143,750
Columbia/HCA Healthcare Corp.................... 9,000 442,125 16,000 786,000 25,000 1,228,125
Elan Corp. PLC Sponsored ADR*................... -- -- 24,000 963,000 24,000 963,000
Genzyme Corp.*.................................. -- -- 21,600 1,258,200 21,600 1,258,200
Johnson & Johnson............................... -- -- 8,000 652,000 8,000 652,000
Manor Care, Inc................................. 12,600 412,650 -- -- 12,600 412,650
Medaphis Corp.*................................. -- -- 30,000 952,500 30,000 952,500
Pfizer, Inc..................................... -- -- 16,000 918,000 16,000 918,000
Tenet Healthcare Corp.,*........................ 27,000 482,625 -- -- 27,000 482,625
----------- ----------- ------------
1,878,150 8,666,950 10,545,100
----------- ----------- ------------
Insurance --
Allstate Corp................................... 8,806 323,621 -- -- 8,806 323,621
American International Group Inc................ 7,650 645,469 -- -- 7,650 645,469
American Re Corp................................ -- -- 28,200 1,078,650 28,200 1,078,650
Chubb Corp...................................... 5,300 476,337 -- -- 5,300 476,337
Exel Ltd........................................ -- -- 19,400 1,037,900 19,400 1,037,900
Selective Insurance Group....................... -- -- 35,000 1,303,750 35,000 1,303,750
St. Paul Companies, Inc......................... 9,600 487,200 -- -- 9,600 487,200
Transamerica Corp............................... 5,000 338,750 -- -- 5,000 338,750
----------- ----------- ------------
2,271,377 3,420,300 5,691,677
----------- ----------- ------------
Machinery --
Veeco Instruments, Inc.*........................ -- -- 13,700 328,800 13,700 328,800
----------- ----------- ------------
</TABLE>
See notes to financial statements.
PF-8
<PAGE> 98
VISTA LARGE CAP EQUITY
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
UNAUDITED -- (CONTINUED)
<TABLE>
<CAPTION>
VISTA VISTA HANOVER HANOVER PRO-FORMA PRO-FORMA
EQUITY EQUITY BLUE CHIP BLUE CHIP COMBINED COMBINED
ISSUER SHARES VALUE SHARES VALUE SHARES VALUE
- ------------------------------------------------ ------ ----------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mainfold Business Forms --
New England Business Service, Inc............... -- $ -- 43,000 $ 827,750 43,000 $ 827,750
----------- ----------- ------------
Manufacturing --
Johnson Controls Inc............................ 13,600 792,200 -- -- 13,600 792,200
Kennametal Inc.................................. 8,200 255,225 -- -- 8,200 255,225
Tyco International Ltd.......................... -- -- 23,900 1,451,925 23,900 1,451,925
Varity Corp.*................................... 18,500 670,625 -- -- 18,500 670,625
----------- ----------- ------------
1,718,050 1,451,925 3,169,975
----------- ----------- ------------
Medical Products --
Medtronic, Inc.................................. -- -- 40,000 2,310,000 40,000 2,310,000
----------- ----------- ------------
Metals/Mining --
Aluminum Co. of America (ALCOA)................. 14,400 734,400 -- -- 14,400 734,400
Inco, Ltd.,..................................... 20,100 690,938 -- -- 20,100 690,938
Phelps Dodge Corp............................... 5,000 316,875 -- -- 5,000 316,875
----------- ----------- ------------
1,742,213 -- 1,742,213
----------- ----------- ------------
Oil & Gas --
Amoco Corp...................................... 6,800 434,350 -- -- 6,800 434,350
British Petroleum PLC, ADR...................... 5,000 441,250 -- -- 5,000 441,250
Halliburton Company............................. 19,600 813,400 -- -- 19,600 813,400
Mobil Corp...................................... 7,600 765,700 -- -- 7,600 765,700
Panhandle Eastern Corp.......................... 34,100 861,025 -- -- 34,100 861,025
Phillips Petroleum Co........................... 8,500 274,125 -- -- 8,500 274,125
Unocal Corp..................................... 14,800 388,500 -- -- 14,800 388,500
Williams Companies, Inc......................... 9,100 351,487 -- -- 9,100 351,487
----------- ----------- ------------
4,329,837 -- 4,329,837
----------- ----------- ------------
Paper/Forest Products --
Champion International Corp..................... 15,900 850,650 -- -- 15,900 850,650
Mead Corp....................................... 9,100 524,387 -- -- 9,100 524,387
Willamette Industries Inc....................... 10,700 620,600 -- -- 10,700 620,600
----------- ----------- ------------
1,995,637 -- 1,995,637
----------- ----------- ------------
Pharmaceuticals --
Abbot Laboratories,............................. 7,500 298,125 -- -- 7,500 298,125
Allergan, Inc................................... 18,000 528,750 -- -- 18,000 528,750
Schering-Plough Corp............................ 8,000 429,000 -- -- 8,000 429,000
Upjohn Company.................................. 6,200 314,650 -- -- 6,200 314,650
Warner-Lambert Co............................... 3,800 323,475 -- -- 3,800 323,475
----------- ----------- ------------
1,894,000 -- 1,894,000
----------- ----------- ------------
Printing & Publishing --
Harcourt General, Inc........................... 14,200 562,675 -- -- 14,200 562,675
----------- ----------- ------------
Restaurants/Food Service --
McDonald's Corp................................. 9,100 373,100 -- -- 9,100 373,100
----------- ----------- ------------
</TABLE>
See notes to financial statements.
PF-9
<PAGE> 99
VISTA LARGE CAP EQUITY
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
UNAUDITED -- (CONTINUED)
<TABLE>
<CAPTION>
VISTA VISTA HANOVER HANOVER PRO-FORMA PRO-FORMA
EQUITY EQUITY BLUE CHIP BLUE CHIP COMBINED COMBINED
ISSUER SHARES VALUE SHARES VALUE SHARES VALUE
- ------------------------------------------------ ------ ----------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Retailing --
American Stores Co.............................. 14,300 $ 427,212 -- $ -- 14,300 $ 427,212
Barnes & Noble Inc.*............................ -- -- 37,300 1,361,450 37,300 1,361,450
Circuit City Stores, Inc........................ 19,000 634,125 -- -- 19,000 634,125
CompUSA, Inc.*.................................. -- -- 34,000 1,300,500 34,000 1,300,500
Dayton-Hudson Corp.............................. 9,700 666,875 -- -- 9,700 666,875
J.C. Penney Company, Inc........................ 6,500 273,812 -- -- 6,500 273,812
Kroger Co.*..................................... 21,000 700,875 -- -- 21,000 700,875
May Department Stores Inc....................... 13,000 510,250 -- -- 13,000 510,250
Mercantile Stores Inc........................... 5,500 246,812 -- -- 5,500 246,812
Sears Roebuck & Co.............................. 9,500 323,000 -- -- 9,500 323,000
----------- ----------- ------------
3,782,961 2,661,950 6,444,911
----------- ----------- ------------
Shipping/Transportation --
Conrail Inc..................................... 8,300 570,625 -- -- 8,300 570,625
CSX Corp........................................ 7,400 619,750 -- -- 7,400 619,750
Ryder System, Inc............................... 12,000 289,500 -- -- 12,000 289,500
----------- ----------- ------------
1,479,875 -- 1,479,875
----------- ----------- ------------
Steel --
USX-US Steel Group, Inc......................... 14,000 418,250 -- -- 14,000 418,250
----------- ----------- ------------
Telecommunications --
AirTouch Communications, Inc.*.................. -- -- 55,000 1,567,500 55,000 1,567,500
A T & T Corp.,.................................. 7,400 473,600 20,000 1,280,000 27,400 1,753,600
Ameritech Corp.................................. 5,500 297,000 -- -- 5,500 297,000
Frontier Corp................................... 12,500 337,500 -- -- 12,500 337,500
GTE Corp........................................ 14,000 577,500 -- -- 14,000 577,500
Lin Television Corp. *.......................... -- -- 20,000 572,500 20,000 572,500
L.M. Ericsson Telephone Co. Sponsored ADR....... -- -- 77,000 1,644,672 77,000 1,644,672
MCI Communications Corp......................... 17,000 423,938 -- -- 17,000 423,938
Motorola, Inc................................... -- -- 15,700 1,030,312 15,700 1,030,312
NYNEX Corp...................................... 6,800 319,600 -- -- 6,800 319,600
Tele-Communications Inc., Class A*.............. 14,200 241,400 59,500 1,011,500 73,700 1,252,900
U S West, Inc................................... 7,000 333,375 -- -- 7,000 333,375
WorldCom, Inc. *................................ -- -- 30,000 978,750 30,000 978,750
----------- ----------- ------------
3,003,913 8,085,234 11,089,147
----------- ----------- ------------
Tire & Rubber --
Goodyear Tire & Rubber, Inc..................... 7,800 296,400 -- -- 7,800 296,400
----------- ----------- ------------
Toys & Games --
Mattel, Inc..................................... 17,000 488,750 -- -- 17,000 488,750
----------- ----------- ------------
</TABLE>
See notes to financial statements.
PF-10
<PAGE> 100
VISTA LARGE CAP EQUITY
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
UNAUDITED -- (CONTINUED)
<TABLE>
<CAPTION>
VISTA VISTA HANOVER HANOVER PRO-FORMA PRO-FORMA
EQUITY EQUITY BLUE CHIP BLUE CHIP COMBINED COMBINED
ISSUER SHARES VALUE SHARES VALUE SHARES VALUE
- ------------------------------------------------ ------ ----------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Utilities --
Arakis Energy Corp.*............................ -- $ -- 48,000 $ 252,000 48,000 $ 252,000
CINergy Corp.................................... 11,500 326,312 -- -- 11,500 326,312
CMS Energy Corp................................. 17,000 469,625 -- -- 17,000 469,625
FPL Group Inc................................... 16,900 707,688 -- -- 16,900 707,688
Nipsco Industries Inc.,......................... 11,900 434,350 -- -- 11,900 434,350
Pinnacle West Capital Corp...................... 23,000 632,500 -- -- 23,000 632,500
Southern Co..................................... 15,000 358,125 -- -- 15,000 358,125
----------- ----------- ------------
2,928,600 252,000 3,180,600
----------- ----------- ------------
TOTAL COMMON STOCK.............................. 54,105,727 54,953,358 109,059,085
----------- ----------- ------------
SHORT-TERM INVESTMENTS
U.S. Government Agency Obligation --
Federal Home Loan Bank Discount Note 11/01/95... -- -- 1,725,000 1,725,000 1,725,000 1,725,000
----------- ----------- ------------
TOTAL INVESTMENTS............................... $54,105,727 $56,678,358 $110,784,085
----------- ----------- ------------
</TABLE>
- ---------------
* = Non-income producing security.
ADR = American Depository Receipts.
See notes to financial statements.
PF-11
<PAGE> 101
VISTA LARGE CAP EQUITY FUND
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
10/31/95
UNAUDITED
<TABLE>
<CAPTION>
HANOVER PRO
VISTA BLUE CHIP FORMA PRO FORMA
EQUITY GROWTH ADJUSTMENTS COMBINED
----------- ----------- -------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment securities, at value............................ $54,105,727 $56,678,358 $ 0 $110,784,085
Cash....................................................... 0 2,158 27,454(8) 29,612
Receivables
Investment securities sold............................... 1,269,841 1,738,112 0 3,007,953
Interest................................................. 80,241 42,890 0 123,131
Shares of beneficial interest sold....................... 102,781 0 0 102,781
Other receivables........................................ 603 0 0 603
Unamortized organizational expenses........................ 0 27,454 (27,454)(8) 0
Other Assets............................................... 0 14,646 0 14,646
----------- ----------- ------- ------------
Total assets........................................ 55,559,193 58,503,618 0 114,062,811
----------- ----------- ------- ------------
LIABILITIES:
Payable for shares of beneficial interest redeemed......... 20,212 0 0 20,212
Payable to Custodian....................................... 10,997 0 0 10,997
Accrued liabilities:
Advisory fee............................................. 0 29,557 0 29,557
Custodian fees........................................... 0 (3,746) 0 (3,746)
Distribution fee......................................... 8,653 0 0 8,653
Fund servicing fees...................................... 0 12,975 0 12,975
Shareholder servicing fees............................... 0 12,315 0 12,315
Sub-administration fee................................... 2,399 0 0 2,399
Other.................................................... 99,709 6,522 0 106,231
----------- ----------- ------- ------------
Total liabilities................................... 141,970 57,623 0 199,593
----------- ----------- ------- ------------
NET ASSETS
Paid in capital............................................ 37,490,294 47,331,150 0 84,821,444
Accumulated undistributed net investment income............ 154,831 151,692 0 306,523
Accumulated undistributed net realized gain (loss) on
investment transactions.................................. 6,886,647 4,700,731 0 11,587,378
Net Unrealized Appreciation/Depreciation..................... 10,885,451 6,262,422 0 17,147,873
----------- ----------- ------- ------------
Net assets............................................... $55,417,223 $58,445,995 $ 0 $113,863,218
=========== =========== ======= ============
Net assets by class
Class A.................................................. $ 0 $ 0 $ 0 $ 0
----------- ----------- ------- ------------
Class B.................................................. 0 0 0 0
----------- ----------- ------- ------------
Class I.................................................. 55,417,223 58,445,995 0 113,863,218
----------- ----------- ------- ------------
Total combined net assets by class.................. $55,417,223 $58,445,995 $ 0 $113,863,218
=========== =========== ======= ============
Shares of beneficial interest outstanding (no par value;
unlimited number of shares authorized):
A........................................................ 0 0 0 0
=========== =========== ======= ============
B........................................................ 0 0 0 0
=========== =========== ======= ============
I........................................................ 4,528,446 4,668,210 105,894(11) 9,302,550
=========== =========== ======= ============
Net asset value and redemption price per share Class A (net
assets/shares outstanding)............................... $ 0.00 $ 0.00 0.00 $ 0.00
=========== =========== ======= ============
Net asset value and redemption price per share Class B (net
assets/shares outstanding)............................... $ 0.00 $ 0.00 0.00 $ 0.00
=========== =========== ======= ============
Net asset value and redemption price per share Class I (net
assets/shares outstanding)............................... $ 12.24 $ 12.52 0.00 $ 12.24
=========== =========== ======= ============
Cost of Investments........................................ $43,220,276 $50,415,937 0 $ 93,636,213
=========== =========== ======= ============
</TABLE>
See notes to financial statements.
PF-12
<PAGE> 102
VISTA LARGE CAP EQUITY FUND
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED 10/31/95
UNAUDITED
<TABLE>
<CAPTION>
VISTA HANOVER BLUE CHIP PRO FORMA PRO FORMA
EQUITY GROWTH ADJUSTMENTS COMBINED
----------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME................ $ 1,703,444 $ 1,030,246 $ 0 $ 2,733,690
----------- ----------- --------- -----------
EXPENSES
Distribution fees
Class A................................... 0 0 0 0
Class B................................... 0 0 0 0
Class I................................... 156,533 0 (156,533)(4) 0
Fund Servicing
Class A................................... 0 0 0 0
Class B................................... 0 0 0 0
Class I................................... 0 32,488 (32,488)(2) 0
Shareholder Servicing fees
Class A................................... 0 0 0 0
Class B................................... 0 0 0 0
Class I................................... 0 125,486 140,852(1),(3) 266,338
Administration fees......................... 62,613 22,737 28,381(1) 113,731
Advisory fees............................... 250,452 353,685 (149,212)(1) 454,925
Sub-Administration fees..................... 31,306 15,156 10,403(1) 56,865
Professional fees........................... 33,546 22,604 (22,604)(8) 33,546
Custodian fees.............................. 0 15,317 73,069(6) 88,386
Interest Expense............................ 0 0 0 0
Printing and postage........................ 1,885 12,745 0 14,630
Registration costs.......................... 4,117 17,437 0 21,554
Transfer agent fees
Class A................................... 0 0 0 0
Class B................................... 0 0 0 0
Class I................................... 14,577 11,282 16,393(7) 42,252
Trustee fees................................ 3,444 2,482 (249)(9) 5,677
Amortization of organizational costs........ 3,716 11,913 (11,913)(8) 3,716
Other....................................... 1,973 7,101 0 9,074
----------- ----------- --------- -----------
Total expenses.................... 564,162 650,433 (103,901) 1,110,694
----------- ----------- --------- -----------
Less amounts waived by the
Administrator, Shareholder Servicing
Agents, Adviser and Distributor...... 368,986 149,028 (62,561)(10) 455,453
----------- ----------- --------- -----------
Net expenses........................... 195,176 501,405 (41,339) 655,242
----------- ----------- --------- -----------
Net investment income............. 1,508,268 528,841 41,339 2,078,448
----------- ----------- --------- -----------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS
Realized gain (loss) on investment
transactions........................... 6,905,243 5,323,276 0 12,228,519
Change in net Unrealized
appreciation/depreciation of
Investments............................... 3,304,651 4,824,963 0 8,129,614
----------- ----------- --------- -----------
Net Realized and Unrealized gain on
Investments............................... 10,209,894 10,148,239 0 20,358,133
----------- ----------- --------- -----------
Net increase in net assets from
operations............................. $11,718,162 $10,677,080 $ 41,339 $22,436,581
=========== =========== ========= ===========
</TABLE>
See notes to financial statements.
PF-13
<PAGE> 103
VISTA SMALL CAP EQUITY
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
UNAUDITED
<TABLE>
<CAPTION>
VISTA VISTA HANOVER HANOVER PRO-FORMA PRO-FORMA
SMALL CAP SMALL CAP SMALL CAP SMALL CAP COMBINED COMBINED
ISSUER SHARES VALUE SHARES VALUE SHARES VALUE
- ------------------------------------------- --------- ----------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
LONG-TERM INVESTMENTS
COMMON STOCK
Advertising --
Catalina Marketing Corp.*.................. -- $ -- 10,000 $ 505,000 10,000 $ 505,000
----------- ----------- ------------
Agricultural Products/Services --
AGCO Corp.................................. 15,000 671,250 -- -- 15,000 671,250
Arcadian Corp. *........................... 45,000 928,125 -- -- 45,000 928,125
----------- ----------- ------------
1,599,375 -- 1,599,375
----------- ----------- ------------
Airlines --
America West Airlines, Inc., Class B*...... 40,000 545,000 -- -- 40,000 545,000
----------- ----------- ------------
Automotive --
Masland Corp............................... 20,000 280,000 -- -- 20,000 280,000
Wabash National Corp....................... -- -- 80,000 2,030,000 80,000 2,030,000
----------- ----------- ------------
280,000 2,030,000 2,310,000
----------- ----------- ------------
Banking --
Mountain Parks Financial Corp.*............ 20,000 465,000 -- -- 20,000 465,000
Zions Bancorporation....................... 17,000 1,177,250 -- -- 17,000 1,177,250
----------- ----------- ------------
1,642,250 -- 1,642,250
----------- ----------- ------------
Business Services --
ITT Educational Services, Inc. *........... 20,000 470,000 -- -- 20,000 470,000
Sitel Corp. *.............................. 15000 341,250 -- -- 15,000 341,250
----------- ----------- ------------
811,250 -- 811,250
----------- ----------- ------------
Chemicals --
Applied Extrusion Technologies, Inc.*...... 40,000 615,000 -- -- 40,000 615,000
Material Sciences Corp.*................... 6,500 108,062 -- -- 6,500 108,062
Mississippi Chemical....................... 25,000 603,125 -- -- 25,000 603,125
The Geon Company........................... 6,000 149,250 -- -- 6,000 149,250
----------- ----------- ------------
1,475,437 -- 1,475,437
----------- ----------- ------------
Computer Software --
American Management Systems, Inc.*......... 6,000 173,250 -- -- 6,000 173,250
Arc Systems, Inc.*......................... 8,000 336,000 -- -- 8,000 336,000
Baan Company, N.V.*........................ 4,400 187,000 -- -- 4,400 187,000
Computervision Corp.*...................... 65,000 763,750 -- -- 65,000 763,750
Datastream Systems, Inc.*.................. 10,000 222,500 -- -- 10,000 222,500
Desktop Data, Inc.*........................ 2,000 71,500 -- -- 2,000 71,500
Discreet Logic, Inc.*...................... 7,000 399,000 -- -- 7,000 399,000
Eagle Point Software Corp.*................ 12,000 231,000 -- -- 12,000 231,000
Expert Software, Inc. *.................... 10,000 207,500 -- -- 10,000 207,500
Hummingbird Communications Ltd.*........... 17,000 731,000 -- -- 17,000 731,000
Legato Systems, Inc.*...................... 5,000 182,500 -- -- 5,000 182,500
Maxis, Inc.*............................... 11,000 486,750 -- -- 11,000 486,750
National Instruments Corp.*................ 17,000 318,750 -- -- 17,000 318,750
Netscape Communications Corp.*............. 2,500 220,000 -- -- 2,500 220,000
Novadigm, Inc.*............................ 3,200 65,600 -- -- 3,200 65,600
Smith Micro Software, Inc.*................ 6,000 73,500 -- -- 6,000 73,500
Softkey International, Inc.*............... 12,000 378,000 -- -- 12,000 378,000
Wind River Systems*........................ 25,000 675,000 -- -- 25,000 675,000
----------- ----------- ------------
5,722,600 -- 5,722,600
----------- ----------- ------------
Commercial Services --
Franklin Quest Co.*........................ -- -- 70,000 1,671,250 70,000 1,671,250
----------- ----------- ------------
</TABLE>
See notes to financial statements.
PF-14
<PAGE> 104
VISTA SMALL CAP EQUITY
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
UNAUDITED -- (CONTINUED)
<TABLE>
<CAPTION>
VISTA VISTA HANOVER HANOVER PRO-FORMA PRO-FORMA
SMALL CAP SMALL CAP SMALL CAP SMALL CAP COMBINED COMBINED
ISSUER SHARES VALUE SHARES VALUE SHARES VALUE
- ------------------------------------------- --------- ----------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Computers/Computer Hardware --
Applied Magnetics Corp.*................... 25,000 $ 384,375 -- $ -- 25,000 $ 384,375
Cornerstone Imaging, Inc.*................. 22,500 506,250 -- -- 22,500 506,250
Hyperion Software.......................... -- -- 25,000 1,231,250 25,000 1,231,250
Micros Systems, Inc.*...................... 13000 484,250 -- -- 13,000 484,250
----------- ----------- ------------
1,374,875 1,231,250 2,606,125
Construction Materials --
Texas Industries Inc....................... 14,000 736,750 -- -- 14,000 736,750
----------- ----------- ------------
Diversified --
Albany International Corp., Class A........ 20,000 415,000 -- -- 20,000 415,000
----------- ----------- ------------
Electronics/Electrical Equipment --
California Amplifier, Inc.*................ 23,000 621,000 -- -- 23,000 621,000
Charter Power Systems, Inc................. -- -- 27,200 680,000 27,200 680,000
C.P. Clare Corp.*.......................... 25,700 664,988 -- -- 25,700 664,988
Dallas Semiconductor Corp.................. -- -- 85,000 1,806,250 85,000 1,806,250
Digi Intl Inc.............................. -- -- 95,000 2,541,250 95,000 2,541,250
ESS Technology, Inc. *..................... 11,100 333,000 -- -- 11,100 333,000
Etec Systems, Inc. *....................... 17,000 187,000 -- -- 17,000 187,000
First Alert, Inc.*......................... -- -- 70,000 1,085,000 70,000 1,085,000
Gemstar International Group Ltd.*.......... -- -- 55,000 1,148,125 55,000 1,148,125
Information Storage Devices, Inc.*......... 29,150 634,012 -- -- 29,150 634,012
ITI Technologies, Inc. *................... 35,000 883,750 -- -- 35,000 883,750
Kulicke & Soffa Industries, Inc.*.......... 15,000 525,000 -- -- 15,000 525,000
Micro Linear Corp.*........................ 25,000 384,375 -- -- 25,000 384,375
Micros Systems, Inc........................ -- -- 10,000 372,500 10,000 372,500
Microchip Technology, Inc.*................ 23,000 912,813 -- -- 23,000 912,813
Octel Comm Corp............................ -- -- 35,000 1,194,375 35,000 1,194,375
Recoton Corp.*............................. -- -- 90,000 2,002,500 90,000 2,002,500
Smartflex Systems, Inc.*................... 7000 102,375 -- -- 7,000 102,375
Tegal Corp.*............................... 54,000 688,500 -- -- 54,000 688,500
Tencor Instruments*........................ 5,000 213,125 -- -- 5,000 213,125
----------- ----------- ------------
6,149,938 10,830,000 16,979,938
----------- ----------- ------------
Entertainment --
Westcott Commission........................ -- -- 55,000 756,250 55,000 756,250
Cinar Films, Inc., Class B*................ 45,000 534,375 -- -- 45,000 534,375
Hollywood Entertainment Corp............... -- -- 75,000 2,006,250 75,000 2,006,250
----------- ----------- ------------
534,375 2,762,500 3,296,875
----------- ----------- ------------
Environmental Services --
Newpark Resources, Inc.*................... 21,000 333,375 -- -- 21,000 333,375
Sanifill, Inc.*............................ 12,000 378,000 -- -- 12,000 378,000
United Waste Systems, Inc.*................ 15,000 592,500 -- -- 15,000 592,500
----------- ----------- ------------
1,303,875 -- 1,303,875
----------- ----------- ------------
Financial Services --
Aames Financial Corp....................... 10,000 250,000 -- -- 10,000 250,000
Alex. Brown, Inc........................... 2,000 97,750 -- -- 2,000 97,750
Charter One Financial, Inc................. -- -- 20,000 567,500 20,000 567,500
Irwin Financial Corp....................... -- -- 12,000 456,000 12,000 456,000
MS Financial, Inc.*........................ 25,000 281,250 -- -- 25,000 281,250
Olympic Financing Ltd.*.................... 5,000 91,250 -- -- 5,000 91,250
SEI Corp................................... 12,800 272,000 -- -- 12,800 272,000
SPS Transaction SVCS....................... -- -- 30,000 791,250 30,000 791,250
WFS Financial, Inc.*....................... 21,300 354,112 -- -- 21,300 354,112
----------- ----------- ------------
1,346,362 1,814,750 3,161,112
----------- ----------- ------------
</TABLE>
See notes to financial statements.
PF-15
<PAGE> 105
VISTA SMALL CAP EQUITY
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
UNAUDITED -- (CONTINUED)
<TABLE>
<CAPTION>
VISTA VISTA HANOVER HANOVER PRO-FORMA PRO-FORMA
SMALL CAP SMALL CAP SMALL CAP SMALL CAP COMBINED COMBINED
ISSUER SHARES VALUE SHARES VALUE SHARES VALUE
- ------------------------------------------- --------- ----------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Health Care --
Enterprise Systems, Inc.*.................. 5,000 $ 116,875 -- $ -- 5,000 $ 116,875
Gelman Sciences, Inc.*..................... 25,000 534,375 -- -- 25,000 534,375
OrNda Healthcorp*.......................... 20,000 352,500 -- -- 20,000 352,500
Sterling House Corp.*...................... 42,000 519,750 -- -- 42,000 519,750
Universal Health Services, Inc., Class
B*....................................... 17,500 656,250 -- -- 17,500 656,250
----------- ----------- ------------
2,179,750 -- 2,179,750
----------- ----------- ------------
Home Builders --
Southern Energy Homes, Inc.*............... -- -- 25,000 368,750 25,000 368,750
----------- ----------- ------------
Hotels/Other Lodging --
Renaissance Hotel Group N.V.*.............. 25,000 487,500 -- -- 25,000 487,500
Doubletree Inc............................. -- -- 42,000 924,000 42,000 924,000
----------- ----------- ------------
487,500 924,000 1,411,500
----------- ----------- ------------
Insurance --
American Travellers Corp.*................. 25,000 559,375 -- -- 25,000 559,375
CMAC Investment Corp....................... -- -- 40,000 1,900,000 40,000 1,900,000
Life Partners Group, Inc................... 5,000 90,625 -- -- 5,000 90,625
Mutual Risk Management Ltd................. -- -- 30,000 1,106,250 30,000 1,106,250
Prudential Reinsurance Holdings, Inc.*..... 26,000 529,750 -- -- 26,000 529,750
PXRE Corp.................................. 25,000 637,500 -- -- 25,000 637,500
Renaissancere Holdings Ltd.*............... 30,000 813,750 -- -- 30,000 813,750
Transnational Re Corp. Class A*............ -- -- 35,000 783,125 35,000 783,125
United Dental Care, Inc.*.................. 2,000 61,000 -- -- 2,000 61000
----------- ----------- ------------
2,692,000 3,789,375 6,481,375
----------- ----------- ------------
Leisure --
Anthony Industries, Inc.................... 25,000 465,625 -- -- 25,000 465,625
Oakley, Inc.*.............................. 24,100 831,450 -- -- 24,100 831,450
Recoton Corp.*............................. 30,000 667,500 -- -- 30,000 667,500
----------- ----------- ------------
1,964,575 -- 1,964,575
----------- ----------- ------------
Machinery & Engineering Equipment --
Applied Power, Inc., Class A............... 25,000 759,375 -- -- 25,000 759,375
Blount Inc., Class A....................... 10,000 433,750 -- -- 10,000 433,750
Computational Systems, Inc.*............... 11,450 170,319 -- -- 11,450 170,319
Precision Castparts Corp................... 7,500 268,125 -- -- 7,500 268,125
Valmont Industries......................... 20,000 490,000 -- -- 20,000 490,000
----------- ----------- ------------
2,121,569 -- 2,121,569
----------- ----------- ------------
Manufacturing --
Elsag Bailey Process Automation N.V.,
ADR*..................................... 8,000 218,000 -- -- 8,000 218,000
----------- ----------- ------------
Medical Hosp. Management & Services --
Sierra Health Services, Inc.*.............. -- -- 50,000 1,431,250 50,000 1,431,250
----------- ----------- ------------
Medical Supplies --
Haemonetics Corp*.......................... -- -- 20,000 377,500 20,000 377,500
Paterson Dental Co.*....................... -- -- 5,000 125,000 5,000 125,000
----------- ----------- ------------
-- 502,500 502,500
----------- ----------- ------------
Metals/Mining --
Commonwealth Aluminum Corp................. 11,000 177,375 -- -- 11,000 177,375
Sinter Metals, Inc. Class A*............... -- -- 30,000 311,250 30,000 311,250
----------- ----------- ------------
177,375 311,250 488,625
----------- ----------- ------------
</TABLE>
See notes to financial statements.
PF-16
<PAGE> 106
VISTA SMALL CAP EQUITY
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
UNAUDITED -- (CONTINUED)
<TABLE>
<CAPTION>
VISTA VISTA HANOVER HANOVER PRO-FORMA PRO-FORMA
SMALL CAP SMALL CAP SMALL CAP SMALL CAP COMBINED COMBINED
ISSUER SHARES VALUE SHARES VALUE SHARES VALUE
- ------------------------------------------- --------- ----------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Oil & Gas --
NGC Corp................................... 20,000 $ 180,000 -- $ -- 20,000 $ 180,000
Nowsco Well Service, Ltd................... 10,000 113,750 -- -- 10,000 113,750
Smith International*....................... 30,000 480,000 -- -- 30,000 480,000
Total Petroleum of North America........... 17,000 172,125 -- -- 17,000 172,125
Weatherford Enterra, Inc................... 13,000 313,625 -- -- 13,000 313,625
Nabors Industries, Inc*.................... -- -- 50,000 431,250 50,000 431,250
----------- ----------- ------------
1,259,500 431,250 1,690,750
----------- ----------- ------------
Printing & Publishing --
Pulitzer Publishing........................ 15,000 678,750 -- -- 15,000 678,750
----------- ----------- ------------
Real Estate --
NHP, Inc.*................................. 25,000 356,250 -- -- 25,000 356,250
----------- ----------- ------------
Real Estate Investment Trust --
Oasis Residential, Inc..................... 12,000 261,000 -- -- 12,000 261,000
----------- ----------- ------------
Restaurants / Food Services --
Daka International, Inc.*.................. 20,000 607,500 -- -- 20,000 607,500
The Cheesecake Factory*.................... -- -- 35,000 761,250 35,000 761,250
Ihop Corp*................................. -- -- 35,000 752,500 35,000 752,500
Papa John's International, Inc.*........... -- -- 15,000 577,500 15,000 577,500
Rock Bottom Rest.,Inc.*.................... -- -- 55,000 880,000 55,000 880,000
Sonic Corp*................................ -- -- 30,000 660,000 30,000 660,000
----------- ----------- ------------
607,500 3,631,250 4,238,750
----------- ----------- ------------
Retailing --
Big B Inc.................................. 18,000 265,500 -- -- 18,000 265,500
Books-A-Million............................ -- -- 27,000 340,875 27,000 340,875
Casey's General Stores, Inc................ 15,000 345,000 -- -- 15,000 345,000
Consolidated Stores Corp.*................. 23,000 531,875 -- -- 23,000 531,875
Discount Auto Parts, Inc................... -- -- 35000 936,250 35,000 936,250
Ethan Allen Interiors, Inc.*............... 4,800 94,800 -- -- 4,800 94,800
Finish Line................................ -- -- 50,000 443,750 50,000 443,750
FTPS Software.............................. -- -- 54,000 1,458,000 54,000 1,458,000
Gucci Group NV*............................ 17,800 534,000 -- -- 17,800 534,000
Gymboree Corp*............................. -- -- 65,000 1,470,625 65,000 1,470,625
Jones Apparel Group........................ -- -- 25,000 856,250 25,000 856,250
Nieman-Marcus Group, Inc.*................. 40,000 685,000 -- -- 40,000 685,000
Tractor Supply Co.......................... -- -- 30,000 472,500 30,000 472,500
Trend Lines, Inc........................... -- -- 35,000 459,375 35,000 459,375
West Marine, Inc........................... -- -- 13,000 396,500 13,000 396,500
----------- ----------- ------------
2,456,175 6,834,125 9,290,300
----------- ----------- ------------
Shipping/Transportation --
Arnold Ind................................. -- -- 10,000 162,500 10,000 162,500
Heartland Express Inc...................... -- -- 15,000 406,875 15,000 406,875
Landstar System, Inc.*..................... 12,000 315,000 -- -- 12,000 315,000
Mark VII, Inc.*............................ 25,000 446,875 -- -- 25,000 446,875
----------- ----------- ------------
761,875 569,375 1,331,250
----------- ----------- ------------
Steel --
Northwestern Steel & Wire Co.*............. 40,000 300,000 -- -- 40,000 300,000
----------- ----------- ------------
Telecommunications --
Aspect Telecommunications Corp.*........... 25,000 859,375 -- -- 25,000 859,375
----------- ----------- ------------
Textile Mill Products --
St. John Knits, Inc........................ 17,500 837,812 -- -- 17,500 837,812
----------- ----------- ------------
</TABLE>
See notes to financial statements.
PF-17
<PAGE> 107
VISTA SMALL CAP EQUITY
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
UNAUDITED -- (CONTINUED)
<TABLE>
<CAPTION>
VISTA VISTA HANOVER HANOVER PRO-FORMA PRO-FORMA
SMALL CAP SMALL CAP SMALL CAP SMALL CAP COMBINED COMBINED
ISSUER SHARES VALUE SHARES VALUE SHARES VALUE
- ------------------------------------------- --------- ----------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Utilities --
Oklahoma Gas & Electric Co................. 17,500 $ 700,000 -- $ -- 17,500 $ 700,000
----------- ----------- ------------
Wholesaling --
Brightpoint Inc............................ -- -- 25,000 475,000 25,000 475,000
US Office Products Co.*.................... 7,500 128,438 -- -- 7,500 128,438
----------- ----------- ------------
128,438 475,000 603,438
----------- ----------- ------------
TOTAL COMMON STOCK......................... 42,984,531 40,112,875 83,097,406
----------- ----------- ------------
CONVERTIBLE CORPORATE BONDS & NOTES
Computer Software --
Softkey International Inc., #.............. 5.500% 500,000 421,020 -- -- 500,000 421,020
Spectrum Holobyte, Inc., #................. 6.500% 250,000 239,228 -- -- 250,000 239,228
----------- ----------- ------------
660,248 -- 660,248
----------- ----------- ------------
Electronics/Electrical Equipment --
Sanmina Corp., #........................... 5.500% 300,000 333,666 -- -- 300,000 333,666
----------- ----------- ------------
Health Care --
Assisted Living Concepts, #................ 7.000% 250,000 274,167 -- -- 250,000 274,167
----------- ----------- ------------
Insurance--
American Travellers Corp.,................. 6.500% 500,000 593,750 -- -- 500,000 593,750
----------- ----------- ------------
TOTAL CONVERTIBLE CORPORATE BONDS &
NOTES.................................... 1,861,831 -- 1,861,831
----------- ----------- ------------
TOTAL LONG-TERM INVESTMENTS................ 44,846,362 40,112,875 84,959,237
----------- ----------- ------------
SHORT-TERM INVESTMENTS
U.S. Government Obligations--
U.S. Treasury Bills-- 5.150% 10,000 9,949 -- -- 10,000 9,949
5.300% 54,000 53,723 -- -- 54000 53,723
----------- ----------- ------------
Total U.S. Government Obligations.......... 63,672 -- 63,672
----------- ----------- ------------
Commercial Paper--
Financial Services--
Broadway Capital Corp.,.................... 5.750% 2,000,000 1,996,167 -- -- 2,000,000 1,996,167
Ciesco LP,................................. 5.730% 2,000,000 1,995,862 -- -- 2,000,000 1,995,862
Household Finance Corp.,................... 5.800% 7,258,000 7,258,000 -- -- 7,258,000 7,258,000
Sony Capital Corp.,........................ 5.710% 2,000,000 1,988,263 -- -- 2,000,000 1,988,263
----------- ----------- ------------
13,238,292 -- 13,238,292
----------- ----------- ------------
Oil & Gas--
Questar Corp.,............................. 5.820% 2,000,000 1,999,353 -- -- 2,000,000 1,999,353
----------- ----------- ------------
Packaging--
Rexam PLC,................................. 5.730% 2,000,000 1,997,135 -- -- 2,000,000 1,997,135
----------- ----------- ------------
Total Commercial Paper..................... 17,234,780 -- -- 17,234,780
----------- ----------- ------------
TOTAL SHORT-TERM INVESTMENTS............... 17,298,452 -- -- 17,298,452
----------- ----------- ------------
Repurchase Agreement
Barclays Repo.............................. -- -- 1,511,000 1,511,000 1,511,000 1,511,000
----------- ------------
TOTAL INVESTMENTS.......................... $62,144,814 $41,623,875 $103,768,689
=========== =========== ============
</TABLE>
- ---------------
ADR = American Depository Receipt.
# = Security may only be sold to qualified institutional buyers.
* = Non-Income producing.
See notes to financial statements.
PF-18
<PAGE> 108
VISTA SMALL CAP EQUITY
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
UNAUDITED -- (CONTINUED)
PURCHASED INDEX FUTURES OUTSTANDING
<TABLE>
<CAPTION>
ORIGINAL NOMINAL UNREALIZED
EXPIRATION NUMBER OF NOMINAL VALUE AT APPRECIATION
DESCRIPTION DATE CONTRACTS VALUE 10/31/95 (DEPRECIATION)
- -------------------------------------------------------------- ---------- --------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Russell 2000 Future........................................... 12/14/95 30 $4,717,742 $4,440,000 ($ 277,742)
</TABLE>
See notes to financial statements.
PF-19
<PAGE> 109
VISTA SMALL CAP EQUITY FUND
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
10/31/95
UNAUDITED
<TABLE>
<CAPTION>
VISTA SMALL CAP HANOVER SMALL PRO FORMA PRO FORMA
EQUITY CAP GROWTH ADJUSTMENTS COMBINED
--------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment securities, at value................... $62,144,814 $41,623,875 $ 0 $103,768,689
Cash.............................................. 6,326 6,763 28,434 (8) 41,523
Receivables
Investment securities sold...................... 2,509,999 439,290 0 2,949,289
Interest........................................ 13,742 239 0 13,981
Dividends....................................... 6,350 4,000 0 10,350
Trust shares sold............................... 1,000,096 0 0 1,000,096
Other receivables............................... 0 4,903 0 4,903
Unamortized organizational expenses............... 30,051 28,434 (28,434 )(8) 30,051
----------- ----------- ----------- ------------
Total assets............................... 65,711,378 42,107,504 0 107,818,882
----------- ----------- ----------- ------------
LIABILITIES:
Payable for investment securities purchased....... 0 1,121,625 0 1,121,625
Payable for Trust shares redeemed................. 84,869 0 0 84,869
Printing exp payable.............................. 0 1,602 0 1,602
Variation margin payable on futures contracts..... 16,500 0 0 16,500
Other liabilities................................. 0 600 0 600
Accrued liabilities:
Advisory fee.................................... 0 51,033 0 51,033
Custodian fees.................................. 16,597 0 0 16,597
Distribution fee................................ 19,964 0 0 19,964
Shareholder servicing fees...................... 4,235 2,700 0 6,935
Sub-administration fee.......................... 1,764 0 0 1,764
Organizational costs payable.................... 36,343 0 0 36,343
Fund accounting................................. 0 13,066 0 13,066
Other........................................... 167,812 10,166 0 177,978
----------- ----------- ----------- ------------
Total liabilities.......................... 348,084 1,200,792 0 1,548,876
----------- ----------- ----------- ------------
NET ASSETS
Paid in capital................................... 57,768,327 36,989,686 0 94,758,013
Accumulated undistributed net investment income... 0 (225,799) 0 (225,799)
Accumulated undistributed net realized gain (loss)
on investment transactions...................... 996,627 3,346,655 0 4,343,282
Net unrealized appreciation of investments........ 6,598,340 796,170 0 7,394,510
----------- ----------- ----------- ------------
Net assets................................. $65,363,294 $40,906,712 $ 0 $106,270,006
=========== =========== =========== ============
Net assets by class
A............................................... $43,739,400 $13,056,843 $ 0 $ 56,796,243
----------- ----------- ----------- ------------
B............................................... 21,623,894 0 0 21,623,894
----------- ----------- ----------- ------------
I............................................... 0 27,849,869 0 27,849,869
----------- ----------- ----------- ------------
Total combined net assets by class......... $65,363,294 $40,906,712 $ 0 $106,270,006
=========== =========== =========== ============
Shares of beneficial interest outstanding (no par
value; unlimited number of shares authorized):
A............................................... 2,902,211 1,170,183 (303,566 )(11) 3,768,828
=========== =========== =========== ============
B............................................... 1,440,738 0 0 1,440,738
=========== =========== =========== ============
I............................................... 0 2,495,961 (647,927 )(11) 1,848,034
=========== =========== =========== ============
Net asset value and redemption price per share
Class A (net assets/shares outstanding)......... $ 15.07 $ 11.16 $ 0.00 $ 15.07
=========== =========== =========== ============
Net asset value and redemption price per share
Class B (net assets/shares outstanding)......... $ 15.01 $ 0.00 $ 0.00 $ 15.01
=========== =========== =========== ============
Net asset value and redemption price per share
Class I (net assets/shares outstanding)......... $ 0.00 $ 11.16 $ 0.00 $ 15.07
=========== =========== =========== ============
Cost of Investments............................... $55,268,732 $40,827,707 $ 0 $ 96,096,439
=========== =========== =========== ============
</TABLE>
See notes to financial statements.
PF-20
<PAGE> 110
VISTA SMALL CAP EQUITY FUND
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED 10/31/95
UNAUDITED
<TABLE>
<CAPTION>
VISTA SMALL HANOVER SMALL PRO FORMA PRO FORMA
CAP EQUITY CAP GROWTH ADJUSTMENTS COMBINED
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME........................... $ 407,650 $ 180,919 $ 0 $ 588,569
---------- ---------- --------- -----------
EXPENSES
Distribution fees
A.................................... 35,265 0 32,642 (1) 67,907
B.................................... 44,661 0 0 44,661
I.................................... 0 0 0 0
Shareholder Servicing fees
A.................................... 0 33,181 (33,181)(4) 0
B.................................... 14,887 0 0 14,887
I.................................... 0 0 69,625 (1),(5) 69,625
Administration fees..................... 20,040 15,064 25,843 (1) 60,947
Advisory fees........................... 130,401 251,060 14,834 (1) 396,295
Sub-Administration fees................. 10,030 10,043 10,410 (1) 30,483
Professional fees....................... 33,922 15,658 (15,658)(8) 33,922
Custodian fees.......................... 38,556 18,402 32,269 (6) 89,227
Printing and postage.................... 5,195 8,609 0 13,804
Registration costs...................... 59,579 14,300 0 73,879
Transfer agent fees
A.................................... 100,958 3,456 18,267 (7) 122,681
B.................................... 49,912 0 10,152 (7) 60,064
I.................................... 0 7,371 (2,553)(7) 4,818
Insurance............................... 0 536 0 536
Fund accounting......................... 0 32,665 (32,665)(8) 0
Trustee fees............................ 1,021 1,654 2,623 (9) 5,298
Amortization of organizational costs.... 6,292 11,768 (11,768)(8) 6,292
Other................................... 22,753 3,319 0 26,072
---------- ---------- --------- -----------
Total expenses................ 573,472 427,086 120,840 1,121,398
---------- ---------- --------- -----------
Less amounts waived by the
Administrator, Shareholder
Servicing Agents, Adviser and
Distributor..................... 162,875 48,147 (141,397)(10) 69,625
Less expenses borne by
Distributor..................... 61,166 0 (61,166)(10) 0
---------- ---------- --------- -----------
Net expenses.................... 349,431 378,939 323,403 1,051,773
---------- ---------- --------- -----------
Net investment income......... 58,219 (198,020) (323,403) (463,204)
---------- ---------- --------- -----------
</TABLE>
See notes to financial statements.
PF-21
<PAGE> 111
VISTA SMALL CAP EQUITY FUND -- CONTINUED
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED 10/31/95
UNAUDITED
<TABLE>
<CAPTION>
VISTA SMALL HANOVER SMALL PRO FORMA PRO FORMA
CAP EQUITY CAP GROWTH ADJUSTMENTS COMBINED
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
REALIZED AND UNREALIZED GAIN/ (LOSS) ON
INVESTMENTS
Realized gain (loss) on investment
transactions......................... $ 1,003,383 $ 4,194,823 $ 0 $ 5,198,206
---------- ---------- --------- -----------
Net realized gain (loss)................ 1,003,383 4,194,823 0 5,198,206
---------- ---------- --------- -----------
Change in net unrealized
appreciation/depreciation on:
Investments.......................... 6,876,082 580,192 0 7,456,274
Futures transactions................. (277,742) 0 0 (277,742)
---------- ---------- --------- -----------
Change in net unrealized appreciation/
depreciation......................... 6,598,340 580,192 0 7,178,532
---------- ---------- --------- -----------
Net realized and unrealized gain
(loss)............................... 7,601,723 4,775,015 0 12,376,738
---------- ---------- --------- -----------
Net increase in net assets from
operations........................... $ 7,659,942 $ 4,576,995 $(323,403) $11,913,534
========== ========== ========= ===========
</TABLE>
See notes to financial statements.
PF-22
<PAGE> 112
MUTUAL FUND GROUP
EXPLANATION OF NOTE REFERENCES:
(1) Reflects adjustment of additional Hanover assets at the Vista
contractual rate.
(2) Reflects new contractual percentages, which have grouped shareholder
and fund servicing together, therefore eliminating the current fund
servicing line items.
(3) Reflects adjustment to amounts based on a new contractual rate or
combination of rates as stated in (2) above.
(4) Reflects adjustment for fees which were previously being charged and
are no longer being charged.
(5) Reflects adjustment for Hanover assets being placed into a newly
formed class of shares.
(6) Reflects adjustment to the fees based on the newly combined assets of
the portfolios at a new contractual rate and a change in the funds fee
structure.
(7) Reflects adjustment to the fees based on the newly contracted fees
plus out of pocket expenses.
(8) Reflects elimination of duplicative services, fees or organizational
costs.
(9) Reflects the new structure of the board of the surviving fund, the
elimination of duplicative expenses and the allocation of complex-wide
fees based on the relative net assets of the newly combined fund.
(10) Adjustment to reflect the elimination or addition of expense waivers
and expenses borne.
(11) Adjustment to reflect number of shares for the Hanover net assets,
based upon the Vista funds 10/31/95 ending NAV.
PF-23
<PAGE> 113
MUTUAL FUND GROUP
NOTES TO THE PRO-FORMA FINANCIAL STATEMENTS
1. BASIS OF COMBINATION
The Pro Forma Combining Portfolio of Investments, Statement of Assets and
Liabilities and Statement of Operations ("Pro Forma Statements") reflect the
accounts of the Vista Portfolios and the Hanover Portfolios at October 31, 1995
and for the year then ended.
The Pro Forma Statements give effect to the proposed transfer of all assets
and liabilities of each portfolio of Hanover to the corresponding portfolio of
Vista in exchange for shares of such Vista Portfolio.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of each Portfolio included in their respective Statements
of Additional Information.
2. SHARES OF BENEFICIAL INTEREST
The pro forma net asset value per share and shares outstanding assume the
issuance of additional shares of the Vista Portfolios would have occurred on
October 31, 1995 in connection with the proposed reorganization. The additional
shares to be issued for each Vista Portfolio were based on the October 31, 1995
net assets of the Hanover Portfolio and the net asset value per share of the
corresponding Vista Portfolio and are as follows:
<TABLE>
<CAPTION>
HANOVER NET
ASSETS NAV PER SHARE ADDITIONAL
HANOVER AT OCTOBER 31, OF VISTA VISTA
PORTFOLIO 1995 PORTFOLIO SHARES
--------------------------------------------- -------------- -------------- ----------
<S> <C> <C> <C>
Small Cap A.................................. $ 13,056,843 $15.07 866,413
Small Cap I.................................. $ 27,849,869 $15.07 1,848,034
Short-term Bond.............................. $ 10,399,486 $10.08 1,031,695
Blue Chip.................................... $ 58,445,995 $12.24 4,775,000
</TABLE>
3. PRO FORMA OPERATING EXPENSES
The Pro Forma Combining Statement of Operations assumes similar rates of
gross investment income for the investments of each Portfolio. Accordingly, the
combined gross investment income is equal to the sum of each Portfolio's gross
investment income. Certain expenses have been adjusted to reflect the expected
expenses of the combined entities more closely. Pro forma operating expenses
include the actual expenses of the Vista and Hanover Portfolio and the combined
Portfolio adjusted for certain items which are factually supportable. For some
of the combined Portfolios certain expenses are expected to be waived by the
Shareholder Servicing Agent, the Distributor, the Adviser and the Administrator,
and those Portfolios' expenses are adjusted to reflect expected waivers. It is
intended that the other Portfolios will bear their expenses without waivers.
PF-24
<PAGE> 114
MUTUAL FUND GROUP
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION.
The response to this item is incorporated by reference to Item 27 of Part C
of Post-Effective Amendment No. 32, filed December 28, 1995 ("Amendment No.
32"), to the Registrant's Registration Statement on Form N-1A, filed May 11,
1987, Registration No. 33-14196 (the "Registration Statement").
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<S> <C>
1(a) Declaration of Trust, as amended.(1)
1(b) Certificate of Amendment to Declaration of Trust dated December 14, 1995.(12)
1(c) Certificate of Amendment to Declaration of Trust dated October 19, 1995.(12)
1(d) Certificate of Amendment to Declaration of Trust dated July 25, 1993.(12)
2 By-laws, as amended.(1)
3 None
4 Agreement and Plan of Reorganization and Liquidation between Registrant and The
Hanover Investment Funds, Inc. (filed herewith as Exhibit A to the
Prospectus/Proxy Statement).
5 Specimen share certificate.(1)
6(a) Investment Advisory Agreements and Sub-Advisory Agreements(6)
6(b) Form of Investment Advisory Agreement for Vista Small Cap Equity Fund.(9)
6(c) Form of Interim Investment Advisory Agreement.(12)
6(d) Form of Proposed Investment Advisory Agreement.(12)
6(e) Form of Proposed Investment Sub-Advisory Agreement between The Chase Manhattan
Bank and Chase Asset Management, Inc.(12)
6(f) Form of Proposed Investment Sub-Advisory Agreement between The Chase Manhattan
Bank and Van Deventer & Hoch.(12)
7(a) Distribution and Sub-Administration Agreement.(6)
7(b) Distribution and Sub-Administration Agreement dated August 21, 1995.(12)
8(a) Retirement Plan for Eligible Trustees.(12)
8(b) Deferred Compensation Plan for Eligible Trustees.(12)
9(a) Custodian Agreement.(1)
9(b) Sub-Custodian Agreement.(1)
10(a) Rule 12b-1 Distribution Plan of Vista Mutual Funds including Selected Dealer
Agreement and Shareholder Service Agreement.(1)
10(b) Rule 12b-1 Distribution Plan of Vista Premier Funds including Selected Dealer
Agreement and Shareholder Service Agreement.(1)
10(c) Rule 12b-1 Distribution Plan for each of Vista Bond Fund, Vista Short-Term Bond
Fund, Vista Equity Fund and Vista U.S. Government Money Market Fund including
Selected Dealer Agreement and Shareholder Service Agreement.(3)
10(d) Form of Rule 12b-1 Distribution Plan for Class B shares of the Vista Prime Money
Market Fund.(8)
</TABLE>
C-1
<PAGE> 115
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<S> <C>
10(e) Form of Rule 12b-1 Distribution Plan for Vista Asian Oceanic Shares Fund, Vista
Japan Pacific Shares Fund, Vista U.S. Government Securities Fund and Vista
European Shares Fund.(8)
10(f) Form of Rule 12b-1 Distribution Plan for Vista Small Cap Equity Fund.(9)
10(g) Proposed Rule 12b-1 Distribution Plan -- Class A Shares -- Vista American Value
Fund (including forms of Selected Dealer Agreement and Shareholder Servicing
Agreement).(12)
10(h) Rule 12b-1 Distribution Plan -- Class B Shares (including forms of Selected Dealer
Agreement and Shareholder Servicing Agreement).(12)
10(i) Form of Rule 18f-3 Multi-Class Plan.(12)
11 Opinion of Counsel regarding legality of issuance of shares and other matters.
(13)
12 Form of Opinion of Counsel on tax matters. (13)
13(a) Transfer Agency Agreement.(1)
13(b) Administrative Services Plan.(1)
13(c) Shareholder Servicing Agreement of Vista Mutual Funds.(1)
13(d) Form of Shareholder Servicing Agreement of Vista Premier Funds.(1)
13(e) Form of Shareholder Servicing Agreement.(12)
13(f) Administration Agreement. (6)
13(g) Form of Administration Agreement. (12)
14(a) Consent of Price Waterhouse LLP, Independent Accountants. (13)
14(b) Consent of KPMG Peat Marwick LLP, Independent Auditors. (13)
14(c) Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (included in Exhibit
11 hereto).
14(d) Consent of Simpson Thacher & Bartlett.(14)
15 Inapplicable.
16 Inapplicable.
17(a) Copy of Registrant's Declaration pursuant to Rule 24f-2 under the Investment
Company Act of 1940. (13)
17(b) Form of Proxy. (13)
</TABLE>
- ---------------
(1) Filed as an exhibit to Amendment No. 6 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) as filed with the
Securities and Exchange Committee on March 23, 1990.
(2) Filed as an exhibit to Amendment No. 11 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) as filed with the
Securities and Exchange Commission on June 8, 1992 to register shares of
the Vista Balanced Fund and IEEE Spectrum Fund series of the Trust.
(3) Filed as an exhibit to Amendment No. 15 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) as filed with the
Securities and Exchange Commission on October 30, 1992.
(4) Filed as an exhibit to Amendment No. 16 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on December 28, 1992.
(5) Filed as an exhibit to Amendment No. 19 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on June 30, 1993.
(6) Filed as an exhibit to Amendment No. 23 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on December 30, 1993.
C-2
<PAGE> 116
(7) Filed as an exhibit to Amendment No. 24 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on February 10, 1994.
(8) Filed as an Exhibit to Amendment No. 26 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on June 30, 1994.
(9) Filed as an Exhibit to Amendment No. 27 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on October 3, 1994.
(10) Filed as an Exhibit to Amendment No. 30 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on July 19, 1995.
(11) Filed as an exhibit to Amendment No. 31 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on November 13, 1995.
(12) Filed as an exhibit to Amendment No. 32.
(13) Filed herewith.
(14) To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a
part of this Registration Statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act, the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(b) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (a) above will be filed as part of an amendment to the
Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
C-3
<PAGE> 117
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on behalf of the registrant, in the City
of New York and State of New York on the 29th day of December, 1995.
MUTUAL FUND GROUP
By:
/s/ H. RICHARD VARTABEDIAN
------------------------------------
H. Richard Vartabedian,
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on the 29th day of December, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ---------------------------------------------
<C> <S>
/s/ FERGUS REID, Chairman and Trustee
III
- ---------------------------------------------
Fergus Reid, III
/s/ WILLIAM J. ARMSTRONG Trustee
- ---------------------------------------------
William J. Armstrong
/s/ JOHN R.H. Trustee
BLUM
- ---------------------------------------------
John R.H. Blum
/s/ JOSEPH J. Trustee
HARKINS
- ---------------------------------------------
Joseph J. Harkins
/s/ RICHARD E. TEN HAKEN Trustee
- ---------------------------------------------
Richard E. Ten Haken
/s/ STUART W. CRAGIN, Trustee
JR.
- ---------------------------------------------
Stuart W. Cragin, Jr.
/s/ IRV Trustee
THODE
- ---------------------------------------------
Irv Thode
/s/ H. RICHARD VARTABEDIAN President and Trustee and Principal Executive
- --------------------------------------------- Officer
H. Richard Vartabedian
/s/ MARTIN R. Treasurer and Principal Financial Officer
DEAN
- ---------------------------------------------
Martin R. Dean
</TABLE>
C-4
<PAGE> 118
MUTUAL FUND GROUP
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ------------------------------------------------------------------------
<S> <C> <C>
11 Opinion of Counsel regarding legality of issuance of shares and other
matters.................................................................
12 Form of Opinion of Counsel on tax matters...............................
14(a) Consent of Price Waterhouse LLP, Independent Accountants................
14(b) Consent of KPMG Peat Marwick LLP, Independent Auditors..................
17(a) Copy of Registrant's Declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940..........................................
17(b) Form of Proxy...........................................................
</TABLE>
<PAGE> 1
EXHIBIT 11
[LETTERHEAD OF KRAMER, LEVIN, NAFTALIS, NESSEN, KAMIN & FRANKEL]
December 28, 1995
Mutual Fund Group
125 West 55th Street
New York, New York 10019
Re: Registration Statement on Form N-14
Gentlemen:
Reference is made to the Registration Statement on Form N-14 under
the Securities Act of 1933, as amended (the "Registration Statement"), to be
filed with the Securities and Exchange Commission (the "Commission") to register
shares of beneficial interest, without par value ("Shares") of Mutual Fund Group
(the "Trust"), a Massachusetts business trust. Such shares are to be issued in
connection with an Agreement and Plan of Reorganization and Liquidation (the
"Agreement") whereby all of the then-existing assets of the following series of
The Hanover Investment Funds, Inc. (the "Company"): The Hanover Short Term U.S.
Government Fund, The Hanover U.S. Government Fund, The Hanover Blue Chip Growth
Fund, The Hanover Small Capitalization Growth Fund and The Hanover American
Value Fund (the "Hanover Portfolios") will be transferred to the following
corresponding series of the Trust: Vista Short Term Bond Fund, Vista U.S.
Government Fund, Vista Equity Fund (to be renamed Vista Large Cap Equity Fund in
connection with the Reorganization), Vista Small Cap Equity Fund and Vista
American Value Fund (the "Vista Funds") in exchange for (i) the assumption of
all the obligations and liabilities of the corresponding Hanover Portfolio by
the respective Vista Fund and (ii) the issuance and delivery to the
corresponding Hanover Portfolio of full and fractional shares of that series and
class of the Trust's shares of beneficial interest (as described in the
Agreement) of the respective Vista Fund (the "Shares"), and such Shares shall be
distributed by the respective
<PAGE> 2
KRAMER, LEVIN, NAFTALIS, NESSEN, KAMIN & FRANKEL
Mutual Fund Group
125 West 55th Street
December 28, 1995
Page 2
Hanover Portfolio pro rata to its shareholders upon its liquidation. The
Agreement was approved by the Board of Directors of the Company and the Board of
Trustees of the Trust on December 13, 1995, and December 14, 1995, respectively
and is to become effective upon its approval by shareholders of the Hanover
Portfolios.
We have reviewed the Declaration of Trust of the Trust, its
By-Laws, resolutions of the Trustees of the Trust, and the Registration
Statement (including exhibits thereto). We have also made such inquiries and
have examined originals, certified copies or copies otherwise identified to our
satisfaction of such documents, records and other instruments as we have deemed
necessary or appropriate for the purposes of this opinion. For purposes of such
examination, we have assumed the genuineness of all signatures on original
documents and the conformity to the original documents of all copies submitted.
In addition, we have assumed that the representations to be made as of the
closing date by the Trust, Company, and Chase will be made by such parties in
the form acceptable to us and that the Trust's and the Company's activities in
connections with the Agreement and the transactions contemplated therein have
been and will be conducted in the manner provided in such documents and as set
forth herein.
The opinions expressed herein are limited to matters of law which
govern the due organization of the Trust and the authorization and issuance of
the Shares. We are members of the Bar of the State of New York and do not hold
ourselves out as experts as to the law of any other state or jurisdiction. Based
upon and subject to the foregoing and provided that the terms of Reorganization
occur in accordance with the terms of the Agreement, as of the date of the
closing, we are of the opinion that, and so advise you as follows:
i. The Trust has been duly organized in its state of organization,
with authority to issue the Shares; and
ii. The Shares, when issued in accordance with the terms of the
Agreement and the Trust's Registration Statement on Form N-1A, will
be validly issued, fully paid and non-assessable by the Trust.
This opinion is solely for your information and is not to be quoted
in whole or in part, summarized or otherwise referred to, nor is it to be filed
with or supplied to or relied upon by any governmental agency or other person
without the prior written consent of this firm. This opinion is as of the date
hereof. We disclaim any responsibility to update or supplement this opinion to
reflect any events or state of facts which may hereafter come to
<PAGE> 3
KRAMER, LEVIN, NAFTALIS, NESSEN, KAMIN & FRANKEL
Mutual Fund Group
125 West 55th Street
December 28, 1995
Page 3
our attention, or any changes in statutes or regulations or any court decisions
which may hereafter occur.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references therein to our firm as Counsel to
the Trust.
Very truly yours,
/s/ Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
<PAGE> 1
EXHIBIT 12
(Simpson Thacher & Bartlett)
___________, 1996
Re: Agreement and Plan of Reorganization
and Liquidation dated as of December
__, 1995 between The Hanover
Investment Funds, Inc. and Mutual
Fund Group
The Hanover Investment Funds, Inc.
237 Park Avenue
New York, New York 10017
Mutual Fund Group
125 West 55th Street
New York, New York 10019
Ladies and Gentlemen:
You have requested our opinion with respect to the federal income tax
consequences of certain aspects of the proposed transfer by each Hanover
Portfolio(1) of all of its assets to its Corresponding MFG Portfolio solely in
exchange for MFG Portfolio Shares of the Corresponding MFG Portfolio and the
assumption of all its obligations and liabilities by the Corresponding MFG
Portfolio (as described in Section
- --------
(1) Where relevant, capitalized terms not otherwise defined herein have the
meanings they have for the purposes of the Agreement and Plan of
Reorganization and Liquidation, dated as of December __, 1995, between
Hanover and MFG (the "Agreement").
<PAGE> 2
The Hanover Investment -2- ____________, 1996
Funds, Inc.
Mutual Fund Group
2(a)(1) of the Agreement) followed by the liquidation of the Hanover Portfolio
and the distribution pro rata of such MFG Portfolio Shares to the shareholders
of the Corresponding Hanover Portfolio. The series of steps that will occur to
effect such transaction are hereinafter referred to as the "Reorganization".
This opinion is being delivered pursuant to Sections 7(d) and 8(e) of the
Agreement.
Hanover is a Maryland corporation registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end investment company
of the management type and is comprised of separate investment portfolios which
include The Hanover Short Term U.S. Government Fund, The Hanover U.S. Government
Securities Fund, The Hanover Blue Chip Growth Fund, The Hanover Small
Capitalization Growth Fund and The Hanover American Value Fund (each, a "Hanover
Portfolio"). Hanover's investment portfolios other than the Hanover Portfolios
(consisting of The Tax Free Income Fund, The New York Tax Free Income Fund, The
New Jersey Tax Free Income Fund, The International Equity Fund and The
International Bond Fund, each of which has not to date commenced investment
operations) are not parties to the Reorganization.
The authorized capital stock of Hanover consists of 200,000,000 shares
of Common Stock, each having a par value $.001 per share. As of ________, 1995,
there were outstanding _______ shares of The Hanover Short Term U.S.
<PAGE> 3
The Hanover Investment -3- ____________, 1996
Funds, Inc.
Mutual Fund Group
Government Fund (consisting of ______ "Investor Shares" and ____ "Advisor
Shares"), _______ shares of The Hanover U.S. Government Securities Fund
(consisting of ______ "Investor Shares" and ___ "Advisor Shares"), ________
shares of The Hanover Blue Chip Growth Fund (consisting of ______ "Investor
Shares" and ___ "Advisor Shares"), ________ shares of The Hanover Small
Capitalization Growth Fund (consisting of ______ "Investor Shares", ___ "Advisor
Shares" and ______ "CBC Benefit" Shares) and ______ shares of The Hanover
American Value Fund (consisting of ______ "Investor Shares" and ___ "Advisor
Shares"), and no shares were held in the treasury of Hanover.
MFG is registered under the Act as an open-end diversified investment
company of the management type and is organized as a Massachusetts business
trust comprised of separate investment portfolios, which include Vista Short
Term Bond Fund, Vista Equity Fund and Vista Small Cap Equity Fund, and which is
expected to include, at the Effective Time of the Reorganization, Vista U.S.
Government Securities Fund and Vista American Value Fund (each, an "MFG
Portfolio"). MFG's investment portfolios other than the MFG Portfolios
(consisting of Vista U.S. Government Income Fund, Vista Balanced Fund, Vista
Bond Fund, Vista Equity Income Fund, Vista IEEE Balanced Fund, Vista Growth and
Income Fund, Vista Capital Growth Fund, Vista International Equity Fund, Vista
<PAGE> 4
The Hanover Investment -4- ____________, 1996
Funds, Inc.
Mutual Fund Group
Global Fixed Income Fund, Vista Southeast Asian Fund, Vista European Fund and
Vista Japan Fund) are not parties to the Reorganization.
MFG has an unlimited number of authorized shares of beneficial
interest, currently without par value, of which as of ________, 1995 there were
outstanding the following numbers of shares of the MFG Portfolios: ________
shares of Vista Short Term Bond Fund (consisting of a single class of shares),
________ shares of Vista Equity Fund (consisting of a single class of shares)
and _______ shares of Vista Small Cap Equity Fund (consisting of __________
"Class A" shares, __________ "Class B" Shares and ______ "Institutional" Shares)
and no shares were held in the treasury of MFG. There are no outstanding shares
of Vista U.S. Government Securities Fund and Vista American Value Fund.
The Agreement was approved by the Board of Trustees of MFG on December
14, 1995 and by the Board of Directors of Hanover on December 13, 1995.
Upon satisfaction of all conditions precedent set forth in the
Agreement, the Reorganization will be effected as set forth in the following
summary:
1. Pursuant to the Agreement, Hanover will cause each Hanover Portfolio
to convey, transfer and deliver at the Closing to the MFG Portfolio set
forth opposite its name in the table attached to the Agreement as Schedule I
<PAGE> 5
The Hanover Investment -5- ____________, 1996
Funds, Inc.
Mutual Fund Group
(each such MFG Portfolio being the "Corresponding MFG Portfolio" of the
Hanover Portfolio set forth opposite its name, and each such Hanover
Portfolio being the "Corresponding Hanover Portfolio" of the MFG Portfolio
set forth opposite its name) all of the then existing assets of such Hanover
Portfolio. In consideration thereof, MFG agrees at the Closing to cause each
MFG Portfolio (i) to assume and pay, to the extent that they exist on or
after the Effective Time of the Reorganization, all of the obligations and
liabilities of its Corresponding Hanover Portfolio and (ii) to issue and
deliver to the Corresponding Hanover Portfolio full and fractional shares of
beneficial interest of the Corresponding MFG Portfolio as follows: (1) to
The Hanover Short Term U.S. Government Fund, Class A shares of Vista Short
Term Bond Fund; (2) to The Hanover U.S. Government Fund, Institutional Class
shares of Vista U.S. Government Fund; (3) to the Hanover Blue Chip Growth
Fund, Institutional Class shares of Vista Equity Fund (to be renamed Vista
Large Cap Equity Fund in connection with the Reorganization); (4) to The
Hanover Small Capitalization Growth Fund, Class A Shares and Institutional
Class shares, as described in paragraph (2) below, of Vista Small Cap Equity
Fund; and (5) to the Hanover American Value Fund, shares of Vista American
<PAGE> 6
The Hanover Investment -6- ____________, 1996
Funds, Inc.
Mutual Fund Group
Value Fund (the shares of the MFG Portfolios to be received by the Hanover
Portfolios in connection with the Reorganization are referred to
collectively as the "MFG Portfolio Shares"), with respect to each class of
each MFG Portfolio equal to that number of full and fractional MFG Portfolio
Shares as determined in Section 2(c) of the Agreement. Any shares of capital
stock, par value $.001 per share, of the Hanover Portfolios ("Hanover
Portfolio Shares") held in the treasury of Hanover on the Effective Time of
the Reorganization shall thereupon be retired.
2. At the Effective Time of the Reorganization, each Hanover Portfolio
will liquidate and distribute pro rata to its holders of Hanover Portfolio
Shares as of the Effective Time of the Reorganization the MFG Portfolio
Shares of the Corresponding MFG Portfolio received by such Hanover Portfolio
pursuant to Section 2(a) of the Agreement. In the case of each Hanover
Portfolio other than The Hanover Small Capitalization Growth Fund, all
shareholders of such Hanover Portfolios will receive the MFG Portfolio
Shares of the Corresponding MFG Portfolio identified in Section 2(a)(1)
above. In the case of the Hanover Small Capitalization Growth Fund,
shareholders of both the "Investor Shares" and the "Advisor Shares" thereof
will receive Class A shares of the Vista Small Cap Equity Fund and
shareholders of "CBC Benefit Shares"
<PAGE> 7
The Hanover Investment -7- ____________, 1996
Funds, Inc.
Mutual Fund Group
thereof will receive Institutional Class shares of the Vista Small Cap
Equity Fund. Such liquidation and distribution will be accompanied by the
establishment of an account on the respective share records of each MFG
Portfolio in the name of each record holder of Hanover Portfolio Shares of
the Corresponding Hanover Portfolio and representing the respective pro rata
number of MFG Portfolio Shares of the Corresponding MFG Portfolio due such
shareholder. Fractional Corresponding MFG Portfolio Shares will be carried
to the third decimal place. Simultaneously with such crediting of MFG
Portfolio Shares to the shareholders, the Hanover Portfolio Shares held by
such shareholders shall be cancelled.
3. As soon as practicable after the Effective Time of the
Reorganization, Hanover shall take all the necessary steps under Maryland
law and Hanover's Articles of Incorporation, as amended and supplemented, to
effect a complete dissolution of Hanover and to deregister Hanover under the
Act.
In acting as special counsel to MFG and Hanover with respect to the
Reorganization, we have, among other things, reviewed the following documents:
1. The Agreement;
2. The proxy statement of MFG dated __________, 1996; and
<PAGE> 8
The Hanover Investment -8- ____________, 1996
Funds, Inc.
Mutual Fund Group
3. MFG's Registration Statement on Form N-14 under the Securities Act
of 1933, as amended and declared effective by the Securities and
Exchange Commission.
In preparing our opinion, as hereinafter set forth, we have reviewed
such other documents relating to the Reorganization and such federal income tax
authorities as we deemed relevant under the circumstances. Further, for purposes
of this opinion, we have assumed, with your permission and without independent
investigation, the following:
1. Each of the Hanover Portfolios and the Corresponding MFG Portfolios
is treated as a separate corporation in accordance with section 851(h) of
the Internal Revenue Code of 1986, as amended (the "Code"), and each
qualifies as a "regulated investment company" for federal income tax
purposes pursuant to section 851 of the Code.
2. The fair market value of the MFG Portfolio Shares received by the
shareholders of each Hanover Portfolio will be approximately equal to the
fair market value of the Hanover Portfolio Shares of such Hanover Portfolio
surrendered by the shareholders of such Hanover Portfolio in the
Reorganization.
<PAGE> 9
The Hanover Investment -9- ____________, 1996
Funds, Inc.
Mutual Fund Group
3. There is no plan or intention by the shareholders of the Hanover
Portfolios who own 5 percent or more of the shares of any Hanover Portfolio,
and to the best of the knowledge of management of the Hanover Portfolios,
there is no plan or intention on the part of the remaining shareholders of
each Hanover Portfolio as a group, to sell, exchange, or otherwise dispose
of a number of MFG Portfolio Shares that would reduce the Hanover
shareholders' ownership of such MFG Portfolio Shares to a number of shares
having a value, as of the date of the Reorganization, of less than 50% of
the value of all of the formerly outstanding Hanover Portfolio Shares of
such Hanover Portfolio. In this connection, Hanover Portfolio Shares or MFG
Portfolio Shares held by Hanover shareholders and otherwise sold, redeemed
or disposed of prior or subsequent to the Reorganization will be considered,
except for shares which are required to be redeemed at the demand of
shareholders by a Hanover Portfolio or MFG Portfolio in the ordinary course
of its business as required by Section 22(e) of the Act ("Section 22(e)
Redemptions").
4. No cash or consideration other than MFG Portfolio Shares will be
received by the Hanover Portfolios from the MFG Portfolios or distributed to
any shareholders of
<PAGE> 10
The Hanover Investment -10- ____________, 1996
Funds, Inc.
Mutual Fund Group
the Hanover Portfolios in liquidation of the Corresponding Hanover
Portfolios.
5. Each MFG Portfolio will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair market
value of the gross assets held by the Corresponding Hanover Portfolios
immediately prior to the Reorganization. In this connection, amounts used by
any Hanover Portfolio to pay its reorganization expenses, amounts paid by
the Hanover Portfolios to shareholders who receive cash or other property,
and all redemptions and distributions (except for Section 22(e) Redemptions
and regular, normal dividends) made by the Hanover Portfolios immediately
preceding the transfer will be included as assets of the Hanover Portfolios
held immediately prior to the Reorganization. The Hanover Portfolios will
pay no amounts to dissenters.
6. None of the MFG Portfolios has any plan or intention to reacquire
any of its shares issued in the Reorganization, subject to the right of MFG
Portfolios' shareholders to receive Section 22(e) Redemptions.
7. Neither Chemical Banking Corporation, The Chase Manhattan
Corporation nor any of their affiliates has any plan or intention to sell,
redeem or otherwise dispose of
<PAGE> 11
The Hanover Investment -11- ____________, 1996
Funds, Inc.
Mutual Fund Group
any Hanover Portfolio Shares or MFG Portfolio Shares in connection with the
Reorganization.
8. None of the MFG Portfolios has any plan or intention to sell or
otherwise dispose of any of the assets of the Corresponding Hanover
Portfolios acquired in the Reorganization, except for dispositions made in
the ordinary course of business.
9. The obligations and liabilities of the Hanover Portfolios, if any,
to be assumed by the Corresponding MFG Portfolios pursuant to the
Reorganization and the liabilities, if any, to which the transferred assets
of the Hanover Portfolios are subject were incurred by the Hanover
Portfolios in the ordinary course of their businesses.
10. Following the consummation of the Reorganization, each of the MFG
Portfolios will continue the historic business of the Corresponding Hanover
Portfolio or use a significant portion of the Corresponding Portfolio's
historic business assets in a business.
11. The shareholders of the Hanover Portfolios will pay their
respective expenses, if any, incurred in connection with the Reorganization.
12. Only certain expenses of Hanover and MFG which are directly related
to the Reorganization will be paid
<PAGE> 12
The Hanover Investment -12- ____________, 1996
Funds, Inc.
Mutual Fund Group
by Chemical Banking Corporation and/or The Chase Manhattan Corporation
pursuant to section 10 of the Agreement.
13. There is no intercorporate indebtedness existing between any
Hanover Portfolio and the Corresponding MFG Portfolio that was issued,
acquired, or will be settled at a discount.
14. None of the MFG Portfolios owns, directly or indirectly, nor has
owned during the past five years, directly or indirectly, any shares of the
Corresponding Hanover Portfolios.
15. The fair market value of the assets of each of the Hanover
Portfolios to be transferred to the Corresponding MFG Portfolios will equal
or exceed the sum of the liabilities assumed by the Corresponding MFG
Portfolios, plus the amount of liabilities, if any, to which the transferred
assets are subject.
Based on the foregoing, and assuming that the Reorganization is
effected in accordance with the terms of the Agreement (and exhibits thereto)
and that the representations made pursuant thereto by the parties are true at
the Effective Time, it is our opinion that for federal income tax purposes:
(i) the Reorganization will constitute a reorganization within the
meaning of section 368(a)(1) of
<PAGE> 13
The Hanover Investment -13- ____________, 1996
Funds, Inc.
Mutual Fund Group
the Code with respect to each Hanover Portfolio and its Corresponding MFG
Portfolio;
(ii) no gain or loss will be recognized by any of the Hanover
Portfolios or the Corresponding MFG Portfolios upon the transfer of all the
assets and liabilities, if any, of each Hanover Portfolio to its
Corresponding MFG Portfolio solely in exchange for MFG Portfolio Shares or
upon the distribution of the MFG Portfolio Shares to the holders of Hanover
Portfolio Shares solely in exchange for all of their Hanover Portfolio
Shares;
(iii) no gain or loss will be recognized by shareholders of any of the
Hanover Portfolios upon the exchange of such Hanover Portfolio Shares solely
for MFG Portfolio Shares;
(iv) the holding period and tax basis of the MFG Portfolio Shares
received by each holder of Hanover Portfolio Shares pursuant to the
Reorganization will be the same as the holding period (provided the Hanover
Portfolio Shares were held as a capital asset on the date of the
Reorganization) and tax basis of the Hanover Portfolio Shares held by the
shareholder immediately prior to the Reorganization; and
(v) the holding period and tax basis of the assets of each of the
Hanover Portfolios acquired by its
<PAGE> 14
The Hanover Investment -14- ____________, 1996
Funds, Inc.
Mutual Fund Group
Corresponding MFG Portfolio will be the same as the holding period and tax
basis of those assets to each of the Hanover Portfolios immediately prior to
the Reorganization.
The payment by Chemical Banking Corporation and/or The Chase Manhattan
Corporation of certain expenses of Hanover and MFG which are directly related to
the Reorganization (referred to in section 10 of the Agreement) will not affect
the opinions set forth above regarding the federal income tax consequences of
the exchanges by Hanover and the shareholders of Hanover. However, no opinion is
expressed as to any other federal income tax consequences to any of the parties
of the payment of such expenses by Chemical Banking Corporation and/or The Chase
Manhattan Corporation.
We express our opinion herein only as to those matters specifically set
forth above and such opinion may be relied upon solely by you for the exclusive
purpose of ascertaining the federal income tax consequences of the
Reorganization contemplated in the Agreement to the Hanover
<PAGE> 15
The Hanover Investment -15- ____________, 1996
Funds, Inc.
Mutual Fund Group
Portfolios, the MFG Portfolios and the shareholders of the Corresponding Hanover
Portfolios on their receipt of the MFG Portfolio Shares pursuant to the
Agreement.
Very truly yours,
<PAGE> 1
EXHIBIT 14(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information and Combined Proxy Statement/Prospectus constituting
parts of this registration statement on From N-14 (the "N-14 Registration
Statement") of our reports, dated December 11, 1995, relating to the financial
statements of Vista Short-Term Bond Fund, Vista Equity Fund (subsequently
renamed Vista Large Cap Equity Fund) and Vista Small Cap Equity Fund
(separately managed portfolios of Mutual Fund Group), appearing in the Annual
Report to Shareholders for the fiscal year ended October 31, 1995, which are
incorporated by reference in such Combined Proxy Statement/Prospectus and
Statement of Additional Information. We also consent to the incorporation by
reference of our report, dated December 19, 1994, in the Statement of Additional
Information of Post Effective Amendment No. 29 of Mutual Fund Group (the "N-1A
Registration Statement"), relating to the financial statements of Vista
Short-Term Bond Fund and Vista Equity Fund (subsequently renamed Vista Large Cap
Equity Fund), appearing in the Annual Report to Shareholders for the fiscal year
ended October 31, 1994, which are incorporated by reference in such Combined
Proxy Statements/Prospectus and Statement of Additional Information. We also
consent to the references to us under the headings "Financial Statements and
Experts" in the N-14 Registration Statement, and under the headings "Condensed
Financial information - Per Share Data and Capital Changes" in the Prospectuses
and "Independent Accountants" in the Statement of Additional Information, of the
N-1A Registration Statement.
/s/ PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 27, 1995
<PAGE> 1
EXHIBIT 14(b)
INDEPENDENT AUDITORS' CONSENT
To the Shareholders and Board of Directors
The Hanover Investment Funds, Inc.
We consent to the use of our report dated January 20, 1995 with respect to the
financial statements and financial highlights of the following portfolios of
The Hanover Investment Funds, Inc. incorporated herein by reference:
- - The Short Term U.S. Government Fund--the statement of assets and liabilities
as of November 30, 1994 and the related statements of operations for the year
then ended, changes in net assets for the year then ended and for the period
from February 25, 1993 (commencement of operations) to November 30, 1993 and
financial highlights for the year then ended and for the period from February
25, 1993 (commencement of operations) to November 30, 1993;
- - The U.S. Government Securities Fund--the statement of assets and liabilities
as of November 30, 1994 and the related statements of operations for the year
then ended, changes in net assets for the year then ended and for the period
from February 19, 1993 (commencement of operations) to November 30, 1993 and
financial highlights for the year then ended and for the period from February
19, 1993 (commencement of operations) to November 30, 1993;
- - The Blue Chip Growth Fund--the statement of assets and liabilities as of
November 30, 1994 and the related statements of operations for the year then
ended, changes in net assets for the year then ended and for the period from
February 19, 1993 (commencement of operations) to November 30, 1993 and
financial highlights for the year then ended and for the period from February
19, 1993 (commencement of operations) to November 30, 1993;
- - The Small Capitalization Growth Fund--the statement of assets and liabilities
as of November 30, 1994 and the related statements of operations for the year
then ended, changes in net assets for the year then ended and for the period
from April 1, 1993 (commencement of operations) to November 30, 1993 and
financial highlights for the year then ended and for the period from April 1,
1993 (commencement of operations) to November 30, 1993.
We also consent to the references to our firm under the headings "Financial
Highlights" and "Financial Statements and Experts" in the Prospectus.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG PEAT MARWICK LLP
New York, New York
December 29, 1995
<PAGE> 1
EXHIBIT 17(a)
As filed with the Securities and Exchange Commission on July 16, 1987
File No.
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
and
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 8
Mutual Fund Group*
(Exact Name of Registrant as Specified in Charter)
200 Berkeley Street, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 617-423-3500
Arnold D. Scott, 200 Berkeley Street, Boston, Massachusetts 02116
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this registration statement.
Pursuant to Rule 24f-2(a)(1), Registrant hereby declares that an indefinite
number of its Shares of Beneficial Interest (without par value) is being
registered by this registration statement.
===========================================================================
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
*Relating to shares of Capital Growth Fund
<PAGE> 1
EXHIBIT 17(b)
[Preliminary Proxy Material]
THE HANOVER INVESTMENT FUNDS, INC.
[Name of Fund]
This proxy is solicited on behalf of the Board of Directors of The Hanover
Investment Funds, Inc. for the Special Meeting of Shareholders to be held
on ____________ __, 1996.
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 Shareholders to be held at 237 Park
Avenue, 13th Floor, New York, New York 10017, on ____________ __, 1996 at
_________, and at any adjournments thereof. The undersigned hereby acknowledges
receipt of the Notice of the Special Meeting of Shareholders and accompanying
Prospectus/Proxy Statement of Mutual Fund Group 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 Shareholders. A majority of the
proxies present and acting at the Special Meeting of Shareholders 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 the 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.
Dated _______________ __, 1996
_______________________________________
_______________________________________
Signature(s), Title(s) (if applicable)
PLEASE SIGN, DATE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE
<PAGE> 2
THE HANOVER INVESTMENT FUNDS, INC.
[Name of Fund]
PLEASE INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX 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 Prospectus/Proxy Statement for a discussion of the
Proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSAL.
- -------------------------------------------------------------------------------
Proposal to approve the Agreement and Plan of Reorganization and Liquidation.
FOR / / AGAINST / / ABSTAIN / /
- --------------------------------------------------------------------------------
PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
