As filed with the Securities and Exchange Commission on December 28, 1995
File No. 811-5151
Registration No. 33-14196
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 32 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Post-Effective Amendment No. 71 |X|
MUTUAL FUND GROUP
(Exact Name of Registrant as Specified in Charter)
125 West 55th Street
New York, New York 10019
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 492-1600
Copy to:
Ann Bergin Carl Frischling, Esq.
Mutual Fund Group Kramer, Levin, et. al.
125 West 55th Street 919 Third Avenue
New York, New York 10019 New York, New York 10022
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
|_| immediately upon filing pursuant to |_| on( ) pursuant to
paragraph (b) paragraph (b)
|_| 60 days after filing pursuant to |_| on( ) pursuant to
paragraph (a)(1) paragraph (a)(1)
|X| 75 days after filing pursuant to |_| on( ) pursuant to
paragraph (a)(2) paragraph (a)(2) rule
485.
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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The Registrant has registered an indefinite number or amount of its shares of
common stock for each of its series under the Securities Act of 1933 pursuant to
Rule 24f-2 under the Investment Company Act of 1940 on July 18, 1994 and
Registrant's Rule 24f-2 Notice was filed on November 27, 1995.
<PAGE>
CROSS-REFERENCE SHEET
(Pursuant to Rule 404 showing location in each form of
Prospectus of the responses to the Items in Part A and location in each form of
Prospectus and the Statement of Additional Information of the responses to the
Items in Part B of Form N-1A).
VISTA(sm) GOVERNMENT SECURITIES FUND
VISTA(SM) AMERICAN VALUE FUND
Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
1 Front Cover Page *
2(a) Expense Summary *
(b) Not Applicable *
3(a) Financial Highlights *
(b) Not Applicable *
(c) Yield and Performance *
Information
4(a)(b) Other Information *
Concerning Shares of the
Fund; Investment Objectives,
Policies and Risk Factors;
Additional Information on
Investment Policies and
Techniques
(c) Investment Objectives, Policies *
and Risk Factors
(d) Not Applicable *
5(a) Management *
(b) Management - The Adviser; *
Back Cover Page
(c)(d) Management - The *
Administrator; Shareholder
Servicing Agents, Transfer
Agent and Custodian
(e) Shareholder Servicing Agents, *
Transfer Agent and Custodian -
Transfer Agent and Custodian;
Back Cover Page
(f) Other Information Concerning *
Shares of the Fund - Expenses
(g) Not Applicable *
5A Not Applicable *
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<PAGE>
6(a) Other Information Concerning *
Shares of the Fund -
Description of Shares, Voting
Rights and Liabilities
(b) Not Applicable *
(c) Not Applicable *
(d) Not Applicable *
(e)(f) Shareholder Servicing Agents, *
Transfer Agent and Custodian -
Shareholder Servicing Agents
(f) Other Information Concerning *
Shares of the Fund - Net
Income - Dividends and Capital
Gains Distributions
(g) Tax Matters Tax Matters
7(a) Purchases and Redemptions of *
Shares - Purchases; Back
Cover Page
(b) Purchases and Redemptions of *
Shares - Purchases; Other
Information Concerning Shares
of the Fund - Net Asset Value;
Shareholder Servicing Agents,
Transfer Agent and Custodian -
Shareholder Servicing Agents
(c) Not Applicable *
(d) Shareholder Servicing Agents, *
Transfer Agent and Custodian -
Shareholder of Servicing
Agents
(e) Purchases and Redemptions of *
Shares; Other Information
concerning Shares of the Fund
- Distribution Plans and
Distribution and Sub-
Administration Agreement
8(a) Purchases and Redemptions of *
Shares - Redemptions
(b) Purchases and Redemptions of *
Shares - Redemptions
(c) Not Applicable *
(d) Not Applicable *
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<PAGE>
9 Not Applicable *
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<PAGE>
VISTA(SM) U.S. GOVERNMENT SECURITIES FUND
VISTA(sm) AMERICAN VALUE FUND
Item Number
Form N-1A, Statement of Additional
Part B Prospectus Caption Information Caption
10 * Front Cover Page
11 * Front Cover Page
12 * Not Applicable
13 Investment Objective and Investment Objective,
Policies Policies and Restrictions
14 * Management of the Fund -
Trustees and Officers
15(a) * Not Applicable
(b) * Not Applicable
(c) * Management of the Fund
16(a) Management-- The Adviser Management of the Fund-Adviser
(b) Management -- The Adviser Management of the Fund-Adviser
(c) Other Information Concerning Management of the Fund-
Shares of the Fund - Expenses Administrator
(d) Management -- Management of the Fund-
The Administrator Administrator
(e) * Not Applicable
(f) Purchases and Redemptions Management of the Fund-
of Shares; Other Information Distribution
concerning Shares -
Distribution of the Fund
-Distribution Plan and
Distribution and Sub-
Administration Agreement
(g) * Not Applicable
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<PAGE>
Item Number
Form N-1A, Statement of Additional
Part B Prospectus Caption Information Caption
(h) * Management of the Fund -
Shareholder Servicing Agents,
Transfer Agent and Custodian;
Independent Accountants; Back
Cover Page
(i) * Not Applicable
17 Investment Objective and Investment Objectives, Policies
Policies and Restrictions - Portfolio
Transactions
18 Other Information Concerning General Information - Description
Shares of the Fund - of Shares, Voting Rights and
Description of Shares Liabilities
Voting Rights and Liabilities
19(a) Purchases and Redemptions of *
Shares
(b) Other Information Concerning Determination of Net Asset Value
Shares of the Fund - Net Asset
Value; Purchases and
Redemptions of Shares
(c) * Not Applicable
20 Tax Matters Tax Matters
21(a) * Management of the Fund -
Distributor
(b) * Management of the Fund -
Distributor
(c) * Not Applicable
22 * Performance Information - Yield
Quotations
23 * Not Applicable
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
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<PAGE>
PART A
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PROSPECTUS
VISTA(SM) AMERICAN VALUE FUND
___________, 1996
VISTA AMERICAN VALUE FUND (the "Fund") seeks to maximize total return,
consisting of capital appreciation (both realized and unrealized) and income.
The Fund seeks to achieve its objective 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 are considered to be undervalued by the
market. Equity securities include common stock, preferred stock and securities
convertible into or exchangeable for common or preferred stock. The Fund is a
non-diversified series of Mutual Fund Group (the "Trust"), an open-end,
management investment company organized as a business trust under the laws of
the Commonwealth of Massachusetts on May 11, 1987, presently consisting of __
separate series (the "Funds"). Because the Fund is "non-diversified", more of
the Fund's assets may be concentrated in the securities of any single issuer
than if the Fund was "diversified" which may make the value of shares of the
Fund more susceptible to certain risks than shares of a diversified mutual fund.
Of course, there can be no assurance that the Fund will achieve its
investment objective. Prospective investors should carefully consider the risks
associated with an investment in the Fund. For a further discussion on the risks
associated with an investment in the Fund, see "Investment Objective and
Policies" in this Prospectus. Investors should also refer to "Additional
Information on Investment Policies and Techniques" on page __.
The Chase Manhattan Bank, N.A. ("Chase" or the "Adviser") is the
investment adviser, custodian (the "Custodian") and administrator (the
"Administrator"). Van Deventer & Hoch ("VD&H") is the investment sub- adviser.
Vista Broker-Dealer Services, Inc. ("VBDS") is the Fund's distributor and is
unaffiliated with Chase. Investments in the Fund are subject to risk--including
possible loss of principal--and will fluctuate in value. Shares of the Fund 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 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.
Shares of the Fund are continuously offered for sale without a
sales load through VBDS, the Fund's distributor (the "Distributor"), to
customers of a financial institution, such as a federal or state-chartered bank,
trust company or savings and loan association with which the Fund has entered
into a shareholder servicing agreement (collectively, "Shareholder Servicing
Agents") or to customers of a securities broker or certain financial
institutions who have entered into Selected Dealer Agreements with the
Distributor. The Fund has a distribution plan and may incur distribution
expenses, at an annual rate, not to exceed 0.25% of average daily net assets. An
investor should obtain from his Shareholder Servicing Agent, and should read in
conjunction with this Prospectus the materials provided by the Shareholder
Servicing Agent describing the procedures under which the shares may be
purchased and redeemed through such Shareholder Servicing Agent. Shares of the
Fund may be redeemed by shareholders at the net asset value next determined on
any Fund Business Day as hereinafter defined.
This Prospectus sets forth concisely the information concerning the
Fund that a prospective investor should know before investing. A Statement of
Additional Information for the Fund, dated ________________, 1996, which
contains more detailed information concerning the Fund including the trustees
and officers of the Fund, has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference. An investor
may obtain a copy of the Statement of Additional Information without charge by
contacting his or her Shareholder Servicing Agent, the Distributor or by calling
the Vista Service Center at 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
<PAGE>
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Investors should read this Prospectus and retain it for future reference.
For information about the Fund or your account, simply call the Vista
Service Center at the following toll-free number: 1-800-34-VISTA.
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<PAGE>
TABLE OF CONTENTS
Expense Summary.............................................................4
Financial Highlights........................................................5
Investment Objective and Policies...........................................6
Additional Information on Investment Policies and Techniques................8
Management of the Fund.....................................................13
Purchases and Redemptions of Shares........................................15
Tax Matters................................................................19
Other Information Concerning Shares of the Fund............................20
Shareholder Servicing Agents, Transfer Agent and Custodian.................22
Yield and Performance Information .........................................24
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<PAGE>
EXPENSE SUMMARY
The following table provides (i) a summary of the aggregate annual
operating expenses of the Fund, as a percentage of average net assets of the
Fund, and (ii) an example illustrating the dollar cost of such expenses on a
$1,000 investment in shares of the Fund.
Annual Fund Operating Expenses
(as a percentage of net assets)
Investment Advisory Fee........................ 0.70%
Rule 12b-1 Distribution Plan Fee+.............. 0.25%
Other Expenses
--Administration Fee......................... 0.10%
--Sub-Administration Fee..................... 0.05%
--Shareholder Servicing Fee.................. 0.08%
--Other Operating Expenses++................. 0.14%
----
Total Fund Operating Expenses.................. 1.32%
====
Example:
You would pay the following expenses on a $1,000 investment in the
Fund, assuming (1) a 5% annual total return and (2) redemption at the end of:
1 year ...................................................... $
3 years....................................................... $
5 years ...................................................... $
10 years...................................................... $
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+ As a result of distribution fees, a long-term shareholder in the Fund
may pay more than the economic equivalent of the maximum front-end
sales charges permitted by the rules of the National Association of
Securities Dealers, Inc.
++ A shareholder may incur a $10.00 charge for certain wire redemptions.
The purpose of the expense summary provided above is to assist
investors in understanding the various costs and expenses that a shareholder in
the Fund will bear directly or indirectly. The expense summary shows the
investment advisory fee, distribution plan fee, administrative fee,
sub-administrative fee, shareholder servicing agent fee and other operating
expenses expected to be incurred by the Fund during the fiscal year. A more
complete description of the Fund's expenses, including any potential fee
waivers, is set forth herein.
The "Example" set forth above assumes all dividends and other
distributions are reinvested and that the percentages under "Annual Fund
Operating Expenses" remain the same in the years shown. The "Example" should not
be considered a representation of past or future expenses of the Fund; actual
expenses may be greater or less than shown.
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<PAGE>
FINANCIAL HIGHLIGHTS
[The table set forth below provides selected per share data and ratios
for a share outstanding throughout the period shown for the Hanover American
Value Fund, the predecessor to the Fund (the "Predecessor Fund"). This
information is supplemented by financial statements and accompanying notes
appearing in the Fund's [Semi]Annual Report to Shareholders for the period from
commencement of operations (see respective dates below) through ___________,
1995, which has been audited by _______ and which is incorporated by reference
into the Statement of Additional Information. Shareholders may obtain a copy of
this [semi-]annual report by contacting the Fund or their Shareholder Servicing
Agent.]
__/__/95*
through
__/__/95
(Unaudited)
Per Share Operating Performance
Net Asset Value, Beginning of Period............................... $
Income From Investment Operations..................................
Net Investment Income..............................................
Net Gains or Losses in 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.......................................... $
=
Totals Return(1)........................................................
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)............................. $
Ratio of Expenses to Average Net Assets #...........................
Ratio of Net Investment Income to Average Net Assets #
Ratio of Expenses Without Waivers and Assumption of Expenses to
Average Net Assets #..............................................
Ratio of Net Investment Income Without Waivers and Assumption of
Expenses to Average Assets #......................................
Portfolio Turnover Rate................................................. ____
# Annualized.
* Commencement of operations.
** Commencement of offering shares.
(1) Total rates of return are calculated before taking into any sales load
for Class A shares, or any contingent deferred sales charge for Class
B shares.
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<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to maximize total return,
consisting of capital appreciation (both realized and unrealized) and income.
The Fund seeks to achieve its objective 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 the Fund's Adviser or
Sub-Adviser, are undervalued by the market. The equity securities in which the
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 Fund's total assets will be
invested in the equity securities of U.S. companies. The 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 Fund invests are expected to be either
listed on an exchange or traded in an over-the-counter market. The 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 "Additional Information on Investment Policies and Techniques."
The 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.
In selecting investments for the Fund, the Fund's Adviser or
Sub-Adviser generally seeks companies which it believes exhibit characteristics
of financial soundness and are undervalued by the market. In seeking to identify
financially sound companies, the Fund's Adviser or Sub-Adviser 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, the Fund's Adviser or Sub-Adviser looks for
companies with substantial tangible assets such as land, timber, oil and other
natural resources, or important brand names, patents, franchises or other
intangible assets which may have greater value than what is reflected in the
company's financial statements. The Adviser or Sub-Adviser will often select
investments for the Fund which are considered to be unattractive by other
investors or are unpopular with the financial press.
Common Stocks
Common stock represents the residual ownership interest in the issuer
after all of its obligations and preferred stocks are satisfied. Common stocks
fluctuate in price in response to many factors, including historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity.
Preferred Stocks
Preferred stock has a preference over common stock in liquidation and
generally in dividends as well, but is subordinated to the liabilities of the
issuer in all respects. Preferred stock may or may not be convertible into
common stock. As a general rule, the market value of preferred stock with a
fixed dividend rate and no conversion element varies inversely with interest
rates and perceived credit risk. Because preferred stock is junior to debt
securities and other obligations of the issuer, deterioration in the credit
quality of the issuer will cause greater changes in the value of a preferred
stock than in a more senior debt security with similar stated yield
characteristics.
Convertible and Exchangeable Securities
Convertible securities generally offer fixed interest or dividend
yields and may be converted either at a stated price or stated rate for common
or preferred stock. Exchangeable securities may be exchanged on specified terms
for common or preferred stock. Although to a lesser extent than with fixed
income securities generally, the market value of convertible securities tends to
decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion or exchange
feature, the market value of convertible or exchangeable securities tends to
vary with fluctuations in the market value of the underlying common or preferred
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<PAGE>
stock. Debt securities that are convertible into or exchangeable for preferred
or common stock are liabilities of the issuer but are generally subordinated to
more senior elements of the issuer's balance sheet.
Other Investments and Activities
Although the 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 ("Money Market Instruments"),
as described under "Additional Information on Investment Policies and
Techniques." In addition, the Fund may make substantial temporary investments in
investment grade U.S. debt securities and invest without limit in Money Market
Instruments when the Fund's Adviser or Sub-Adviser believes a defensive posture
is warranted. To the extent that the Fund deviates from its investment policies
during temporary defensive periods, its investment objective may not be
achieved.
The Fund may also engage in certain other activities and utilize
certain other strategies, as described and subject to the limitations and risks
described under "Additional Information on Investment Policies and Techniques."
The Fund has no current intention to engage in the various investment strategies
described under "Additional Information on Investment Policies and Techniques"
under the caption "Hedging and Derivatives," 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 "Additional
Information on Investment Policies and Techniques" in this Prospectus and in the
Statement of Additional Information.
The investment objective of the Fund is fundamental and may not be
changed without the affirmative vote of a "majority" of the holders of the
Fund's outstanding shares. Of course, achievement of the objective cannot be
guaranteed. The investment policies and activities of the Fund, with the
exception of those which are identified as fundamental, are not fundamental and
may be changed by the Board of Trustees of the Trust without the approval of
shareholders. Additional fundamental investment policies of the Fund are
identified in the Statement of Additional Information.
The investment policies of the Fund may lead to frequent changes in
investments, particularly in periods of rapidly changing market conditions or
interest rates. The portfolio turnover of the Fund may be higher than that of
other investment companies. While it is impossible to predict with certainty the
portfolio turnover for the Fund, the Fund's Adviser and Sub-Adviser expect that
the annual turnover rate will not exceed 100%. High portfolio turnover rates
will generally result in higher transaction costs to the Fund, 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 may also make it more difficult for the Fund to satisfy the requirement
for qualification as a regulated investment company under the Internal Revenue
Code of 1986, as amended (the "Code"), that less than 30% of the Fund's gross
income in any tax year be derived from gains on the sale of securities held for
less than three months. The portfolio turnover rate is computed by dividing the
lesser amount of the securities purchased or securities sold by the average
monthly value of securities owned during the year (excluding securities whose
maturities at acquisition were one year or less).
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND TECHNIQUES
Following is a description of certain additional types of investments
which the Fund may make, and certain activities in which the Fund may engage.
Money Market Instruments
The Fund may invest in cash or high quality, short-term money market
instruments. Such instruments may include U.S. Government Securities; commercial
paper or domestic issuers rated, at the time of purchase, at least in the
category P-1 by Moody's Investor's Service, Inc. ("Moody's"), A-1 by Standard &
Poors Corporation ("S&P"), F-1 by Fitch or D-1 by Duff & Phelps ("D&P"), rated
comparably by another Nationally Recognized Statistical Rating Organization, or,
if not rated, of comparable quality as determined by their investment adviser;
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<PAGE>
certificates of deposits, banker's acceptances or time deposits and repurchase
agreements. The Fund limits its investment 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.
Foreign Securities
The Fund may invest in securities of foreign issuers, although the Fund
does not currently intend to invest more than 20% of its assets in such
securities. Investments in foreign securities may involve investment risks such
as future political and economic developments, the possible imposition of
foreign withholding taxes, the possible seizure or nationalization of foreign
assets and the possible establishment of exchange controls or other foreign
governmental laws or restrictions that might adversely affect the payment of
dividends. Changes in the exchange rates of foreign currencies in which the
Fund's investments may be denominated will affect the U.S. dollar value of the
Fund's assets and the Fund's return. Foreign securities markets may be smaller
and less liquid and may be subject to settlement difficulties, greater price
volatility and higher transaction costs and other expenses than U.S. markets.
Foreign issuers may not be subject to the same disclosure, accounting, auditing
and financial record-keeping standards and requirements as U.S. issuers.
American Depositary Receipts
The Fund may purchase ADRs, subject to the limitation set forth under
"Investment Objectives and Policies." ADRs are receipts issued by U.S. banks or
trust companies in respect of securities of foreign issuers held on deposit for
use in the U.S. securities markets. The Fund treats ADRs as interests in the
underlying securities for purposes of its investment policies. While ADRs may
not necessarily be denominated in the same currency as the securities into which
they may be converted, certain of the risks associated with foreign securities
(discussed above) may also apply to ADRs. The Fund will limit its investment in
ADRs not sponsored by the issuer of the underlying securities to no more than 5%
of the value of its net assets (at the time of investment). See the Statement of
Additional Information for certain risks related to unsponsored ADRs.
Corporate Reorganizations
The 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 Adviser or Sub-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 Fund may
sustain a loss.
Warrants and Rights
The 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 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.
Repurchase Agreements
Securities held by the Fund may be subject to repurchase agreements.
Pursuant to a repurchase agreement, the Fund will purchase portfolio securities
from a seller which commits itself, at the time of sale, to repurchase the
securities at a mutually agreed upon time and price. Repurchase agreements may
be characterized as loans which are collateralized by the underlying securities.
The Fund 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 Fund is permitted
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<PAGE>
to invest. As an operating policy, the Fund, through its custodian bank, takes
constructive possession of the collateral underlying repurchase agreements.
Additionally, procedures have been established for the Fund 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 the Fund in repurchase agreements maturing
in more than seven days are subject to the restrictions on investments in
illiquid securities discussed below under "Illiquid Securities." In the event of
default by the seller under the repurchase agreement, the Fund could experience
losses that include: (i) possible decline in the value of the underlying
security during the period while the Fund seeks to enforce its rights thereto;
(ii) additional expenses to the Fund for enforcing those rights; (iii) possible
loss of all or part of the income or proceeds of the repurchase agreement; and
(iv) possible delay in the disposition of the underlying security pending court
action or possible loss of rights in such securities.
Reverse Repurchase Agreements
The Fund may also enter into reverse repurchase agreements to avoid
selling securities during unfavorable market conditions to meet redemptions.
Pursuant to a reverse repurchase agreement, the Fund will sell portfolio
securities and agree to repurchase them from the buyer at a particular date and
price. Whenever the Fund 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. The Fund pays interest on amounts obtained
pursuant to reverse repurchase agreements. Reverse repurchase agreements are
considered to be borrowings by the Fund under the 1940 Act and are subject to
the Fund's general limitation with respect to borrowings.
Loans of Portfolio Securities
Although the Fund does not anticipate engaging in such activity in the
ordinary course of business, the Fund may lend portfolio 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
its total assets. In connection with such loans, the Fund will receive
collateral consisting of cash, cash equivalents, U.S. Government securities or
irrevocable letters of credit issued by financial institutions. Such collateral
will be maintained at all times in an amount equal to at least 102% of the
current market value of the securities loaned plus accrued interest. The Fund
can earn income through the investment of such collateral. The Fund 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 the Fund on a
loaned security from the borrower will not qualify for the dividends-received
deduction. Such loans will be terminable at any time upon specified notice. The
Fund might experience risk of loss if the institutions with which it has engaged
in portfolio loan transactions breach their agreements with such Fund. The 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 Adviser or Sub-Adviser to be of good standing and will not be made
unless, in the judgment of the investment Adviser or Sub-Adviser, the
consideration to be earned from such loans justifies the risk.
Illiquid or Restricted Securities
The Fund may purchase securities for which there is a limited trading
market or which are subject to restrictions on resale to the public. Investments
in securities which are "restricted" may involve added expenses to the Fund
should the Fund be required to bear registration costs with respect to such
securities and could involve delays in disposing of such securities which might
have an adverse effect upon the price and timing of sales of such securities and
the liquidity of the Fund with respect to redemptions. As a matter of
fundamental policy the Fund will not invest more than 15% of the value of its
total assets in illiquid investments, such as "restricted securities" which are
illiquid, and securities that are not readily marketable. As more fully
described in the Statement of Additional Information, the Fund may purchase
certain restricted securities ("Rule 144A securities") for which there may be a
secondary market of qualified institutional buyers as contemplated by recently
adopted Rule 144A under
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the Securities Act of 1933. The Fund's holdings of Rule 144A securities which
are liquid securities will not be subject to the 15% limitation described above.
There is no assurance that a liquid market in Rule 144A securities will develop
or be maintained. To the extent that the number of qualified institutional
buyers is reduced, a previously liquid Rule 144A security may be determined to
be illiquid, thus increasing the percentage of illiquid assets in the Fund's
portfolio. The Board of Trustees of the Trust will be responsible for monitoring
the liquidity of Rule 144A securities and the selection by the Adviser or
Sub-Adviser of such securities.
Firm Commitments and When-Issued Securities
The Fund may purchase securities on a firm commitment basis, including
when-issued securities. Securities purchased on a firm commitment basis are
purchased for delivery beyond the normal settlement date at a stated price and
yield. Such securities are recorded as an asset and are subject to changes in
value based upon changes in the general level of interest rates. The Fund will
make commitments to purchase securities on a firm commitment basis only with the
intention of actually acquiring the securities, but may sell them before the
settlement date if it is deemed advisable.
No income accrues to the purchaser of a security on a firm commitment
basis prior to delivery. Purchasing a security on a firm commitment basis can
involve a risk that the market price at the time of delivery may be lower than
the agreed upon purchase price, in which case there could be an unrealized loss
at the time of delivery. The Fund will establish a segregated account in which
it will maintain liquid assets in an amount at least equal in value to the
Fund's commitments to purchase securities on a firm commitment basis. If the
value of theses assets declines, the Fund will place additional liquid assets in
the account on a daily basis so that the value of the assets in the account is
equal to the amount of such commitments.
Other Investment Companies
The Fund 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 the overall objective and policies of the Fund and subject to
the limitations of the 1940 Act and the Fund's investment limitations as
described in the Statement of Additional Information.
Variable Rate Securities and Participation Certificates
The variable rate demand instruments that may be purchased by the 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 Statement of
Additional Information).
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 Statement of Additional Information).
As a result of the variable rate nature of these investments, the
Fund's yield will decline and its shareholders will forego the opportunity for
capital appreciation during periods when prevailing interest rates have
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declined. Conversely, during periods where prevailing interest rates have
increased, the Fund's yield will increase and its shareholders will have reduced
risk of capital depreciation.
Hedging and Derivatives
The Fund may invest its assets in derivative and related instruments subject
only to the Fund's investment objective and policies and the requirement that,
to avoid leveraging the Fund, the Fund 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 Fund
invests may be particularly sensitive to changes in prevailing interest rates or
other economic factors, and -- like other investment of the Fund -- the ability
of the Fund to successfully utilize these instruments may depend in part upon
the ability of the Adviser or Sub-Adviser to forecast interest rates and other
economic factors correctly. If the Adviser or Sub-Adviser incorrectly forecasts
such factors and has taken positions in derivative or similar instruments
contrary to prevailing market trends, the Fund could be exposed to the risk of a
loss. The Fund may 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 Fund's investment objective and
policies, and as described more fully in the Statement of Additional
Information, the Fund 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 Statement of Additional
Information, there are a number of risk factors 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. As incorrect correlation could result in a loss
on both the hedged assets in the Fund and the hedging vehicle so that the Funds
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
Fund may have been in a better position had it not entered into such strategy.
Hedging strategies, while reducing the 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 the Fund. Certain strategies, such as yield enhancement, can have
speculative characteristics and may result in more risk to the Fund than hedging
strategies using the same instruments. There can be no assurance that a liquid
market will exist at a time when the Fund seeks to close out an option, futures
contract or other derivative or related position. Many exchanges and boards of
trade limit the amount of fluctuation permitted in option or futures contract
prices during a single day; once the daily limit has been reached on 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 the Fund may
experience a loss. In transactions involving currencies, the value of the
currency underlying an instrument may fluctuate due to many factors, including
economic conditions, interest rates, governmental policies and market forces.
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MANAGEMENT OF THE FUND
The Fund's Adviser is Chase, which also serves as the Fund's
administrator. Chase global investment management capabilities are supported by
investment professionals located in cities around the world, including New York,
Geneva and Hong Kong. The Fund's investment Sub-Adviser is VD&H.
The Adviser
The Adviser manages the assets of the Fund pursuant to an Investment
Advisory Agreement dated __________________, 1996 and, subject to such policies
as the Board of Trustees may determine, the Adviser makes investment decisions
for the Fund. For its services under the Investment Advisory Agreement, the
Adviser is entitled to receive an annual fee computed daily and paid monthly
based at an annual rate equal to 0.60% of the Fund's average daily net assets.
The Adviser may, from time to time, voluntarily waive all or a portion of its
fees payable under the Advisory Agreement.
The Adviser, a wholly-owned subsidiary of The Chase Manhattan
Corporation, a registered bank holding company, is a commercial bank offering a
wide range of banking and investment services to customers throughout the United
States and around the world. Its headquarters is at One Chase Manhattan Plaza,
New York, NY 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.
Certain Relationships and Activities. The Adviser and its affiliates
may have deposit, loan and other commercial banking relationships with the
issuers of securities purchased on behalf of the Fund, including outstanding
loans to such issuers which may be repaid in whole or in part with the proceeds
of securities so purchased. The Adviser and its affiliates deal, trade and
invest for their own accounts in U.S. Government obligations, municipal
obligations and commercial paper and are among the leading dealers of various
types of U.S. Government obligations and municipal obligations. The Adviser and
its affiliates may sell U.S. Government obligations and municipal obligations
to, and purchase them from, other investment companies sponsored by the
Distributor or affiliates of the Distributor. The Adviser will not invest the
Fund's 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
by the Fund. The Adviser has informed the Fund that in making its investment
decisions, it does not obtain or use material inside information in the
possession of any other division or department of the Adviser, including the
division that performs services for the Fund as Custodian, or in the possession
of any affiliate of the Adviser. Shareholders of the Fund are notified that
Chase and its affiliates may exchange among themselves certain information about
the shareholder and his account.
The Sub-Adviser
Under an investment advisory agreement between the Trust, on behalf of
the Fund, and Chase, Chase may delegate a portion of its responsibilities to a
sub-adviser. In addition, the investment advisory agreement provides that Chase
may render services through its own employees or the employees of one or more
affiliated companies that are qualified to act as an adviser of the Fund and are
under the common control of New Chase as long as all such persons are
functioning as part of an organized group of persons, managed by authorized
officers of Chase.
Chase, on behalf of the Fund, has entered into an investment
sub-advisory agreement (the "Sub-Advisory Agreement") with Van Deventer & Hoch
("VD&H"), whose principal offices are located at 800 North Brand Boulevard,
Suite 300, Glendale, California 91203. VD&H is a general partnership which is
equally owned by individuals who serve VD&H in key professional capacities and
by CBC Holdings (California), which is a wholly-
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<PAGE>
owned subsidiary of Chemical Banking Corporation, a bank holding company. VD&H
provides a wide range of asset management services to individuals, corporations,
private and charitable trusts, endowments, foundations and retirement funds. Its
investment management responsibilities, as of ___________, 1995, included
accounts with aggregate assets in excess of $__ billion. Richard D. Trautwein
serves as executive Vice President at VD&H and is primarily responsible for the
day-to-day management of the Fund's portfolio. Mr. Trautwein joined VD&H in 1972
and heads the firm's portfolio strategy group and is a member of the firm's
investment policy committee.
Subject to the supervision and direction of the Adviser and the Board
of Trustees, VD&H provides investment sub-advisory services to the Fund in
accordance with the Fund's objectives and policies, makes investment decisions
for the Fund and places orders to purchase and sell securities on behalf of the
Fund. The SubAdvisory Agreement provides that, as compensation for services, the
Sub-Adviser receives, from the Advisor, a fee, computed and paid monthly based
on a rate equal to .___% of the Fund's average daily net assets, on an
annualized basis for the Fund's then-current fiscal year.
The Administrator
Pursuant to an Administration Agreement, dated as of ___________, 1996 (the
"Administration Agreement") Chase serves as administrator of the Fund.
Chase 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. Chase is entitled to
receive from the Fund a fee computed daily and paid monthly at an annual rate
equal to 0.03% of the Fund's average daily net assets. Chase may, from time to
time, voluntarily waive all or a portion of its fees payable to it under the
administration agreements.
Glass-Steagall Act. Chase has received the opinion of its legal counsel
that it may provide the services described in the Investment Advisory and the
Administration Agreements, as described above, and the Shareholder Servicing
Agreements and Custodian Agreement with the Fund, as described below, without
violating the federal banking law commonly known as the Glass-Steagall Act. The
Act generally bars banks from publicly underwriting or distributing certain
securities.
Based on the advice of its counsel, the Adviser believes that the
Court's decision, and these other decisions of banking regulators, permit it to
serve as Adviser to a registered, open-end investment company.
Regarding the performance of shareholder servicing and custodial
activities, the staff of the Office of the Comptroller of the Currency, which
supervises national banks, has issued opinion letters stating that national
banks may engage in shareholder servicing and custodial activities. Therefore,
the Adviser believes, based on advice of counsel, that it may serve as
Shareholder Servicing Agent and/or Custodian to the Fund and render the services
described below and as set forth in the shareholder servicing agreement and
Custodian Agreement, as an appropriate, incidental national banking function and
as a proper adjunct to its serving as Adviser and administrator to the Fund.
Industry practice and regulatory decisions also support a bank's
authority to act as administrator for a registered investment company. Chase, on
the advice of its counsel, believes that it may render the services described in
its Administration Agreement without violating the Glass-Steagall Act or other
applicable banking laws.
Possible future changes in federal law or administrative or judicial
interpretations of current or future law, however, could prevent the Adviser
from continuing to perform investment advisory, shareholder servicing, custodial
or other administrative services for the Fund. If that occurred, the Fund's
Board of Trustees promptly would seek to obtain for the Fund the services of
another qualified Adviser, shareholder servicing agent, custodian or
administrator, as necessary. Although no assurances can be given, the Fund
believes that, if necessary, the
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<PAGE>
transfer to a new Adviser, shareholder servicing agent, custodian or
administrator could be accomplished without undue disruption to its operations.
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 law.
PURCHASES AND REDEMPTIONS OF SHARES
Purchases
The shares of the Fund are continuously offered for sale without a
sales load at the net asset value next determined through Vista Broker-Dealer
Services, Inc. ("VBDS" or the "Distributor") after an order is received and
accepted by a Shareholder Servicing Agent if it is transmitted by VBDS 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 the Fund--Net Asset Value"). Orders for Fund shares
received and accepted prior to 4:00 p.m., will be entitled to all dividends
declared on such day. Shares of the Fund are being 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 the
Fund) or to customers of brokers or certain financial institutions which have
entered into Shareholder Servicing Agreements with VBDS. An investor may
purchase shares of the Fund by authorizing his Shareholder Servicing Agent,
broker or financial institution to purchase such shares on his behalf through
the Distributor, which the Shareholder Servicing Agent, broker or financial
institution must do promptly. 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 the Fund or its agents.
Shareholder Servicing Agents may offer services to their customers,
including specialized procedures for the purchase and redemption of shares of
the Fund, 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 the Fund 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--Shareholder
Servicing Agents"), 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 the Fund and waive any applicable holding periods.
The Fund 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. Fund shares will be
maintained in book entry form, and no certificates representing shares owned
will be issued to shareholders.
Minimum Investments
The Fund has established minimum initial and additional investments for
the purchase of Fund Shares. The minimums detailed below vary by the type of
account being established:
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<PAGE>
Account Type Minimum Initial Investment
Individual............................................ $2,500 (1)
Individual Retirement Account (IRA)................... $1,000 (2)
Spousal IRA........................................... $ 250
SEP-IRA............................................... $1,000 (2)
Purchase Accumulation Plan............................ $ 250 (3)
Payroll Deduction Program............................. $ 100 (4)
(401(k), 403(b), Keogh)
- ---------------
(1) Employees of the Adviser and its affiliates, and Qualified Persons as
defined in "Purchases of Class A Shares at Net Asset Value", are
eligible for a $1,000 minimum initial investment.
(2) A $250 minimum initial investment is allowed if the new account is
established with a $100 minimum monthly Systematic Investment Plan as
described below.
(3) Account must be established with a $200 minimum monthly Systematic
Investment Plan as described below.
(4) A $25 minimum monthly investment must be established through an
automated payroll cycle.
The minimum additional investment is $100 for all types of accounts.
Systematic Investment Plan
A shareholder may establish a monthly investment plan by which
investments are automatically made to his/her Vista Fund 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.
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. The letter should contain your Vista Fund
account number, the desired amount and cycle of the systematic investment, and
must include a voided check from the checking account from 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.
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 and transmitted by it to and received by the Fund'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. Shares which are redeemed earn dividends
up to and including the day prior to the day the redemption is effected. 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 may redeem his Fund shares by authorizing his
Shareholder Servicing Agent, its agent, or 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 the Fund records.
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<PAGE>
The value of shares of the Fund 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 the Fund generally
retains the right to pay the redemption price of shares in kind with securities
(instead of cash), the Trust has filed an election under Rule 18f-1 committing
to pay in cash all redemptions by a shareholder of record up to 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 (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.
Automatic Redemption Plan. A shareholder owning $10,000 or more of the
shares of the Fund 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. The Fund 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.
General
Reorganization with Predecessor Fund
The Predecessor Fund was a portfolio of The Hanover Investment Funds,
Inc. On _______________, 1996, the Shareholders of the Predecessor Fund approved
an Agreement and Plan of Reorganization (the "Reorganization Plan"). Under the
Reorganization Plan, the Predecessor Fund transferred all its assets and
liabilities to the Fund in exchange for shares of the Fund, which were
distributed pro rata to shareholders of the Predecessor Fund, who then became
shareholders of the Fund (the "Reorganization"). The Predecessor Fund has ceased
operations. The Fund had no assets and did not begin operations until the
Reorganization occurred.
The Fund has established certain procedures and restrictions, subject
to change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Fund'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 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. The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. In the event the Fund does
not employ such reasonable procedures, it may be liable for losses due to
unauthorized or fraudulent instructions.
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<PAGE>
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, the Fund 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 the Fund 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 the Fund in writing. Shareholders agree to release and hold
harmless the Fund, 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 Fund 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 the Fund 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 Fund
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.
The Fund may require signature guarantees for changes that shareholders
request be made in Fund 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 the Fund.
The Fund may also refuse to accept or carry out any transaction that does not
satisfy any restrictions then in effect.
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 the Fund that is contained in the
Statement of Additional Information. In addition, each prospective investor
should consult with his own tax advisers as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund in
his own state and locality.
The Fund intends to qualify each year and elect to be treated as a
separate "regulated investment company" under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). If the Fund is treated as a
"regulated investment company" and all of its taxable income 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 the Fund 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 the Fund's
current and accumulated earnings and profits. The Portfolio is not required to
pay any federal income or excise taxes.
The Trust is organized as a Massachusetts business trust and, under
current law, is not liable for any income or franchise tax in the Commonwealth
of Massachusetts as long as the Fund (and each other series of the Trust)
qualifies as a regulated investment company under the Code.
Distributions by the Fund 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 the Fund with
respect to a year (which cannot exceed the aggregate amount of its share of
qualifying dividends received by the Portfolio from domestic corporations during
the year) may qualify for the 70%
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<PAGE>
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 the Fund 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 the Fund
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 the Fund. In general, distributions by the Fund 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 the
Fund 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 fiscal year, including any portions which constitute
ordinary income dividends (and any portion thereof which qualify for the
dividends-received deduction for corporations) and capital gains dividends, will
be sent to the Fund's shareholders promptly after the end of each 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 the Fund
may be disallowed if other shares of the Fund are purchased within 30 days
before or after such disposition.
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 the Fund. Generally, shareholders are subject to
backup withholding if they have not provided the Fund with a correct taxpayer
identification number and certain required certifications.
OTHER INFORMATION CONCERNING SHARES OF THE FUND
Net Asset Value
The net asset value of the Fund 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 net assets by the number of shares outstanding. Values of assets held
by the Fund (i.e., the value of its investment in the Fund and its other assets)
are determined on the basis of their market or other fair value, as described in
the Statement of Additional Information. A share's net asset value is effective
for orders received by a Shareholder Servicing Agent prior to its calculation
and received by the 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.
Net Income, Dividends and Capital Gain Distributions
Substantially all of the net income from dividends and interest (if
any) of the Fund is paid to its shareholders annually (in the month of December)
as a dividend. The Fund's net investment income is calculated by adding the
value of all the Fund's investments, plus cash and other assets, deducting Fund
liabilities and then dividing the result by the number of shares outstanding.
Certain expenses are applied on a per-class basis only and are deducted
accordingly. The Fund will distribute its net realized short-term and long-term
capital gains, if any, to its shareholders at least annually.
- 18 -
<PAGE>
The Fund 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 of either class may elect to receive dividends and capital
gains distributions from the Fund in either cash or additional shares of that
class.
Distribution Plan and Distribution and Sub-Administration Agreement
The Trustees have adopted a Distribution Plan (the "Distribution Plan")
in accordance with Rule 12b-1 under the 1940 Act, after having concluded that
there is a reasonable likelihood that the Distribution Plan will benefit the
Fund and its shareholders.
The Class A Distribution Plan provides that the Fund shall pay
distribution fees, including payments to the Distributor, at annual rates not to
exceed 0.25% of its average daily net assets for distribution services. Some
payments under the Distribution Plan may be used to compensate broker-dealers
with trail or maintenance commissions in an amount not to exceed 0.25%
annualized of the assets value of the shares maintained in the Fund by such
broker-dealers' customers. Since the distribution fees are not directly tied to
expenses, the amount of distribution fees paid by the Fund during any year may
be more or less than actual expenses incurred pursuant to the Distribution Plan.
For this reason, this type of distribution fee arrangement is characterized by
the staff of the Securities and Exchange 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 Distribution and Sub-Administration Agreement dated August 21, 1995
(the "Distribution Agreement"), provides that the Distributor will act as the
principal underwriter of the Fund's shares and bear the expenses of printing,
distributing and filing prospectuses and statements of additional information
and reports used for sales purposes, and of preparing and printing sales
literature and advertisements not paid for by the Distribution Plan.
In addition, the Distributor will provide certain sub-administration services,
including providing officers, clerical staff and office space. The Distributor
currently receives a fee for sub-administration from the Fund at an annual rate
equal to 0.05% of the Fund's average daily net assets, on an annualized basis
for the Fund's then-current fiscal year. Other funds which have investment
objectives similar to those of the Fund, 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 Distributor has agreed to use a portion of its distribution and
sub-administration fee to pay for certain expenses of the Fund incurred in
connection with organizing new series of the Trust and certain other ongoing
expenses of the Trust. The Distributor may, from time to time, waive all or a
portion of the fees payable to it under the Distribution Agreement.
The respective expenses of each of the Funds of the Trust include the
compensation of their respective Trustees: registration fees; interest charges;
taxes; fees and expenses of independent accountants, of legal counsel and of any
transfer agent, custodian, registrar or dividend disbursing agent of the Trust;
insurance premiums; and expenses of calculating the net asset value of, and the
net income on, shares of the Fund.
Expenses
The Fund intends to pay all of its pro rata share of the Trust's
expenses, including the compensation of the Trustees; all fees under the
Distribution Plan; 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 or dividend disbursing
agent; expenses of 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
- 19 -
<PAGE>
portfolio security transactions; insurance premiums; fees and expenses of the
Fund's custodian including safekeeping of funds and securities and maintaining
required books and accounts; expenses of calculating its net asset value;
expenses of shareholder meetings; and the advisory fees payable to the Adviser
under the Investment Advisory Agreement, the administration fee payable to the
Administrator under the Administration Agreement and the subadministration fee
payable to the Distributor under the Distribution and Sub-Administration
Agreement. Expenses relating to the issuance, registration and qualification of
shares of the Fund and the preparation, printing and mailing of prospectuses for
such purposes are borne by the Fund except that the Distribution and
Sub-Administration Agreement with the Distributor requires the Distributor to
pay for prospectuses which are to be used for sales to prospective investors.
Description of Shares, Voting Rights and Liabilities
Mutual Fund Group is an open-end management investment company
organized as a Massachusetts business trust under the laws of the Commonwealth
of Massachusetts in 1987. Because the Fund is "non-diversified", more of the
assets of the Fund may be concentrated in the securities of any single issuer
than if the Fund was "diversified", which may make the value of the shares in a
fund more susceptible to certain risks than shares of a diversified mutual fund.
The Trust has reserved the right to create and issue additional series
or classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or class.
The shares of each series or class participate equally in the earnings,
dividends and assets of the particular series or class. Expenses of the Trust
which are not attributable to a specific series or class are allocated among all
the series in a manner believed by management of the Trust to be fair and
equitable. Shares have no pre-emptive or conversion rights. Shares when issued
are fully paid and non-assessable, except as set forth below. Shareholders are
entitled to one vote for each whole share held, and each fractional share shall
be entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. 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 Trust 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 the Trust may, in accordance
with certain rules of the Securities and Exchange 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 the Trust'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 the Trust. 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. The Trust'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.
The Trust 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 shareholder
- 20 -
<PAGE>
liability is limited to circumstances in which both inadequate insurance exists
and the Fund itself is unable to meet its obligations.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
Shareholder Servicing Agents
The shareholder servicing agreement with each Shareholder Servicing
Agent 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 the Fund as to
which the Shareholder Servicing Agent is so acting and certain other matters
pertaining to the Fund; 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) quarterly and year-end
statements and confirmations of purchases and redemptions; transmit, on behalf
of the Fund, proxy statements, annual reports, updated prospectuses and other
communications to shareholders of the Fund; receive, tabulate and transmit to
the Fund proxies executed by shareholders with respect to meetings of
shareholders of the Fund; and provide such other related services as the Fund or
a shareholder may request. Shareholder servicing agents may be required to
register pursuant to state securities law.
For performing these services, each Shareholder Servicing Agent
receives certain fees, which may be paid periodically, determined by a formula
based upon the number of accounts serviced by such Shareholder Servicing Agent
during the period for which payment is being made, the level of activity in
accounts serviced by such Shareholder Servicing Agent during such period, and
the expenses incurred by such Shareholder Servicing Agent. Fees relating to
acting as liaison to shareholders and providing personal services to
shareholders, will not exceed, on an annual basis, 0.25% of the average daily
net assets of the Fund 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 all or a portion of the fees payable to it. In
addition, Chase may provide other related services to the Fund for which it may
receive compensation.
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 Fund shares, receive dividends and
distributions on Fund 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 the Fund's shares. The Trust, on behalf
of the Fund, will engage banks, including the Adviser, as Shareholder Servicing
Agents, only to perform advisory, custodial, administrative and shareholder
servicing functions as described above. While the matter is not free from doubt,
Trust management believes that such laws should not preclude a bank, including a
bank which acts as adviser, custodian or administrator, or in all such
capacities, for the Fund, 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 part of its servicing activities. If that occurred, the bank's
shareholder clients would be permitted to remain Fund shareholders and
alternative means for continuing the servicing of such shareholders would be
sought. In such event, changes in the operation of the Fund might occur and a
shareholder serviced by such bank might no longer be able to avail himself of
any automatic investment
- 21 -
<PAGE>
or other services then being provided by such bank. The Fund 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 the Fund. In this capacity, DST
maintains the account records of all shareholders in the Funds, including
statement preparation and mailing. DST is also responsible for disbursing
dividend and capital gain distributions to shareholders, whether taken in cash
or additional shares. From time to time, DST and/or the Fund 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 the Trust 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 the Fund, for which Chase receives compensation as is from time to
time agreed upon by the Trust and Chase. The Custodian's responsibilities
include safeguarding and controlling the Fund's cash and securities, handling
the receipt and delivery of securities, determining income and collecting
interest on the Fund'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 beneficial interests in the Fund. Fund
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 the Fund's Custodian does not determine the investment policies of the
Fund or decide which securities will be bought or sold on behalf of the Fund or
otherwise have access to or share material inside information with the internal
division that performs advisory services for the Fund.
Tax-Sheltered Retirement Plans
Shares of the Fund 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, 401(k) and 403(b)
Retirement Plans. Call or write the Transfer Agent for more information.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Fund may use hypothetical investment examples
and performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
historical earnings, it should not be considered as an indication or
representation of the performance of any classes of the Fund in the future. From
time to time, the performance and yield of classes of the Fund may be quoted and
compared to those of other mutual funds with similar investment objectives,
unmanaged investment accounts, including savings accounts, or other similar
products and to stock or other relevant indices or to rankings prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, the performance of the Fund 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 the Fund or its classes. Additionally, the Fund may, with proper
authorization, reprint articles written about the Fund and provide them to
prospective shareholders.
The Fund may provide period and average annualized "total rates of
return." The "total rate of return" refers to the change in the value of an
investment in the Fund over a period (which period shall be stated in any
advertisement or communication with a shareholder) based on any change in net
asset value per share including the
- 22 -
<PAGE>
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
reinvestment.
Unlike some bank deposits or other investments which pay a fixed yield
for a stated period of time, the yields and the net asset values of the classes
of shares of the Fund will vary based on interest rates, the current market
value of the securities held by the Fund and changes in the Fund's expenses. The
Adviser, the Shareholder Servicing Agent, the Administrator and the Distributor
may voluntarily waive a portion of their fees on a month-to-month basis. In
addition, the Distributor may assume a portion of the Fund's operating expenses
on a month-to-month basis. These actions would have the effect of increasing the
net income (and therefore the yield and total rate of return) of the shares of
the Fund during the period such waivers are in effect. These factors and
possible differences in the methods used to calculate the yields and total rates
of return should be considered when comparing the yields or total rates of
return of the shares of the Fund to yields and total rates of return published
for other investment companies and other investment vehicles (including
different classes of shares). The Fund 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 Statement of Additional Information for further
information concerning the calculation of the yields or total rates of return
quotations for classes of shares of the Fund.
The Fund is the successor to the Hanover American Value Fund. The Fund may also
quote historical performance of the Hanover American Value Fund.
Other Information
The Statement of Additional Information contains more detailed
information about the Fund, including information related to (i) the Fund's
investment policies and restrictions, (ii) risk factors associated with Fund's
policies and investments, (iii) the Trust's Trustees, officers and the
administrators and the Adviser, (iv) portfolio transactions, (v) the Fund'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.
The Code of Ethics of the Fund prohibits all affiliated personnel from
engaging in personal investment activities which compete with or attempt to take
advantage of the Fund's planned portfolio transactions. The objective of the
Code of Ethics of the Fund is that its operations be carried out for the
exclusive benefit of the Fund's shareholders. The Fund maintains careful
monitoring of compliance with the Code of Ethics.
- 23 -
<PAGE>
PROSPECTUS
VISTA(SM) U.S. GOVERNMENT SECURITIES FUND ____________, 1996
VISTA U.S. GOVERNMENT SECURITIES FUND's (the "Fund") investment
objective 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 Fund seeks to achieve its objective by investing
under normal circumstances, at least 65% of the value of its total assets in
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements with respect thereto. There is no
restriction on the maturity of the Fund's portfolio or any individual portfolio
security. The Fund is a non-diversified series of Mutual Fund Group (the
"Trust"), an open-end, management investment company organized as a business
trust under the laws of the Commonwealth of Massachusetts on May 11, 1987,
presently consisting of __ separate series (the "Funds"). Because the Fund is
"non-diversified", more of the Fund's assets may be concentrated in the
securities of any single issuer than if the Fund was "diversified", which may
make the value of shares of the Fund more susceptible to certain risks than
shares of a diversified mutual fund.
Of course, there can be no assurance that the Fund will achieve its
investment objective. Prospective investors should carefully consider the risks
associated with an investment in the Fund. For a further discussion on the risks
associated with an investment in the Fund, see "Investment Objective and
Policies" in this Prospectus. Investors should also refer to "Additional
Information on Investment Policies and Techniques" on page 27.
The Chase Manhattan Bank, N.A. (the "Adviser") is the Fund's investment
adviser, custodian (the "Custodian") and administrator (the "Administrator").
Chase Asset Management, Inc. ("CAM Inc." or the "Sub-Adviser") is the investment
sub-adviser to the Fund. Vista Broker-Dealer Services, Inc. ("VBDS") is the
Fund's distributor and is unaffiliated with Chase. Investments in the Fund are
subject to risk--including possible loss of principal-- and will fluctuate in
value. Shares of the Fund 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 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.
Shares of the Fund are continuously offered for sale through VBDS, the
Fund's distributor (the "Distributor"). An investor should obtain from his or
her Shareholder Servicing Agent, if appropriate, and should read in conjunction
with this Prospectus, the materials provided by the Shareholder Servicing Agent
describing the procedures under which the shares of the Fund may be purchased
and redeemed through such Shareholder Servicing Agent. Investors may select
Class A or Institutional Class shares, each with a public offering price that
reflects different sales charges and expense levels. Class A shares are offered
at net asset value plus the applicable sales charge (maximum of 4.50% of public
offering price). Institutional Class shares are offered at net asset value
without an initial sales charge to qualified institutions or investors making an
initial minimum investment of $1,000,000 or more. Salespersons and any other
person entitled to receive compensation for selling or servicing shares of the
Fund may receive different compensation with respect to one particular class of
shares over another in the Fund.
This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor should know before investing. A Statement of
Additional Information for the Fund, dated ____________, 1996, which contains
more detailed information concerning the Fund, has been filed with the
Securities and Exchange Commission and is incorporated into this Prospectus by
reference. An investor may obtain a copy of the Statement of Additional
Information without charge by contacting his Shareholder Servicing Agent, the
Distributor or the Fund.
Investors should read this Prospectus and retain it for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
<PAGE>
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
For information about the Fund, simply call the Vista Service Center at the
following toll-free number: 1-800-34-VISTA.
- 2 -
<PAGE>
TABLE OF CONTENTS
Expense Summary............................................................ 4
Financial Highlights....................................................... 5
Investment Objective and Policies.......................................... 7
Additional Information on Investment Policies and Techniques.............. 8
Management of the Fund.................................................... 17
Purchases and Redemptions of Shares....................................... 19
Tax Matters............................................................... 28
Other Information Concerning Shares of the Fund........................... 30
Shareholder Servicing Agents, Transfer Agent and Custodian................ 34
Yield and Performance Information......................................... 40
Appendix A
Description of Ratings........................................... A-1
- 3 -
<PAGE>
EXPENSE SUMMARY
The following table provides (i) a summary of the aggregate annual operating
expenses of the Fund, as a percentage of average net assets of the Fund, and
(ii) an example illustrating the dollar cost of such expenses on a $1,000
investment in shares of the Fund.
Institutional
Class A Class
Shareholder Transaction Expenses
Maximum Initial Sales Charge imposed on Purchases
(as a percentage of offering price)*...................... 4.50% None
Maximum Sales Charge imposed on Reinvested Dividends........ None None
Exchange Fee................................................ None None
Maximum Contingent Deferred Sales Charge (as a percentage of
redemption proceeds)+..................................... None None
Annual Fund Operating Expenses (as a percentage of net assets)
Investment Advisory Fee ..................................... .30% .30%
Rule 12b-1 Distribution Plan++ .............................. .25% None
Administration Fee........................................... .10% .10%
Other Expenses
- --Sub-administration Fee..................................... .05% .05%
- --Shareholder Servicing Fee.................................. .17% .22%
- --Other Operating Expenses+++................................ .18% .18%
---- ----
1.05% .85%
Example:
You would pay the following expenses on a $1,000 investment in the
Fund, assuming (1) a 5% annual rate of return and (2) redemption at the end of
each time period:
Three Five
One Year Years Years Ten Years
Class A Shares(1)............. $ $ $ $
Institutional Class Shares.... $ $ $ $
- ---------------
* The rules of the Securities and Exchange Commission require that the
Fund's maximum sales charge be reflected in the expense summary.
++ As a result of distribution fees, a long-term shareholder in Class A
shares of the Fund may pay more than the economic equivalent of the
maximum front-end sales charges permitted by the rules of the National
Association of Securities Dealers, Inc.
+++ A shareholder may incur a $10.00 charge for certain wire redemptions.
(1) Assumes deduction at the time of purchase of the maximum 4.50% initial
sales charge, as applicable.
The purpose of the expense summary provided above is to assist
investors in understanding the various costs and expenses that a shareholder in
the Fund will bear directly or indirectly. A more complete description of the
Fund's expenses, including any potential fee waivers, is set forth herein.
- 4 -
<PAGE>
The "Example" set forth above assumes all dividends and other
distributions are reinvested and that the percentages under "Annual Fund
Operating Expenses" remain the same in years shown. The "Example" should not be
considered a representation of past or future expenses of the Fund; actual
expenses may be greater or less than shown. The actual expenses incurred and
attributable to each class of shares will depend on several factors, including
the level of average net assets and the extent to which a class incurs variable
expenses, such as transfer agency costs.
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios
for one Investor share of The Hanover U.S. Government Securities Fund, the
predecessor to the Fund (the "Predecessor Fund") for each period shown. This
information is supplemented by financial statements and accompanying notes
appearing in the Predecessor Fund's Annual Report to Shareholders for the fiscal
year ended November 30, 1994, which is incorporated by reference into the
Statement of Additional Information. The financial statements and notes, as well
as the financial information set forth in the table below, have been audited by
KPMG Peat Marwick LLP, independent accountants, whose report thereon is also
included in the Annual Report to Shareholders. Shareholders can obtain a copy of
this Annual Report by contacting the Fund or their Shareholder Servicing Agent.
<TABLE>
<CAPTION>
The Hanover U.S. Government Securities Fund
(For an Investor Share outstanding throughout the period)
Years ended Period Ended
November 30, November 30,
1995 1994 1993*
---- ---- -------------
<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 gain (loss) 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/Supplement 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 (Loss) to Average Net Assets 5.15% 4.26%+++
Portfolio Turnover Rate 134.29% 37.45%
</TABLE>
- -------------
* Fund commenced operations on February 19, 1993.
** Until February 28, 1994, Investor Shares of the Fund 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.
- 5 -
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the 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. Under normal circumstances, at
least 65% of the value of the 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 Fund are not guarantees of the market value of such
obligations, nor do they extend to the value of shares of the Fund. There is no
restriction on the maturity of the 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 Fund's portfolio and may
adjust the average maturity of the 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
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 Fund may not be as high as that of other funds which invest in
lower quality securities.
United States Treasury Obligations
The 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.
United States Government Agency and Instrumentality Obligations
The 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 the Government National Mortgage Association); (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 the Federal Home Loan
Mortgage Corporation). 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 Banks, the Federal Land Banks, the Student Loan
Marketing Association and Resolution Funding Corporation.
The 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 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 Fund will not invest in
principal-only or interest-only stripped mortgage-backed securities.
Other Investments and Activities
Under normal circumstances, at least 65% of the value of the Fund's
total assets will be invested in U.S. Government Securities and repurchase
agreements with respect thereto. The Fund may, at any time, hold up to 35% of
the value of its total assets in high quality, short-term money market
instruments and certain domestic or foreign fixed income securities, as
described under "Additional Information on Investment Policies and Techniques."
Such fixed income securities must be rated, at the time of investment, at least
"A" or the equivalent by Moody's Investors Service, Inc. ("Moody's") or Standard
and Poor's Ratings Group ("S&P"), have a comparable rating assigned by another
nationally recognized statistical rating organization ("NRSRO"), or, if not
rated, be of comparable quality as determined by the Fund's investment adviser.
A description of Moody's and S&P ratings
- 6 -
<PAGE>
is contained in the Statement of Additional Information. Investment in foreign
securities involves certain risks, as described under "Risk Factors and Special
Considerations" below.
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 Fund's share price) 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 effected by changes interest rates. There is no
restriction on the maturity of the Fund's portfolio or of any individual
portfolio security, and to the extent the fund invests in securities with longer
maturities, the volatility of the Fund in response to changes in interest rates
can be expected to be greater than if the Fund had invested in comparable
securities with shorter maturities.
The Fund may, at any time, invest up to 35% of the value of its total
assets in high quality, short-term money market instruments (as described below
under "Additional Investment Policies and Techniques"). When a temporary
defensive posture in the market is appropriate in the Adviser's or sub-adviser's
opinion, the Fund may invest without limitation in these instruments
The Fund may engage in certain other activities and utilize certain
other strategies, including entry into transactions in derivatives and related
instruments, as described and subject to the limitations and risks described
under "Additional Information on Investment Policies and Techniques." The Fund
may also hold cash pending investment in portfolio securities. A description of
these investment strategies and certain risks associated therewith is contained
under the caption "Additional Information on Investment Policies and Techniques"
in this Prospectus and in the Statement of Additional Information.
------------------
The investment objective of the Fund is fundamental and may not be
changed without the affirmative vote of a "majority" of the holders of its
outstanding shares. Of course, achievement of the objective cannot be
guaranteed. The investment policies and activities of the Fund, with the
exception of those which are identified as fundamental, are not fundamental and
may be changed by the Board of Trustees of the Trust without the approval of
shareholders. Additional fundamental investment policies of the Fund are
identified in the Statement of Additional Information.
The investment policies of the Fund may lead to frequent changes in
investments, particularly in periods of rapidly changing market conditions or
interest rates. The portfolio turnover of the Fund may be higher than that of
other investment companies. While it is impossible to predict with certainty the
portfolio turnover for the Fund, the Fund's investment adviser expects that the
annual turnover rate will not exceed 200%. High portfolio turnover rates will
generally result in higher transaction costs to the Fund, 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
may also make it more difficult for the Fund to satisfy the requirement for
qualification as a regulated investment company under the Internal Revenue Code
of 1986, as amended (the "Code"), that less than 30% of the Fund's gross income
in any tax year be derived from gains on the sale of securities held for less
than three months. The portfolio turnover rate is computed by dividing the
lesser amount of the securities purchased or securities sold by the average
monthly value of securities owned during the year (excluding securities whose
maturities at acquisition were one year or less).
- 7 -
<PAGE>
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND TECHNIQUES
Following is a description of certain additional types of investments
which the Fund may make, and certain activities in which the Fund may engage.
Money Market Instruments
The Fund may invest in cash or high quality, short-term money market
instruments. Such instruments may include U.S. Government Securities; commercial
paper or domestic and 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 Duff & Phelps
("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. The Fund limits
its investment 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 Fund limits its investment 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 the United States. The Fund may also
invest in obligations of foreign branches of U.S. banks, as well as obligations
of U.S. branches of foreign banks, if the Fund 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.
Zero Coupon Securities
The Fund may invest without limitation in zero coupon securities,
subject to its investment objective 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 the
Fund may invest are STRIPS. See "STRIPS" below.
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. The Company 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 Fund will not treat such obligations as
U.S. Government securities.
STRIPS
The 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
- 8 -
<PAGE>
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.
Foreign Government Obligations and Obligations Issued by Supranational Entities
The Fund may invest the portion of its assets not invested in U.S.
Government Securities and repurchase agreements with respect thereto in foreign
obligations issued or guaranteed by foreign governments or supranational
entities. In addition, the 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 without
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 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.
Mortgage-Related Securities
The 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 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 the Government National Mortgage Association ("GNMA"));
or guaranteed by agencies or instrumentalities of the U.S. Government (in the
case of securities guaranteed by the Federal National Mortgage Association
("FNMA") or the Federal Home Loan Mortgage Corporation ("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
- 9 -
<PAGE>
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-government 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 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 Funds' ability to invest
in such CMOs will be limited. See the Statement of Additional Information.
The Fund expects 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 Fund's investment adviser will,
consistent with the Fund's investment objectives, policies and quality
standards, consider making investments in such new types of mortgage-related
securities.
Asset-Backed Securities
The Fund may purchase asset-backed securities, subject to the Fund's
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.
Repurchase Agreements
Securities held by the Fund may be subject to repurchase agreements.
Pursuant to a repurchase agreement, the Fund will purchase portfolio securities
from a seller which commits itself, at the time of sale, to repurchase the
securities at a mutually agreed upon time and price. Repurchase agreements may
be characterized as loans which are collateralized by the underlying securities.
The Fund 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 Fund is permitted to invest. As an operating
policy, the Fund, through its custodian bank, takes constructive possession of
the collateral underlying repurchase agreements. Additionally, procedures have
been established for the Fund 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 the Fund in repurchase agreements maturing in more than seven
days are subject to the restrictions on investments in illiquid securities
discussed below under "Illiquid Securities." In the event of default by the
seller under the repurchase agreement, the Fund could experience losses that
include: (i) possible decline in the value of the underlying security during the
period while the Fund seeks to enforce its rights thereto; (ii) additional
expenses to the Fund for enforcing those rights; (iii) possible loss of all or
part of the income or proceeds of the repurchase agreement; and (iv) possible
delay in the disposition of the underlying security pending court action or
possible loss of rights in such securities.
- 10 -
<PAGE>
Reverse Repurchase Agreements
The Fund may also enter into reverse repurchase agreements to avoid
selling securities during unfavorable market conditions to meet redemptions.
Pursuant to a reverse repurchase agreement, the Fund will sell portfolio
securities and agree to repurchase them from the buyer at a particular date and
price. Whenever the Fund 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. The Fund pays interest on amounts obtained
pursuant to reverse repurchase agreements. Reverse repurchase agreements are
considered to be borrowings by the Fund under the 1940 Act and are subject to
the Fund's general limitation with respect to borrowing.
Loans of Portfolio Securities
Although the Fund does not anticipate engaging in such activity in the
ordinary course of business, the Fund may lend portfolio 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
its total assets. In connection with such loans, the Fund will receive
collateral consisting of cash, cash equivalents, U.S. Government securities or
irrevocable letters of credit issued by financial institutions. Such collateral
will be maintained at all times in an amount equal to at least 102% of the
current market value of the securities loaned plus accrued interest. The Fund
can earn income through the investment of such collateral. The Fund 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 the Fund on a
loaned security from the borrower will not qualify for the dividends-received
deduction. Such loans will be terminable at any time upon specified notice. The
Fund might experience risk of loss if the institutions with which it has engaged
in portfolio loan transactions breach their agreements with such Fund. The 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 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.
Illiquid or Restricted Securities
The Fund may purchase securities for which there is a limited trading
market or which are subject to restrictions on resale to the public. Investments
in securities which are "restricted" may involve added expenses to the Fund
should the Fund be required to bear registration costs with respect to such
securities and could involve delays in disposing of such securities which might
have an adverse effect upon the price and timing of sales of such securities and
the liquidity of the Fund with respect to redemptions. The Fund will not invest
more than 15% of the value of its total assets in illiquid investments, such as
"restricted securities" which are illiquid, and securities that are not readily
marketable. As more fully described in the Statement of Additional Information,
the Fund may purchase certain restricted securities ("Rule 144A securities") for
which there may be a secondary market of qualified institutional buyers as
contemplated by Rule 144A under the Securities Act of 1933. Rule 144A is a
relatively recent development and there is no assurance that a liquid market in
Rule 144A securities will develop or be maintained. To the extent that the
number of qualified institutional buyers is reduced, a previously liquid Rule
144A security may be determined to be illiquid, thus increasing the percentage
of illiquid assets in the Fund's portfolio. The Fund may also invest in
commercial obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act of
1933 ("Section 4(2) paper"). Section 4(2) paper is restricted as to disposition
under the federal laws, and generally is sold to institutional investors such as
the Fund which agree that they are purchasing the paper for investment and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper normally is resold to other institutional
investors through or with the assistance of the issuer or investment dealers who
make a market in the Section 4(2) paper, which can thus provide liquidity. The
Fund's holdings of Rule 144A securities and Section 4(2) paper which are liquid
securities will not be subject to the 15% limitation described
- 11 -
<PAGE>
above. The Board of Trustees of the Trust will be responsible for monitoring the
liquidity of Rule 144A securities and Section 4(2) paper and the selection by
the investment adviser of such instruments.
Firm Commitments And When-Issued Securities
The Fund may purchase securities on a firm commitment basis, including
when-issued securities. Securities purchased on a firm commitment basis are
purchased for delivery beyond the normal settlement date at a stated price and
yield. Such securities are recorded as an asset and are subject to changes in
value based upon changes in the general level of interest rates. The Fund will
make commitments to purchase securities on a firm commitment basis only with the
intention of actually acquiring the securities, but may sell them before the
settlement due if it is deemed advisable.
No income accrues to the purchaser of a security on a firm commitment
basis prior to delivery. Purchasing a security on a firm commitment basis can
involve a risk that the market price at the time of delivery may be lower than
the agreed upon purchase price, in which case there could be an unrealized loss
at the time of delivery. The Fund will establish a segregated account in which
it will maintain liquid assets in an amount at least equal in value to the
Fund's commitments to purchase securities on a firm commitment basis. If the
value of these assets declines, the Fund will place additional liquid assets in
the account on a daily basis so that the value of the assets in the account is
equal to the amount of such commitments.
Stand-By Commitments
The Fund 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, the Fund acquires the right to sell a
security at an agreed upon price within a specified period prior to its maturity
date, and a stand-by commitment entitles the Fund to same-day settlement and to
receive an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. In the event that the
party obligated to purchase the underlying security from the Fund defaults on
its obligation to purchase the underlying security, then the Fund 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.
Other Investment Companies
The Fund 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 the overall objective and policies of the Fund and subject to
the limitations of the 1940 Act and the Fund's investment limitations as
described in the Statement of Additional Information.
Variable Rate Securities and Participation Certificates
The variable rate demand instruments that may be purchased by the 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 Statement of
Additional Information).
- 12 -
<PAGE>
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 Statement of Additional Information).
As a result of the variable rate nature of these investments, the
Fund'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 Fund's yield will increase and its shareholders will have reduced
risk of capital depreciation.
Hedging and Derivatives
The Fund may invest its assets in derivative and related instruments subject
only to the Fund's investment objective and policies and the requirement that,
to avoid leveraging the Fund, the Fund 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 Fund
invests may be particularly sensitive to changes in prevailing interest rates or
other economic factors, and -- like other investment of the Fund -- the ability
of the Fund to successfully utilize these instruments may depend in part upon
the ability of the Adviser or Sub-Adviser to forecast interest rates and other
economic factors correctly. If the Adviser or Sub-Adviser incorrectly forecasts
such factors and has taken positions in derivative or similar instruments
contrary to prevailing market trends, the Fund could be exposed to the risk of a
loss. The Fund may 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 Fund's investment objective and
policies, and as described more fully in the Statement of Additional
Information, the Fund 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 Statement of Additional
Information, there are a number of risk factors 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. As incorrect correlation could result in a loss
on both the hedged assets in the Fund and the hedging vehicle so that the Funds
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
Fund may have been in a better position had it not entered into such strategy.
Hedging strategies, while reducing the 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 the Fund. Certain strategies, such as yield enhancement, can have
speculative characteristics and may result in more risk to the Fund than hedging
strategies using the same instruments. There can be no assurance that a liquid
market will exist at a time when the Fund seeks to close out an option, futures
contract or other derivative or related position. Many exchanges and boards of
trade limit the amount of fluctuation permitted in option or futures contract
prices during a single day; once the daily limit has been reached on 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
- 13 -
<PAGE>
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 the Fund may experience a loss. In transactions
involving currencies, the value of the currency underlying an instrument may
fluctuate due to many factors, including economic conditions, interest rates,
governmental policies and market forces.
MANAGEMENT OF THE FUND
The Adviser
The Chase Manhattan Bank, N.A. ("Chase" or the "Adviser") manages the
assets of the Fund pursuant to an Investment Advisory Agreement dated
____________, 1996. Subject to such policies as the Board of Trustees may
determine, the Adviser makes investment decisions for the Fund. For its services
under the Investment Advisory Agreement, the Adviser is entitled to receive an
annual fee computed daily and paid monthly based at an annual rate equal to
0.30% of the Fund's average daily net assets. The Adviser may, from time to
time, voluntarily waive all or a portion of its fees payable under the Advisory
Agreement.
The Adviser, a wholly-owned subsidiary of The Chase Manhattan
Corporation, a registered bank holding company, is a commercial bank offering a
wide range of banking and investment services to customers throughout the United
States and around the world. Its headquarters is at One Chase Manhattan Plaza,
New York, NY 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.
Certain Relationships and Activities. The Adviser and its affiliates
may have deposit, loan and other commercial banking relationships with the
issuers of securities purchased on behalf of the Fund, including outstanding
loans to such issuers which may be repaid in whole or in part with the proceeds
of securities so purchased. The Adviser and its affiliates deal, trade and
invest for their own accounts in U.S. Government obligations, municipal
obligations and commercial paper and are among the leading dealers of various
types of U.S. Government obligations and municipal obligations. The Adviser and
its affiliates may sell U.S. Government obligations and municipal obligations
to, and purchase them from, other investment companies sponsored by the
Distributor or affiliates of the Distributor. The Adviser will not invest the
Fund's 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
by the Fund. The Adviser has informed the Fund that in making its investment
decisions, it does not obtain or use material inside information in the
possession of any other division or department of the Adviser, including the
division that performs services for the Fund as Custodian, or in the possession
of any affiliate of the Adviser. Shareholders of the Fund should be aware that,
subject to applicable legal or regulatory restrictions, Chase and its affiliates
may exchange among themselves certain information about the shareholder and his
account.
The Sub-Adviser
Under an investment advisory agreement between the Trust, on behalf of
the Fund, and Chase, Chase may delegate a portion of its responsibilities to a
sub-adviser. In addition, the investment advisory agreement provides that Chase
may render services through its own employees or the employees of one or more
affiliated companies that are qualified to act as an adviser of the Fund and are
under the common control of New Chase as long as all such persons are
functioning as part of an organized group of persons, managed by authorized
officers of Chase.
Chase has entered into an investment sub-advisory agreement with its
affiliate, CAM Inc., a registered investment adviser, on behalf of the Fund. The
Sub-Adviser is a wholly-owned subsidiary of Chase. Subject to the supervision
and direction of the Adviser and the Board of Trustees, CAM Inc. provides
investment sub-advisory
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<PAGE>
services to the Fund in accordance with the Fund's objectives and policies,
makes investment decisions for the Fund and places orders to purchase and sell
securities on behalf of the Fund. The Sub-Advisory Agreement provides that, as
compensation for services, the Sub-Adviser receives, from the Adviser, a fee,
based on the Fund's average daily net assets, determined at a rate agreed upon
from time to time between the Adviser and CAM Inc. [DISCLOSURE ABOUT SUB-ADVISER
TO COME]
The Administrator
Pursuant to an Administration Agreement, dated ________, 1996 (the
"Administration Agreement"), Chase serves as administrator of the Fund. 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 the Fund a fee computed daily and paid monthly at an
annual rate equal to 0.10% of the Fund's average daily net assets. The
Administrator may, from time to time, voluntarily waive all or a portion of its
fees payable to it under the Administration Agreement. The Administrator shall
not have any responsibility or authority for the Fund's investments, the
determination of investment policy, or for any matter pertaining to the
distribution of Fund shares.
Glass-Steagall Act. Chase has received the opinion of its legal counsel
that it may provide the services described in the Investment Advisory and the
Administration Agreements, as described above, and the Shareholder Servicing
Agreements and Custodian Agreement with the Fund, as described below, without
violating the federal banking law commonly known as the Glass-Steagall Act. The
Act generally bars banks from publicly underwriting or distributing certain
securities.
Based on the advice of its counsel, Chase believes that the Court's
decision, and these other decisions of banking regulators, permit it to serve as
investment adviser to a registered, open-end investment company.
Regarding the performance of shareholder servicing and custodial
activities, the staff of the Office of the Comptroller of the Currency, which
supervises national banks, has issued opinion letters stating that national
banks may engage in shareholder servicing and custodial activities. Therefore,
the Adviser believes, based on advice of counsel, that it may serve as
Shareholder Servicing Agent and/or Custodian to the Fund and render the services
described below and as set forth in the shareholder servicing agreement and
Custodian Agreement, as an appropriate, incidental national banking function and
as a proper adjunct to its serving as investment adviser and administrator to
the Fund.
Industry practice and regulatory decisions also support a bank's
authority to act as administrator for a registered investment company. The
Administrator, on the advice of its counsel believes that it may render the
services described in its Administration Agreement without violating the
Glass-Steagall Act or other applicable banking laws.
Possible future changes in federal law or administrative or judicial
interpretations of current or future law, however, could prevent the Adviser
from continuing to perform investment advisory, shareholder servicing, custodial
or other administrative services for the Fund. If that occurred, the Fund's
Board of Trustees promptly would seek to obtain for the Fund the services of
another qualified adviser, shareholder servicing agent, custodian or
administrator, as necessary. Although no assurances can be given, the Fund
believes that, if necessary, the transfer to a new adviser, shareholder
servicing agent, custodian or administrator could be accomplished without undue
disruption to the Fund's operations.
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 law.
- 15 -
<PAGE>
PURCHASES AND REDEMPTIONS OF SHARES
Purchases
Class A shares are sold to investors subject to an initial sales
charge. Institutional Class Shares are available only to qualified investors
making an initial minimum investment of $1,000,000 or more.
Class A Shares
Classes A shares of the Fund may be purchased through selected
financial service firms, such as broker-dealer firms and banks ("Dealers") who
have entered into a selected dealer agreement with Vista Broker-Dealer Services,
Inc., at the public offering price which is computed once daily as of the close
of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time) on
each business day during which the Exchange is open for trading ("Fund Business
Day"). (See "Other Information Concerning Shares of the Fund-Net Asset Value").
The public offering price of Class A shares is the next determined net asset
value, plus applicable initial sales charge. Orders received by Dealers prior to
the New York Stock Exchange closing time are confirmed at the offering price
effective at the close of such Exchange, provided the order is received by the
Transfer Agent prior to its close of business. Dealers are responsible for
forwarding orders for the purchase of shares on a timely basis. Fund shares
normally will be maintained in book entry form and only Class A share
certificates will be issued upon request. Management reserves the right to
refuse to sell shares of the Fund to any person.
All purchases made by check should be in U.S. dollars and made payable
to the Vista Funds. Third party checks, except those payable to an existing
shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. When purchases are
made by check or periodic automatic investment, redemptions will not be allowed
until the investment being redeemed has been in the account for 15 business
days.
Shareholder Servicing Agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each Shareholder Servicing Agent may establish its own terms and conditions,
including reduced minimum initial purchase amounts and limitations on the
amounts of subsequent transactions, with respect to such services. Certain
Shareholder Servicing Agents may (although they are not required by the Trust to
do so) credit to the accounts of their customers from whom they are already
receiving other fees an amount not exceeding the fees for their services as
Shareholder Servicing Agents (see "Shareholder Servicing Agents, Transfer Agent
and Custodian -- Shareholder Servicing Agents"), which will have the effect of
increasing the net return on the investment of customers of that Shareholder
Servicing Agent.
Minimum Investments
The Fund has established minimum initial and additional investments for
the purchase of Class A Shares. The minimums detailed below vary by the type of
accounting being established:
Account Type Minimum Initial Investment
Individual............................................ $2,500(1)
Individual Retirement Account (IRA)................... $1,000(2)
Spousal IRA........................................... $ 250
SEP-IRA............................................... $1,000(2)
Purchase Accumulation Plan............................ $ 250(3)
Payroll Deduction Program............................. $ 100(4)
(401(k), 403(b), Keogh)
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<PAGE>
- -------------------
(1) Employees of the Adviser and its affiliates, and Qualified Persons as
defined in "Purchases of Class A Shares at Net Asset Value", are
eligible for a $1,000 minimum initial investment.
(2) A $250 minimum initial investment is allowed if the new account is
established with a $100 minimum monthly Systematic Investment Plan as
described below.
(3) Account must be established with a $200 minimum monthly Systematic
Investment Plan as described below.
(4) A $25 minimum monthly investment must be established through an
automated payroll cycle.
The minimum additional investment is $100 for all types of accounts.
Systematic Investment Plan. A shareholder may establish a monthly
investment plan by which investments are automatically made to his/her Vista
Fund 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.
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. The letter should contain your Vista Fund
account number, the desired amount and cycle of the systematic investment, and
must include a voided check from the checking account from 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
The public offering price of Class A shares 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:
Concession
Sales Charge to Dealers
% of % of Net % of
Offering Amount Offering
Amount of Purchase Price Invested Price
Less than $100,000............ 4.50 4.71 4.00
$100,000 to $249,999.......... 3.75 3.90 3.25
$250,000 to $499,000.......... 2.50 2.56 2.25
$500,000 to $999,999.......... 2.00 2.04 1.75
$1,000,000 to $2,499,999...... -- -- 0.75
$2,500,000 to $9,999,999...... -- -- 0.50
$10,000,000 to $49,999,999.... -- -- 0.25
$50,000,000 and over.......... -- -- 0.15
The initial sales charge on Class A shares varies with the size of the
purchase as shown above. The reduced charges apply to the aggregate of purchases
of Class A shares of the Fund 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
Distributor may compensate Dealers for sales of $1,000,000 or more from its own
resources and/or the Distribution Plan.
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<PAGE>
Upon notice to Dealers with whom it has sales agreements, VBDS may
reallow up to the full applicable sales charge and such Dealer may therefore be
deemed an "underwriter" under the Securities Act of 1933, as amended, during
such periods. For the three-year period commencing July 19, 1993, for activities
in maintaining and servicing accounts of customers invested in the Fund,
Associated Securities Corp. ("Associated Securities") may receive payments from
the Adviser based, in part, on the amount of the aggregate asset values of the
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
Distributor, Associated Securities will be entitled to receive either 50% or 70%
of the difference between the total front-end sales load, or in the case of
Class B shares 4.00%, and that portion paid to selling group member broker-
dealers.
To the extent permitted by applicable SEC and NASD regulations, the
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 Fund or other Funds in the Trust. At various times the
Distributor may implement programs under which a Dealer's sales force may be
eligible to win cash or awards for certain sales efforts or under which the
Distributor will reallow an amount not exceeding the total applicable initial
sales charges on the sales of Class A shares or the Maximum Contingent Deferred
Sales charge of Class B shares generated by the Dealer during such programs to
any Dealer that sponsors sales contests or recognition programs conforming to
criteria established by the Distributor or participates in sales programs
sponsored by the Distributor. The 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 at Net Asset Value
Shareholders As of November 30, 1990
Shareholders of record of any Vista Fund as of November 30, 1990, may
purchase shares of the Fund at Net Asset Value without an initial sales charge
for as long as they continue to own shares of any Vista Fund, 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, Distributor, Transfer Agency or any affiliates or
subsidiaries thereof.
b) Employees (including their spouses and children under 21) of
Dealers having a selected dealers agreement with the distributor.
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 of
the Fund by:
a) An investor seeking to invest the proceeds of a qualified
retirement plan, where a portion of the plan was invested in Vista.
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<PAGE>
b) Any qualified retirement plan with 250 or more participants.
c) An individual participant in a tax-qualified plan making a
tax-free rollover or transfer of assets from the plan in which the
adviser of the Fund 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
Purchase of Class A shares of the Fund may be made with no initial
sales charge through an investment adviser, broker, or financial planner who
charges a fee for their services. Purchase of Class A Shares of the Fund may be
made with no initial sales charge (i) by an investment adviser, broker or
financial planner, provided arrangements are pre-approved and purchases are
placed through an omnibus account with the Fund or (ii) by clients of such
investment advisor or financial planner who place trades for their own accounts,
if such accounts are linked to a master account of such investment adviser or
financial planner on the books and records of the broker or agent. Such
purchases may be made for retirement and deferred compensation plans and trusts
used to fund those plans, including but not limited to those defined in section
401(a), 403(b) or 457 of the Internal Revenue Code or rabbi trusts.
Investors may incur a fee if they effect transactions through a broker
or agent.
Purchases Through A Bank As Fiduciary
Purchases of Class A Shares of the Fund 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 the Fund,
the distributor or the Transfer Agent.
The Fund 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
Cumulative Quantity Discount. Class A shares of the Fund 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 Fund, or any other Vista Fund, including any Vista money
market Fund 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 of the Fund 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 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 and now were investing $15,000, the initial
sales charge would be 3.75% on the $15,000 purchase. 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.
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<PAGE>
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 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 the Fund and the members, must agree
to include sales and other materials related to the Fund in its publications and
mailings to members at reduced or no cost to the Distributor, and must seek to
arrange for payroll deduction or other bulk transmission of investments of the
Fund. 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 may also qualify
for reduced initial sales charges by signing a Statement of Intention (the
"Statement"). This enables the investor to aggregate purchases of Class A shares
in the Fund with purchases of Class A shares of any other Vista Fund (or if a
fund has only one class, shares of such fund), including shares of any Vista
money market Fund acquired by exchange from a fund which charged an initial
sales charge, 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
or other qualifying shares of these Funds 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 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. Reinvested dividend and
capital gain distributions are not counted towards satisfying the Statement.
Reinstatement Privilege. Class A shareholders have a one time privilege
of reinstating their investment in the Fund, 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 30 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.
Exchanges for Class A shares of other Vista Funds. Class A shares of
the Fund may be obtained without an initial sales charge through exchanges for
Class A shares of other Vista Funds. See "Exchange Privilege."
Institutional Shares
The Institutional Shares are continuously offered for sale without a
sales load at the net asset value next determined through Vista Broker-Dealer
Services, Inc. ("VBDS" or the "Distributor") after an order is received if it is
transmitted prior to 12:00 noon, Eastern time for the Tax Free Fund, and prior
to 2:00 p.m., Eastern time for the U.S. Government Fund, Global Fund, Treasury
Fund, Federal Fund and Prime Fund on any business day during which the New York
Stock Exchange and the Adviser are open for trading ("Fund Business Day"). (See
"Other Information Concerning Shares of the Fund--Net Asset Value"). Orders for
Institutional Shares received and accepted prior to the above designated times
will be entitled to all dividends declared on such day. The minimum initial
purchase is $1,000,000. Shareholders must maintain a minimum account balance of
$1,000,000 in the Institutional Shares at all times. It is anticipated that each
Institutional Share's net asset value win remain
- 20 -
<PAGE>
constant at $1.00 per share and each Fund will employ specific investment
policies and procedures to accomplish this result. An investor may purchase
Institutional Shares by authorizing his broker or financial institution to
purchase such Shares on his behalf through the Distributor, which the broker or
financial institution must do on a timely basis. All share purchases must be
paid for by federal funds wire. If federal funds are not available with respect
to any such order by the close of business on the day the order is received by
the Transfer Agent, the order will be cancelled. Any order received after the
times noted above will not be accepted. Any funds received in connection with
late orders will be invested on the next business day. The Funds may at their
discretion reject any order for shares. The Funds also reserve the right to
suspend sales of shares to the public at any time, in response to the conditions
in the securities market or otherwise. Fund shares will be maintained in book
entry form, and no certificates representing shares owned will be issued to
shareholders.
Federal regulations require that each investor provide a certified
Taxpayer Identification Number upon opening an account.
Each Fund intends to be as fully invested at all times as is reasonably
practicable in order to enhance the yield on its assets. Accordingly, in order
to make investments which will immediately generate income, each Fund must have
federal funds available to it (i.e., monies credited to the account of such
Fund's custodian bank by a Federal Reserve Bank).
Redemptions
Class A Shares
Shareholders may redeem all or any portion of the shares in their
account at any time at the net asset value next determined after a redemption
request in proper form is furnished by the shareholder to his Shareholder
Servicing Agent or Dealer and transmitted to and received by the Transfer Agent.
The proceeds of a redemption normally will be paid on the next Fund Business Day
after a redemption request has been received by the Fund, 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 may
redeem his shares by authorizing his Shareholder Servicing Agent, Dealer or its
agent to redeem such shares, which the Shareholder Servicing Agent, Dealer or
its agent must do on a timely basis. The signature of both shareholders is
required for any written redemption requests 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 the Fund's records.
The value of shares of the Fund 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 a loss. Although the Fund generally
retains the right to pay the redemption price of shares in kind with securities
(instead of cash), the Trust has filed an election under Rule 18f-1 under the
Investment Company Act of 1940, as amended (the "1940 Act") committing it to pay
in cash all redemptions by a shareholder of record up to the amounts specified
by 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. For the protection of shareholders, all
telephone redemption requests in excess of $25,000 will be wired directly to
such previously designated bank account. 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
designated bank account for up to four days. There is a $10.00 charge for each
federal funds wire transaction. If no share certificates have been issued, a
wire redemption may be requested by telephone or wire to the Vista Service
Center. For telephone redemptions, call the Vista Service Center at (800)
34-VISTA.
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<PAGE>
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.
Systematic Redemption Plan--Class A Shares. A shareholder owning
$10,000 or more of the Class A shares of the Fund as determined by the then
current net asset value may provide for the payment monthly or quarterly of at
least $100 from his account. A sufficient number of full and fractional Class A
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.
For further information as to how to direct a Shareholder Servicing
Agent to redeem shares of the Fund, a shareholder should contact his Shareholder
Servicing Agent.
Redemption of Accounts of Less than $500. The Fund 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.
Institutional Shares
An investor 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 received by a Fund'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 12:00 noon, Eastern time for
the Tax Free Fund, and prior to 2:00 p.m., Eastern time for the U.S. Government
Fund, Global Fund, Treasury Fund, Federal Fund and Prime Fund, on any Fund
Business Day. Shares which are redeemed earn dividends up to an including the
day prior to the day redemption is effected. The proceeds of a redemption will
be paid by wire in federal funds normally on the Fund Business Day the
redemption is effected but in any event within seven days. Payment for
redemption requests received prior to the above-mentioned times is normally made
in federal funds wired to the redeeming shareholder on the same Business Day.
Payment for redeemed shares for which a redemption order is received after the
times stated above on a Business Day is normally made in federal funds wired to
the redeeming shareholder on the next Business Day following redemption. In
order to allow Chase to most effectively manage the Funds' portfolios, investors
are urged to make redemption requests as early in the day as possible. In making
redemption requests, the names of the registered shareholders and their account
numbers must be supplied. While the Fund retains the right to pay the redemption
price of shares in kind with securities (instead of cash), the Trust has filed
an election under Rule 18f-1 under the Investment Company Act of 1940, as
amended (the "1940 Act") committing to pay in cash all redemptions by a
shareholder of record up to the amounts specified in the rule (approximately
$250,000).
A wire redemption may be requested by telephone or wire to the Vista
Service Center. For telephone redemptions, call the Vista Service Center at
(900) 622-4273.
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 exits.
Exchange Privilege
Shareholders may exchange, at respective net asset value, Class A
shares of the Fund for Class A shares of the other Vista Funds, in accordance
with the terms of the then current prospectus of the Fund being acquired. No
initial sales charge is imposed on the Class A shares being acquired. The
prospectus of the other Vista Fund into which shares are being exchanged should
be read carefully prior to any exchange and retained for future
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<PAGE>
reference. Under the Exchange Privilege, Class A shares of the Fund also may be
exchanged for shares of such other Vista Funds only if those Funds and their
shares are registered in the states where the exchange may legally be made.
Shares of the Fund may only be exchanged into the same class of another Vista
Fund and only if the account registrations are identical.
With respect to exchanges from any Vista money market Fund,
shareholders must have acquired their shares in such money market Fund by
exchange from one of the other Funds in the Trust, or any exchange directly from
one of such Vista money market Funds will be done at relative net asset value
plus the appropriate sales charge.
Any such exchange may create a gain or loss to be recognized for
federal income tax purposes. Normally, shares of the Fund to be acquired through
an exchange transaction are purchased on the redemption date, but such purchase
may be delayed by either Fund up to five business days if the Fund determines
that it would be disadvantaged by an immediate transfer of the proceeds. This
privilege may be amended or terminated at any time without notice. Arrangements
have been made for the acceptance of instructions by telephone to exchange
shares if certain preauthorizations or indemnifications are accepted and on
file. Further information and telephone exchange forms are available from the
Transfer Agent.
Institutional shares do not have an exchange privilege.
Market Timing. The exchange privilege described in each Prospectus 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 Adviser believes doing so would be in the
best interest of the Fund, the Fund 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 Fund in a year or three in a calendar quarter will be charged
$5.00 administration fee per each such exchange.
General
The Fund has established certain procedures and restrictions, subject
to change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Fund'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 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. The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. In the event the Fund 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, the Fund 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 the Fund 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 the Fund in writing. Shareholders agree to release and hold
harmless the Fund, 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 Fund 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
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someone claiming to be a shareholder if the Fund 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.
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 the Fund that is contained in the
Statement of Additional Information. In addition, each prospective investor
should consult with his own tax advisers as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund in
his own state and locality and the possible applicability of a federal
alternative minimum tax to a portion of the distributions of the Fund.
The Fund intends to qualify each year and elect to be treated as a
separate "regulated investment company" under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). If the Fund is treated 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 the Fund 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 the Fund's current and accumulated earnings and
profits.
The Trust is organized as a Massachusetts business trust and, under
current law, is not liable for any income or franchise tax in the Commonwealth
of Massachusetts as long as the Fund (and each other series of the Trust)
qualifies as a regulated investment company under the Code.
Distributions by the Fund of its tax-exempt interest income (net of
expenses) are designated as "exemptinterest dividends" which are excluded from
gross income for regular federal income tax purposes. In accordance with the
investment objectives of the Fund, it is expected that most or all of the net
investment income of the Fund will be attributable to interest from Municipal
Obligations, although from time to time a portion of the portfolio of the Fund
may be invested in short-term taxable obligations since the preservation of
capital and the maintenance of liquidity are important aspects of the Fund's
investment objective. As a result, most or all of the dividends paid out of the
Fund's net investment income will be designated "exempt-interest dividends". The
percentage of such dividends so designated will be applied uniformly to all such
dividends from the Fund made during each fiscal year and may differ from the
actual percentage for any particular month.
Although excluded from gross income for regular federal income tax
purposes, exempt-interest dividends, together with other tax-exempt interest,
are required to be reported on shareholders' federal income tax returns, and are
taken into account in determining the portion, if any, of Social Security
benefits which must be included in gross income for federal income tax purposes.
In addition, exempt-interest dividends paid out of interest on certain Municipal
Obligations that may be purchased by the Fund will be treated as a tax
preference item for both individual and corporate shareholders potentially
subject to an alternative minimum tax ("AMT"), and all exempt-interest dividends
will be included in computing a corporate shareholder's adjusted current
earnings, upon which is based a separate corporate preference item which may be
subject to AMT and to the environmental superfund tax. Interest on indebtedness
incurred, or continued, to purchase or carry shares of the Fund is not
deductible. Further, entities or persons who may be "substantial users" (or
persons related to "substantial users") of facilities financed by certain types
of Municipal Obligations should consult with their own tax advisers before
purchasing shares of the Fund.
Distributions by the Fund of any 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, but do not qualify for the dividends-received deduction for
corporations. Distributions by the Fund of the excess, if any, of its net
long-term
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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.
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 the Fund. In general, distributions by the Fund 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 the
Fund 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 fiscal year, including any portions which constitute
ordinary income dividends, capital gain dividends and exemptinterest dividends,
will be sent to the Fund's shareholders promptly after the end of each year.
Any loss realized upon a taxable disposition of shares within six
months from the date of their purchase will be disallowed to the extent of any
exempt-interest dividends received on such shares and (to the extent not
disallowed) will be treated as a long-term capital loss to the extent of any
capital gain dividends received on such shares. All or a portion of any loss
realized upon a taxable disposition of shares of the Fund may be disallowed if
other shares of the Fund are purchased within 30 days before or after such
disposition.
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 the Fund. Generally, shareholders are subject to
backup withholding if they have not provided the Fund with a correct taxpayer
identification number and certain required certifications.
The exclusion from gross income for federal income tax purposes of
exempt-interest dividends does not necessarily result in an exclusion under the
income or other tax laws of any state or local taxing authority. Shareholders of
the Fund may be exempt from state and local taxes on exempt-interest dividends
paid out of interest on Municipal Obligations of the state and/or municipalities
of the state in which they reside but may be subject to state and local tax on
exempt-interest dividends paid out of interest on Municipal Obligations of other
jurisdictions.
No gain or loss will be recognized by a shareholder as a result of a
conversion from Class B shares to Class A shares.
State and Local Income Taxes
Some states provide that a regulated investment company may pass
through (without restriction) to its shareholders state and local income tax
exemptions available to direct owners of certain types of U.S. Government
securities (such as U.S. Treasury obligations). Thus, for residents of these
states, distributions derived from the Fund's investment in certain types of
U.S. Government securities should be free from state and local income taxes to
the extent that the interest income from such investments would have been exempt
from state and local income taxes if such securities had been held directly by
the respective shareholders themselves. Certain states, however, do not allow a
regulated investment company to pass through to its shareholders the state and
local income tax exemptions available to direct owners of certain types of U.S.
Government securities unless the regulated investment company holds at lest a
required amount of U.S. Government securities. Accordingly, for residents of
these states, distributions derived from the Fund's investment in certain types
of U.S. Government securities may not be entitled to the exemptions from state
and local income taxes that would be available if the shareholders had purchased
U.S. Government securities directly. Shareholders' dividends attributable to the
Fund's income from repurchase agreements generally are subject to state and
local income taxes. The exemption from state and local income taxes does not
preclude states from asserting other taxes on the ownership of U.S. Government
securities. To the extent that the Fund invests to a substantial degree in U.S.
Government securities which are subject to favorable state and
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<PAGE>
local tax treatment, shareholders of the Fund will be notified as to the extent
to which distributions from the Fund are attributable to interest on such
securities.
OTHER INFORMATION CONCERNING SHARES OF THE FUND
Net Asset Value
The net asset value of a class of shares of the Fund is determined as
of the close of regular trading on the New York Stock Exchange (normally 4:00
p.m. Eastern time), on each Fund Business Day, by dividing the net assets
attributable to that class by the number of its shares outstanding. Values of
assets in the Fund's portfolio are determined on the basis of their market or
other fair value, as described in the Statement of Additional Information. A
share's net asset value is effective for orders received by a Shareholder
Servicing Agent prior to its calculation and received by the 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 per share net asset value of Class A shares of the Fund will
generally be lower than that of the Institutional Class shares because of the
higher expenses borne by the Class A shares. The net asset values per share of
Class A and Institutional Class differ due to differing allocations of
class-specific expenses.
Net Income, Dividends and Capital Gain Distributions
Income dividends are declared daily and paid monthly. The Fund's net
investment income is calculated by adding the value of all the Fund's
investments, plus cash and other assets, deducting Fund liabilities and then
dividing the result by the number of shares outstanding. Certain expenses are
applied on a per-class basis only and are deducted accordingly. The Fund will
distribute its net realized short-term and long-term capital gains, if any, to
its shareholders at least annually. In general, dividends on Class A shares are
expected to be lower than those on Institutional Class shares due to the higher
distribution expenses, and certain other expenses borne by the Class A shares.
The Fund 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 the Fund in either cash or additional shares.
Distribution Plans and Distribution and Sub-Administration Agreement
The Trustees have adopted a Distribution Plan (the "Distribution Plan")
for the Class A shares in accordance with Rule 12b-1 under the 1940 Act, after
having concluded that there is a reasonable likelihood that the Distribution
Plan will benefit that class and its shareholders. The Institutional Shares do
not have a Distribution Plan.
The Class A Distribution Plan provides that the Fund shall pay
distribution fees including payments to the Distributor, at an annual rate not
to exceed 0.25% of its average daily net assets for distribution services. Some
payments under the Distribution Plan may be used to compensate broker-dealers
with trail or maintenance commissions in amounts not to exceed 0.25% annualized
of the asset value of Class A shares, maintained in the Fund by such
broker-dealers' customers. Since the distribution fees are not directly tied to
expenses, the amount of distribution fees paid by the Fund during any year may
be more or less than actual expenses incurred pursuant to the Distribution
Plans. For this reason, this type of distribution fee arrangement is
characterized by the staff of the Securities and Exchange Commission as being of
the "compensation variety" (in contrast to "reimbursement" arrangements by which
a distributor's compensation is directly linked to its expenses).
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<PAGE>
Class A shares are entitled to exclusive voting rights with respect to
matters concerning its Distribution Plan.
The Distribution and Sub-Administration Agreement dated April 15, 1994
(the "Distribution Agreement"), provides that the Distributor will act as the
principal underwriter of the Fund's shares and bear the expenses of printing,
distributing and filing prospectuses and statements of additional information
and reports used for sales purposes, and of preparing and printing sales
literature and advertisements not paid for by the Distribution Plans. In
addition, the Distributor will provide certain sub-administration services,
including providing officers, clerical staff and office space. The Distributor
currently receives a fee for sub-administration from the Fund at an annual rate
equal to 0.05% of the Fund's average daily net assets, on an annualized basis
for the Fund's then-current fiscal year. Other funds which have investment
objectives similar to those of the Fund, 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 Distributor has agreed to use a portion of its distribution and
sub-administration fee to pay for certain expenses of the Fund incurred in
connection with organizing new series of the Trust and certain other ongoing
expenses of the Trust. The Distributor may, from time to time, waive all or a
portion of the fees payable to it under the Distribution Agreement.
The Fund will pay all of its pro rata share of the foregoing expenses
of the Trust, including membership dues in the Investment Company Institute,
administrative fees payable under the Fund's Administration Agreement, and
sub-administration fees payable under the Distribution and Sub-Administration
Agreement. In addition, each class will pay those expenses allocable to the
class, including: 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 and
Sub-Administration Agreement requires the Distributor to pay for prospectuses
which are to be used for sales to prospective investors).
Expenses
The expenses each of the Funds of the Trust include the compensation of
its Trustee; registration fees; interest charges; taxes; fees and expenses of
independent accountants, of legal counsel and of any transfer agent, custodian,
registrar or dividend disbursing agent of the Trust Portfolio; insurance
premiums; and expenses of calculating the net asset value of, and the net income
on the shares of the Fund.
The Fund will pay all of its pro rata share of the foregoing expenses
of the Trust, including membership dues in the Investment Company Institute,
administrative fees payable under the Fund's Administration Agreement, and
sub-administration fees payable under the Distribution and Sub-Administration
Agreement. In addition, each class will pay those expenses allocable to the
class, including: 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 and
Sub-Administration Agreement requires the Distributor to pay for prospectuses
which are to be used for sales to prospective Investors).
Description of Shares, Voting Rights and Liabilities
Mutual Fund Group is an open-end, management investment company
organized as a Massachusetts business trust under the laws of the Commonwealth
of Massachusetts in 1987. Because the Fund is "non-diversified," more of the
Fund's assets may be concentrated in the securities of any single issuer than if
the Fund was "diversified," which may make the value of the shares in a fund
more susceptible to certain risks than shares of a diversified mutual fund.
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<PAGE>
The Trust has reserved the right to create and issue additional series
and classes. Each share of a series or class including Class A and Institutional
Class, represents an equal proportionate interest in that series or class with
each other share of that series or class. The shares of each series or class
participate equally in the earnings, dividends and assets of the particular
series or class. Shares have no pre-emptive or conversion rights. Shares when
issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each whole share held, and each
fractional share shall be entitled to a proportionate fractional vote, except
that Trust shares held in the treasury of the Trust shall not be voted. Shares
of Class A and Institutional Class generally vote separately, for example to
approve distribution plans, but shares of all series or classes vote together,
to the extent required under the 1940 Act, in the election or selection of
Trustees and independent accountants.
The Trust is not required to hold annual meetings of shareholders but
will hold special meetings of shareholders of Class A or Institutional Class or
of all series or classes when in the judgment of the Trustees it is necessary or
desirable to submit matters for a shareholder vote. A Trustee of the Trust may,
in accordance with certain rules of the Securities and Exchange 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 the Funds'
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 all outstanding shares of the Trust. 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. The Trust'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 portfolio 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,
including Class A and Class B, would be entitled to share pro rata in the net
assets of that series or class available for distribution to shareholders upon
liquidation of the Fund or that series or class.
The Trust reserves the right to create and issue a number of series of
shares, in which case the shares of each series would participate equally in the
earnings, dividends and assets of the particular series (except for differences
among any classes of shares of any series).
The Trust 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 shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
The Code of Ethics of the Trust prohibits all affiliated personnel from
engaging in personal investment activities which compete with or attempt to take
advantage of a Fund's planned portfolio transactions. The objective of the Code
of Ethics is to ensure that the operations of a Fund be carried out for the
exclusive benefit of a Fund's shareholders. The Trust maintains careful
monitoring of Compliance with the Code of Ethics. See "General Information" in
the Fund's Statement of Additional Information.
On __________, 1996, the Shareholders of the Predecessor Fund approved
an Agreement and Plan of Reorganization (the "Reorganization Plan"). Under the
Reorganization Plan, the Predecessor Fund transferred all its assets and
liabilities to the Fund in exchange for shares of the Fund, which were
distributed pro rata to shareholders of the Predecessor Fund, who then became
shareholders of the Fund (the "Reorganization"). The Predecessor Fund has ceased
operations. The Fund had no assets and did not begin operations until the
Reorganization occurred.
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<PAGE>
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
Shareholder Servicing Agents
The shareholder servicing agreement with each Shareholder Servicing
Agent 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 the Fund as to
which the Shareholder Servicing Agent is so acting and certain other matters
pertaining to the Fund; 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 the Fund,
proxy statements, annual reports, updated prospectuses and other communications
to shareholders of the Fund; receive, tabulate and transmit to the Fund proxies
executed by shareholders with respect to meetings of shareholders of the Fund;
and provide such other related services as the Fund or a shareholder may
request. Shareholder Servicing Agents may be required to register pursuant to
state securities law.
For performing these services, each Shareholder Servicing Agent
receives certain fees, which may be paid periodically, determined by a formula
based upon the number of accounts serviced by such Shareholder Servicing Agent
during the period for which payment is being made, the level of activity in
accounts serviced by such Shareholder Servicing Agent during such period, and
the expenses incurred by such Shareholder Servicing Agent. The fees relating to
acting as liaison to shareholders and providing personal services to
shareholders will not exceed, on an annual basis, 0.25% of the average daily net
assets of each class of the Fund 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 all or a portion of the fees payable to it.
In addition, Chase may provide other related services to the Fund for which it
may receive compensation.
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 Class A or Institutional Class
shares, receive dividends and distributions on Fund 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 the Fund's shares. The Trust, on behalf
of the Fund, will engage banks, including the Adviser Administrator, as
Shareholder Servicing Agents, only to perform advisory, custodial,
administrative and shareholder servicing functions as described above. While the
matter is not free from doubt, Trust management 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 the Fund, 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 part of its servicing
activities. If that occurred, the bank's shareholder clients would be permitted
to remain Fund shareholders and alternative means for continuing the servicing
of such shareholders would be sought. In such event, changes in the operation of
the Fund might occur and 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. The Fund does not expect that shareholders would suffer
any adverse financial consequences as a result of these occurrences.
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<PAGE>
Transfer Agent and Custodian
DST Systems, Inc. ("DST") acts as transfer agent and dividend
disbursing agent (the "Transfer Agent") for the Fund. In this capacity, DST
maintains the account records of all shareholders in the Funds, including
statement preparation and mailing. DST is also responsible for disbursing
dividend and capital gain distributions to shareholders, whether taken in cash
or additional shares. From time to time, DST and/or the Fund 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 the Trust 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 the Fund for which Chase receives compensation as is from time to time
agreed upon by the Trust and Chase. The Custodian's responsibilities include
safeguarding and controlling the Fund's cash and securities, handling the
receipt and delivery of securities, determining income and collecting interest
on the Fund'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 the Fund. 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 the Fund's Custodian
does not determine the investment policies of the Fund or decide which
securities will be bought or sold on behalf of the Fund or otherwise have access
to or share material inside information with the internal division that performs
advisory services for the Fund.
Tax-Sheltered Retirement Plans
Shares of the Fund 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, 401(k) and 403(b)
Retirement Plans. Call or write the Transfer Agent for more information.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Fund may use hypothetical investment examples
and performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
historical earnings, it should not be considered as an indication or
representation of the performance of any classes of the Fund in the future. From
time to time, the performance and yield of the classes of Fund may be quoted and
compared to those of other mutual funds with similar investment objectives,
unmanaged investment accounts, including savings accounts, or other similar
products and to stock or other relevant indices or to rankings prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, the performance of the Fund 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 the Fund or its classes. Additionally, the Fund may, with proper
authorization, reprint articles written about the Fund and provide them to
prospective shareholders.
The Fund may provide period and average annual "total rates of return."
The "total rate of return" refers to the change in the value of an investment in
the Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. For
Class A shares, the average annual total rate of return will assume payment of
the maximum initial sales load at the time of purchase. For Class B shares, the
average annual total rate of return figures will assume deduction of the
applicable contingent deferred sales charge imposed on a total redemption of
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shares held for the period. One-, five- and ten-year periods will be shown,
unless the class has been in existence for a shorter period.
The Fund may provide "yield" quotations in addition to total rate of
return quotations. The "yield" quotations of the Fund will be based upon a
hypothetical net investment income earned by the Fund over a thirty day or one
month period (which period shall be stated in any advertisement or communication
with a shareholder). The "yield" is then "annualized" by assuming that the
income generated over the period will be generated over a one year period. A
"yield" quotation, unlike a total rate of return quotation, does not reflect
changes in investment value.
Unlike some bank deposits or other investments which pay a fixed yield
for a stated period of time, the yields and the net asset values of classes of
shares of the Fund will vary based on interest rates, the current market value
of the securities held in the Fund's portfolio and changes in the Fund's
expenses. The Adviser, the Shareholder Servicing Agent, the Administrator or the
Distributor have all voluntarily agreed to waive a portion of their fees on a
month-to-month basis. In addition, the Distributor may assume a portion of the
Fund's operating expenses on a month-to-month basis. These actions have the
effect of increasing the net income (and therefore the yield and total rate of
return) of the Fund during the period such waivers are in effect. These factors
and possible differences in the methods used to calculate the yield and total
rate of return should be considered when comparing the yields or total rates of
return of the classes of shares of the Fund to yields and total rates of return
published for other investment companies and other investment vehicles
(including different classes of shares). The Fund 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 Statement of Additional Information
for further information concerning the calculation of the yields or total rates
of return quotations for classes of shares of the Fund.
The Fund is the successor to the Hanover U.S. Government Securities
Fund. The Fund may also quote historical performance of the Hanover U.S.
Government Securities Fund.
Other Information
The net asset value of shares of the Fund changes as the general levels
of interest rates fluctuate. When interest rates decline, the value of a
portfolio invested at higher yields can be expected to rise. Conversely, when
interest rates rise, the value of a portfolio invested at lower yields can be
expected to decline. Although changes in the value of the portfolio securities
of the Fund subsequent to their acquisition are reflected in their net asset
values, such changes will not affect the income received by them from such
securities. Debt securities with longer maturities such as those intended for
investment by the Fund generally tend to produce higher yields and are subject
to greater market fluctuation as a result of changes in interest rates than debt
securities with shorter maturities. Since available yields vary over time, no
specific level of income can ever be assured. The dividends paid on shares of
the Fund will increase or decrease in relation to the income received by the
Fund from its investments, which will in any case be reduced by the Fund's
expenses before being distributed to its shareholders.
Federal tax legislation enacted over the past few years has limited the
types and volume of bonds, the interest on which is excludable from gross income
or does not constitute a preference item potentially subject to the alternative
minimum tax on individuals. As a result, this legislation may affect the
availability of Municipal Obligations for investment by the Fund.
More than 25% of the assets of the Fund may be invested in securities
to be paid from revenue of similar projects, which may cause the Fund to be more
susceptible to similar economic, political, or regulatory occurrences. The value
of shares of the Fund may be subject to greater risk than those of other mutual
funds that do not permit
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<PAGE>
such a practice. Moreover, as the similarity in issuers increases, the potential
for fluctuation of the net asset value of the shares of the Fund also increases.
The Statement of Additional Information contains more detailed
information about the Trust and the Fund, including information related to (i)
the Fund's investment policies and restrictions, (ii) risk factors associated
with Fund's policies and investments, (iii) the Trust's Trustees, officers and
the Administrator and the Adviser, (iv) portfolio transactions, (v) the Funds'
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 the Fund. The audited financial statements for the
Fund for its last fiscal year end are incorporated by reference in the Statement
of Additional Information.
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<PAGE>
PART B
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
__________, 1996
VISTA(sm) AMERICAN VALUE FUND
125 West 55th Street, New York, New York 10019
This Statement of Additional Information sets forth information which may be of
interest to investors but which is not necessarily included in the Prospectus
offering the Fund. This Statement of Additional Information should be read in
conjunction with the Prospectus offering shares of Vista American Value Fund
(the "Fund"), dated _________, 1996. A copy of the Prospectus may be obtained by
an investor without charge by contacting Vista Broker-Dealer Services, Inc., the
Fund's distributor, at the above-listed address or by calling the Vista Service
Center at the toll-free number listed below.
This Statement of Additional Information is NOT a prospectus and is authorized
for distribution to prospective investors only if preceded or accompanied by an
effective prospectus.
For more information about the Fund or your account, simply call the Vista
Service Center at our toll-free number:
1-800-34-VISTA
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141
VAM-SAI
<PAGE>
Table of Contents Page
The Fund............................................................ 3
Investment Objective, Policies and Restrictions..................... 3
Additional Investment Activities.................................... 4
Hedging and Derivatives............................................. 8
Limiting Investment Risks........................................... 17
Performance Information............................................. 20
Determination of Net Asset Value.................................... 23
Tax Matters......................................................... 24
Management of the Fund.............................................. 32
Independent Accountants............................................. 41
General Information................................................. 41
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THE FUND
Mutual Fund Group (the "Trust") is an open-end management investment
company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on May 11, 1987. The Trust presently consists of
__ separate series (a "Fund" or the "Funds"). Certain of the Funds are
diversified and other Funds are non-diversified, as such term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). Under a multiple
class distribution system, several of the Income and Equity Funds may be offered
through two or more classes of shares.
The Funds' Shares are continuously offered for sale through Vista
Broker-Dealer Services, Inc. ("VBDS"), the Fund's distributor (the
"Distributor"), which is not affiliated with Chase Manhattan Bank, N.A.' or its
affiliates, to investors who are customers of 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 the Trust on behalf
of the Fund (collectively, "Shareholder Servicing Agents") or customers of a
securities broker or certain financial institutions who have entered into
Selected Dealer Agreements with the Distributor. VBDS receives a distribution
fee from the Fund, pursuant to the plan of distribution adopted pursuant to Rule
12b-1 of the 1940 Act.
The Board of Trustees of the Trust provides broad supervision over
the affairs of the Trust including the Fund. The Chase Manhattan Bank, N.A.
("Chase") is the investment adviser (the "Adviser") for the Fund. Van Deventer &
Hoch (VD&H) is the investment sub-adviser (the "Sub-Adviser") for the Fund.
Chase also serves as the Trust's administrator (the "Administrator") and
supervises the overall administration of the Trust, including the Fund. The
Adviser continuously manages the investments of the Fund in accordance with the
investment objective and policies of the Fund. The selection of investments for
the Fund and the way in which the Fund is managed depend on the conditions and
trends in the economy and the financial marketplaces. Occasionally,
communications to shareholders may contain the views of the investment adviser
as to current market, economic, trade and interest rate trends, as well as
legislative, regulatory and monetary developments, and may include investment
strategies and related matters believed to be of relevance to the Fund. A
majority of the Trustees of the Trust are not affiliated with the Adviser.
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
Investment Objective
VISTA AMERICAN VALUE FUND (the "Fund") seeks to maximize total
return, consisting of capital appreciation (both realized and unrealized) and
income. The Fund seeks to achieve its objective 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 the Fund's
investment adviser, are undervalued by the market. Equity securities include
common stock, preferred stock and securities convertible into or exchangeable
for common or preferred stock.
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<PAGE>
Investment Policies
The Prospectus sets forth the various investment policies applicable
to the Fund. The following information supplements and should be read in
conjunction with the sections of the Prospectus entitled "Investment Objective
and Policies" and "Additional Information on Investment Policies and
Techniques." Except for the matters specified under "Limiting Investment Risks"
in the Prospectus and in this Statement of Additional Information, and as
otherwise stated in the Prospectus, all matters described herein and in the
Prospectus are not fundamental and may be changed by the Board of Trustees of
the Trust without the approval of shareholders. See "General Information."
ADDITIONAL INVESTMENT ACTIVITIES
The discussion below supplements the information set forth in the
Prospectuses under "Other Investment Activities."
Bank Obligations
Bank obligations include negotiable certificates of deposit, bankers'
acceptances, fixed time deposits and deposit notes. A certificate of deposit is
a short-term negotiable certificate issued by a commercial bank against funds
deposited in the bank and is either interest-bearing or purchased on a discount
basis. A bankers' acceptance is a short-term draft drawn on a commercial bank by
a borrower, usually in connection with an international commercial transaction.
The borrower is liable for payment as is the bank, which unconditionally
guarantees to pay the draft at its face amount on the maturity date. Fixed time
deposits are obligations of branches of United States banks or foreign banks
which are payable at a stated maturity date and bear a fixed rate of interest.
Although fixed time deposits do not have a market, there are no contractual
restrictions on the right to transfer a beneficial interest in the deposit to a
third party. Fixed time deposits subject to withdrawal penalties and with
respect to which the Fund cannot realize the proceeds thereon within seven days
are deemed "illiquid" for the purposes of the third investment limitation set
forth under "Limiting Investment Risks" in the Prospectus. Deposit notes are
notes issued by commercial banks which generally bear fixed rates of interest
and typically have original maturities ranging from eighteen months to five
years.
Banks are subject to extensive governmental regulations that may
limit both the amounts and types of loans and other financial commitments that
may be made and the interest rates and fees that may be charged. The
profitability of this industry is largely dependent upon the availability and
cost of capital funds for the purpose of financing lending operations under
prevailing money market conditions. Also, general economic conditions play an
important part in the operations of this industry and exposure to credit losses
arising from possible financial difficulties of borrowers might affect a bank's
ability to meet its obligations. Bank obligations may be general obligations of
the parent bank or may be limited to the issuing branch by the terms of the
specific obligations or by government regulation. Investors should also be aware
that securities of foreign banks and foreign branches of United States banks may
involve investment risks in addition to those relating to domestic bank
obligations. Such investment risks are discussed in the Prospectus under the
caption "Special Considerations and Risk Factors."
4
<PAGE>
Asset-Backed Securities
Asset-backed securities are generally issued as pass through
certificates, which represent undivided fractional ownership interests in the
underlying pool of assets, or as debt instruments, which are generally issued as
the debt of a special purpose entity organized solely for the purpose of owning
such assets and issuing such debt. Assetbacked securities are often backed by a
pool of assets representing the obligations of a number of different parties.
Asset-backed securities frequently carry credit protection in the form of extra
collateral, subordinate certificates, cash reserve accounts, letters of credit
or other enhancements. For example, payments of principal and interest may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit or other enhancement issued by a financial institution unaffiliated with
the entities issuing the securities. Assets which, to date, have been used to
back asset-backed securities include motor vehicle installment sales contracts
or installment loans secured by motor vehicles, and receivables from revolving
credit (credit card) agreements.
Asset-backed securities present certain risks which are, generally,
related to limited interests, if any, in related collateral. Credit card
receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to set off certain amounts owed on the credit cards,
thereby reducing the balance due. Most issuers of automobile receivables permit
the servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have a
proper security interest in all of the obligations backing such receivables.
Therefore, there is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on these securities.
Other types of asset-backed securities will be subject to the risks associated
with the underlying assets. If a letter of credit or other form of credit
enhancement is exhausted or otherwise unavailable, holders of asset-backed
securities may also experience delays in payments or losses if the full amounts
due on underlying assets are not realized. Because asset-backed securities are
relatively new, the market experience in these securities is limited and the
market's ability to sustain liquidity through all phases of the market cycle has
not been tested.
American Depositary Receipts
The Fund may purchase American Depositary Receipts ("ADRs"). The Fund
will limit its investment in "unsponsored" ADRs to no more than 5% of the value
of its net assets (at the time of investment). A purchaser of an unsponsored ADR
may not have unlimited voting rights and may not receive as much information
about the issuer of the underlying securities as with a sponsored ADR.
5
<PAGE>
Corporate Reorganizations
The Fund may invest 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 ("reorganization securities"). Frequently the holders of securities of
companies involved in such transactions will receive new securities in exchange
therefor. The principal risk of this type of investing is that such offers or
proposals may not be consummated within the time and under the terms
contemplated at the time of investment, in which case, unless such offers or
proposals are replaced by equivalent or increased offers or proposals which are
consummated, the Fund may sustain a loss.
In general, securities that are the subject of such an offer or
proposal sell at a premium to their historic market price immediately prior to
the announcement of the offer or proposal. The increased market price of these
securities may also discount what the stated or appraised value of the security
would be if the contemplated action were approved or consummated. These
investments may be advantageous when the discount significantly overstates the
risk of the contingencies involved; significantly undervalues the securities,
assets or cash to be received by shareholders of the prospective portfolio
company as a result of the contemplated transaction; or fails adequately to
recognize the possibility that the offer or proposal may be replaced or
superseded by an offer or proposal of greater value. The evaluation of these
contingencies requires unusually broad knowledge and experience on the part of
the Fund's Adviser or Sub-Adviser that must appraise not only the value of the
issuer and its component businesses as well as the assets or securities to be
received as a result of the contemplated transaction, but also the financial
resources and business motivation of the offeror as well as the dynamics of the
business climate when the offer or proposal is in progress. Investments in
reorganization securities may tend to increase the turnover ratio of the Fund
and increase its brokerage and other transaction expenses.
Warrants and Rights
The Fund may invest in warrants and rights. Warrants basically are
options to purchase equity securities at a specified price valid for a specific
period of time. Their prices do not necessarily move parallel to the prices of
the underlying securities. Rights are similar to but normally have a short
duration and are distributed directly by the issuer to its shareholders. Rights
and warrants have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer.
6
<PAGE>
Rule 144A Securities and Section 4(2) Paper
As indicated in the Prospectus, the Fund may purchase certain
restricted securities ("Rule 144A securities") for which there may be a
secondary market of qualified institutional buyers, as contemplated by Rule 144A
under the Securities Act of 1933 (the "Securities Act") and may invest in
commercial obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act
("Section 4(2) paper"). Rule 144A provides an exemption from the registration
requirements of the Securities Act for the resale of certain restricted
securities to qualified institutional buyers. Section 4(2) paper is restricted
as to disposition under the federal securities laws, and generally is sold to
institutional investors such as the Fund who agree that they are purchasing the
paper for investment and not with a view to public distribution. Any resale of
Section 4(2) paper by the purchaser must be an exempt transaction.
One effect of Rule 144A and Section 4(2) is that certain restricted
securities may now be liquid, though there is no assurance that a liquid market
for Rule 144A securities or Section 4(2) paper will develop or be maintained.
The Board of Trustees of the Trust has adopted policies and procedures for the
purpose of determining whether securities that are eligible for resale under
Rule 144A and Section 4(2) paper are liquid or illiquid for purposes of the
Fund's limitation on investment in illiquid securities. Pursuant to those
policies and procedures, the Board of Trustees will delegate to the Adviser or
Sub-Adviser the determination as to whether a particular instrument is liquid or
illiquid, requiring that consideration be given to, among other things, the
frequency of trades and quotes for the security, the number of dealers willing
to sell the security and the number of potential purchasers, dealer undertakings
to make a market in the security, the nature of the security and the time needed
to dispose of the security. The Board of Trustees will periodically review the
Fund's purchases and sales of Rule 144A securities and Section 4(2) paper.
Floating and Variable Rate Instruments
Certain of the obligations that the Fund may purchase have a floating
or variable rate of interest. Such obligations may include obligations issued or
guaranteed by agencies or instrumentalities of the United States Government,
certificates of deposit and municipal obligations. Floating or variable rate
obligations bear interest at rates that are not fixed, but vary with changes in
specified market rates or indices, such as the prime rate, and at specified
intervals. Except with respect to temporary defensive investments in short-term
money market instruments, the Fund does not expect to invest more than 5% of the
value of its total assets in obligations which have a floating or variable rate
of interest.
Certain of the floating or variable rate obligations that may be
purchased by the Fund may carry a demand feature that would permit the holder to
tender them back to the issuer of the underlying instrument, or to a third
party, at par value prior to maturity. Such obligations include variable rate
demand or master notes, which provide for periodic adjustments in the interest
rate. Master demand notes, which are instruments issued
7
<PAGE>
pursuant to an agreement between the issuer and the holder may permit the
indebtedness thereunder to vary.
The demand features of certain floating or variable rate obligations
may permit the Fund to tender the obligations to foreign banks. The Fund's
ability to receive payment in such circumstances under the demand feature from
such foreign banks may involve certain of the risks associated with foreign
investments, such as future political and economic developments, the possible
establishments of laws or restrictions that might adversely affect the payment
of the bank's obligations under the demand feature and the difficulty of
obtaining or enforcing a judgment against the bank.
HEDGING AND DERIVATIVES
As described in the Prospectus under "Additional Information" under
the caption "Hedging and Derivatives," the Fund is authorized to use a variety
of investment strategies to hedge various market risks (such as interest rates,
currency exchange rates and broad or specific market movements), to manage the
effective maturity or duration of debt instruments held by the Fund, or, with
respect to certain strategies to seek to increase the Fund's income or gain
(such investment strategies and transactions are referred to as "Hedging and
Derivatives").
A detailed discussion of Hedging and Derivatives follows below. The
Fund will not be obligated, however, to pursue any of such strategies and the
Fund does not make any representation as to the availability of these techniques
at this time or at any time in the future. In addition, the Fund's ability to
pursue certain of these strategies may be limited by the Commodity Exchange Act,
as amended, applicable rules and regulations of the Commodity Futures Trading
Commission ("CFTC") thereunder and the federal income tax requirements
applicable to regulated investment companies which are not operated as commodity
pools.
General Characteristics of Options
Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying
instrument on which they are purchased or sold. Thus, the following general
discussion relates to each of the particular types of options discussed in
greater detail below. In addition, many of the Hedging and Derivatives which
involve options require segregation of Fund assets in special accounts, as
described below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
The Fund's purchase of a put option on a security, for example, might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
of such instrument by giving the Fund the right to sell the instrument at the
option exercise price. A call option, upon payment of a premium, gives the
purchaser of the option the right to buy, and the seller the obligation to sell,
the
8
<PAGE>
underlying instrument at the exercise price. The Fund's purchase of a call
option on a security, financial futures contract, index, currency or other
instrument might be intended to protect the Fund against an increase in the
price of the underlying instrument that it intends to purchase in the future by
fixing the price at which it may purchase the instrument. An "American" style
put or call option may be exercised at any time during the option period,
whereas a "European" style put or call option may be exercised only upon
expiration or during a fixed period prior to expiration. Exchange-listed options
are issued by a regulated intermediary such as the Options Clearing Corporation
("OCC"), which guarantees the performance of the obligations of the parties to
the options. The discussion below uses the OCC as an example, but is also
applicable to other similar financial intermediaries.
OCC-issued and exchange-listed options, with certain exceptions,
generally settle by physical delivery of the underlying security or currency,
although in the future, cash settlement may become available. Index options and
Eurodollar instruments (which are described below under "Eurodollar
Instruments") are cash settled for the net amount, if any, by which the option
is "in-the-money" (that is, the amount by which the value of the underlying
instrument exceeds, in the case of a call option, or is less than, in the case
of a put option, the exercise price of the option) at the time the option is
exercised. Frequently, rather than taking or making delivery of the underlying
instrument through the process of exercising the option, listed options are
closed by entering into offsetting purchase or sale transactions that do not
result in ownership of the new option.
The Fund's ability to close out its position as a purchaser or seller
of an OCCissued or exchange-listed put or call option is dependent, in part,
upon the liquidity of the particular option market. Among the possible reasons
for the absence of a liquid option market on an exchange are: (1) insufficient
trading interest in certain options, (2) restrictions on transactions imposed by
an exchange, (3) trading halts, suspensions or other restrictions imposed with
respect to particular classes or series of options or underlying securities,
including reaching daily price limits, (4) interruption of the normal operations
of the OCC or an exchange, (5) inadequacy of the facilities of an exchange or
the OCC to handle current trading volume, or (6) a decision by one or more
exchanges to discontinue the trading of options (or a particular class or series
of options), in which event the relevant market for that option on that exchange
would cease to exist, although any such outstanding options on that exchange
would continue to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the
hours during which the underlying financial instruments are traded. To the
extent that the option markets close before the markets for the underlying
financial instruments, significant price and rate movements can take place in
the underlying markets that would not be reflected in the corresponding option
markets.
Over-the-counter ("OTC") options are purchased from or sold to
securities dealers, financial institutions or other parties (collectively
referred to as "Counterparties" and individually referred to as a
"Counterparty") through direct bilateral agreement with the Counterparty. In
contrast to exchange-listed options, which generally have standardized terms and
performance mechanics, all of the terms of an OTC option, including such
9
<PAGE>
terms as method of settlement, term, exercise price, premium, guaranties and
security, are determined by negotiation of the parties. It is anticipated that
the Fund will generally only enter into OTC options that have cash settlement
provisions, although it will not be required to do so.
Unless the parties provide for it, no central clearing or guaranty
function is involved in an OTC option. As a result, if a Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with the Fund or fails to make a cash
settlement payment due in accordance with the term of that option, the Fund will
lose any premium it paid for the option as well as any anticipated benefit of
the transaction. Thus, the Fund's Adviser or Sub-Adviser must assess the
creditworthiness of each such Counterparty or any guarantor or credit
enhancement of the Counterparty's credit to determine the likelihood that the
terms of the OTC option will be met. The Fund will enter into OTC option
transactions only with U.S. Government securities dealers recognized by the
Federal Reserve Bank of New York as "primary dealers," or broker-dealers,
domestic or foreign banks, or other financial institutions that are deemed
creditworthy by the Fund's Adviser or Sub-Adviser. In the absence of a change in
the current position of the staff of the SEC, OTC options purchased by the Fund
and the amount of the Fund's obligations pursuant to an OTC operation sold by
the Fund (the cost of the sell-back plus the in-the-money amount, if any) or the
value of the assets held to cover such options will be deemed illiquid.
If the Fund sells a call option, the premium that it receives may
serve as a partial hedge, to the extent of the option premium, against a
decrease in the value of the underlying securities or instruments held by the
Fund or will increase the Fund's income. Similarly, the sale of put options can
also provide portfolio gains.
If and to the extent authorized to do so, the Fund may purchase and
sell call options on securities and on Eurodollar instruments that are traded on
U.S. and foreign securities exchanges and in the OTC markets, and on securities
indices, currencies and futures contracts. All calls sold by the Fund must be
"covered" (that is, the Fund must own the securities or futures contract subject
to the call) or must otherwise meet the asset segregation requirements described
below for so long as the call is outstanding. Even though the Fund will receive
the option premium to help protect it against loss, a call sold by the Fund will
expose the Fund during the term of the option to possible loss of opportunity to
realize appreciation in the market price of the underlying security or
instrument and may require the Fund to hold a security or instrument that it
might otherwise have sold.
The Fund reserves the right to invest in options on instruments and
indices which may be developed in the future to the extent consistent with
applicable law, the Fund's investment objective and the restrictions set forth
herein.
If and to the extent authorized to do so, the Fund may purchase put
options on securities (whether or not the Fund holds the securities in its
portfolio) and on securities indices, currencies and contracts. The Fund will
not sell put options, except that they may sell put options to close out
existing positions.
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General Characteristics of Futures Contracts and Options on Future Contracts
The Fund may trade financial futures contracts or purchase or sell
put and call options on those contracts as a hedge against anticipated interest
rate, currency or market changes, for duration management, for risk management
purposes or to increase the Fund's income or gain. Futures contracts are
generally bought and sold on the commodities exchanges on which they are listed
with payment of initial and variation margin as described below. The sale of a
futures contract creates a firm obligation by the Fund, as seller, to deliver to
the buyer the specific type of financial instrument called for in the contract
at a specific future time for a specified price (or, with respect to certain
instruments, the net cash amount). Options on futures contracts are similar to
options on securities except that an option on a futures contract gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract and obligates the seller to deliver that position.
The Fund's use of financial futures contracts and options thereon
will in all cases be consistent with applicable regulatory requirements and in
particular the rules and regulations of the CFTC and will be entered into only
for bona fide hedging, risk management (including duration management) or other
permissible purposes. Maintaining a futures contract or selling an option on a
futures contract will typically require the Fund to deposit with a financial
intermediary, as security for its obligations, an amount of cash or other
specified assets ("initial margin") that initially is from 1% to 10% of the face
amount of the contract (but may be higher in some circumstances). Additional
cash or assets ("variation margin") may be required to be deposited thereafter
daily as the mark-to-market value of the futures contract fluctuates. The
purchase of an option on a financial futures contract involves payment of a
premium for the option without any further obligation on the part of Fund. If
the Fund exercises an option on a futures contract it will be obligated to post
initial margin (and potentially variation margin) for the resulting futures
position just as it would for any futures position. Futures contracts and
options thereon are generally settled by entering into an offsetting
transaction, but no assurance can be given that a position can be offset prior
to settlement or that delivery to occur.
The Fund will not enter into a futures contract or option thereof if,
immediately thereafter, the sum of the amount of its initial margin and options
thereon would exceed 5% of the current fair market value of the Fund's total
assets; however, in the case of an option that is in-the-money at the time of
the purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. The value of all futures contracts sold by the Fund (adjusted for
the historical volatility relationship between the Fund's portfolio and the
contracts) will not exceed the total market value of the Fund's securities. The
Fund will not engage in transactions in futures contracts or options thereon for
speculative purposes but only as a hedge against changes resulting from market
conditions in the values of securities in its portfolio; provided, however, that
the Fund may enter into futures contracts or options thereon for purposes other
than bona fide hedging if, immediately thereafter, the sum of the amount of its
initial margin and premiums on such open contracts and options would not exceed
5% of the liquidation value of the Fund's portfolio; provided, further, that in
the case of an option that is in-the-money at the time
11
<PAGE>
of the purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. The Fund reserves the right to comply with such different standards
as may be established from time to time by CFTC rules and regulations with
respect to the purchase and sale of futures contracts and options thereon. The
segregation requirements with respect to futures contracts and options thereon
are described below under "Use of Segregated and Other Special Accounts."
Options on Securities Indices and Other Financial Indices
The Fund may purchase and sell call options and purchase put options
on securities indices and other financial indices. In so doing, the Fund can
achieve many of the same objectives it would achieve through the sale or
purchase of options on individual securities or other instruments. Options on
securities indices and other financial indices are similar to options on a
security or other instrument except that, rather than settling by physical
delivery of the underlying instrument, options on indices settle by cash
settlement; that is, an option on an index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the index upon which the option is based exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option (except if, in
the case of an OTC option, physical delivery is specified). This amount of cash
is equal to the excess of the closing price of the index over the exercise price
of the option, which also may be multiplied by a formula value. The seller of
the option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments comprising the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
Currency Transactions
The Fund may engage in currency transactions with Counterparties to
hedge the value of the Fund's portfolio securities denominated in particular
currencies against fluctuations in relative value or to increase the Fund's
income or gain. Currency transactions include currency forward contracts,
exchange-listed currency futures contracts and options thereon, exchange-listed
and OTC options on currencies, and currency swaps. A forward currency contract
involves a privately negotiated obligation to purchase or sell (with delivery
generally required) a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. A currency swap is an agreement to
exchange cash flows based on the notional difference among two or more
currencies and operates similarly to an interest rate swap, which is described
below under "Swaps, Caps, Floors and Collars." The Fund may enter into currency
transactions with Counterparties that are deemed creditworthy by the Fund's
Adviser or Sub-Adviser.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures contracts, options, options on futures contracts
and swaps for hedging purposes may take the form of transaction hedging or
position hedging. Transaction hedging is entering into a currency transaction
with respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of the
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<PAGE>
Fund's portfolio securities or the receipt of income from them. Position hedging
is entering into a currency transaction with respect to portfolio securities
positions denominated or generally quoted in that currency. The Fund will not
enter into a transaction to hedge currency exposure to an extent greater, after
netting all transactions intended wholly or partially to offset other
transactions, than the aggregate market value (at the time of entering into the
transaction) of the securities held by the Fund that are denominated or
generally quoted in or currently convertible into the currency, other than with
respect to proxy hedging as described below. The Fund may also enter into
currency transactions to increase the Fund's income or gain.
The Fund may cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to increase or decline
in value relative to other currencies to which the Fund has or in which the Fund
expects to have exposure. To reduce the effect of currency fluctuations on the
value of existing or anticipated holdings of its securities, the Fund may engage
in proxy hedging. Proxy hedging is often used when the currency to which the
Fund's holdings is exposed is difficult to hedge generally or difficult to hedge
against the dollar. Proxy hedging entails entering into a forward contract to
sell a currency, the changes in the value of which are generally considered to
be linked to a currency or currencies in which some or all of the Fund's
securities are or are expected to be denominated, and to buy dollars. The amount
of the contract would not exceed the market value of the Fund's securities
denominated in linked currencies.
Currency transactions are subject to risks different from other
portfolio transactions, as discussed below under "Risk Factors." If the Fund
enters into a currency transaction, the Fund will comply with the asset
segregation requirements described below under "Use of Segregated and Other
Special Accounts."
[Combined Transactions
The Fund may enter into multiple transactions, including multiple
options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts), multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions, instead of a single Hedging and Derivative, as part of a single or
combined strategy when, in the judgment of the Fund's Adviser or Sub-Adviser, it
is in the best interests of the Fund to do so. A combined transaction will
usually contain elements of risk that are present in each of its component
transactions. Although combined transactions will normally be entered into by
the Fund based on the judgment of the Fund's Adviser or Sub-Adviser that the
combined strategies will reduce risk or otherwise more effectively achieve the
desired portfolio management goal, it is possible that the combination will
instead increase the risks or hinder achievement of the Fund's portfolio
management objective.]
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Swaps, Caps, Floors and Collars
Among the Hedging and Derivatives into which the Fund may be
authorized to enter are interest rate, currency and index swaps, the purchase or
sale of related caps, floors and collars and other derivatives. The Fund will
enter into these transactions primarily to seek to preserve a return or spread
on a particular investment or portion of its portfolio, to protect against
currency fluctuations as a duration management technique or to protect against
any increase in the price of securities the Fund anticipates purchasing at a
later date. The Fund will use these transactions for non-speculative purposes
and will not sell interest rate caps or floors if it does not own securities or
other instruments providing the income the Fund may be obligated to pay.
Interest rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest (for example, an exchange of
floating rate payments for fixed rate payments with respect to a notional amount
of principal). A currency swap is an agreement to exchange cash flows on a
notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling the cap to the extent that a specified
index exceeds a predetermined interest rate. The purchase of an interest rate
floor entitles the purchaser to receive payments of interest on a notional
principal amount from the party selling the interest rate floor to the extent
that a specified index falls below a predetermined interest rate or amount. The
purchase of a floor entitles the purchaser to receive payments on a notional
principal amount from the party selling the floor to the extent that a specific
index falls below a predetermined interest rate or amount. A collar is a
combination of a cap and a floor that preserves a certain return with a
predetermined range of interest rates or values.
The Fund will usually enter into interest rate swaps on a net basis,
that is, the two payments streams are netted out in a cash settlement on the
payment date or dates specified in the instrument, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments. Inasmuch as
these swaps, caps, floors, collars and other similar derivatives are entered
into for good faith hedging or other non-speculative purposes, they do not
constitute senior securities under the Investment Company Act of 1940, as
amended, and, thus, will be treated as being subject to the Fund's borrowing
restrictions. The Fund will not enter into any swap, cap, floor, collar or other
derivative transaction unless the Counterparty is deemed creditworthy by the
Fund's Adviser or SubAdviser. If a Counterparty defaults, the Fund may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and, for that
reason, they are less liquid than swaps.
Risk Factors
Hedging and Derivatives have special risks associated with them,
including possible default by the Counterparty to the transaction, illiquidity
and, to the extent the view of the Fund's Adviser or Sub-Adviser as to certain
market movements is incorrect,
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<PAGE>
the risk that the use of the Hedging and Derivatives could result in losses
greater than if they had not been used. Use of put and call options could result
in losses to the Fund, force the sale or purchase of the Fund's portfolio
securities at inopportune times or for prices higher than (in the case of put
options) or lower than (in the case of call options) current market values, or
cause the Fund to hold a security it might otherwise sell.
The use of futures and options transactions entails certain special
risks. In particular, the variable degree of correlation between price movements
of futures contracts and price movements in the related securities or currency
position of the Fund could create the possibility that losses on a hedging
instrument are greater than gains in the value of the Fund's position. In
addition, futures and options markets could be illiquid in some circumstances
and certain over-the-counter options could have no markets. As a result, in
certain markets, a Fund might not be able to close out a transaction without
incurring substantial losses. Although the Fund's use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time it will tend to
limit any potential gain to a Fund that might result from an increase in value
of the Fund's position. Finally, the daily variation margin requirements for
futures contracts create a greater ongoing potential financial risk than would
purchases of options, in which case the exposure is limited to the cost of the
initial premium.
Currency transactions involve some of the same risks and
considerations as other transactions with similar instruments. Currency
transactions can result in losses to the Fund if a currency being hedged
fluctuates in value to a degree or in a direction that is not anticipated.
Further, the risk exists that the perceived linkage between various currencies
may not be present or may not be present during the particular time that a Fund
is engaging in proxy hedging. Currency transactions are also subject to risks
different from those of other Fund transactions. Because currency control is of
great importance to the issuing governments and influences economic planning and
policy, purchases and sales of currency and related transactions can be
adversely affected by government exchange controls, limitations or restrictions
on repatriation of currency, and manipulations or exchange restrictions imposed
by governments. These forms of governmental actions can result in losses to the
Fund if it is unable to deliver or receive currency or monies in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as the incurrence of
transaction costs. Buyers and sellers of currency futures contracts are subject
to the same risks that apply to the use of futures contracts generally. Further,
settlement of a currency futures contract for the purchase of most currencies
must occur at a bank based in the issuing nation. Trading options on currency
futures contracts is relatively new, and the ability to establish and close out
positions on these options is subject to the maintenance of a liquid market that
may not always be available. Currency exchange rates may fluctuate based on
factors extrinsic to that country's economy.
Losses resulting from the use of Hedging and Derivatives will reduce
the Fund's net asset value, and possibly income, and the losses can be greater
than if Hedging and Derivatives had not been used.
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<PAGE>
Risks of Hedging and Derivatives Outside the United States
When conducted outside the United States, Hedging and Derivatives may
not be regulated as rigorously as in the United States, may not involve a
clearing mechanism and related guarantees, and will be subject to the risk of
governmental actions affecting trading in, or the prices of, foreign securities,
currencies and other instruments. The value of positions taken as part of
non-U.S. Hedging and Derivatives also could be adversely affected by: (1) other
complex foreign political, legal and economic factors, (2) lesser availability
of data on which to make trading decisions than in the United States, (3) delays
in the Fund's ability to act upon economic events occurring in foreign markets
during non-business hours in the United States, (4) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States and (5) lower trading volume and liquidity.
Use of Segregated and Other Special Accounts
Use of many Hedging and Derivatives by the Fund will require, among
other things, that the Fund segregate cash, liquid high grade debt obligations
or other assets with its custodian, or a designated sub-custodian, to the extent
the Fund's obligations are not otherwise "covered" through ownership of the
underlying security, instrument or currency. In general, either the full amount
of any obligation by the Fund to pay or deliver securities or assets must be
covered at all times by the securities, instruments or currency required to be
delivered, or, subject to any regulatory restrictions, an amount of cash or
liquid high grade debt obligations at least equal to the current amount of the
obligation must be segregated with the custodian or sub-custodian. The
segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. A
call option on securities written by the Fund, for example, will require the
Fund to hold the securities subject to the call (or securities convertible into
the needed securities without additional consideration) or to segregate liquid
high grade debt obligations sufficient to purchase and deliver the securities if
the call is exercised. A call option sold by the Fund on an index will require
the Fund to own portfolio securities that correlate with the index or to
segregate liquid high grade debt obligations equal to the excess of the index
value over the exercise price on a current basis. Except when the Fund enters
into a forward contract in connection with the purchase or sale of a security
denominated in a foreign currency or for other non-speculative purposes, which
requires no segregation, a currency contract that obligates the Fund to buy or
sell a foreign currency will generally require the Fund to hold an amount of
that currency or liquid securities denominated in that currency equal to the
Fund's obligations or to segregate liquid high grade debt obligations equal to
the amount of the Fund's obligations.
OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices, and OCC-issued and exchange-listed
index options will generally provide for cash settlement, although the Fund will
not be required to do so. As a result, when the Fund sells these instruments it
will segregate an amount of assets equal to its obligations under the options.
OCC-issued and exchange-listed options sold by the Fund other than those
described above generally settle with physical delivery, and the Fund will
segregate an amount of assets equal to the full value of the option. OTC
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<PAGE>
options settling with physical delivery or with an election of either physical
delivery or cash settlement will be treated the same as other options settling
with physical delivery.
In the case of a futures contract or an option on a futures contract,
the Fund must deposit initial margin and, in some instances, daily variation
margin in addition to segregating assets sufficient to meet its obligations to
purchase or provide securities or currencies, or to pay the amount owed at the
expiration of an index-based futures contract. These assets may consist of cash,
cash equivalents, liquid debt or equity securities or other acceptable assets.
The Fund will accrue the net amount of the excess, if any, of its obligations
relating to swaps over its entitlements with respect to each swap on a daily
basis and will segregate with its custodian, or designated sub-custodian, an
amount of cash or liquid high grade debt obligations having an aggregate value
equal to at least the accrued excess. Caps, floors and collars require
segregation of assets with a value equal to Fund's net obligation, if any.
Hedging and Derivatives may be covered by means other than those
described above when consistent with applicable regulatory policies. The Fund
may also enter into offsetting transactions so that its combined position,
coupled with any segregated assets, equals its net outstanding obligation in
related options and Hedging and Derivatives. The Fund could purchase a put
option, for example, if the strike price of that option is the same or higher
than the strike price of a put option sold by the Fund. Moreover, instead of
segregating assets if it holds a futures contracts or forward contract, the Fund
could purchase a put option on the same futures contract or forward contract
with a strike price as high or higher than the price of the contract held. Other
Hedging and Derivatives may also be offset in combinations. If the offsetting
transaction terminates at the time of or after the primary transaction, no
segregation is required, but if it terminates prior to that time, assets equal
to any remaining obligation would need to be segregated.
Other Limitations
The degree to which the Fund may utilize Hedging and Derivatives may
also be affected by certain provisions of the Internal Revenue Code of 1986, as
amended (the "Code").
LIMITING INVESTMENT RISKS
In addition to the limitations described under "Limiting Investment
Risks" in the Prospectuses, the Fund is subject to the following investment
limitations:
(i) The Fund may not borrow money, except that the Fund may borrow
money for temporary or emergency purposes, or by engaging in reverse
repurchase transactions, in an amount not exceeding 33 1/3% of the value
of its total assets at the time when the loan is made and may pledge,
mortgage or hypothecate no more than 1/3 of its net assets to secure such
borrowings. Any borrowings representing more than 5% of the Fund's total
assets must be repaid before the Fund may make additional investments.
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<PAGE>
(ii) The Fund may not make loans, except that the Fund may: (i)
purchase and hold debt instruments (including without limitation,
bonds, notes, debentures or other obligations and certificates of
deposit, bankers' acceptances and fixed time deposits) in accordance
with its investment objectives and policies; (ii) enter into
repurchase agreements with respect to portfolio securities; and (iii)
lend portfolio securities with a value not in excess of one-third of
the value of its total assets.
(iii) The Fund may not purchase the securities of any issuer
(other than securities issued or guaranteed by the U.S. government or
any of its agencies or instrumentalities, or repurchase agreements
secured thereby) if, as a result, more than 25% of the Fund's total
assets would be invested in the securities of companies whose
principal business activities are in the same industry.
Notwithstanding the foregoing, with respect to the Fund's permissible
futures and options transactions, positions in options and futures
shall not be subject to this restriction.
(iv) The Fund may not purchase or sell physical commodities
unless acquired as a result of ownership of securities or other
instruments (but this shall not prevent a Fund from purchasing or
selling options and futures contracts or from investing in securities
or other instruments backed by physical commodities) or engaging in
forward purchases or sales of foreign currencies or securities.
(v) The Fund may not purchase or sell real estate unless
acquired as a result of ownership of securities or other instruments
(but this shall not prevent the Fund from investing in securities or
other instruments backed by real estate or securities of companies
engaged in the real estate business). Investments by the Fund in
securities backed by mortgages on real estate or in marketable
securities of companies engaged in such activities are not hereby
precluded.
(vi) The Fund may not issue any senior security (as defined in
the 1940 Act), except that (a) the Fund may engage in transactions
that may result in the issuance of senior securities to the extent
permitted under applicable regulations and interpretations of the
1940 Act or an exemptive order; (b) the Fund may acquire other
securities, the acquisition of which may result in the issuance of a
senior security, to the extent permitted under applicable regulations
or interpretations of the 1940 Act; (c) subject to the restrictions
set forth above, the Fund may borrow money as authorized by the 1940
Act. For purposes of this restriction, collateral arrangements with
respect to the Fund's permissible options and futures transactions,
including deposits of initial and variation margin, are not
considered to be the issuance of a senior security for purposes of
this restriction.
If a percentage limitation on investment or use of assets is adhered
to at the time a transaction is effected, later changes in percentage resulting
from any cause other than actions by the Fund will not be considered a
violation.
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For purposes of investment restriction (v) above, real estate
includes Real Estate Limited Partnerships.
The following investment restrictions are nonfundamental and may be
changed without shareholder approval:
(i) The Fund may not, with respect to 75% of its assets, hold
more than 10% of the outstanding voting securities of an issuer.
(ii) The Fund may not make short sales of securities, other than
short sales "against the box," or purchase securities on margin
except for short-term credits necessary for clearance of portfolio
transactions, provided that this restriction will not be applied to
limit the use of options, futures contracts and related options, in
the manner otherwise permitted by the investment restrictions,
policies and investment program of the Fund.
(iii) The Fund may not purchase or sell interests in oil, gas or
mineral leases.
(iv) The Fund may not invest more than 15% of its net assets in
illiquid securities. [This limitation may be subject to additional
restrictions imposed by jurisdictions in which the Fund's shares are
offered for sale (currently 10%).]
(v) The Fund may not write, purchase or sell any put or call
option or any combination thereof, provided that this shall not
prevent the writing, purchasing or selling of puts, calls or
combinations thereof with respect to U.S. government securities or
with respect to a Fund's permissible futures and options
transactions, purchasing, ownership, holding or selling of futures
and options positions or of puts, calls or combinations thereof with
respect to futures.
(vi) The Fund may invest up to 5% of its total assets in the
securities of any one investment company, but may not own more than
3% of the securities of any one investment company or invest more
than 10% of its total assets in the securities of other investment
companies. With respect to any such investment, fees are waived to
the extent required under State requirements. For example, a Texas
undertaking currently requires a disclosure that advisory fees
pertaining to any such investments will be waived by Chase.]
It is the Trust's position that proprietary strips, such as CATS and
TIGRS, are United States Government securities. However, the Trust has been
advised that the staff of the Commission's Division of Investment Management
does not consider these to be United States Government securities, as defined
under the Investment Company Act of 1940, as amended.
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The investment limitations described above and in the Prospectus with
respect to the Fund under "Limiting Investment Risks" are fundamental policies
of the Fund and may be changed only when permitted by law and approved by the
holders of a majority of the Fund's outstanding voting securities, as described
under "General Information."
In order to permit the sale of its shares in certain states, the Fund
may make commitments more restrictive than the investment policies and
limitations described above and under the Prospectus. Should the Fund determine
that any such commitment is no longer in its best interests, it will revoke the
commitment by terminating sales of its shares in the state involved.
Portfolio Transactions and Brokerage Allocation
Specific decisions to purchase or sell securities for the Fund are
made by the Fund's portfolio manager who is an employee of the Adviser or
Sub-Adviser and who is appointed and supervised by senior officers of such
Adviser or Sub-Adviser. Changes in the Fund's investments are reviewed by the
Board of Trustees. The Fund's portfolio manager may serve other clients of the
Adviser or Sub-Adviser in a similar capacity.
The frequency of the Fund's portfolio transactions -- the portfolio
turnover rate -will vary from year to year depending upon market conditions.
Because a high turnover rate may increase transaction costs and the possibility
of taxable short-term gains (see "Tax Matters" in the Prospectus), the Adviser
or Sub-Adviser will weigh the added costs of short-term investment against
anticipated gains. For the fiscal year ending __________, 1996 the annual rate
of portfolio turnover for the Fund is expected not to exceed 100%.
Under the Advisory Agreement and the Sub-Advisory Agreement, the
Adviser shall use its best efforts to seek to execute portfolio transactions at
prices which, under the circumstances, result in total costs or proceeds being
the most favorable to the Funds.
The Adviser or Sub-Adviser attempts to achieve this result by
selecting broker-dealers to execute portfolio transactions on behalf of the Fund
and other clients of the Adviser or Sub-Adviser on the basis of their
professional capability, the value and quality of their brokerage services, and
the level of their brokerage commissions. Debt securities are traded principally
in the over-the-counter market through dealers acting on their own account and
not as brokers. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Adviser or Sub-Adviser normally seeks to deal directly with
the primary market makers unless, in its opinion, best execution is available
elsewhere. In the case of securities purchased from underwriters, the cost of
such securities generally includes a fixed underwriting commission or
concession. From time to time, soliciting dealer fees are available to the
Adviser or Sub-Adviser on the tender of the Fund's portfolio securities in
so-called tender or exchange offers. Such soliciting dealer fees are in effect
recaptured for the Fund by the Adviser or Sub-Adviser. At present, no other
recapture arrangements are in effect.
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Under the Fund's Investment Advisory (Sub-Advisory) Agreement and as
permitted by Section 28(e) of the Securities Exchange Act of 1934, the Adviser
or SubAdviser may cause the Fund to pay a broker-dealer which provides brokerage
and research services to the Adviser or Sub-Adviser, the Funds and/or other
accounts for which the Adviser or Sub-Adviser exercises investment discretion an
amount of commission for effecting a securities transaction for the Funds in
excess of the amount other broker-dealers would have charged for the transaction
if the Adviser or Sub-Adviser determines in good faith that the greater
commission is reasonable in relation to the value of the brokerage and research
services provided by the executing broker-dealer viewed in terms of either a
particular transaction or the Adviser or Sub-Adviser's overall responsibilities
to the Fund or to accounts over which they exercise investment discretion. Not
all of such services are useful or of value in advising the Fund. The Adviser or
SubAdviser shall report to the Board of Trustees of the Trust regarding overall
commissions paid by the Funds and their reasonableness in relation to the
benefits to the Funds.
The term "brokerage and research services" includes advice as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or of purchasers or sellers of
securities, furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts, and effecting securities transactions and performing functions
incidental thereto such as clearance and settlement.
Although commissions paid on every transaction will, in the judgment
of the Adviser or Sub-Adviser, be reasonable in relation to the value of the
brokerage services provided, commissions exceeding those which another broker
might charge may be paid to broker-dealers who were selected to execute
transactions on behalf of the Fund and the Adviser or Sub-Adviser's other
clients as part of providing advice as to the availability of securities or of
purchasers or sellers of securities and services in effecting securities
transactions and performing functions incidental thereto, such as clearance and
settlement.
Broker-dealers may be willing to furnish statistical, research and
other factual information or services ("Research") to the Adviser or Sub-Adviser
for no consideration other than brokerage or underwriting commissions.
Securities may be bought or sold through such broker-dealers, but at present,
unless otherwise directed by the Fund, a commission higher than one charged
elsewhere will not be paid to such a firm solely because it provided Research to
the Adviser or Sub-Adviser.
The Adviser or Sub-Adviser's investment management personnel will
attempt to evaluate the quality of Research provided by brokers. Results of this
effort are sometimes used by the Adviser or Sub-Adviser as a consideration in
the selection of brokers to execute portfolio transactions. However, the Adviser
or Sub-Adviser would be unable to quantify the amount of commissions which are
paid as a result of such Research because a substantial number of transactions
are effected through brokers which provide Research but which are selected
principally because of their execution capabilities.
The management fees that the Fund pays to the Adviser or Sub-Adviser
will not be reduced as a consequence of the Adviser or Sub-Adviser's receipt of
brokerage and
21
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research services. To the extent the Fund's portfolio transactions are used to
obtain such services, the brokerage commissions paid by the Fund will exceed
those that might otherwise be paid, by an amount which cannot be presently
determined. Such services would be useful and of value to the Adviser or
Sub-Adviser in serving one or more of the Fund and other clients and,
conversely, such services obtained by the placement of brokerage business of
other clients would be useful to the Adviser or Sub-Adviser in carrying out its
obligations to the Fund. While such services are not expected to reduce the
expenses of the Adviser or Sub-Adviser, the Adviser or Sub-Adviser would,
through use of the services, avoid the additional expenses which would be
incurred if it should attempt to develop comparable information through its own
staff.
In certain instances, there may be securities that are suitable for
one or more of the Funds as well as one or more of the Adviser or Sub-Adviser's
other clients. Investment decisions for the Fund and for the Adviser or
Sub-Adviser's other clients are made with a view to achieving their respective
investment objectives. It may develop that the same investment decision is made
for more than one client or that a particular security is bought or sold for
only one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive investment advice from
the same investment adviser, particularly when the same security is suitable for
the investment objectives of more than one client. In executing portfolio
transactions for a Fund, the Adviser or SubAdviser may, to the extent permitted
by applicable laws and regulations, but shall not be obligated to, aggregate the
securities to be sold or purchased with those of other Funds or its other
clients if, in the Adviser or Sub-Adviser's reasonable judgment, such
aggregation (i) will result in an overall economic benefit to the Fund, taking
into consideration the advantageous selling or purchase price, brokerage
commission and other expenses, and trading requirements, and (ii) is not
inconsistent with the policies set forth in the Trust's registration statement
and the Fund's Prospectus and Statement of Additional Information. In such
event, the Adviser or Sub-Adviser will allocate the securities so purchased or
sold, and the expenses incurred in the transaction, in an equitable manner,
consistent with its fiduciary obligations to the Fund and such other clients. It
is recognized that in some cases this system could have a detrimental effect on
the price or volume of the security as far as the Fund is concerned. However, it
is believed that the ability of the Fund to participate in volume transactions
will generally produce better executions for the Fund.
For the period from ___________, 1995 through ___________, 1995, the
Fund paid aggregate brokerage commissions of $______.
No portfolio transactions are executed with the Adviser or
Sub-Adviser or a Shareholder Servicing Agent, or with any affiliate of the
Adviser or Sub-Adviser or a Shareholder Servicing Agent, acting either as
principal or as broker.
PERFORMANCE INFORMATION
Total Rate of Return
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<PAGE>
The Fund's total rate of return for any period will be calculated by
(a) dividing (i) the sum of the net asset value per share on the last day of the
period and the net asset value per share on the last day of the period of shares
purchasable with dividends and capital gains declared during such period with
respect to a share held at the beginning of such period and with respect to
shares purchased with such dividends and capital gains distributions, by (ii)
the public offering price per share on the first day of such period, and (b)
subtracting 1 from the result. The average annual rate of return quotation will
be calculated by (x) adding 1 to the period total rate of return quotation as
calculated above, (y) raising such sum to a power which is equal to 365 divided
by the number of days in such period, and (z) subtracting 1 from the result.
For the period from ___________, 1995 (commencement of operations) to
___________, 1995, the total return for the A shares of the Fund after the
maximum initial sales charge of 4.25% was _____%. The total return for the same
period without the effect of the maximum sales load was _____%.
Yield Quotations
Any current "yield" quotation of the Fund shall consist of an
annualized hypothetical yield, carried at least to the nearest hundredth of one
percent, based on a thirty calendar day period and shall be calculated by (a)
raising to the sixth power the sum of 1 plus the quotient obtained by dividing
the Fund's net investment income earned during the period by the product of the
average daily number of shares outstanding during the period that were entitled
to receive dividends and the maximum offering price per share on the last day of
the period, (b) subtracting 1 from the result, and (c) multiplying the result by
2.
The yield of the A Shares of the Fund for the thirty-day period ended
___________, 1996 was ____%.
Non-Standardized Performance Results
From time to time, the Fund may provide certain non-standardized
performance results, if any, in addition to the total rate of return quotations
required by the Securities and Exchange Commission. As discussed more fully in
the Prospectus, neither these performance results, nor total rate of return
quotations, should be considered as representative of the performance of the
Fund in the future. These factors and the possible differences in the methods
used to calculate performance results and total rates of return should be
considered when comparing such performance results and total rate of return
quotations of the Fund with those published for other investment companies and
other investment vehicles.
23
<PAGE>
<TABLE>
<CAPTION>
Period Value of Value of
Ended Initial $10,000 Capital Gains Reinvested
/ /95 * Investment Distributions Dividends Total Value
<S> <C> <C> <C> <C>
A Shares: $ $ - $ $
B Shares: $ $ - $ - $
* Period represents ___________, 1995 through ___________, 1996 for Class A Shares.
After the Maximum Sales charge of 4.25% for Class A Shares, the
figure for the same period was as follows:
Period Value of Value of
Ended Initial $10,000 Capital Gains Reinvested
/ /95 Investment Distributions Dividends Total Value
A Shares: $ - $ $ $
</TABLE>
DETERMINATION OF NET ASSET VALUE
The Fund determines its net asset value per Share each day as of the
regular close of the New York Stock Exchange, or 4:15 p.m. for options, during
which the New York Stock Exchange is open for trading (a "Fund Business Day"),
by dividing the value of its net assets (i.e., the value of its securities and
other assets less its liabilities, including expenses payable or accrued (which
is apportioned between the classes to obtain net assets by class), by the number
of its shares outstanding at the time the determination is made. (As of the date
of this Statement of Additional Information, the New York Stock Exchange is open
for trading every weekday except for the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas.) Purchases and redemptions will be effected at
the time of determination of net asset value next following the receipt of any
purchase or redemption order. (See "Purchases and Redemptions of Shares" in the
Prospectus.)
Equity securities are valued at the last sale price on the exchange
on which they are primarily traded or on the NASDAQ National Market System, or
at the last quoted bid price for securities in which there were no sales during
the day or for other unlisted (over-the-counter) securities not reported on the
NASDAQ National Market System. Bonds and other fixed income securities (other
than short-term obligations, but including listed issues) are valued on the
basis of valuations furnished by a pricing service, the use of which has been
approved by the Board of Trustees. In making such valuations, the pricing
service utilizes both dealer-supplied valuations and electronic data processing
techniques that take into account appropriate factors such as institutional-size
trading in similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics and other market data, without exclusive
reliance upon quoted prices or exchange or over-the-counter prices, since such
valuations are believed to reflect more accurately the fair value of such
securities. Short-Term obligations which mature in 60 days or less are
24
<PAGE>
valued at amortized cost, which constitutes fair value as determined by the
Board of Trustees. Futures and option contracts that are traded on commodities
or securities exchanges are normally valued at the settlement price on the
exchange on which they are traded. Portfolio securities (other than short-term
obligations) for which there are no such quotations or valuations are valued at
fair value as determined in good faith by or at the direction of the Board of
Trustees.
Interest income on long-term obligations in the Fund's portfolio is
determined on the basis of coupon interest accrued plus amortization of discount
(the difference between acquisition price and stated redemption price at
maturity) and premiums (the excess of purchase price over stated redemption
price at maturity). Interest income on short-term obligations is determined on
the basis of interest and discount accrued less amortization of premium.
Subject to compliance with applicable regulations, the Fund has
reserved the right to pay the redemption price of its Shares, either totally or
partially, by a distribution in kind of portfolio securities (instead of cash).
The securities so distributed would be valued at the same amount as that
assigned to them in calculating the net asset value for the shares being sold.
If a shareholder received a distribution in kind, the shareholder could incur
brokerage or other charges in converting the securities to cash. The Trust has
filed an election under Rule 18f-1 committing to pay in cash all redemptions by
a shareholder of record up to amounts specified by the rule.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Fund and its shareholders that are not
described in the Fund's Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussions here and in the Prospectus are not intended as substitutes for
careful tax planning.
Qualification as a Regulated Investment Company
The Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Fund is not subject to federal
income tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (i.e., net investment income and the excess of
net short-term capital gain over net long-term capital loss) and at least 90% of
its tax-exempt income (net of expenses allocable thereto) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are described below. Distributions by the Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and can therefore satisfy the Distribution Requirement.
25
<PAGE>
In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or options, futures or forward contracts thereon) held for less than
three months (the "Short-Short Gain Test"). For purposes of these calculations,
gross income includes tax-exempt income. However, foreign currency gains,
including those derived from options, futures and forwards, will not in any
event be characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options or
futures thereon). Because of the Short-Short Gain Test, the Fund may have to
limit the sale of appreciated securities that it has held for less than three
months. However, the ShortShort Gain Test will not prevent the Fund from
disposing of investments at a loss, since the recognition of a loss before the
expiration of the three-month holding period is disregarded for this purpose.
Interest (including original issue discount) received by the Fund at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of such
security within the meaning of the Short-Short Gain Test. However, income that
is attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
In general, gain or loss recognized by the Fund on the disposition of
an asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation (including a municipal obligation) purchased by
the Fund at a market discount (generally, at a price less than its principal
amount) will be treated as ordinary income to the extent of the portion of the
market discount which accrued during the period of time the Fund held the debt
obligation.
Further, the Code also treats as ordinary income, a portion of the
capital gain attributable to a transaction where substantially all of the return
realized is attributable to the time value of the Fund's net investment in the
transaction and: (1) the transaction consists of the acquisition of property by
the Fund and a contemporaneous contract to sell substantially identical property
in the future; (2) the transaction is a straddle within the meaning of Section
1092 of the Code; (3) the transaction is one that was marketed or sold to the
Fund on the basis that it would have the economic characteristics of a loan but
the interest-like return would be taxed as capital gain; or (4) the transaction
is described as a conversion transaction in the Treasury Regulations. The amount
of the gain recharacterized generally will not exceed the amount of the interest
that would have accrued on the net investment for the relevant period at a yield
equal to 120% of the federal long-term, mid-term, or short-term rate, depending
upon the type of instrument at issue, reduced by an amount equal to: (1) prior
inclusions of ordinary income items from the conversion transaction; and (2) the
capitalized interest on acquisition indebtedness
26
<PAGE>
under Code Section 263(g). Built-in losses will be preserved where the Fund has
a built-in loss with respect to property that becomes a part of a conversion
transaction. No authority exists that indicates that the converted character of
the income will not be passed to the Fund's shareholders.
In general, for purposes of determining whether capital gain or loss
recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if: (1) the asset is
used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, (2) the asset is otherwise held by the Fund as part of a "straddle" (which
term generally excludes a situation where the asset is stock and the Fund grants
a qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto); or (3) the asset is stock and the Fund
grants an in-the-money qualified covered call option with respect thereto.
However, for purposes of the ShortShort Gain Test, the holding period of the
asset disposed of may be reduced only in the case of clause (i) above. In
addition, the Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by the Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by the Fund will commence on the date it is written and end on the date it
lapses or the date a closing transaction is entered into. Accordingly, the Fund
may be limited in its ability to write options which expire within three months
and to enter into closing transactions at a gain within three months of the
writing of options.
The Fund's investments in options, futures contracts and forward
contracts, options on futures contracts and stock indices and certain other
securities, including transactions involving actual or deemed short sales or
foreign exchange gains or loses are subject to many complex and special tax
rules. For example, over-the-counter options on debt securities and equity
options, including options on stock and on narrow-based stock indexes, will be
subject to tax under Section 1234 of the Code, generally producing a long-term
or short-term capital gain or loss upon exercise, lapse or closing out of the
option or sale of the underlying stock or security. Certain transactions that
may be engaged in by the Fund (such as regulated futures contracts, certain
foreign currency contracts, and options on stock indexes and futures contracts)
will be subject to special tax treatment as "Section 1256 contracts." Section
1256 contracts are treated as if they are sold for their fair market value on
the last business day of the taxable year, even though a taxpayer's obligations
(or rights) under such contracts have not terminated (by delivery, exercise,
entering into a closing transaction or otherwise) as of such date. Any gain or
loss recognized as a consequence of the year-end deemed disposition of Section
1256 contracts is taken into account for the taxable year together with any
other gain or loss that was previously recognized upon the termination of
Section 1256 contracts during that taxable year. Any capital gain or loss for
the taxable year with respect to Section 1256 contracts (including any capital
gain or loss arising as a consequence of the year-end deemed sale of such
contracts) is generally treated as 60% long-term capital
27
<PAGE>
gain or loss and 40% short-term capital gain or loss. The Fund, however, may
elect not to have this special tax treatment apply to Section 1256 contracts
that are part of a "mixed straddle" with other investments of the Fund that are
not Section 1256 contracts. The Internal Revenue Service (the "IRS") has held in
several private rulings (and Treasury Regulations now provide) that gains
arising from Section 1256 contracts will be treated for purposes of the
Short-Short Gain Test as being derived from securities held for not less than
three months if the gains arise as a result of a constructive sale under Code
Section 1256.
Treasury Regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss) for
any taxable year, to elect (unless it has made a taxable year election for
excise tax purposes as discussed below) to treat all or any part of any net
capital loss, any net long-term capital loss or any net foreign currency loss
incurred after October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security not the issuer of the option. However, with regard to forward currency
contracts, there does not appear to be any formal or informal authority which
identifies the issuer of such instrument. For purposes of asset diversification
testing, obligations issued or guaranteed by agencies or instrumentalities of
the U.S. Government such as the Federal Agricultural Mortgage Corporation, the
Farm Credit System Financial Assistance Corporation, a Federal Home Loan Bank,
the Federal Home Loan Mortgage Association, the Government National Mortgage
Corporation, and the Student Loan Marketing Association are treated as U.S.
Government Securities.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
28
<PAGE>
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election"))(Tax-exempt
interest on municipal obligations is not subject to the excise tax). The balance
of such income must be distributed during the next calendar year. For the
foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall:
(1) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year; and (2) exclude
foreign currency gains and losses incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
Fund Distributions
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they will qualify for the 70% dividends-received deduction for
corporations only to the extent discussed below.
The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to distribute any
such amounts. If net capital gain is distributed and designated as a capital
gain dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares. The Code provides, however, that under certain conditions
only 50% of the capital gain recognized upon the Fund's disposition of "small
business" stock will be subject to tax.
Conversely, if the Fund elects to retain its net capital gain, the
Fund will be taxed thereon (except to the extent of any available capital loss
carryovers) at the 35% corporate tax rate. If the Fund elects to retain its net
capital gain, it is expected that the
29
<PAGE>
Fund also will elect to have shareholders of record on the last day of its
taxable year treated as if each received a distribution of his pro rata share of
such gain, with the result that each shareholder will be required to report his
pro rata share of such gain on his tax return as long-term capital gain, will
receive a refundable tax credit for his pro rata share of tax paid by the Fund
on the gain, and will increase the tax basis for his shares by an amount equal
to the deemed distribution less the tax credit.
Ordinary income dividends paid by the Fund with respect to a taxable
year will qualify for the 70% dividends-received deduction generally available
to corporations (other than corporations, such as Subchapter S corporations,
which are not eligible for the deduction because of their special
characteristics and other than for purposes of special taxes such as the
accumulated earnings tax and the personal holding company tax) to the extent of
the amount of qualifying dividends received by the Fund from domestic
corporations for the taxable year. A dividend received by the Fund will not be
treated as a qualifying dividend (1) if it has been received with respect to any
share of stock that the Fund has held for less than 46 days (91 days in the case
of certain preferred stock), excluding for this purpose under the rules of Code
Section 246(c) (3) and (4): (i) any day more than 45 days (or 90 days in the
case of certain preferred stock) after the date on which the stock becomes
ex-dividend and (ii) any period during which the Fund has an option to sell, is
under a contractual obligation to sell, has made and not closed a short sale of,
is the grantor of a deep-in-the-money or otherwise nonqualified option to buy,
or has otherwise diminished its risk of loss by holding other positions with
respect to, such (or substantially identical) stock; (2) to the extent that the
Fund is under an obligation (pursuant to a short sale or otherwise) to make
related payments with respect to positions in substantially similar or related
property; or (3) to the extent the stock on which the dividend is paid is
treated as debt-financed under the rules of Code Section 246A. Moreover, the
dividends-received deduction for a corporate shareholder may be disallowed or
reduced (1) if the corporate shareholder fails to satisfy the foregoing
requirements with respect to its shares of the Fund or (2) by application of
Code Section 246(b) which in general limits the dividends-received deduction to
70% of the shareholder's taxable income (determined without regard to the
dividends-received deduction and certain other items).
Alternative minimum tax ("AMT") is imposed in addition to, but only
to the extent it exceeds, the regular tax and is computed at a maximum marginal
rate of 28% for noncorporate taxpayers and 20% for corporate taxpayers on the
excess of the taxpayer's alternative minimum taxable income ("AMTI") over an
exemption amount. In addition, under the Superfund Amendments and
Reauthorization Act of 1986, a tax is imposed for taxable years beginning after
1986 and before 1996 at the rate of 0.12% on the excess of a corporate
taxpayer's AMTI (determined without regard to the deduction for that tax and the
AMT net operating loss deduction) over $2 million. For purposes of the Corporate
AMT and the environmental Superfund tax, the corporate dividends-received
deduction is not itself an item of tax preference that must be added back to
taxable income or is otherwise disallowed in determining a corporation's AMTI.
However, corporate shareholders will generally be required to take the full
amount of any dividend received from a Fund into account (without a
dividends-received deduction) in determining its adjusted current earnings,
which are used in computing an additional corporate preference item (i.e., 75%
of the excess of a corporate taxpayer's adjusted current earnings over its
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<PAGE>
AMTI (determined without regard to this item and the AMT net operating loss
deduction)) includible in AMTI.
Investment income that may be received by the Fund from sources
within foreign countries may be subject to foreign taxes withheld at the source.
The United States has entered into tax treaties with many foreign countries
which entitle the Fund to a reduced rate of, or exemption from, taxes on such
income. It is impossible to determine the effective rate of foreign tax in
advance since the amount of the Fund's assets to be invested in various
countries is not known.
Distributions by the Fund that do not constitute ordinary income
dividends, exempt-interest dividends or capital gain dividends will be treated
as a return of capital to the extent of (and in reduction of) the shareholder's
tax basis in his shares; any excess will be treated as gain from the sale of his
shares, as discussed below.
Distributions by the Fund will be treated in the manner described
above regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of the Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
Ordinarily, shareholders are required to take distributions by the
Fund into account in the year in which the distributions are made. However,
dividends declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of ordinary income dividends and capital gain dividends,
and the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that it is not subject to backup withholding or that it is a
corporation or other "exempt recipient."
31
<PAGE>
Sale or Redemption of Shares
Each shareholder will recognize gain or loss on the sale or
redemption of shares of the Fund in an amount equal to the difference between
the proceeds of the sale or redemption and the shareholder's adjusted tax basis
in the shares. All or a portion of any loss so recognized may be disallowed if
the shareholder purchases other shares of the Fund within 30 days before or
after the sale or redemption. In general, any gain or loss arising from (or
treated as arising from) the sale or redemption of shares of the Fund will be
considered capital gain or loss and will be long-term capital gain or loss if
the shares were held for longer than one year. However, any capital loss arising
from the sale or redemption of shares held for six months or less will be
disallowed to the extent of the amount of exempt-interest dividends received on
such shares and (to the extent not disallowed) will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) (discussed above in connection with the dividends-received
deduction for corporations) generally will apply in determining the holding
period of shares. Long-term capital gains of noncorporate taxpayers are
currently taxed at a maximum rate 11.6% lower than the maximum rate applicable
to ordinary income. Capital losses in any year are deductible only to the extent
of capital gains plus, in the case of a noncorporate taxpayer, $3,000 of
ordinary income.
If a shareholder (1) incurs a sales load in acquiring shares of the
Fund, (2) disposes of such shares less than 91 days after they are acquired and
(3) subsequently acquires shares of the Fund or another fund at a reduced sales
load pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of but shall be treated as incurred on the
acquisition of the shares subsequently acquired.
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder"), depends on whether the income from
the Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from the Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income dividends
paid to a foreign shareholder will be subject to U.S. withholding tax at the
rate of 30% (or lower treaty rate) upon the gross amount of the dividend. Such a
foreign shareholder would generally be exempt from U.S. federal income tax on
gains realized on the sale of shares of the Fund, capital gain dividends and
exempt-interest dividends and amounts retained by the Fund that are designated
as undistributed capital gains.
If the income from the Fund is effectively connected with a U.S.
trade or business carried on by a foreign shareholder, then ordinary income
dividends, capital gain
32
<PAGE>
dividends, and any gains realized upon the sale of shares of the Fund will be
subject to U.S. federal income tax at the rates applicable to U.S. citizens or
domestic corporations.
In the case of foreign noncorporate shareholders, the Fund may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholders furnish the Fund with proper notification of its
foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the Treasury Regulations issued thereunder
as in effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends,
exempt-interest dividends and capital gain dividends from regulated investment
companies often differ from the rules for U.S. federal income taxation described
above. Shareholders are urged to consult their tax advisers as to the
consequences of these and other state and local tax rules affecting investment
in the Fund.
MANAGEMENT OF THE FUND
Trustees and Officers of the Trust
The Trustees and officers and their principal occupations for at
least the past five years are set forth below. Their titles may have varied
during that period. Asterisks indicate those Trustees and officers that are
"interested persons" (as defined in the 1940 Act). Unless otherwise indicated
below, the address of each officer is 125 W. 55th Street, New York, New York
10019.
Trustees
FERGUS REID, III* - Chairman of the Board of Trustees; Chairman of the Board of
Trustees of Mutual Fund Group and Trustee of certain Portfolios advised by
Chase; Chairman and Chief Executive Officer, Lumelite Corporation, since
September 1985.
Address: 971 West Road, New Canaan, Connecticut 06840.
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<PAGE>
RICHARD E. TEN HAKEN - Trustee of Mutual Fund Trust and the Portfolios. Former
Chief Executive Officer, Board of Cooperative Education Services, Monroe and
Orleans Counties, New York; Former Chairman of the New York State Teachers'
Retirement System.
Address: 4 Barnfield Road, Pittsford, New York 14534.
WILLIAM J. ARMSTRONG - Trustee of Mutual Fund Trust and the Portfolios; Vice
President and Treasurer, Ingersoll-Rand Company (Woodcliff Lake, New Jersey).
Address: 49 Aspen Way, Upper Saddle River, New Jersey 07458.
JOHN R.H. BLUM - Trustee of Mutual Fund Trust and the Portfolios; Partner in the
law firm of Richards, O'Neil & Allegaert; Commissioner of Agriculture - State of
Connecticut.
Address: 1 John Street, Millerton, New York 12546.
JOSEPH J. HARKINS* - Trustee of Mutual Fund Trust and the Portfolios; Retired;
Commercial Sector Executive and Executive Vice President of The Chase Manhattan
Bank, N.A. from 1985 through 1989. He has been employed by Chase in numerous
capacities and offices since 1954. Director of Blessings Corporation, Jefferson
Insurance Company of New York, Monticello Insurance Company and Nationar.
Address: 257 Plantation Circle South, Ponte Vedra South, Ponte Vedra Beach, FL
32082
H. RICHARD VARTABEDIAN* - President and Trustee of the Trust and Mutual Fund
Trust; Chairman and President of the Portfolios; Retired; Senior Investment
Officer, Division Executive of the Investment Management Division of The Chase
Manhattan Bank, N.A., 1980-1991; responsible for investment research, trading
and portfolio management for commingled funds and high net worth individuals
within the U.S. Employed by Chase in various investment oriented capacities
since 1960, primarily as a senior portfolio manager for institutional, ERISA and
high net worth portfolios.
Address: P.O. Box 296, Beach Road, Hendrick's Head, Southport, Maine 04576.
STUART W. CRAGIN, Jr. - Trustee of Mutual Fund Trust and the Portfolios;
President, Fairfield Testing Laboratory, Inc. He has previously served in a
variety of marketing, manufacturing and general management positions with Union
Camp Corp., Trinity Paper & Plastics Corp., and Canover Industries.
Address 652 Glenbrook Road, Greenwich, Connecticut 06906
IRVING L. THODE - Trustee of Mutual Fund Trust and the Portfolios; Retired; Vice
President of Quotron Systems. He has previously served in a number of executive
positions with Control Data Corp., including President of their Latin American
operations, and General Manager of their Data Services business.
Address: 80 Perkins Road, Greenwich, Connecticut 06830
The Board of Trustees of the Trust presently has an Audit Committee. The members
of the Audit Committee are Messrs. Ten Haken (Chairman), Blum, Armstrong,
Harkins, Reid, and Vartabedian who will serve until [Date]. The function of the
Audit Committee is to recommend independent auditors and monitor accounting and
financial matters.
The Audit Committee met times during the fiscal period ended October 31, 1995.
34
<PAGE>
Remuneration of Trustees and Certain Executive Officers:
Each Trustee is reimbursed for expenses incurred in attending each
meeting of the Board of Trustees or any committee thereof. Each Trustee who is
not an affiliate of the Adviser or Sub-Adviser is compensated for his or her
services according to a fee schedule which recognizes the fact that each Trustee
also serves as a Trustee of other investment companies advised by the Adviser or
Sub-Adviser. Each Trustee receives a fee, allocated among all investment
companies for which the Trustee serves, which consists of an annual retainer
component and a meeting fee component. Effective August 21, 1995, each Trustee
of the Vista Funds receives a quarterly retainer of $12,000 and an additional
per meeting fee of $1,500. Members of committees receive a meeting fee only if
the committee meeting is held on a day other than a day on which a regularly
scheduled meeting is held. Prior to August 21, 1995, the annual retainer was
$36,000 and the permeeting fee was $1,000. The Chairman of the Trustees, Fergus
Reid, has and continues to receive a 50% increment over regular Trustee total
compensation for serving as Chairman and Trustee for all the investment
companies advised by the Adviser or SubAdviser.
Effective August 21, 1995, the Trustees also instituted a Retirement
Plan for Eligible Trustees (the "Plan") pursuant to which each Trustee (who is
not an employee of any of the Portfolios, the Adviser or Sub-Adviser,
Administrator or distributor or any of their affiliates) may be entitled to
certain benefits upon retirement from the Board of Trustees. Pursuant to the
Plan, the normal retirement date is the date on which the eligible Trustee has
attained age 65 and has completed at least five years of continuous service with
one or more of the investment companies advised by the Adviser or SubAdviser
(collectively, the "Covered Funds"). Each eligible Trustee is entitled to
receive from the Covered Funds an annual benefit commencing on the first day of
the calendar quarter coincident with or following his date of retirement equal
to 10% of the highest annual compensation received from the Covered Funds
multiplied by the number of such Trustee's years of service (not in excess of 10
years) completed with respect to any of the Covered Funds. Such benefit is
payable to each eligible Trustee in monthly installments for the life of the
Trustee.
Set forth in the table below are the estimated annual benefits
payable to an eligible Trustee upon retirement assuming various compensation and
years of service classifications. The estimated credited years of service for
Messrs. Reid, Ten Haken, Armstrong, Blum, Harkins, Vartabedian, Cragin, and
Thode are [insert years of service]
The following tables indicate the compensation received by each
Trustee during the fiscal period of the Portfolios which ended on October 31,
1995:
35
<PAGE>
<TABLE>
<CAPTION>
Total Compensation
Pension or Retirement Benefits Estimated Annual Benefits from Victory
Accrued as Portfolio Expenses Upon Retirement "Portfolio Complex"
<S> <C> <C> <C>
Forges Reid, III, Trustee........
Richard E. Ten Haken, Trustee....
William J. Armstrong, Trustee....
John R.H. Blum, Trustee..........
Joseph J. Harkins, Trustee.......
H. Richard Vartabedian, Trustee..
Stuart W. Cragin, Jr., Trustee...
Irving L. Thode, Trustee.........
</TABLE>
Officers
RICHARD FABIETTI* - Treasurer and Assistant Secretary of the Trust; Vice
President, Concord Financial Group, Inc.
The Declaration of Trust provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, unless, as to liability to the Trust or its shareholders, it is finally
adjudicated that they engaged in wilful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in their offices or with respect to
any matter unless it is finally adjudicated that they did not act in good faith
in the reasonable belief that their actions were in the best interest of the
Trust. In the case of settlement, such indemnification will not be provided
unless it has been determined by a court or other body approving the settlement
or other disposition, or by a reasonable determination based upon a review of
readily available facts, by vote of a majority of disinterested Trustees or in a
written opinion of independent counsel, that such officers or Trustees have not
engaged in wilful misfeasance, bad faith, gross negligence or reckless disregard
of their duties.
The Fund pays no direct remuneration to any officer of the Trust.
Adviser or Sub-Adviser
The Adviser or Sub-Adviser manages the assets of the Fund pursuant to
an Investment Advisory Agreement, dated as of __________, 1996 (the "Advisory
Agreement"). Subject to such policies as the Board of Trustees may determine,
Chase makes investment decisions for the Fund. Pursuant to the terms of the
Advisory Agreement, the Adviser or Sub-Adviser provides the Fund with such
investment advice and supervision as it deems necessary for the proper
supervision of the Fund's investments. The Adviser or Sub-Adviser continuously
provides investment programs and determines from time to time what securities
shall be purchased, sold or exchanged and what portion of the Fund's assets
shall be held uninvested. The Adviser or Sub-Adviser furnishes, at its own
expense, all services, facilities and personnel necessary in connection
36
<PAGE>
with managing the investments and effecting portfolio transactions for the Fund.
The other expenses attributable to, and payable by the Fund, are described under
"Expenses" in the Prospectus. The Advisory Agreement for the Fund will continue
in effect from year to year only if such continuance is specifically approved at
least annually by the Board of Trustees or by vote of a majority of the Fund's
outstanding voting securities and by a majority of the Trustees who are not
parties to the Advisory Agreement or interested persons of any such party, at a
meeting called for the purpose of voting on such Advisory Agreement.
Under the Advisory Agreement, the Adviser or Sub-Adviser may utilize
the specialized portfolio skills of all its various affiliates, thereby
providing the Fund with greater opportunities and flexibility in accessing
investment expertise.
Pursuant to the terms of the Advisory Agreement, the Adviser or
Sub-Adviser is permitted to render services to others. The Advisory Agreement is
terminable without penalty by the Trust on behalf of the Fund on not more than
60 days', nor less than 30 days', written notice when authorized either by a
majority vote of the Fund's shareholders or by a vote of a majority of the Board
of Trustees of the Trust, or by the Adviser or SubAdviser on not more than 60
days', nor less than 30 days', written notice, and will automatically terminate
in the event of its "assignment" (as defined in the 1940 Act). The Advisory
Agreement provides that the Adviser or Sub-Adviser under such Agreement shall
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution of
portfolio transactions for the respective Fund, except for wilful misfeasance,
bad faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties thereunder.
In the event the operating expenses of the Fund, including all
investment advisory, administration and sub-administration fees, but excluding
brokerage commissions and fees, taxes, interest and extraordinary expenses such
as litigation, for any fiscal year exceed the most restrictive expense
limitation applicable to the Fund imposed by the securities laws or regulations
thereunder of any state in which the shares of the Fund is qualified for sale,
as such limitations may be raised or lowered from time to time, the Adviser or
Sub-Adviser shall reduce its advisory fee (which fee is described below) to the
extent of its share of such excess expenses. The amount of any such reduction to
be borne by the Adviser or Sub-Adviser shall be deducted from the monthly
advisory fee otherwise payable with respect to the Fund during such fiscal year;
and if such amounts should exceed the monthly fee, the Adviser or Sub-Adviser
shall pay to the Fund its share of such excess expenses no later than the last
day of the first month of the next succeeding fiscal year.
In consideration of the services provided by the Adviser or
Sub-Adviser pursuant to the Advisory Agreement, the Fund pays an investment
advisory fee computed and paid monthly based on a rate equal to ____ % of the
Fund's average daily net assets, on an annualized basis for the Fund's
then-current fiscal year. However, the Adviser or SubAdviser may voluntarily
agree to waive a portion of the fees payable to it on a month-to-month basis.
37
<PAGE>
Under an investment advisory agreement between the Trust, on behalf
of the Fund, and Chase, Chase may delegate a portion of its responsibilities to
a subadviser. In addition, the investment advisory agreement provides that Chase
may render services through its own employees or the employees of one or more
affiliated companies that are qualified to act as an investment adviser of the
Fund and are under the common control of New Chase as long as all such persons
are functioning as part of an organized group of persons, managed by authorized
officers of Chase. [Chase, on behalf of the Fund, has entered into an investment
sub-advisory agreement (the "Sub-Advisory Agreement") with Van Deventer & Hoch
("VD&H"), whose principal offices are located at 800 North Brand Boulevard,
Suite 300, Glendale, California 91203. VD&H is a general partnership which is
equally owned by individuals who serve VD&H in key professional capacities and
by CBC Holdings (California), which is a wholly-owned subsidiary of Chemical
Banking Corporation, a bank holding company. With respect to the day to day
management of the Fund, under the sub-advisory agreement, the Sub-Adviser makes
decisions concerning, and places all orders for, purchases and sales of
securities and helps maintain the records relating to such purchases and sales.
The Sub-Adviser may, in its discretion, provide such services through its own
employees or the employees of one or more affiliated companies that are
qualified to act as an investment adviser to the Company under applicable laws
and are under the common control of New Chase; provided that (i) all persons,
when providing services under the sub-advisory agreement, are functioning as
part of an organized group of persons, and (ii) such organized group of persons
is managed at all times by authorized officers of the Sub-Adviser. This
arrangement will not result in the payment of additional fees by the Fund.]
Administrator
Pursuant to an Administration Agreement, dated as of __________, 1996
(the "Administration Agreement"), Chase serves as administrator of the Trust.
Chase provides certain administrative services to the Trust, including, among
other responsibilities, coordinating the negotiation of contracts and fees with,
and the monitoring of performance and billing of, the Trust's independent
contractors and agents; preparation for signature by an officer of the Trust of
all documents required to be filed for compliance by the Trust with applicable
laws and regulations excluding those of the securities laws of various states;
arranging for the computation of performance data, including net asset value and
yield; responding to shareholder inquiries; and arranging for the maintenance of
books and records of the Trust and providing, at its own expense, office
facilities, equipment and personnel necessary to carry out its duties. The
Administrator does not have any responsibility or authority for the management
of the Fund, the determination of investment policy, or for any matter
pertaining to the distribution of Fund shares.
Under the Administration Agreement Chase renders administrative
services to others. The Administration Agreement will continue in effect from
year to year only if such continuance is specifically approved at least annually
by the Board of Trustees or by vote of a majority of the Fund's outstanding
voting securities and by a majority of the Trustees who are not parties to the
Administration Agreement or "interested persons" (as defined in the 1940 Act) of
any such party. The Administration Agreement is terminable without penalty by
the Trust on behalf of the Fund on 60 days' written notice when authorized
either by a majority vote of the Fund's shareholders or by vote of a majority
38
<PAGE>
of the Board of Trustees, including a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust, or by the
Administrator on 60 days' written notice, and will automatically terminate in
the event of its "assignment" (as defined in the 1940 Act). The Administration
Agreement also provides that neither Chase nor its personnel shall be liable for
any error of judgment or mistake of law or for any act or omission in the
administration or management of the Fund, except for wilful misfeasance, bad
faith or gross negligence in the performance of its or their duties or by reason
of reckless disregard of its or their obligations and duties under the
Administration Agreement.
In addition, the Administration Agreement provides that, in the event
the operating expenses of any Fund including all investment advisory,
administration and sub-administration fees, but excluding brokerage commissions
and fees, taxes, interest and extraordinary expenses such as litigation, for any
fiscal year exceed the most restrictive expense limitation applicable to the
Fund imposed by the securities laws or regulations thereunder of any state in
which the shares of the Fund is qualified for sale, as such limitations may be
raised or lowered from time to time, Chase shall reduce its administration fee
(which fee is described below) to the extent of its share of such excess
expenses. The amount of any such reduction to be borne by Chase shall be
deducted from the monthly administration fee otherwise payable to Chase during
such fiscal year; and if such amounts should exceed the monthly fee, Chase shall
pay to such Fund its share of such excess expenses no later than the last day of
the first month of the next succeeding fiscal year.
In consideration of the services provided by Chase pursuant to the
Administration Agreement, the Administrator receives from the Fund a fee
computed and paid monthly at an annual rate equal to 0.03% of the Fund's average
daily net assets, on an annualized basis for the Fund's then-current fiscal
year. Chase may voluntarily waive a portion of the fees payable to it with
respect to each Fund on a month-to-month basis.
Distributor
Distribution Plan
The Trust has adopted separate plans of distribution pursuant to Rule
12b-1 under the 1940 Act (a "Distribution Plan") including a Distribution Plan
on behalf of the Fund, which provides that the Fund shall pay a distribution fee
(the "Distribution Fee"), including payments to the Distributor, at an annual
rate not to exceed 0.25% of its Shares average daily net assets for distribution
services. The Distributor may use all or any portion of such Distribution Fee to
pay for Fund expenses of printing prospectuses and reports used for sales
purposes, expenses of the preparation and printing of sales literature and other
such distribution-related expenses.
The Distribution Plan provides that it will continue in effect
indefinitely if such continuance is specifically approved at least annually by a
vote of both a majority of the Trustees and a majority of the Trustees who are
not "interested persons" (as defined in the 1940 Act) of the Trust and who have
no direct or indirect financial interest in the operation of the Distribution
Plan or in any agreement related to the Plan ("Qualified
39
<PAGE>
Trustees"). The Distribution Plan requires that the Trust shall provide to the
Board of Trustees, and the Board of Trustees shall review, at least quarterly, a
written report of the amounts expended (and the purposes therefor) under the
Distribution Plan. The Distribution Plan further provides that the selection and
nomination of Qualified Trustees shall be committed to the discretion of the
disinterested Trustees (as defined in the 1940 Act) then in office. The
Distribution Plan may be terminated at any time by a vote of a majority of the
Qualified Trustees by vote of a majority of the outstanding voting Shares of the
Fund (as defined in the 1940 Act). The Distribution Plan may not be amended to
increase materially the amount of permitted expenses thereunder without the
approval of shareholders and may not be materially amended in any case without a
vote of the majority of both the Trustees and the Qualified Trustees. The Fund
will preserve copies of any plan, agreement or report made pursuant to the
Distribution Plan for a period of not less than six years from the date of the
Distribution Plan, and for the first two years such copies will be preserved in
an easily accessible place.
Since the Distribution Fee is not directly tied to actual expenses,
the amount of Distribution Fee paid by each of the Shares during any year may be
more or less than actual expenses incurred pursuant to the Distribution Plan.
For this reason, this type of distribution fee arrangement is characterized by
the staff of the Securities and Exchange Commission as being of the
"compensation variety" (in contrast to "reimbursement" arrangements, such as
those in which the Distributor's compensation is directly linked to its
expenses). However, the Shares are not liable for any distribution expenses
incurred in excess of the Distribution Fee paid.
Distribution and Sub-Administration Agreement
The Trust has entered into a Distributor and Sub-Administration
Agreement dated __________, 1996 (the "Distribution Agreement"), with the
Distributor, pursuant to which the Distributor acts as the Fund's exclusive
underwriter, provides certain administration services and promotes and arranges
for the sale of the Fund's shares. The Distributor is a wholly-owned subsidiary
of BISYS Fund Services, Inc. The Distribution Agreement provides that the
Distributor will bear the expenses of printing, distributing and filing
prospectuses and statements of additional information and reports used for sales
purposes, and of preparing and printing sales literature and advertisements not
paid for by the Distribution Plan. The Trust pays for all of the expenses for
qualification of the shares of the Fund for sale in connection with the public
offering of such shares, and all legal expenses in connection therewith. In
addition, pursuant to the Distribution Agreement, the Distributor provides
certain sub-administration services to the Trust, including providing officers,
clerical staff and office space.
The Distribution Agreement is currently in effect and will continue
in effect with respect to the Fund only if such continuance is specifically
approved at least annually by the Board of Trustees or by vote of a majority of
the Fund's outstanding voting securities and by a majority of the Trustees who
are not parties to the Distribution Agreement or "interested persons" (as
defined in the 1940 Act) of any such party. The Distribution Agreement is
terminable without penalty by the Trust on behalf of the Fund on 60 days'
written notice when authorized either by a majority vote of the Fund's
shareholders or by vote of a majority of the Board of Trustees of the Trust,
including a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust, or
40
<PAGE>
by the Distributor on 60 days' written notice, and will automatically terminate
in the event of its "assignment" (as defined in the 1940 Act). The Distribution
Agreement also provides that neither the Distributor nor its personnel shall be
liable for any act or omission in the course of, or connected with, rendering
services under the Distribution Agreement, except for wilful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations or duties.
In the event the operating expenses of the Fund, including all
investment advisory, administration and sub-administration fees, but excluding
brokerage commissions and fees, taxes, interest and extraordinary expenses such
as litigation, for any fiscal year exceed the most restrictive expense
limitation applicable to the Fund imposed by the securities laws or regulations
thereunder of any state in which the shares of the Fund are qualified for sale,
as such limitations may be raised or lowered from time to time, the Distributor
shall reduce its sub-administration fee with respect to the Fund (which fee is
described below) to the extent of its share of such excess expenses. The amount
of any such reduction to be borne by the Distributor shall be deducted from the
monthly sub-administration fee otherwise payable with respect to the Fund during
such fiscal year; and if such amounts should exceed the monthly fee, the
Distributor shall pay to the Fund its share of such excess expenses no later
than the last day of the first month of the next succeeding fiscal year.
In consideration of the sub-administration services provided by the
Distributor pursuant to the Distribution Agreement, the Distributor receives an
annual fee, payable monthly, of 0.045% of the net assets of the Fund. However,
the Distributor has voluntarily agreed to waive a portion of the fees payable to
it under the Distribution Agreement with respect to the Fund on a month-to-month
basis.
Shareholder Servicing Agents, Transfer Agent and Custodian
The Trust has entered into a shareholder servicing agreement (a
"Servicing Agreement") with each Shareholder Servicing Agent to provide certain
services. The fees relating to acting as liaison to shareholders and providing
personal services to shareholders will not exceed, on an annualized basis, 0.25%
of the average daily net assets of the Fund represented by shares owned during
the period for which payment is being made by investors with whom such
Shareholder Servicing Agent maintains a servicing relationship. However, each
Shareholder Servicing Agent has voluntarily agreed to waive a portion of the
fees payable to it under its Servicing Agreement with respect to the Fund on a
month-to-month basis.
The Trust has also entered into a Transfer Agency Agreement with DST
Systems, Inc. ("DST") pursuant to which DST acts as transfer agent for the
Trust. Pursuant to a Custodian Agreement, Chase acts as the custodian of the
assets of the Fund for which Chase receives compensation as is from time to time
agreed upon by the Trust and Chase. For additional information, see "Shareholder
Servicing Agents, Transfer Agent and Custodian" in the Prospectus.
In certain circumstances Shareholder Servicing Agents may be required
to register as dealers under state law.
41
<PAGE>
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York
10036 serves as independent accountants of the Fund. Price Waterhouse LLP
provides the Fund with audit services, tax return preparation, and assistance
and consultation with respect to the preparation of filings with the Securities
and Exchange Commission.
GENERAL INFORMATION
Description of Shares, Voting Rights and Liabilities
Mutual Fund Group is an open-end, management investment company
organized as Massachusetts business trust under the laws of the Commonwealth of
Massachusetts in 1987. Because certain of the Funds comprising the Trust,
including the Fund, are "non-diversified", more than 5% of any of the assets of
the Fund may be invested in the obligations of any single issuer, which may make
the value of the shares in the Fund more susceptible to certain risks than
shares of a diversified mutual fund.
The Trust currently consists of __ Funds of shares of beneficial
interest without par value. Certain of the Funds in the Trust may offer more
than one class of shares. The Trust has reserved the right to create and issue
additional series or classes. Each share of a series or class represents an
equal proportionate interest in that series or class with each other share of
that series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Expenses
of the Trust which are not attributable to a specific series or class are
allocated amount all the series in a manner believed by management of the Trust
to be fair and equitable. Shares have no pre-emptive or conversion rights.
Shares when issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each share held. Shares of each series
or class generally vote separately, for example to approve investment advisory
agreements or distribution plans, 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. With respect to shares
purchased through a Shareholder Servicing Agent and, in the event written proxy
instructions are not received by the Fund or its designated agent prior to a
shareholder meeting at which a proxy is to be voted and the shareholder does not
attend the meeting in person, the Shareholder Servicing Agent for such
shareholder will be authorized pursuant to an applicable agreement with the
shareholder to vote the shareholder's outstanding shares in the same proportion
as the votes cast by other Fund shareholders represented at the meeting in
person or by proxy.
The Trust is not required to hold annual meetings of shareholders but
will hold special meetings of shareholders of a series or class when, in the
judgment of the Trustees, it is necessary or desirable to submit matters for a
shareholder vote. Shareholders have, under certain circumstances, the right to
communicate with other shareholders in connection with requesting a meeting of
shareholders for the purpose of removing one or more Trustees. Shareholders also
have, in certain circumstances, the right to remove one or more Trustees without
a meeting. No material amendment may be made to the Trust's Declaration of Trust
without the affirmative vote of the holders of
42
<PAGE>
a majority of the outstanding shares of each portfolio affected by the
amendment. The Trust's Declaration of Trust provides that, at any meeting of
shareholders of the Trust or of any series or class, a Shareholder Servicing
Agent may vote any shares as to which such Shareholder Servicing Agent is the
agent of record and which are not represented in person or by proxy at the
meeting, proportionately in accordance with the votes cast by holders of all
shares of that portfolio 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. Shares have no preemptive or
conversion rights. Shares, when issued, are fully paid and non-assessable,
except as set forth below. Any series or class may be terminated (i) upon the
merger or consolidation with, or the sale or disposition of all or substantially
all of its assets to, another entity, if approved by the vote of the holders of
two-thirds of its outstanding shares, except that if the Board of Trustees
recommends such merger, consolidation or sale or disposition of assets, the
approval by vote of the holders of a majority of the series' or class'
outstanding shares will be sufficient, or (ii) by the vote of the holders of a
majority of its outstanding shares, or (iii) by the Board of Trustees by written
notice to the series' or class' shareholders. Unless each series and class is so
terminated, the Trust will continue indefinitely.
Stock certificates are issued only upon the written request of a
shareholder, subject to the policies of the investor's Shareholder Servicing
Agent, but the Trust will not issue a stock certificate with respect to shares
that may be redeemed through expedited or automated procedures established by a
Shareholder Servicing Agent.
The Trust 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 Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides for indemnification and reimbursement of expenses out of the Trust
property for any shareholder held personally liable for the obligations of the
Trust. The Trust's Declaration of Trust also provides that the Trust shall
maintain appropriate insurance (for example, fidelity bonding and errors and
omissions insurance) for the protection of the Trust, its shareholders,
Trustees, officers, employees and agents covering possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
The Trust's Declaration of Trust further provides that obligations of
the Trust are not binding upon the Trustees individually but only upon the
property of the Trust and that the Trustees will not be liable for any action or
failure to act, errors of judgment or mistakes of fact or law, but nothing in
the Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
The Board of Trustees has adopted a Code of Ethics addressing personal
securities transactions by investment personnel and access persons and other
related matters. The
43
<PAGE>
Code of Ethics substantially conforms to the recommendations made by the
Investment Company Institute ("ICI") (except where noted) and includes such
provisions as:
o Prohibitions on investment personnel acquiring securities in
initial offerings;
o A requirement that access persons obtain prior to acquiring
securities in a private placement and that the officer granting
such approval have no interest in the issuer making the private
placement;
o A restriction on access persons executing transactions for
securities on a recommended list until 14 days after distribution
of that list;
o A prohibition on access persons acquiring securities that are
pending execution by one of the Portfolios until 7 days after the
transactions of the Portfolios are completed;
o A prohibition of any buy or sell transaction in a particular
security in a 30-day period, except as may be permitted in
certain hardship cases or exigent circumstances where prior
approval is obtained. This provision differs slightly from the
ICI recommendation;
o A requirement for pre-clearance of any buy or sell transaction in
a particular security after 30 days, but within 60 days;
o A requirement that any gift exceeding $75.00 from a customer must
be reported to the appropriate compliance officer;
o A requirement that access persons submit in writing any request
to serve as a director or trustee of a publicly traded company;
o A requirement that all securities transactions in excess of
$1,000 be pre-cleared, except that if a person has engaged in
more than $10,000 of securities transactions in a calendar
quarter all securities of such person require preclearance (this
de minimus exception differs slightly from the ICI
recommendations); o A requirement that all access persons direct
their broker-dealer to submit duplicate confirmation and customer
statements to the appropriate compliance unit; and o A
requirement that all access persons sign a Code of Ethics
acknowledgment, affirming that they have read and understood the
Code and submit a personal security holdings report upon
commencement of employment or status and a personal security
transaction report within 10 days of each calendar quarter
thereafter.
Principal Holders
As of __________, 1995, no persons owned beneficially, directly or
indirectly, 5% or more of the outstanding shares of each class of shares of the
Fund.
44
<PAGE>
Specimen Computations of Offering Prices Per Shares
Net Asset Value and Redemption Price per Shares of Beneficial Interest
at ___________, 1996................................................... $_____
Maximum Offering Price per Shares .................................... $_____
45
<PAGE>
RATINGS APPENDIX
Moody's Investors Service's Commercial Paper Ratings
Prime-1 -- Issuers rated Prime-1 (or related supporting institutions)
have a superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
o Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2 -- Issuers and Prime-2 (or related supporting institutions)
have a strong capacity for repayment of short-term obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions.
Ample alternate liquidity is maintained.
Standard & Poor's Ratings Group Commercial Paper Ratings
A-1 -- This highest category indicates that the degree of safety
regarding timely payment is strong. Those issuers determined to possess
overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issuers designated A-1.
--------------
Other nationally recognized statistical rating organizations ("NRSROs")
have rating categories similar to those used by Moody's Investors Service and
Standard and Poor's Ratings Group.
After purchase by a Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require the Fund to sell such security. If a security is
backed by an unconditional demand feature, the issuer of the demand feature
rather than the issuer of the underlying security may be relied upon in
determining whether a Fund's rating criteria have been met. To the extent
A-1
<PAGE>
the ratings given by any NRSRO may change as a result of changes in such
organizations or in their rating systems, the Funds will attempt to use
comparable ratings as standards for investments in accordance with the
investment policies contained in the Prospectuses and in this Statement of
Additional Information.
A-1
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
__________, 1996
VISTA(sm) U.S. GOVERNMENT SECURITIES FUND
125 West 55th Street, New York, New York 10019
This Statement of Additional Information sets forth information which may be of
interest to investors but which is not necessarily included in the Prospectus
offering the Fund. This Statement of Additional Information should be read in
conjunction with the Prospectus offering shares of Vista U.S. Government
Securities Fund (the "Fund"), dated _________, 1996. A copy of the Prospectus
may be obtained by an investor without charge by contacting Vista Broker-Dealer
Services, Inc., the Fund's distributor, at the above-listed address or by
calling the Vista Service Center at the toll-free number listed below.
This Statement of Additional Information is NOT a prospectus and is authorized
for distribution to prospective investors only if preceded or accompanied by an
effective prospectus.
For more information about the Fund or your account, simply call the Vista
Service Center at our toll-free number:
1-800-34-VISTA
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141
VUSGS-SAI
<PAGE>
Table of Contents Page
The Fund 3
Investment Objective, Policies and Restrictions 3
Additional Investment Activities 4
Hedging and Derivatives 8
Limiting Investment Risks 17
Performance Information 21
Determination of Net Asset Value 22
Tax Matters 24
Management of the Fund 32
Independent Accountants 41
General Information 41
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THE FUND
Mutual Fund Group (the "Trust") is an open-end management
investment company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on May 11, 1987. The Trust presently consists of
__ separate series (a "Fund" or the "Funds"). Certain of the Funds are
diversified and other Funds are non-diversified, as such term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). Under a multiple
class distribution system, several of the Income and Equity Funds may be offered
through two or more classes of shares.
The Funds' Shares are continuously offered for sale through
Vista Broker-Dealer Services, Inc. ("VBDS"), the Fund's distributor (the
"Distributor"), which is not affiliated with Chase Manhattan Bank, N.A.' or its
affiliates, to investors who are customers of 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 the Trust on behalf
of the Fund (collectively, "Shareholder Servicing Agents") or customers of a
securities broker or certain financial institutions who have entered into
Selected Dealer Agreements with the Distributor. VBDS receives a distribution
fee from the Fund, pursuant to the plan of distribution adopted pursuant to Rule
12b-1 of the 1940 Act.
The Board of Trustees of the Trust provides broad supervision
over the affairs of the Trust including the Fund. The Chase Manhattan Bank, N.A.
("Chase") is the investment adviser (the "Adviser") for the Fund. Chase Asset
Management, Inc. ("CAM Inc.") is the investment sub-adviser (the "Sub-Adviser")
for the Fund.] Chase also serves as the Trust's administrator (the
"Administrator") and supervises the overall administration of the Trust,
including the Fund. The Adviser continuously manages the investments of the Fund
in accordance with the investment objective and policies of the Fund. The
selection of investments for the Fund and the way in which the Fund is managed
depend on the conditions and trends in the economy and the financial
marketplaces. Occasionally, communications to shareholders may contain the views
of the investment adviser as to current market, economic, trade and interest
rate trends, as well as legislative, regulatory and monetary developments, and
may include investment strategies and related matters believed to be of
relevance to the Fund. A majority of the Trustees of the Trust are not
affiliated with the Adviser.
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
Investment Objective
VISTA U.S. GOVERNMENT SECURITIES FUND's (the "Fund")
investment objective is to provide investors with as high a level of total
return, consisting of income and capitol appreciation as is consistent with the
preservation of capital. The Fund seeks to achieve its objective by investing
primarily in securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and repurchase agreements with respect thereto.
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Investment Policies
The Prospectus sets forth the various investment policies
applicable to the Fund. The following information supplements and should be read
in conjunction with the sections of the Prospectus entitled "Investment
Objective and Policies" and "Additional Information on Investment Policies and
Techniques." Except for the matters specified under "Limiting Investment Risks"
in the Prospectus and in this Statement of Additional Information, and as
otherwise stated in the Prospectus, all matters described herein and in the
Prospectus are not fundamental and may be changed by the Board of Trustees of
the Trust without the approval of shareholders. See "General Information."
ADDITIONAL INVESTMENT ACTIVITIES
The discussion below supplements the information set forth in
the Prospectus under "Other Investment Activities."
United States Government Securities
United States Treasury Obligations. The United States Treasury
issues various types of marketable securities. These securities are direct
obligations of the United States Government and differ primarily in the length
of their maturity.
United States Government Agency and Instrumentality
Obligations. Agencies and instrumentalities that issue or guarantee debt
securities and that have been established or sponsored by the United States
Government include the Government National Mortgage Association, the Banks for
Cooperatives, the Export-Import Bank, the Federal Farm Credit System, the
Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation, the Federal
Intermediate Credit Banks, the Federal Land Banks, the Federal National Mortgage
Association, the Student Loan Marketing Association and Resolution Funding
Corporation.
Bank Obligations
Bank obligations include negotiable certificates of deposit,
bankers' acceptances, fixed time deposits and deposit notes. A certificate of
deposit is a short-term negotiable certificate issued by a commercial bank
against funds deposited in the bank and is either interest-bearing or purchased
on a discount basis. A bankers' acceptance is a short-term draft drawn on a
commercial bank by a borrower, usually in connection with an international
commercial transaction. The borrower is liable for payment as is the bank, which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Fixed time deposits are obligations of branches of United States banks or
foreign banks which are payable at a stated maturity date and bear a fixed rate
of interest. Although fixed time deposits do not have a market, there are no
contractual restrictions on the right to transfer a beneficial interest in the
deposit to a third party. Fixed time deposits subject to withdrawal penalties
and with respect to which the Fund cannot realize the proceeds thereon within
seven days are deemed "illiquid" for the purposes of the third investment
limitation set forth under "Limiting Investment Risks" in the Prospectus.
Deposit notes are notes issued by commercial banks which generally bear
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<PAGE>
fixed rates of interest and typically have original maturities ranging from
eighteen months to five years.
Banks are subject to extensive governmental regulations that
may limit both the amounts and types of loans and other financial commitments
that may be made and the interest rates and fees that may be charged. The
profitability of this industry is largely dependent upon the availability and
cost of capital funds for the purpose of financing lending operations under
prevailing money market conditions. Also, general economic conditions play an
important part in the operations of this industry and exposure to credit losses
arising from possible financial difficulties of borrowers might affect a bank's
ability to meet its obligations. Bank obligations may be general obligations of
the parent bank or may be limited to the issuing branch by the terms of the
specific obligations or by government regulation. Investors should also be aware
that securities of foreign banks and foreign branches of United States banks may
involve investment risks in addition to those relating to domestic bank
obligations. Such investment risks are discussed in the Prospectus under the
caption "Special Considerations and Risk Factors."
Asset-Backed Securities
Asset-backed securities are generally issued as pass through
certificates, which represent undivided fractional ownership interests in the
underlying pool of assets, or as debt instruments, which are generally issued as
the debt of a special purpose entity organized solely for the purpose of owning
such assets and issuing such debt. Assetbacked securities are often backed by a
pool of assets representing the obligations of a number of different parties.
Asset-backed securities frequently carry credit protection in the form of extra
collateral, subordinate certificates, cash reserve accounts, letters of credit
or other enhancements. For example, payments of principal and interest may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit or other enhancement issued by a financial institution unaffiliated with
the entities issuing the securities. Assets which, to date, have been used to
back asset-backed securities include motor vehicle installment sales contracts
or installment loans secured by motor vehicles, and receivables from revolving
credit (credit card) agreements.
Asset-backed securities present certain risks which are, generally, related to
limited interests, if any, in related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicers to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there is
the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities. Other types of
asset-backed securities will be subject to the risks associated with the
underlying assets. If a letter of credit or other form of credit enhancement is
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<PAGE>
exhausted or otherwise unavailable, holders of asset-backed securities may also
experience delays in payments or losses if the full amounts due on underlying
assets are not realized. Because asset-backed securities are relatively new, the
market experience in these securities is limited and the market's ability to
sustain liquidity through all phases of the market cycle has not been tested.
Rule 144A Securities and Section 4(2) Paper
As indicated in the Prospectus, the Fund may purchase certain
restricted securities ("Rule 144A securities") for which there may be a
secondary market of qualified institutional buyers, as contemplated by Rule 144A
under the Securities Act of 1933 (the "Securities Act") and may invest in
commercial obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act
("Section 4(2) paper"). Rule 144A provides an exemption from the registration
requirements of the Securities Act for the resale of certain restricted
securities to qualified institutional buyers. Section 4(2) paper is restricted
as to disposition under the federal securities laws, and generally is sold to
institutional investors such as the Fund who agree that they are purchasing the
paper for investment and not with a view to public distribution. Any resale of
Section 4(2) paper by the purchaser must be an exempt transaction.
One effect of Rule 144A and Section 4(2) is that certain
restricted securities may now be liquid, though there is no assurance that a
liquid market for Rule 144A securities or Section 4(2) paper will develop or be
maintained. The Board of Trustees of the Trust has adopted policies and
procedures for the purpose of determining whether securities that are eligible
for resale under Rule 144A and Section 4(2) paper are liquid or illiquid for
purposes of the Fund's limitation on investment in illiquid securities. Pursuant
to those policies and procedures, the Board of Trustees will delegate to the
Adviser or Sub-Adviser the determination as to whether a particular instrument
is liquid or illiquid, requiring that consideration be given to, among other
things, the frequency of trades and quotes for the security, the number of
dealers willing to sell the security and the number of potential purchasers,
dealer undertakings to make a market in the security, the nature of the security
and the time needed to dispose of the security. The Board of Trustees will
periodically review the Fund's purchases and sales of Rule 144A securities and
Section 4(2) paper.
Floating and Variable Rate Instruments
Certain of the obligations that the Fund may purchase have a
floating or variable rate of interest. Such obligations may include obligations
issued or guaranteed by agencies or instrumentalities of the United States
Government, certificates of deposit and municipal obligations. Floating or
variable rate obligations bear interest at rates that are not fixed, but vary
with changes in specified market rates or indices, such as the prime rate, and
at specified intervals. Except with respect to temporary defensive investments
in short-term money market instruments, the Fund does not expect to invest more
than 5% of the value of its total assets in obligations which have a floating or
variable rate of interest.
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<PAGE>
Certain of the floating or variable rate obligations that may
be purchased by the Fund may carry a demand feature that would permit the holder
to tender them back to the issuer of the underlying instrument, or to a third
party, at par value prior to maturity. Such obligations include variable rate
demand or master notes, which provide for periodic adjustments in the interest
rate. Master demand notes, which are instruments issued pursuant to an agreement
between the issuer and the holder may permit the indebtedness thereunder to
vary.
The demand features of certain floating or variable rate
obligations may permit the Fund to tender the obligations to foreign banks. The
Fund's ability to receive payment in such circumstances under the demand feature
from such foreign banks may involve certain of the risks associated with foreign
investments, such as future political and economic developments, the possible
establishments of laws or restrictions that might adversely affect the payment
of the bank's obligations under the demand feature and the difficulty of
obtaining or enforcing a judgment against the bank.
Stand-by Commitments
The Fund may acquire rights to "put" its securities at an
agreed upon price within a specified period prior to their maturity date. The
Fund may also enter into put transactions sometimes referred to as "stand-by
commitments," which entitle the holder to same-day settlement and to receive an
exercise price equal to the amortized cost of the underlying security plus
accrued interest, if any, at the time of exercise. The Fund's right to exercise
a stand-by commitment will be unconditional and unqualified.
The Fund expects that stand-by commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, the Fund may pay for certain stand-by commitments
either separately in cash or by paying a higher price for portfolio securities
which are acquired subject to a stand-by commitment (thus reducing the yield to
maturity otherwise available for the same securities). The Fund intends to enter
into stand-by commitments solely to facilitate portfolio liquidity and does not
intend to exercise its rights thereunder for trading purposes. The actual
stand-by commitment will be valued at zero in determining net asset value. Where
the Fund pays any consideration directly or indirectly for a stand-by
commitment, its cost will be reflected as unrealized depreciation for the period
during which the stand-by commitment is held by the Fund and will be reflected
in realized gain or loss when the standby commitment is exercised or expires.
In the event that the issuer of a stand-by commitment acquired
by the Fund defaults on its obligation to purchase the underlying security, then
the Fund might be unable to recover all or a portion of any loss sustained from
having to sell the security elsewhere.
If the value of the underlying security increases, the
potential for unrealized or realized gain is reduced by the cost of the stand-by
commitment. The maturity of a portfolio security will not be considered
shortened by a stand-by commitment to which such obligation is subject.
Therefore, stand-by commitment transactions will not affect the average weighted
maturity of the Fund's portfolio.
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HEDGING AND DERIVATIVES
As described in the Prospectus under "Additional Information"
under the caption "Hedging and Derivatives," the Fund is authorized to use a
variety of investment strategies to hedge various market risks (such as interest
rates, currency exchange rates and broad or specific market movements), to
manage the effective maturity or duration of debt instruments held by the Fund,
or, with respect to certain strategies to seek to increase the Fund's income or
gain (such investment strategies and transactions are referred to as "Hedging
and Derivatives").
A detailed discussion of Hedging and Derivatives follows
below. The Fund will not be obligated, however, to pursue any of such strategies
and the Fund does not make any representation as to the availability of these
techniques at this time or at any time in the future. In addition, the Fund's
ability to pursue certain of these strategies may be limited by the Commodity
Exchange Act, as amended, applicable rules and regulations of the Commodity
Futures Trading Commission ("CFTC") thereunder and the federal income tax
requirements applicable to regulated investment companies which are not operated
as commodity pools.
General Characteristics of Options
Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying
instrument on which they are purchased or sold. Thus, the following general
discussion relates to each of the particular types of options discussed in
greater detail below. In addition, many of the Hedging and Derivatives which
involve options require segregation of Fund assets in special accounts, as
described below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment
of a premium, the right to sell, and the writer the obligation to buy, the
underlying security, commodity, index, currency or other instrument at the
exercise price. The Fund's purchase of a put option on a security, for example,
might be designed to protect its holdings in the underlying instrument (or, in
some cases, a similar instrument) against a substantial decline in the market
value of such instrument by giving the Fund the right to sell the instrument at
the option exercise price. A call option, upon payment of a premium, gives the
purchaser of the option the right to buy, and the seller the obligation to sell,
the underlying instrument at the exercise price. The Fund's purchase of a call
option on a security, financial futures contract, index, currency or other
instrument might be intended to protect the Fund against an increase in the
price of the underlying instrument that it intends to purchase in the future by
fixing the price at which it may purchase the instrument. An "American" style
put or call option may be exercised at any time during the option period,
whereas a "European" style put or call option may be exercised only upon
expiration or during a fixed period prior to expiration. Exchange-listed options
are issued by a regulated intermediary such as the Options Clearing Corporation
("OCC"), which guarantees the performance of the obligations of the parties to
the options. The discussion below uses the OCC as an example, but is also
applicable to other similar financial intermediaries.
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<PAGE>
OCC-issued and exchange-listed options, with certain
exceptions, generally settle by physical delivery of the underlying security or
currency, although in the future, cash settlement may become available. Index
options and Eurodollar instruments (which are described below under "Eurodollar
Instruments") are cash settled for the net amount, if any, by which the option
is "in-the-money" (that is, the amount by which the value of the underlying
instrument exceeds, in the case of a call option, or is less than, in the case
of a put option, the exercise price of the option) at the time the option is
exercised. Frequently, rather than taking or making delivery of the underlying
instrument through the process of exercising the option, listed options are
closed by entering into offsetting purchase or sale transactions that do not
result in ownership of the new option.
The Fund's ability to close out its position as a purchaser or
seller of an OCC-issued or exchange-listed put or call option is dependent, in
part, upon the liquidity of the particular option market. Among the possible
reasons for the absence of a liquid option market on an exchange are: (1)
insufficient trading interest in certain options, (2) restrictions on
transactions imposed by an exchange, (3) trading halts, suspensions or other
restrictions imposed with respect to particular classes or series of options or
underlying securities, including reaching daily price limits, (4) interruption
of the normal operations of the OCC or an exchange, (5) inadequacy of the
facilities of an exchange or the OCC to handle current trading volume, or (6) a
decision by one or more exchanges to discontinue the trading of options (or a
particular class or series of options), in which event the relevant market for
that option on that exchange would cease to exist, although any such outstanding
options on that exchange would continue to be exercisable in accordance with
their terms.
The hours of trading for listed options may not coincide with
the hours during which the underlying financial instruments are traded. To the
extent that the option markets close before the markets for the underlying
financial instruments, significant price and rate movements can take place in
the underlying markets that would not be reflected in the corresponding option
markets.
Over-the-counter ("OTC") options are purchased from or sold to
securities dealers, financial institutions or other parties (collectively
referred to as "Counterparties" and individually referred to as a
"Counterparty") through direct bilateral agreement with the Counterparty. In
contrast to exchange-listed options, which generally have standardized terms and
performance mechanics, all of the terms of an OTC option, including such terms
as method of settlement, term, exercise price, premium, guaranties and security,
are determined by negotiation of the parties. It is anticipated that the Fund
will generally only enter into OTC options that have cash settlement provisions,
although it will not be required to do so.
Unless the parties provide for it, no central clearing or
guaranty function is involved in an OTC option. As a result, if a Counterparty
fails to make or take delivery of the security, currency or other instrument
underlying an OTC option it has entered into with the Fund or fails to make a
cash settlement payment due in accordance with the term of that option, the Fund
will lose any premium it paid for the option as well as any anticipated benefit
of the transaction. Thus, the Fund's Adviser or Sub-Adviser must assess the
creditworthiness of each such Counterparty or any guarantor or credit
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<PAGE>
enhancement of the Counterparty's credit to determine the likelihood that the
terms of the OTC option will be met. The Fund will enter into OTC option
transactions only with U.S. Government securities dealers recognized by the
Federal Reserve Bank of New York as "primary dealers," or broker-dealers,
domestic or foreign banks, or other financial institutions that are deemed
creditworthy by the Fund's Adviser or Sub-Adviser. In the absence of a change in
the current position of the staff of the SEC, OTC options purchased by the Fund
and the amount of the Fund's obligations pursuant to an OTC operation sold by
the Fund (the cost of the sell-back plus the in-the-money amount, if any) or the
value of the assets held to cover such options will be deemed illiquid.
If the Fund sells a call option, the premium that it receives
may serve as a partial hedge, to the extent of the option premium, against a
decrease in the value of the underlying securities or instruments held by the
Fund or will increase the Fund's income. Similarly, the sale of put options can
also provide portfolio gains.
If and to the extent authorized to do so, the Fund may
purchase and sell call options on securities and on Eurodollar instruments that
are traded on U.S. and foreign securities exchanges and in the OTC markets, and
on securities indices, currencies and futures contracts. All calls sold by the
Fund must be "covered" (that is, the Fund must own the securities or futures
contract subject to the call) or must otherwise meet the asset segregation
requirements described below for so long as the call is outstanding. Even though
the Fund will receive the option premium to help protect it against loss, a call
sold by the Fund will expose the Fund during the term of the option to possible
loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require the Fund to hold a security or
instrument that it might otherwise have sold.
The Fund reserves the right to invest in options on
instruments and indices which may be developed in the future to the extent
consistent with applicable law, the Fund's investment objective and the
restrictions set forth herein.
If and to the extent authorized to do so, the Fund may
purchase put options on securities (whether or not the Fund holds the securities
in its portfolio) and on securities indices, currencies and contracts. The Fund
will not sell put options, except that they may sell put options to close out
existing positions.
General Characteristics of Futures Contracts and Options on Future Contracts
The Fund may trade financial futures contracts or purchase or
sell put and call options on those contracts as a hedge against anticipated
interest rate, currency or market changes, for duration management, for risk
management purposes or to increase the Fund's income or gain. Futures contracts
are generally bought and sold on the commodities exchanges on which they are
listed with payment of initial and variation margin as described below. The sale
of a futures contract creates a firm obligation by the Fund, as seller, to
deliver to the buyer the specific type of financial instrument called for in the
contract at a specific future time for a specified price (or, with respect to
certain instruments, the net cash amount). Options on futures contracts are
similar to options on securities except that an option on a futures contract
gives the purchaser the right, in
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return for the premium paid, to assume a position in a futures contract and
obligates the seller to deliver that position.
The Fund's use of financial futures contracts and options
thereon will in all cases be consistent with applicable regulatory requirements
and in particular the rules and regulations of the CFTC and will be entered into
only for bona fide hedging, risk management (including duration management) or
other permissible purposes. Maintaining a futures contract or selling an option
on a futures contract will typically require the Fund to deposit with a
financial intermediary, as security for its obligations, an amount of cash or
other specified assets ("initial margin") that initially is from 1% to 10% of
the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets ("variation margin") may be required to be deposited
thereafter daily as the mark-to-market value of the futures contract fluctuates.
The purchase of an option on a financial futures contract involves payment of a
premium for the option without any further obligation on the part of Fund. If
the Fund exercises an option on a futures contract it will be obligated to post
initial margin (and potentially variation margin) for the resulting futures
position just as it would for any futures position. Futures contracts and
options thereon are generally settled by entering into an offsetting
transaction, but no assurance can be given that a position can be offset prior
to settlement or that delivery to occur.
The Fund will not enter into a futures contract or option
thereof if, immediately thereafter, the sum of the amount of its initial margin
and options thereon would exceed 5% of the current fair market value of the
Fund's total assets; however, in the case of an option that is in-the-money at
the time of the purchase, the in-the-money amount may be excluded in calculating
the 5% limitation. The value of all futures contracts sold by the Fund (adjusted
for the historical volatility relationship between the Fund's portfolio and the
contracts) will not exceed the total market value of the Fund's securities. The
Fund will not engage in transactions in futures contracts or options thereon for
speculative purposes but only as a hedge against changes resulting from market
conditions in the values of securities in its portfolio; provided, however, that
the Fund may enter into futures contracts or options thereon for purposes other
than bona fide hedging if, immediately thereafter, the sum of the amount of its
initial margin and premiums on such open contracts and options would not exceed
5% of the liquidation value of the Fund's portfolio; provided, further, that in
the case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The Fund
reserves the right to comply with such different standards as may be established
from time to time by CFTC rules and regulations with respect to the purchase and
sale of futures contracts and options thereon. The segregation requirements with
respect to futures contracts and options thereon are described below under "Use
of Segregated and Other Special Accounts."
Options on Securities Indices and Other Financial Indices
The Fund may purchase and sell call options and purchase put
options on securities indices and other financial indices. In so doing, the Fund
can achieve many of the same objectives it would achieve through the sale or
purchase of options on individual securities or other instruments. Options on
securities indices and other financial indices are similar to options on a
security or other instrument except that, rather than settling by
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physical delivery of the underlying instrument, options on indices settle by
cash settlement; that is, an option on an index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the index upon which the option is based exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option (except if, in
the case of an OTC option, physical delivery is specified). This amount of cash
is equal to the excess of the closing price of the index over the exercise price
of the option, which also may be multiplied by a formula value. The seller of
the option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments comprising the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
Currency Transactions
The Fund may engage in currency transactions with
Counterparties to hedge the value of the Fund's portfolio securities denominated
in particular currencies against fluctuations in relative value or to increase
the Fund's income or gain. Currency transactions include currency forward
contracts, exchange-listed currency futures contracts and options thereon,
exchange-listed and OTC options on currencies, and currency swaps. A forward
currency contract involves a privately negotiated obligation to purchase or sell
(with delivery generally required) a specific currency at a future date, which
may be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. A currency swap is an
agreement to exchange cash flows based on the notional difference among two or
more currencies and operates similarly to an interest rate swap, which is
described below under "Swaps, Caps, Floors and Collars." The Fund may enter into
currency transactions with Counterparties that are deemed creditworthy by the
Fund's Adviser or Sub-Adviser.
The Fund's dealings in forward currency contracts and other
currency transactions such as futures contracts, options, options on futures
contracts and swaps for hedging purposes may take the form of transaction
hedging or position hedging. Transaction hedging is entering into a currency
transaction with respect to specific assets or liabilities of the Fund, which
will generally arise in connection with the purchase or sale of the Fund's
portfolio securities or the receipt of income from them. Position hedging is
entering into a currency transaction with respect to portfolio securities
positions denominated or generally quoted in that currency. The Fund will not
enter into a transaction to hedge currency exposure to an extent greater, after
netting all transactions intended wholly or partially to offset other
transactions, than the aggregate market value (at the time of entering into the
transaction) of the securities held by the Fund that are denominated or
generally quoted in or currently convertible into the currency, other than with
respect to proxy hedging as described below. The Fund may also enter into
currency transactions to increase the Fund's income or gain.
The Fund may cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to increase or
decline in value relative to other currencies to which the Fund has or in which
the Fund expects to have exposure. To reduce the effect of currency fluctuations
on the value of existing or
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anticipated holdings of its securities, the Fund may engage in proxy hedging.
Proxy hedging is often used when the currency to which the Fund's holdings is
exposed is difficult to hedge generally or difficult to hedge against the
dollar. Proxy hedging entails entering into a forward contract to sell a
currency, the changes in the value of which are generally considered to be
linked to a currency or currencies in which some or all of the Fund's securities
are or are expected to be denominated, and to buy dollars. The amount of the
contract would not exceed the market value of the Fund's securities denominated
in linked currencies.
Currency transactions are subject to risks different from
other portfolio transactions, as discussed below under "Risk Factors." If the
Fund enters into a currency transaction, the Fund will comply with the asset
segregation requirements described below under "Use of Segregated and Other
Special Accounts."
[Combined Transactions
The Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts), multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions, instead of a single Hedging and Derivative, as part of a single or
combined strategy when, in the judgment of the Fund's Adviser or Sub-Adviser, it
is in the best interests of the Fund to do so. A combined transaction will
usually contain elements of risk that are present in each of its component
transactions. Although combined transactions will normally be entered into by
the Fund based on the judgment of the Fund's Adviser or Sub-Adviser that the
combined strategies will reduce risk or otherwise more effectively achieve the
desired portfolio management goal, it is possible that the combination will
instead increase the risks or hinder achievement of the Fund's portfolio
management objective.]
Swaps, Caps, Floors and Collars
Among the Hedging and Derivatives into which the Fund may be
authorized to enter are interest rate, currency and index swaps, the purchase or
sale of related caps, floors and collars and other derivatives. The Fund will
enter into these transactions primarily to seek to preserve a return or spread
on a particular investment or portion of its portfolio, to protect against
currency fluctuations as a duration management technique or to protect against
any increase in the price of securities the Fund anticipates purchasing at a
later date. The Fund will use these transactions for non-speculative purposes
and will not sell interest rate caps or floors if it does not own securities or
other instruments providing the income the Fund may be obligated to pay.
Interest rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest (for example, an exchange of
floating rate payments for fixed rate payments with respect to a notional amount
of principal). A currency swap is an agreement to exchange cash flows on a
notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling the cap to the extent that a specified
index exceeds a predetermined interest rate. The purchase of an interest rate
floor entitles the purchaser to receive payments of interest on a notional
principal amount from the
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<PAGE>
party selling the interest rate floor to the extent that a specified index falls
below a predetermined interest rate or amount. The purchase of a floor entitles
the purchaser to receive payments on a notional principal amount from the party
selling the floor to the extent that a specific index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return with a predetermined range of interest
rates or values.
The Fund will usually enter into interest rate swaps on a net
basis, that is, the two payments streams are netted out in a cash settlement on
the payment date or dates specified in the instrument, with the Fund receiving
or paying, as the case may be, only the net amount of the two payments. Inasmuch
as these swaps, caps, floors, collars and other similar derivatives are entered
into for good faith hedging or other non-speculative purposes, they do not
constitute senior securities under the Investment Company Act of 1940, as
amended, and, thus, will be treated as being subject to the Fund's borrowing
restrictions. The Fund will not enter into any swap, cap, floor, collar or other
derivative transaction unless the Counterparty is deemed creditworthy by the
Fund's Adviser or Sub-Adviser. If a Counterparty defaults, the Fund may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and, for that
reason, they are less liquid than swaps.
Risk Factors
Hedging and Derivatives have special risks associated with
them, including possible default by the Counterparty to the transaction,
illiquidity and, to the extent the view of the Fund's Adviser or Sub-Adviser as
to certain market movements is incorrect, the risk that the use of the Hedging
and Derivatives could result in losses greater than if they had not been used.
Use of put and call options could result in losses to the Fund, force the sale
or purchase of the Fund's portfolio securities at inopportune times or for
prices higher than (in the case of put options) or lower than (in the case of
call options) current market values, or cause the Fund to hold a security it
might otherwise sell.
The use of futures and options transactions entails certain
special risks. In particular, the variable degree of correlation between price
movements of futures contracts and price movements in the related securities or
currency position of the Fund could create the possibility that losses on a
hedging instrument are greater than gains in the value of the Fund's position.
In addition, futures and options markets could be illiquid in some circumstances
and certain over-the-counter options could have no markets. As a result, in
certain markets, a Fund might not be able to close out a transaction without
incurring substantial losses. Although the Fund's use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time it will tend to
limit any potential gain to a Fund that might result from an increase in value
of the Fund's position. Finally, the daily variation margin requirements for
futures contracts create a greater ongoing potential financial risk
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<PAGE>
than would purchases of options, in which case the exposure is limited to the
cost of the initial premium.
Currency transactions involve some of the same risks and
considerations as other transactions with similar instruments. Currency
transactions can result in losses to the Fund if a currency being hedged
fluctuates in value to a degree or in a direction that is not anticipated.
Further, the risk exists that the perceived linkage between various currencies
may not be present or may not be present during the particular time that a Fund
is engaging in proxy hedging. Currency transactions are also subject to risks
different from those of other Fund transactions. Because currency control is of
great importance to the issuing governments and influences economic planning and
policy, purchases and sales of currency and related transactions can be
adversely affected by government exchange controls, limitations or restrictions
on repatriation of currency, and manipulations or exchange restrictions imposed
by governments. These forms of governmental actions can result in losses to the
Fund if it is unable to deliver or receive currency or monies in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as the incurrence of
transaction costs. Buyers and sellers of currency futures contracts are subject
to the same risks that apply to the use of futures contracts generally. Further,
settlement of a currency futures contract for the purchase of most currencies
must occur at a bank based in the issuing nation. Trading options on currency
futures contracts is relatively new, and the ability to establish and close out
positions on these options is subject to the maintenance of a liquid market that
may not always be available. Currency exchange rates may fluctuate based on
factors extrinsic to that country's economy.
Losses resulting from the use of Hedging and Derivatives will
reduce the Fund's net asset value, and possibly income, and the losses can be
greater than if Hedging and Derivatives had not been used.
Risks of Hedging and Derivatives Outside the United States
When conducted outside the United States, Hedging and
Derivatives may not be regulated as rigorously as in the United States, may not
involve a clearing mechanism and related guarantees, and will be subject to the
risk of governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of positions taken as
part of non-U.S. Hedging and Derivatives also could be adversely affected by:
(1) other complex foreign political, legal and economic factors, (2) lesser
availability of data on which to make trading decisions than in the United
States, (3) delays in the Fund's ability to act upon economic events occurring
in foreign markets during non-business hours in the United States, (4) the
imposition of different exercise and settlement terms and procedures and margin
requirements than in the United States and (5) lower trading volume and
liquidity.
Use of Segregated and Other Special Accounts
Use of many Hedging and Derivatives by the Fund will require,
among other things, that the Fund segregate cash, liquid high grade debt
obligations or other assets with its custodian, or a designated sub-custodian,
to the extent the Fund's obligations are
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<PAGE>
not otherwise "covered" through ownership of the underlying security, instrument
or currency. In general, either the full amount of any obligation by the Fund to
pay or deliver securities or assets must be covered at all times by the
securities, instruments or currency required to be delivered, or, subject to any
regulatory restrictions, an amount of cash or liquid high grade debt obligations
at least equal to the current amount of the obligation must be segregated with
the custodian or sub-custodian. The segregated assets cannot be sold or
transferred unless equivalent assets are substituted in their place or it is no
longer necessary to segregate them. A call option on securities written by the
Fund, for example, will require the Fund to hold the securities subject to the
call (or securities convertible into the needed securities without additional
consideration) or to segregate liquid high grade debt obligations sufficient to
purchase and deliver the securities if the call is exercised. A call option sold
by the Fund on an index will require the Fund to own portfolio securities that
correlate with the index or to segregate liquid high grade debt obligations
equal to the excess of the index value over the exercise price on a current
basis. Except when the Fund enters into a forward contract in connection with
the purchase or sale of a security denominated in a foreign currency or for
other non-speculative purposes, which requires no segregation, a currency
contract that obligates the Fund to buy or sell a foreign currency will
generally require the Fund to hold an amount of that currency or liquid
securities denominated in that currency equal to the Fund's obligations or to
segregate liquid high grade debt obligations equal to the amount of the Fund's
obligations.
OTC options entered into by the Fund, including those on
securities, currency, financial instruments or indices, and OCC-issued and
exchange-listed index options will generally provide for cash settlement,
although the Fund will not be required to do so. As a result, when the Fund
sells these instruments it will segregate an amount of assets equal to its
obligations under the options. OCC-issued and exchange-listed options sold by
the Fund other than those described above generally settle with physical
delivery, and the Fund will segregate an amount of assets equal to the full
value of the option. OTC options settling with physical delivery or with an
election of either physical delivery or cash settlement will be treated the same
as other options settling with physical delivery.
In the case of a futures contract or an option on a futures
contract, the Fund must deposit initial margin and, in some instances, daily
variation margin in addition to segregating assets sufficient to meet its
obligations to purchase or provide securities or currencies, or to pay the
amount owed at the expiration of an index-based futures contract. These assets
may consist of cash, cash equivalents, liquid debt or equity securities or other
acceptable assets. The Fund will accrue the net amount of the excess, if any, of
its obligations relating to swaps over its entitlements with respect to each
swap on a daily basis and will segregate with its custodian, or designated
sub-custodian, an amount of cash or liquid high grade debt obligations having an
aggregate value equal to at least the accrued excess. Caps, floors and collars
require segregation of assets with a value equal to Fund's net obligation, if
any.
Hedging and Derivatives may be covered by means other than
those described above when consistent with applicable regulatory policies. The
Fund may also enter into offsetting transactions so that its combined position,
coupled with any
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<PAGE>
segregated assets, equals its net outstanding obligation in related options and
Hedging and Derivatives. The Fund could purchase a put option, for example, if
the strike price of that option is the same or higher than the strike price of a
put option sold by the Fund. Moreover, instead of segregating assets if it holds
a futures contracts or forward contract, the Fund could purchase a put option on
the same futures contract or forward contract with a strike price as high or
higher than the price of the contract held. Other Hedging and Derivatives may
also be offset in combinations. If the offsetting transaction terminates at the
time of or after the primary transaction, no segregation is required, but if it
terminates prior to that time, assets equal to any remaining obligation would
need to be segregated.
Other Limitations
The degree to which the Fund may utilize Hedging and
Derivatives may also be affected by certain provisions of the Internal Revenue
Code of 1986, as amended (the "Code").
LIMITING INVESTMENT RISKS
In addition to the limitations described under "Limiting
Investment Risks" in the Prospectuses, the Fund is subject to the following
investment limitations:
(1) The Fund may not borrow money, except that the
Fund may borrow money for temporary or emergency purposes, or
by engaging in reverse repurchase transactions, in an amount
not exceeding 33 1/3% of the value of its total assets at the
time when the loan is made and may pledge, mortgage or
hypothecate no more than 1/3 of its net assets to secure such
borrowings. Any borrowings representing more than 5% of the
Fund's total assets must be repaid before the Fund may make
additional investments.
(2) The Fund may not make loans, except that the Fund
may: (i) purchase and hold debt instruments (including without
limitation, bonds, notes, debentures or other obligations and
certificates of deposit, bankers' acceptances and fixed time
deposits) in accordance with its investment objectives and
policies; (ii) enter into repurchase agreements with respect
to portfolio securities; and (iii) lend portfolio securities
with a value not in excess of one-third of the value of its
total assets.
(3) The Fund may not purchase the securities of any
issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities, or
repurchase agreements secured thereby) if, as a result, more
than 25% of the Fund's total assets would be invested in the
securities of companies whose principal business activities
are
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<PAGE>
in the same industry. Notwithstanding the foregoing, with
respect to the Fund's permissible futures and options
transactions, positions in options and futures shall not be
subject to this restriction.
(4) The Fund may not purchase or sell physical
commodities unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent
the Fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments
backed by physical commodities) or engaging in forward
purchases or sales of foreign currencies or securities.
(5) The Fund may not purchase or sell real estate
unless acquired as a result of ownership of securities or
other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate
business). Investments by the Fund in securities backed by
mortgages on real estate or in marketable securities of
companies engaged in such activities are not hereby precluded.
(6) The Fund may not issue any senior security (as
defined in the 1940 Act), except that (a) the Fund may engage
in transactions that may result in the issuance of senior
securities to the extent permitted under applicable
regulations and interpretations of the 1940 Act or an
exemptive order; (b) the Fund may acquire other securities,
the acquisition of which may result in the issuance of a
senior security, to the extent permitted under applicable
regulations or interpretations of the 1940 Act; (c) subject to
the restrictions set forth above, the Fund may borrow money as
authorized by the 1940 Act. For purposes of this restriction,
collateral arrangements with respect to the Fund's permissible
options and futures transactions, including deposits of
initial and variation margin, are not considered to be the
issuance of a senior security for purposes of this
restriction.
For purposes of investment restriction (5) above, real estate
includes Real Estate Limited Partnerships.
The following investment restrictions are nonfundamental and
may be changed without shareholder approval:
(1) The Fund may not, with respect to 75% of its
assets, hold more than 10% of the outstanding voting
securities of an issuer.
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<PAGE>
(2) The Fund may not make short sales of securities,
other than short sales "against the box," or purchase
securities on margin except for short-term credits necessary
for clearance of portfolio transactions, provided that this
restriction will not be applied to limit the use of options,
futures contracts and related options, in the manner otherwise
permitted by the investment restrictions, policies and
investment program of the Fund.
(3) The Fund may not purchase or sell interests in
oil, gas or mineral leases.
(4) The Fund may not invest more than 15% of its net
assets in illiquid securities. [This limitation may be subject
to additional restrictions imposed by jurisdictions in which
the Fund's shares are offered for sale (currently 10%).]
(5) The Fund may not write, purchase or sell any put
or call option or any combination thereof, provided that this
shall not prevent the writing, purchasing or selling of puts,
calls or combinations thereof with respect to U.S. government
securities or with respect to the Fund's permissible futures
and options transactions, the writing, purchasing, ownership,
holding or selling of futures and options positions or of
puts, calls or combinations thereof with respect to futures.
(6) The Fund may invest up to 5% of its total assets
in the securities of any one investment company, but may not
own more than 3% of the securities of any one investment
company or invest more than 10% of its total assets in the
securities of other investment companies. [With respect to any
such investment, fees are waived to the extent required under
State requirements. For example, a Texas undertaking currently
requires a disclosure that advisory fees pertaining to any
such investments will be waived by Chase.]
If a percentage limitation on investment or use of assets is
adhered to at the time a transaction is effected, later changes in percentage
resulting from any cause other than actions by the Fund will not be considered a
violation.
It is the Trust's position that proprietary strips, such as
CATS and TIGRS, are United States Government securities. However, the Trust has
been advised that the staff of the Commission's Division of Investment
Management does not consider these to be United States Government securities, as
defined under the Investment Company Act of 1940, as amended.
The investment limitations described above and in the Prospectus with
respect to the Fund under "Limiting Investment Risks" are fundamental policies
of the Fund and may
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<PAGE>
be changed only when permitted by law and approved by the holders of a majority
of the Fund's outstanding voting securities, as described under "General
Information."
In order to permit the sale of its shares in certain states, the Fund
may make commitments more restrictive than the investment policies and
limitations described above and under the Prospectus. Should the Fund determine
that any such commitment is no longer in its best interests, it will revoke the
commitment by terminating sales of its shares in the state involved.
Portfolio Transactions and Brokerage Allocation
Specific decisions to purchase or sell securities for the Fund
are made by the Fund's portfolio manager who is an employee of the Adviser or
Sub-Adviser and who is appointed and supervised by senior officers of such
Adviser or Sub-Adviser. Changes in the Fund's investments are reviewed by the
Board of Trustees. The Fund's portfolio manager may serve other clients of the
Adviser or Sub-Adviser in a similar capacity.
The frequency of the Fund's portfolio transactions -- the
portfolio turnover rate -- will vary from year to year depending upon market
conditions. Because a high turnover rate may increase transaction costs and the
possibility of taxable short-term gains (see "Tax Matters" in the Prospectus),
the Adviser or Sub-Adviser will weigh the added costs of short-term investment
against anticipated gains. For the fiscal year ending __________, 1996 the
annual rate of portfolio turnover for the Fund is expected not to exceed 100%.
Under the Advisory Agreement and the Sub-Advisory Agreement,
the Adviser shall use its best efforts to seek to execute portfolio transactions
at prices which, under the circumstances, result in total costs or proceeds
being the most favorable to the Funds. The Adviser or Sub-Adviser attempts to
achieve this result by selecting broker-dealers to execute portfolio
transactions on behalf of the Fund and other clients of the Adviser or
Sub-Adviser on the basis of their professional capability, the value and quality
of their brokerage services, and the level of their brokerage commissions. Debt
securities are traded principally in the over-the-counter market through dealers
acting on their own account and not as brokers. In the case of securities traded
in the over-the-counter market (where no stated commissions are paid but the
prices include a dealer's markup or markdown), the Adviser or Sub-Adviser
normally seeks to deal directly with the primary market makers unless, in its
opinion, best execution is available elsewhere. In the case of securities
purchased from underwriters, the cost of such securities generally includes a
fixed underwriting commission or concession. From time to time, soliciting
dealer fees are available to the Adviser or Sub-Adviser on the tender of the
Fund's portfolio securities in so-called tender or exchange offers. Such
soliciting dealer fees are in effect recaptured for the Fund by the Adviser or
Sub-Adviser. At present, no other recapture arrangements are in effect.
Under the Fund's Investment Advisory (Sub-Advisory) Agreement
and as permitted by Section 28(e) of the Securities Exchange Act of 1934, the
Adviser or SubAdviser may cause the Fund to pay a broker-dealer which provides
brokerage and research
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<PAGE>
services to the Adviser or Sub-Adviser, the Funds and/or other accounts for
which the Adviser or Sub-Adviser exercises investment discretion an amount of
commission for effecting a securities transaction for the Funds in excess of the
amount other broker-dealers would have charged for the transaction if the
Adviser or Sub-Adviser determines in good faith that the greater commission is
reasonable in relation to the value of the brokerage and research services
provided by the executing broker-dealer viewed in terms of either a particular
transaction or the Adviser or Sub-Adviser's overall responsibilities to the Fund
or to accounts over which they exercise investment discretion. Not all of such
services are useful or of value in advising the Fund. The Adviser or SubAdviser
shall report to the Board of Trustees of the Trust regarding overall commissions
paid by the Funds and their reasonableness in relation to the benefits to the
Funds.
The term "brokerage and research services" includes advice as
to the value of securities, the advisability of investing in, purchasing or
selling securities, and the availability of securities or of purchasers or
sellers of securities, furnishing analyses and reports concerning issues,
industries, securities, economic factors and trends, portfolio strategy and the
performance of accounts, and effecting securities transactions and performing
functions incidental thereto such as clearance and settlement.
Although commissions paid on every transaction will, in the
judgment of the Adviser or Sub-Adviser, be reasonable in relation to the value
of the brokerage services provided, commissions exceeding those which another
broker might charge may be paid to broker-dealers who were selected to execute
transactions on behalf of the Fund and the Adviser or Sub-Adviser's other
clients as part of providing advice as to the availability of securities or of
purchasers or sellers of securities and services in effecting securities
transactions and performing functions incidental thereto, such as clearance and
settlement.
Broker-dealers may be willing to furnish statistical, research
and other factual information or services ("Research") to the Adviser or
Sub-Adviser for no consideration other than brokerage or underwriting
commissions. Securities may be bought or sold through such broker-dealers, but
at present, unless otherwise directed by the Fund, a commission higher than one
charged elsewhere will not be paid to such a firm solely because it provided
Research to the Adviser or Sub-Adviser.
The Adviser or Sub-Adviser's investment management personnel
will attempt to evaluate the quality of Research provided by brokers. Results of
this effort are sometimes used by the Adviser or Sub-Adviser as a consideration
in the selection of brokers to execute portfolio transactions. However, the
Adviser or Sub-Adviser would be unable to quantify the amount of commissions
which are paid as a result of such Research because a substantial number of
transactions are effected through brokers which provide Research but which are
selected principally because of their execution capabilities.
The management fees that the Fund pays to the Adviser or
Sub-Adviser will not be reduced as a consequence of the Adviser or Sub-Adviser's
receipt of brokerage and research services. To the extent the Fund's portfolio
transactions are used to obtain such services, the brokerage commissions paid by
the Fund will exceed those that might otherwise be paid, by an amount which
cannot be presently determined. Such services
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<PAGE>
would be useful and of value to the Adviser or Sub-Adviser in serving one or
more of the Fund and other clients and, conversely, such services obtained by
the placement of brokerage business of other clients would be useful to the
Adviser or Sub-Adviser in carrying out its obligations to the Fund. While such
services are not expected to reduce the expenses of the Adviser or Sub-Adviser,
the Adviser or Sub-Adviser would, through use of the services, avoid the
additional expenses which would be incurred if it should attempt to develop
comparable information through its own staff.
In certain instances, there may be securities that are
suitable for one or more of the Funds as well as one or more of the Adviser or
Sub-Adviser's other clients. Investment decisions for the Fund and for the
Adviser or Sub-Adviser's other clients are made with a view to achieving their
respective investment objectives. It may develop that the same investment
decision is made for more than one client or that a particular security is
bought or sold for only one client even though it might be held by, or bought or
sold for, other clients. Likewise, a particular security may be bought for one
or more clients when one or more clients are selling that same security. Some
simultaneous transactions are inevitable when several clients receive investment
advice from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. In executing
portfolio transactions for a Fund, the Adviser or SubAdviser may, to the extent
permitted by applicable laws and regulations, but shall not be obligated to,
aggregate the securities to be sold or purchased with those of other Funds or
its other clients if, in the Adviser or Sub-Adviser's reasonable judgment, such
aggregation (i) will result in an overall economic benefit to the Fund, taking
into consideration the advantageous selling or purchase price, brokerage
commission and other expenses, and trading requirements, and (ii) is not
inconsistent with the policies set forth in the Trust's registration statement
and the Fund's Prospectus and Statement of Additional Information. In such
event, the Adviser or Sub-Adviser will allocate the securities so purchased or
sold, and the expenses incurred in the transaction, in an equitable manner,
consistent with its fiduciary obligations to the Fund and such other clients. It
is recognized that in some cases this system could have a detrimental effect on
the price or volume of the security as far as the Fund is concerned. However, it
is believed that the ability of the Fund to participate in volume transactions
will generally produce better executions for the Fund.
For the period from ___________, 1995 through ___________,
1995, the Fund paid aggregate brokerage commissions of $______.
No portfolio transactions are executed with the Adviser or
Sub-Adviser or a Shareholder Servicing Agent, or with any affiliate of the
Adviser or Sub-Adviser or a Shareholder Servicing Agent, acting either as
principal or as broker.
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<PAGE>
PERFORMANCE INFORMATION
Total Rate of Return
The Fund's total rate of return for any period will be
calculated by (a) dividing (i) the sum of the net asset value per share on the
last day of the period and the net asset value per share on the last day of the
period of shares purchasable with dividends and capital gains declared during
such period with respect to a share held at the beginning of such period and
with respect to shares purchased with such dividends and capital gains
distributions, by (ii) the public offering price per share on the first day of
such period, and (b) subtracting 1 from the result. The average annual rate of
return quotation will be calculated by (x) adding 1 to the period total rate of
return quotation as calculated above, (y) raising such sum to a power which is
equal to 365 divided by the number of days in such period, and (z) subtracting 1
from the result.
For the period from ___________, 1995 (commencement of
operations) to ___________, 1995, the total return for the A shares of the Fund
after the maximum initial sales charge of 4.25% was _____%. The total return for
the same period without the effect of the maximum sales load was _____%.
Yield Quotations
Any current "yield" quotation of the Fund shall consist of an
annualized hypothetical yield, carried at least to the nearest hundredth of one
percent, based on a thirty calendar day period and shall be calculated by (a)
raising to the sixth power the sum of 1 plus the quotient obtained by dividing
the Fund's net investment income earned during the period by the product of the
average daily number of shares outstanding during the period that were entitled
to receive dividends and the maximum offering price per share on the last day of
the period, (b) subtracting 1 from the result, and (c) multiplying the result by
2.
The yield of the A Shares of the Fund for the thirty-day
period ended ___________, 1996 was ____%.
Non-Standardized Performance Results
From time to time, the Fund may provide certain
non-standardized performance results, if any, in addition to the total rate of
return quotations required by the Securities and Exchange Commission. As
discussed more fully in the Prospectus, neither these performance results, nor
total rate of return quotations, should be considered as representative of the
performance of the Fund in the future. These factors and the possible
differences in the methods used to calculate performance results and total rates
of return should be considered when comparing such performance results and total
rate of return quotations of the Fund with those published for other investment
companies and other investment vehicles.
-23-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Period Value of Value of
Ended Initial $10,000 Capital Gains Reinvested
/ /95 * Investment Distributions Dividends Total Value
<S> <C> <C> <C> <C>
A Shares: $ $ - $ $
B Shares: $ $ - $ - $
* Period represents ___________, 1995 through ___________, 1996 for Class A Shares.
After the Maximum Sales charge of 4.25% for Class A Shares, the
figure for the same period was as follows:
Period Value of Value of
Ended Initial $10,000 Capital Gains Reinvested
/ /95 Investment Distributions Dividends Total Value
A Shares: $ - $ $ $
</TABLE>
DETERMINATION OF NET ASSET VALUE
The Fund determines its net asset value per Share each day as
of the regular close of the New York Stock Exchange, or 4:15 p.m. for options,
during which the New York Stock Exchange is open for trading (a "Fund Business
Day"), by dividing the value of its net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued (which is apportioned between the classes to obtain net assets by
class), by the number of its shares outstanding at the time the determination is
made. (As of the date of this Statement of Additional Information, the New York
Stock Exchange is open for trading every weekday except for the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas.) Purchases and
redemptions will be effected at the time of determination of net asset value
next following the receipt of any purchase or redemption order. (See "Purchases
and Redemptions of Shares" in the Prospectus.)
Equity securities are valued at the last sale price on the
exchange on which they are primarily traded or on the NASDAQ National Market
System, or at the last quoted bid price for securities in which there were no
sales during the day or for other unlisted (over-the-counter) securities not
reported on the NASDAQ National Market System. Bonds and other fixed income
securities (other than short-term obligations, but including listed issues) are
valued on the basis of valuations furnished by a pricing service, the use of
which has been approved by the Board of Trustees. In making such valuations, the
pricing service utilizes both dealer-supplied valuations and electronic data
processing techniques that take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading
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<PAGE>
characteristics and other market data, without exclusive reliance upon quoted
prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities.
Short-Term obligations which mature in 60 days or less are valued at amortized
cost, which constitutes fair value as determined by the Board of Trustees.
Futures and option contracts that are traded on commodities or securities
exchanges are normally valued at the settlement price on the exchange on which
they are traded. Portfolio securities (other than short-term obligations) for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Board of Trustees.
Interest income on long-term obligations in the Fund's
portfolio is determined on the basis of coupon interest accrued plus
amortization of discount (the difference between acquisition price and stated
redemption price at maturity) and premiums (the excess of purchase price over
stated redemption price at maturity). Interest income on short-term obligations
is determined on the basis of interest and discount accrued less amortization of
premium.
Subject to compliance with applicable regulations, the Fund
has reserved the right to pay the redemption price of its Shares, either totally
or partially, by a distribution in kind of portfolio securities (instead of
cash). The securities so distributed would be valued at the same amount as that
assigned to them in calculating the net asset value for the shares being sold.
If a shareholder received a distribution in kind, the shareholder could incur
brokerage or other charges in converting the securities to cash. The Trust has
filed an election under Rule 18f-1 committing to pay in cash all redemptions by
a shareholder of record up to amounts specified by the rule.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Fund and its shareholders that are not
described in the Fund's Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussions here and in the Prospectus are not intended as substitutes for
careful tax planning.
Qualification as a Regulated Investment Company
The Fund has elected to be taxed as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Fund is not subject to federal
income tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (i.e., net investment income and the excess of
net short-term capital gain over net long-term capital loss) and at least 90% of
its tax-exempt income (net of expenses allocable thereto) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are described below. Distributions by the Fund made during the
taxable year or, under
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<PAGE>
specified circumstances, within twelve months after the close of the
taxable year, will be considered distributions of income and gains of the
taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a
regulated investment company must: (1) derive at least 90% of its gross income
from dividends, interest, certain payments with respect to securities loans,
gains from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency gains are directly related to the
regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies (the "Income Requirement"); and (2)
derive less than 30% of its gross income (exclusive of certain gains on
designated hedging transactions that are offset by realized or unrealized losses
on offsetting positions) from the sale or other disposition of stock, securities
or foreign currencies (or options, futures or forward contracts thereon) held
for less than three months (the "Short-Short Gain Test"). For purposes of these
calculations, gross income includes tax-exempt income. However, foreign currency
gains, including those derived from options, futures and forwards, will not in
any event be characterized as Short-Short Gain if they are directly related to
the regulated investment company's investments in stock or securities (or
options or futures thereon). Because of the Short-Short Gain Test, the Fund may
have to limit the sale of appreciated securities that it has held for less than
three months. However, the ShortShort Gain Test will not prevent the Fund from
disposing of investments at a loss, since the recognition of a loss before the
expiration of the three-month holding period is disregarded for this purpose.
Interest (including original issue discount) received by the Fund at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of such
security within the meaning of the Short-Short Gain Test. However, income that
is attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
In general, gain or loss recognized by the Fund on the
disposition of an asset will be a capital gain or loss. However, gain recognized
on the disposition of a debt obligation (including a municipal obligation)
purchased by the Fund at a market discount (generally, at a price less than its
principal amount) will be treated as ordinary income to the extent of the
portion of the market discount which accrued during the period of time the Fund
held the debt obligation.
Further, the Code also treats as ordinary income, a portion of
the capital gain attributable to a transaction where substantially all of the
return realized is attributable to the time value of the Fund's net investment
in the transaction and: (1) the transaction consists of the acquisition of
property by the Fund and a contemporaneous contract to sell substantially
identical property in the future; (2) the transaction is a straddle within the
meaning of Section 1092 of the Code; (3) the transaction is one that was
marketed or sold to the Fund on the basis that it would have the economic
characteristics of a loan but the interest-like return would be taxed as capital
gain; or (4) the transaction is described as a conversion transaction in the
Treasury Regulations. The amount of the gain recharacterized generally will not
exceed the amount of the interest that would have
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<PAGE>
accrued on the net investment for the relevant period at a yield equal to 120%
of the federal long-term, mid-term, or short-term rate, depending upon the type
of instrument at issue, reduced by an amount equal to: (1) prior inclusions of
ordinary income items from the conversion transaction; and (2) the capitalized
interest on acquisition indebtedness under Code Section 263(g). Built-in losses
will be preserved where the Fund has a built-in loss with respect to property
that becomes a part of a conversion transaction. No authority exists that
indicates that the converted character of the income will not be passed to the
Fund's shareholders.
In general, for purposes of determining whether capital gain
or loss recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if: (1) the asset is
used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, (2) the asset is otherwise held by the Fund as part of a "straddle" (which
term generally excludes a situation where the asset is stock and the Fund grants
a qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto); or (3) the asset is stock and the Fund
grants an in-the-money qualified covered call option with respect thereto.
However, for purposes of the Short-Short Gain Test, the holding period of the
asset disposed of may be reduced only in the case of clause (i) above. In
addition, the Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by the Fund on the lapse of, or any gain
or loss recognized by the Fund from a closing transaction with respect to, an
option written by the Fund will be treated as a short-term capital gain or loss.
For purposes of the ShortShort Gain Test, the holding period of an option
written by the Fund will commence on the date it is written and end on the date
it lapses or the date a closing transaction is entered into. Accordingly, the
Fund may be limited in its ability to write options which expire within three
months and to enter into closing transactions at a gain within three months of
the writing of options.
The Fund's investments in options, futures contracts and forward
contracts, options on futures contracts and stock indices and certain other
securities, including transactions involving actual or deemed short sales or
foreign exchange gains or loses are subject to many complex and special tax
rules. For example, over-the-counter options on debt securities and equity
options, including options on stock and on narrow-based stock indexes, will be
subject to tax under Section 1234 of the Code, generally producing a long-term
or short-term capital gain or loss upon exercise, lapse or closing out of the
option or sale of the underlying stock or security. Certain transactions that
may be engaged in by the Fund (such as regulated futures contracts, certain
foreign currency contracts, and options on stock indexes and futures contracts)
will be subject to special tax treatment as "Section 1256 contracts." Section
1256 contracts are treated as if they are sold for their fair market value on
the last business day of the taxable year, even though a taxpayer's obligations
(or rights) under such contracts have not terminated (by delivery, exercise,
entering into a closing transaction or otherwise) as of such date. Any gain or
loss recognized as a consequence of the year-end deemed disposition of Section
1256 contracts is taken into account for the taxable year together with any
other gain or
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<PAGE>
loss that was previously recognized upon the termination of Section 1256
contracts during that taxable year. Any capital gain or loss for the taxable
year with respect to Section 1256 contracts (including any capital gain or loss
arising as a consequence of the year-end deemed sale of such contracts) is
generally treated as 60% long-term capital gain or loss and 40% short-term
capital gain or loss. The Fund, however, may elect not to have this special tax
treatment apply to Section 1256 contracts that are part of a "mixed straddle"
with other investments of the Fund that are not Section 1256 contracts. The
Internal Revenue Service (the "IRS") has held in several private rulings (and
Treasury Regulations now provide) that gains arising from Section 1256 contracts
will be treated for purposes of the Short-Short Gain Test as being derived from
securities held for not less than three months if the gains arise as a result of
a constructive sale under Code Section 1256.
Treasury Regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss) for
any taxable year, to elect (unless it has made a taxable year election for
excise tax purposes as discussed below) to treat all or any part of any net
capital loss, any net long-term capital loss or any net foreign currency loss
incurred after October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above,
the Fund must satisfy an asset diversification test in order to qualify as a
regulated investment company. Under this test, at the close of each quarter of
the Fund's taxable year, at least 50% of the value of the Fund's assets must
consist of cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which the
Fund has not invested more than 5% of the value of the Fund's total assets in
securities of such issuer and as to which the Fund does not hold more than 10%
of the outstanding voting securities of such issuer), and no more than 25% of
the value of its total assets may be invested in the securities of any one
issuer (other than U.S. Government securities and securities of other regulated
investment companies), or in two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses. Generally, an
option (call or put) with respect to a security is treated as issued by the
issuer of the security not the issuer of the option. However, with regard to
forward currency contracts, there does not appear to be any formal or informal
authority which identifies the issuer of such instrument. For purposes of asset
diversification testing, obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government such as the Federal Agricultural
Mortgage Corporation, the Farm Credit System Financial Assistance Corporation, a
Federal Home Loan Bank, the Federal Home Loan Mortgage Association, the
Government National Mortgage Corporation, and the Student Loan Marketing
Association are treated as U.S. Government Securities.
If for any taxable year the Fund does not qualify as a
regulated investment company, all of its taxable income (including its net
capital gain) will be subject to tax at regular corporate rates without any
deduction for distributions to shareholders, and such distributions will be
taxable to the shareholders as ordinary dividends to the extent of the Fund's
current and accumulated earnings and profits. Such distributions generally will
be eligible for the dividends-received deduction in the case of corporate
shareholders.
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<PAGE>
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated
investment company that fails to distribute in each calendar year an amount
equal to 98% of ordinary taxable income for the calendar year and 98% of capital
gain net income for the one-year period ended on October 31 of such calendar
year (or, at the election of a regulated investment company having a taxable
year ending November 30 or December 31, for its taxable year (a "taxable year
election"))(Tax-exempt interest on municipal obligations is not subject to the
excise tax). The balance of such income must be distributed during the next
calendar year. For the foregoing purposes, a regulated investment company is
treated as having distributed any amount on which it is subject to income tax
for any taxable year ending in such calendar year.
For purposes of the excise tax, a regulated investment company
shall: (1) reduce its capital gain net income (but not below its net capital
gain) by the amount of any net ordinary loss for the calendar year; and (2)
exclude foreign currency gains and losses incurred after October 31 of any year
(or after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
Fund Distributions
The Fund anticipates distributing substantially all of its
investment company taxable income for each taxable year. Such distributions will
be taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes, but they will qualify for the 70%
dividends-received deduction for corporations only to the extent discussed
below.
The Fund may either retain or distribute to shareholders its
net capital gain for each taxable year. The Fund currently intends to distribute
any such amounts. If net capital gain is distributed and designated as a capital
gain dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares. The Code provides, however, that under certain conditions
only 50% of the capital gain recognized upon the Fund's disposition of "small
business" stock will be subject to tax.
Conversely, if the Fund elects to retain its net capital gain,
the Fund will be taxed thereon (except to the extent of any available capital
loss carryovers) at the 35% corporate tax rate. If the Fund elects to retain its
net capital gain, it is expected that the Fund also will elect to have
shareholders of record on the last day of its taxable year
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<PAGE>
treated as if each received a distribution of his pro rata share of such gain,
with the result that each shareholder will be required to report his pro rata
share of such gain on his tax return as long-term capital gain, will receive a
refundable tax credit for his pro rata share of tax paid by the Fund on the
gain, and will increase the tax basis for his shares by an amount equal to the
deemed distribution less the tax credit.
Ordinary income dividends paid by the Fund with respect to a
taxable year will qualify for the 70% dividends-received deduction generally
available to corporations (other than corporations, such as Subchapter S
corporations, which are not eligible for the deduction because of their special
characteristics and other than for purposes of special taxes such as the
accumulated earnings tax and the personal holding company tax) to the extent of
the amount of qualifying dividends received by the Fund from domestic
corporations for the taxable year. A dividend received by the Fund will not be
treated as a qualifying dividend (1) if it has been received with respect to any
share of stock that the Fund has held for less than 46 days (91 days in the case
of certain preferred stock), excluding for this purpose under the rules of Code
Section 246(c) (3) and (4): (i) any day more than 45 days (or 90 days in the
case of certain preferred stock) after the date on which the stock becomes
ex-dividend and (ii) any period during which the Fund has an option to sell, is
under a contractual obligation to sell, has made and not closed a short sale of,
is the grantor of a deep-in-the-money or otherwise nonqualified option to buy,
or has otherwise diminished its risk of loss by holding other positions with
respect to, such (or substantially identical) stock; (2) to the extent that the
Fund is under an obligation (pursuant to a short sale or otherwise) to make
related payments with respect to positions in substantially similar or related
property; or (3) to the extent the stock on which the dividend is paid is
treated as debt-financed under the rules of Code Section 246A. Moreover, the
dividends-received deduction for a corporate shareholder may be disallowed or
reduced (1) if the corporate shareholder fails to satisfy the foregoing
requirements with respect to its shares of the Fund or (2) by application of
Code Section 246(b) which in general limits the dividends-received deduction to
70% of the shareholder's taxable income (determined without regard to the
dividends-received deduction and certain other items).
Alternative minimum tax ("AMT") is imposed in addition to, but
only to the extent it exceeds, the regular tax and is computed at a maximum
marginal rate of 28% for noncorporate taxpayers and 20% for corporate taxpayers
on the excess of the taxpayer's alternative minimum taxable income ("AMTI") over
an exemption amount. In addition, under the Superfund Amendments and
Reauthorization Act of 1986, a tax is imposed for taxable years beginning after
1986 and before 1996 at the rate of 0.12% on the excess of a corporate
taxpayer's AMTI (determined without regard to the deduction for that tax and the
AMT net operating loss deduction) over $2 million. For purposes of the Corporate
AMT and the environmental Superfund tax, the corporate dividends-received
deduction is not itself an item of tax preference that must be added back to
taxable income or is otherwise disallowed in determining a corporation's AMTI.
However, corporate shareholders will generally be required to take the full
amount of any dividend received from a Fund into account (without a
dividends-received deduction) in determining its adjusted current earnings,
which are used in computing an additional corporate preference item (i.e., 75%
of the excess of a corporate taxpayer's adjusted current
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<PAGE>
earnings over its AMTI (determined without regard to this item and the AMT net
operating loss deduction)) includible in AMTI.
Investment income that may be received by the Fund from
sources within foreign countries may be subject to foreign taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries which entitle the Fund to a reduced rate of, or exemption from, taxes
on such income. It is impossible to determine the effective rate of foreign tax
in advance since the amount of the Fund's assets to be invested in various
countries is not known.
Distributions by the Fund that do not constitute ordinary
income dividends, exempt-interest dividends or capital gain dividends will be
treated as a return of capital to the extent of (and in reduction of) the
shareholder's tax basis in his shares; any excess will be treated as gain from
the sale of his shares, as discussed below.
Distributions by the Fund will be treated in the manner
described above regardless of whether such distributions are paid in cash or
reinvested in additional shares of the Fund (or of another fund). Shareholders
receiving a distribution in the form of additional shares will be treated as
receiving a distribution in an amount equal to the fair market value of the
shares received, determined as of the reinvestment date. In addition, if the net
asset value at the time a shareholder purchases shares of the Fund reflects
undistributed net investment income or recognized capital gain net income, or
unrealized appreciation in the value of the assets of the Fund, distributions of
such amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
Ordinarily, shareholders are required to take distributions by
the Fund into account in the year in which the distributions are made. However,
dividends declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Fund will be required in certain cases to withhold and
remit to the U.S. Treasury 31% of ordinary income dividends and capital gain
dividends, and the proceeds of redemption of shares, paid to any shareholder (1)
who has provided either an incorrect tax identification number or no number at
all, (2) who is subject to backup withholding by the IRS for failure to report
the receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that it is not subject to backup withholding or that it is a
corporation or other "exempt recipient."
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<PAGE>
Sale or Redemption of Shares
Each shareholder will recognize gain or loss on the sale or
redemption of shares of the Fund in an amount equal to the difference between
the proceeds of the sale or redemption and the shareholder's adjusted tax basis
in the shares. All or a portion of any loss so recognized may be disallowed if
the shareholder purchases other shares of the Fund within 30 days before or
after the sale or redemption. In general, any gain or loss arising from (or
treated as arising from) the sale or redemption of shares of the Fund will be
considered capital gain or loss and will be long-term capital gain or loss if
the shares were held for longer than one year. However, any capital loss arising
from the sale or redemption of shares held for six months or less will be
disallowed to the extent of the amount of exempt-interest dividends received on
such shares and (to the extent not disallowed) will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) (discussed above in connection with the dividends-received
deduction for corporations) generally will apply in determining the holding
period of shares. Long-term capital gains of noncorporate taxpayers are
currently taxed at a maximum rate 11.6% lower than the maximum rate applicable
to ordinary income. Capital losses in any year are deductible only to the extent
of capital gains plus, in the case of a noncorporate taxpayer, $3,000 of
ordinary income.
If a shareholder (1) incurs a sales load in acquiring shares
of the Fund, (2) disposes of such shares less than 91 days after they are
acquired and (3) subsequently acquires shares of the Fund or another fund at a
reduced sales load pursuant to a right to reinvest at such reduced sales load
acquired in connection with the acquisition of the shares disposed of, then the
sales load on the shares disposed of (to the extent of the reduction in the
sales load on the shares subsequently acquired) shall not be taken into account
in determining gain or loss on the shares disposed of but shall be treated as
incurred on the acquisition of the shares subsequently acquired.
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder"), depends on whether the income from
the Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from the Fund is not effectively connected with
a U.S. trade or business carried on by a foreign shareholder, ordinary income
dividends paid to a foreign shareholder will be subject to U.S. withholding tax
at the rate of 30% (or lower treaty rate) upon the gross amount of the dividend.
Such a foreign shareholder would generally be exempt from U.S. federal income
tax on gains realized on the sale of shares of the Fund, capital gain dividends
and exempt-interest dividends and amounts retained by the Fund that are
designated as undistributed capital gains.
If the income from the Fund is effectively connected with a
U.S. trade or business carried on by a foreign shareholder, then ordinary income
dividends, capital gain
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<PAGE>
dividends, and any gains realized upon the sale of shares of the Fund will be
subject to U.S. federal income tax at the rates applicable to U.S. citizens or
domestic corporations.
In the case of foreign noncorporate shareholders, the Fund may
be required to withhold U.S. federal income tax at a rate of 31% on
distributions that are otherwise exempt from withholding tax (or taxable at a
reduced treaty rate) unless such shareholders furnish the Fund with proper
notification of its foreign status.
The tax consequences to a foreign shareholder entitled to
claim the benefits of an applicable tax treaty may be different from those
described herein. Foreign shareholders are urged to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in a Fund, including the applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the Treasury Regulations issued thereunder
as in effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income
dividends, exemptinterest dividends and capital gain dividends from regulated
investment companies often differ from the rules for U.S. federal income
taxation described above. Shareholders are urged to consult their tax advisers
as to the consequences of these and other state and local tax rules affecting
investment in the Fund.
MANAGEMENT OF THE FUND
Trustees and Officers of the Trust
The Trustees and officers and their principal occupations for
at least the past five years are set forth below. Their titles may have varied
during that period. Asterisks indicate those Trustees and officers that are
"interested persons" (as defined in the 1940 Act). Unless otherwise indicated
below, the address of each officer is 125 W. 55th Street, New York, New York
10019.
Trustees
FERGUS REID, III* - Chairman of the Board of Trustees; Chairman of the Board of
Trustees of Mutual Fund Group and Trustee of certain Portfolios advised by
Chase; Chairman and Chief Executive Officer, Lumelite Corporation, since
September 1985.
Address: 971 West Road, New Canaan, Connecticut 06840.
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<PAGE>
RICHARD E. TEN HAKEN - Trustee of Mutual Fund Trust and the Portfolios. Former
Chief Executive Officer, Board of Cooperative Education Services, Monroe and
Orleans Counties, New York; Former Chairman of the New York State Teachers'
Retirement System.
Address: 4 Barnfield Road, Pittsford, New York 14534.
WILLIAM J. ARMSTRONG - Trustee of Mutual Fund Trust and the Portfolios; Vice
President and Treasurer, Ingersoll-Rand Company (Woodcliff Lake, New Jersey).
Address: 49 Aspen Way, Upper Saddle River, New Jersey 07458.
JOHN R.H. BLUM - Trustee of Mutual Fund Trust and the Portfolios; Partner in the
law firm of Richards, O'Neil & Allegaert; Commissioner of Agriculture - State of
Connecticut.
Address: 1 John Street, Millerton, New York 12546.
JOSEPH J. HARKINS* - Trustee of Mutual Fund Trust and the Portfolios; Retired;
Commercial Sector Executive and Executive Vice President of The Chase Manhattan
Bank, N.A. from 1985 through 1989. He has been employed by Chase in numerous
capacities and offices since 1954. Director of Blessings Corporation, Jefferson
Insurance Company of New York, Monticello Insurance Company and Nationar.
Address: 257 Plantation Circle South, Ponte Vedra South, Ponte Vedra Beach, FL
32082
H. RICHARD VARTABEDIAN* - President and Trustee of the Trust and Mutual Fund
Trust; Chairman and President of the Portfolios; Retired; Senior Investment
Officer, Division Executive of the Investment Management Division of The Chase
Manhattan Bank, N.A., 1980-1991; responsible for investment research, trading
and portfolio management for commingled funds and high net worth individuals
within the U.S. Employed by Chase in various investment oriented capacities
since 1960, primarily as a senior portfolio manager for institutional, ERISA and
high net worth portfolios. Address: P.O. Box 296, Beach Road, Hendrick's Head,
Southport, Maine 04576.
STUART W. CRAGIN, Jr. - Trustee of Mutual Fund Trust and the Portfolios;
President, Fairfield Testing Laboratory, Inc. He has previously served in a
variety of marketing, manufacturing and general management positions with Union
Camp Corp., Trinity Paper & Plastics Corp., and Canover Industries. Address 652
Glenbrook Road, Greenwich, Connecticut 06906
IRVING L. THODE - Trustee of Mutual Fund Trust and the Portfolios; Retired; Vice
President of Quotron Systems. He has previously served in a number of executive
positions with Control Data Corp., including President of their Latin American
operations, and General Manager of their Data Services business. Address: 80
Perkins Road, Greenwich, Connecticut 06830
The Board of Trustees of the Trust presently has an Audit Committee. The members
of the Audit Committee are Messrs. Ten Haken (Chairman), Blum, Armstrong,
Harkins, Reid, and Vartabedian who will serve until [Date]. The function of the
Audit Committee is to recommend independent auditors and monitor accounting and
financial matters.
The Audit Committee met times during the fiscal period ended October 31, 1995.
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<PAGE>
Remuneration of Trustees and Certain Executive Officers:
Each Trustee is reimbursed for expenses incurred in attending
each meeting of the Board of Trustees or any committee thereof. Each Trustee who
is not an affiliate of the Adviser or Sub-Adviser is compensated for his or her
services according to a fee schedule which recognizes the fact that each Trustee
also serves as a Trustee of other investment companies advised by the Adviser or
Sub-Adviser. Each Trustee receives a fee, allocated among all investment
companies for which the Trustee serves, which consists of an annual retainer
component and a meeting fee component. Effective August 21, 1995, each Trustee
of the Vista Funds receives a quarterly retainer of $12,000 and an additional
per meeting fee of $1,500. Members of committees receive a meeting fee only if
the committee meeting is held on a day other than a day on which a regularly
scheduled meeting is held. Prior to August 21, 1995, the annual retainer was
$36,000 and the per-meeting fee was $1,000. The Chairman of the Trustees, Fergus
Reid, has and continues to receive a 50% increment over regular Trustee total
compensation for serving as Chairman and Trustee for all the investment
companies advised by the Adviser or Sub-Adviser.
Effective August 21, 1995, the Trustees also instituted a
Retirement Plan for Eligible Trustees (the "Plan") pursuant to which each
Trustee (who is not an employee of any of the Portfolios, the Adviser or
Sub-Adviser, Administrator or distributor or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Trustees.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible Trustee has attained age 65 and has completed at least five years of
continuous service with one or more of the investment companies advised by the
Adviser or SubAdviser (collectively, the "Covered Funds"). Each eligible Trustee
is entitled to receive from the Covered Funds an annual benefit commencing on
the first day of the calendar quarter coincident with or following his date of
retirement equal to 10% of the highest annual compensation received from the
Covered Funds multiplied by the number of such Trustee's years of service (not
in excess of 10 years) completed with respect to any of the Covered Funds. Such
benefit is payable to each eligible Trustee in monthly installments for the life
of the Trustee.
Set forth in the table below are the estimated annual benefits
payable to an eligible Trustee upon retirement assuming various compensation and
years of service classifications. The estimated credited years of service for
Messrs. Reid, Ten Haken, Armstrong, Blum, Harkins, Vartabedian, Cragin, and
Thode are [insert years of service]
The following tables indicate the compensation received by
each Trustee during the fiscal period of the Portfolios which ended on October
31, 1995:
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<PAGE>
<TABLE>
<CAPTION>
Total Compensation
Pension or Retirement Benefits Estimated Annual Benefits from Victory
Accrued as Portfolio Expenses Upon Retirement "Portfolio Complex"
<S> <C> <C> <C>
Forges Reid, III, Trustee........
Richard E. Ten Haken, Trustee....
William J. Armstrong, Trustee....
John R.H. Blum, Trustee..........
Joseph J. Harkins, Trustee.......
H. Richard Vartabedian, Trustee..
Stuart W. Cragin, Jr., Trustee...
Irving L. Thode, Trustee.........
</TABLE>
Officers
RICHARD FABIETTI* - Treasurer and Assistant Secretary of the Trust; Vice
President, Concord Financial Group, Inc.
ANN BERGIN* - Secretary; Vice President, Concord Financial Group, Inc.; and
Chief Compliance Officer and Secretary, Vista Broker-Dealer Services, Inc.
The Declaration of Trust provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, unless, as to liability to the Trust or its shareholders, it is finally
adjudicated that they engaged in wilful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in their offices or with respect to
any matter unless it is finally adjudicated that they did not act in good faith
in the reasonable belief that their actions were in the best interest of the
Trust. In the case of settlement, such indemnification will not be provided
unless it has been determined by a court or other body approving the settlement
or other disposition, or by a reasonable determination based upon a review of
readily available facts, by vote of a majority of disinterested Trustees or in a
written opinion of independent counsel, that such officers or Trustees have not
engaged in wilful misfeasance, bad faith, gross negligence or reckless disregard
of their duties.
The Fund pays no direct remuneration to any officer of the Trust.
Adviser or Sub-Adviser
The Adviser manages the assets of the Fund pursuant to an Investment
Advisory Agreement, dated as of __________, 1996 (the "Advisory Agreement").
Subject to such policies as the Board of Trustees may determine, Chase makes
investment decisions for the Fund. Pursuant to the terms of the Advisory
Agreement, the Adviser provides the Fund with such investment advice and
supervision as it deems necessary for the proper supervision of the Fund's
investments. The Adviser continuously provides investment programs and
determines from time to time what securities shall be purchased, sold or
exchanged and what portion of the Fund's assets shall be held uninvested. The
Adviser
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<PAGE>
or Sub-Adviser furnishes, at its own expense, all services, facilities and
personnel necessary in connection with managing the investments and effecting
portfolio transactions for the Fund. The other expenses attributable to, and
payable by the Fund, are described under "Expenses" in the Prospectus. The
Advisory Agreement for the Fund will continue in effect from year to year only
if such continuance is specifically approved at least annually by the Board of
Trustees or by vote of a majority of the Fund's outstanding voting securities
and by a majority of the Trustees who are not parties to the Advisory Agreement
or interested persons of any such party, at a meeting called for the purpose of
voting on such Advisory Agreement.
Under the Advisory Agreement, the Adviser or Sub-Adviser may utilize
the specialized portfolio skills of all its various affiliates, thereby
providing the Fund with greater opportunities and flexibility in accessing
investment expertise.
Pursuant to the terms of the Advisory Agreement, the Adviser or
Sub-Adviser is permitted to render services to others. The Advisory Agreement is
terminable without penalty by the Trust on behalf of the Fund on not more than
60 days', nor less than 30 days', written notice when authorized either by a
majority vote of the Fund's shareholders or by a vote of a majority of the Board
of Trustees of the Trust, or by the Adviser or SubAdviser on not more than 60
days', nor less than 30 days', written notice, and will automatically terminate
in the event of its "assignment" (as defined in the 1940 Act). The Advisory
Agreement provides that the Adviser or Sub-Adviser under such Agreement shall
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution of
portfolio transactions for the respective Fund, except for wilful misfeasance,
bad faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties thereunder.
In the event the operating expenses of the Fund, including all
investment advisory, administration and sub-administration fees, but excluding
brokerage commissions and fees, taxes, interest and extraordinary expenses such
as litigation, for any fiscal year exceed the most restrictive expense
limitation applicable to the Fund imposed by the securities laws or regulations
thereunder of any state in which the shares of the Fund is qualified for sale,
as such limitations may be raised or lowered from time to time, the Adviser or
Sub-Adviser shall reduce its advisory fee (which fee is described below) to the
extent of its share of such excess expenses. The amount of any such reduction to
be borne by the Adviser or Sub-Adviser shall be deducted from the monthly
advisory fee otherwise payable with respect to the Fund during such fiscal year;
and if such amounts should exceed the monthly fee, the Adviser or Sub-Adviser
shall pay to the Fund its share of such excess expenses no later than the last
day of the first month of the next succeeding fiscal year.
In consideration of the services provided by the Adviser or
Sub-Adviser pursuant to the Advisory Agreement, the Fund pays an investment
advisory fee computed and paid monthly based on a rate equal to ____ % of the
Fund's average daily net assets, on an annualized basis for the Fund's
then-current fiscal year. However, the Adviser or SubAdviser may voluntarily
agree to waive a portion of the fees payable to it on a month-to-month basis.
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<PAGE>
Under an investment advisory agreement between the Trust, on behalf
of the Fund, and Chase, Chase may delegate a portion of its responsibilities to
a subadviser. In addition, the investment advisory agreement provides that Chase
may render services through its own employees or the employees of one or more
affiliated companies that are qualified to act as an investment adviser of the
Fund and are under the common control of New Chase as long as all such persons
are functioning as part of an organized group of persons, managed by authorized
officers of Chase. Chase, on behalf of the Fund, has entered into an investment
sub-advisory agreement (the "Sub-Advisory Agreement") with Van Deventer & Hoch
("VD&H"), whose principal offices are located at 800 North Brand Boulevard,
Suite 300, Glendale, California 91203. VD&H is a general partnership which is
equally owned by individuals who serve VD&H in key professional capacities and
by CBC Holdings (California), which is a wholly-owned subsidiary of Chemical
Banking Corporation, a bank holding company. With respect to the day to day
management of the Fund, under the sub-advisory agreement, the Sub-Adviser makes
decisions concerning, and places all orders for, purchases and sales of
securities and helps maintain the records relating to such purchases and sales.
The Sub-Adviser may, in its discretion, provide such services through its own
employees or the employees of one or more affiliated companies that are
qualified to act as an investment adviser to the Company under applicable laws
and are under the common control of New Chase; provided that (i) all persons,
when providing services under the sub-advisory agreement, are functioning as
part of an organized group of persons, and (ii) such organized group of persons
is managed at all times by authorized officers of the Sub-Adviser. This
arrangement will not result in the payment of additional fees by the Fund.
Administrator
Pursuant to an Administration Agreement, dated as of __________, 1996
(the "Administration Agreement"), Chase serves as administrator of the Trust.
Chase provides certain administrative services to the Trust, including, among
other responsibilities, coordinating the negotiation of contracts and fees with,
and the monitoring of performance and billing of, the Trust's independent
contractors and agents; preparation for signature by an officer of the Trust of
all documents required to be filed for compliance by the Trust with applicable
laws and regulations excluding those of the securities laws of various states;
arranging for the computation of performance data, including net asset value and
yield; responding to shareholder inquiries; and arranging for the maintenance of
books and records of the Trust and providing, at its own expense, office
facilities, equipment and personnel necessary to carry out its duties. The
Administrator does not have any responsibility or authority for the management
of the Fund, the determination of investment policy, or for any matter
pertaining to the distribution of Fund shares.
Under the Administration Agreement Chase renders administrative
services to others. The Administration Agreement will continue in effect from
year to year only if such continuance is specifically approved at least annually
by the Board of Trustees or by vote of a majority of the Fund's outstanding
voting securities and by a majority of the Trustees who are not parties to the
Administration Agreement or "interested persons" (as defined in the 1940 Act) of
any such party. The Administration Agreement is terminable without penalty by
the Trust on behalf of the Fund on 60 days' written notice when authorized
either by a majority vote of the Fund's shareholders or by vote of a majority of
the Board of Trustees, including a majority of the Trustees who are not
"interested
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<PAGE>
persons" (as defined in the 1940 Act) of the Trust, or by the Administrator on
60 days' written notice, and will automatically terminate in the event of its
"assignment" (as defined in the 1940 Act). The Administration Agreement also
provides that neither Chase nor its personnel shall be liable for any error of
judgment or mistake of law or for any act or omission in the administration or
management of the Fund, except for wilful misfeasance, bad faith or gross
negligence in the performance of its or their duties or by reason of reckless
disregard of its or their obligations and duties under the Administration
Agreement.
In addition, the Administration Agreement provides that, in the event
the operating expenses of any Fund including all investment advisory,
administration and sub-administration fees, but excluding brokerage commissions
and fees, taxes, interest and extraordinary expenses such as litigation, for any
fiscal year exceed the most restrictive expense limitation applicable to the
Fund imposed by the securities laws or regulations thereunder of any state in
which the shares of the Fund is qualified for sale, as such limitations may be
raised or lowered from time to time, Chase shall reduce its administration fee
(which fee is described below) to the extent of its share of such excess
expenses. The amount of any such reduction to be borne by Chase shall be
deducted from the monthly administration fee otherwise payable to Chase during
such fiscal year; and if such amounts should exceed the monthly fee, Chase shall
pay to such Fund its share of such excess expenses no later than the last day of
the first month of the next succeeding fiscal year.
In consideration of the services provided by Chase pursuant to the
Administration Agreement, the Administrator receives from the Fund a fee
computed and paid monthly at an annual rate equal to 0.03% of the Fund's average
daily net assets, on an annualized basis for the Fund's then-current fiscal
year. Chase may voluntarily waive a portion of the fees payable to it with
respect to each Fund on a month-to-month basis.
Distributor
Distribution Plan
The Trust has adopted separate plans of distribution pursuant to Rule
12b-1 under the 1940 Act (a "Distribution Plan") including several Distribution
Plans on behalf of the Class A Shares of certain of the Funds, including the
Fund, which provides that the Fund shall pay a distribution fee (the
"Distribution Fee"), including payments to the Distributor, at an annual rate
not to exceed 0.25% of its Shares average daily net assets for distribution
services. The Distributor may use all or any portion of such Basic Distribution
Fee to pay for Fund expenses of printing prospectuses and reports used for sales
purposes, expenses of the preparation and printing of sales literature and other
such distribution-related expenses.
The Class A Distribution Plan provides that it will continue in
effect indefinitely if such continuance is specifically approved at least
annually by a vote of both a majority of the Trustees and a majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust and who have no direct or indirect financial interest in the operation of
the Distribution Plan or in any agreement related to such Plan ("Qualified
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<PAGE>
Trustees"). The Distribution Plan requires that the Trust shall provide to the
Board of Trustees, and the Board of Trustees shall review, at least quarterly, a
written report of the amounts expended (and the purposes therefor) under the
Distribution Plan. The Distribution Plan further provides that the selection and
nomination of Qualified Trustees shall be committed to the discretion of the
disinterested Trustees (as defined in the 1940 Act) then in office. The
Distribution Plan may be terminated at any time by a vote of a majority of the
Qualified Trustees by vote of a majority of the outstanding voting Shares of the
Fund (as defined in the 1940 Act). The Distribution Plan may not be amended to
increase materially the amount of permitted expenses thereunder without the
approval of shareholders of teh affected class and may not be materially amended
in any case without a vote of the majority of both the Trustees and the
Qualified Trustees. The Fund will preserve copies of any plan, agreement or
report made pursuant to the Distribution Plans for a period of not less than six
years from the date of the Distribution Plan, and for the first two years such
copies will be preserved in an easily accessible place.
Since the Distribution Fee is not directly tied to actual expenses,
the amount of Distribution Fee paid by each of the Class A shares during any
year may be more or less than actual expenses incurred pursuant to the
Distribution Plan. For this reason, this type of distribution fee arrangement is
characterized by the staff of the Securities and Exchange Commission as being of
the "compensation variety" (in contrast to "reimbursement" arrangements in which
the Distributor's compensation is directly linked to its expenses). However, the
Shares are not liable for any distribution expenses incurred in excess of the
Basic Distribution Fee paid.
Distribution and Sub-Administration Agreement
The Trust has entered into a Distributor and Sub-Administration
Agreement dated __________, 1996 (the "Distribution Agreement"), with the
Distributor, pursuant to which the Distributor acts as the Fund's exclusive
underwriter, provides certain administration services and promotes and arranges
for the sale of the Fund's shares. The Distributor became a wholly-owned
subsidiary of Concord Financial Group. The Distribution Agreement provides that
the Distributor will bear the expenses of printing, distributing and filing
prospectuses and statements of additional information and reports used for sales
purposes, and of preparing and printing sales literature and advertisements not
paid for by the Distribution Plan. The Trust pays for all of the expenses for
qualification of the shares of the Fund for sale in connection with the public
offering of such shares, and all legal expenses in connection therewith. In
addition, pursuant to the Distribution Agreement, the Distributor provides
certain sub-administration services to the Trust, including providing officers,
clerical staff and office space.
The Distribution Agreement is currently in effect and will
continue in effect with respect to the Fund only if such continuance is
specifically approved at least annually by the Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities and by a majority of the
Trustees who are not parties to the Distribution Agreement or "interested
persons" (as defined in the 1940 Act) of any such party. The Distribution
Agreement is terminable without penalty by the Trust on behalf of the Fund on 60
days' written notice when authorized either by a majority vote of the Fund's
shareholders or by vote of a majority of the Board of Trustees of the Trust,
including a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust, or
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<PAGE>
by the Distributor on 60 days' written notice, and will automatically
terminate in the event of its "assignment" (as defined in the 1940 Act). The
Distribution Agreement also provides that neither the Distributor nor its
personnel shall be liable for any act or omission in the course of, or connected
with, rendering services under the Distribution Agreement, except for wilful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties.
In the event the operating expenses of the Fund, including all
investment advisory, administration and sub-administration fees, but excluding
brokerage commissions and fees, taxes, interest and extraordinary expenses such
as litigation, for any fiscal year exceed the most restrictive expense
limitation applicable to the Fund imposed by the securities laws or regulations
thereunder of any state in which the shares of the Fund are qualified for sale,
as such limitations may be raised or lowered from time to time, the Distributor
shall reduce its sub-administration fee with respect to the Fund (which fee is
described below) to the extent of its share of such excess expenses. The amount
of any such reduction to be borne by the Distributor shall be deducted from the
monthly sub-administration fee otherwise payable with respect to the Fund during
such fiscal year; and if such amounts should exceed the monthly fee, the
Distributor shall pay to the Fund its share of such excess expenses no later
than the last day of the first month of the next succeeding fiscal year.
In consideration of the sub-administration services provided by the
Distributor pursuant to the Distribution Agreement, the Distributor receives an
annual fee, payable monthly, of 0.045% of the net assets of the Fund. However,
the Distributor has voluntarily agreed to waive a portion of the fees payable to
it under the Distribution Agreement with respect to the Fund on a month-to-month
basis.
Shareholder Servicing Agents, Transfer Agent and Custodian
The Trust has entered into a shareholder servicing agreement (a
"Servicing Agreement") with each Shareholder Servicing Agent to provide certain
services. The fees relating to acting as liaison to shareholders and providing
personal services to shareholders will not exceed, on an annualized basis, 0.25%
of the average daily net assets of the Fund represented by shares owned during
the period for which payment is being made by investors with whom such
Shareholder Servicing Agent maintains a servicing relationship. However, each
Shareholder Servicing Agent has voluntarily agreed to waive a portion of the
fees payable to it under its Servicing Agreement with respect to the Fund on a
month-to-month basis.
The Trust has also entered into a Transfer Agency Agreement with DST
Systems, Inc. ("DST") pursuant to which DST acts as transfer agent for the
Trust. Pursuant to a Custodian Agreement, Chase acts as the custodian of the
assets of the Fund for which Chase receives compensation as is from time to time
agreed upon by the Trust and Chase. For additional information, see "Shareholder
Servicing Agents, Transfer Agent and Custodian" in the Prospectus.
In certain circumstances Shareholder Servicing Agents may be required
to register as dealers under state law.
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<PAGE>
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York
10036 serves as independent accountants of the Fund. Price Waterhouse LLP
provides the Fund with audit services, tax return preparation, and assistance
and consultation with respect to the preparation of filings with the Securities
and Exchange Commission.
GENERAL INFORMATION
Description of Shares, Voting Rights and Liabilities
Mutual Fund Group is an open-end, management investment company organized as
Massachusetts business trust under the laws of the Commonwealth of Massachusetts
in 1987. Because certain of the Funds comprising the Trust, including the Fund,
are "non-diversified", more than 5% of any of the assets of the Fund may be
invested in the obligations of any single issuer, which may make the value of
the shares in the Fund more susceptible to certain risks than shares of a
diversified mutual fund.
The Trust currently consists of __ Funds of shares of beneficial interest
without par value. Certain of the Funds in the Trust may offer more than one
class of shares. The Trust has reserved the right to create and issue additional
series or classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in the
earnings, dividends and assets of the particular series or class. Expenses of
the Trust which are not attributable to a specific series or class are allocated
amount all the series in a manner believed by management of the Trust to be fair
and equitable. Shares have no pre-emptive or conversion rights. Shares when
issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each share held. Shares of each series
or class generally vote separately, for example to approve investment advisory
agreements or distribution plans, 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. With respect to shares
purchased through a Shareholder Servicing Agent and, in the event written proxy
instructions are not received by the Fund or its designated agent prior to a
shareholder meeting at which a proxy is to be voted and the shareholder does not
attend the meeting in person, the Shareholder Servicing Agent for such
shareholder will be authorized pursuant to an applicable agreement with the
shareholder to vote the shareholder's outstanding shares
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in the same proportion as the votes cast by other Fund shareholders represented
at the meeting in person or by proxy.
Class A shares are sold at net asset value plus an initial sales charge of
up to a maximum of 4.50% of the offering price.
Selected dealers and financial consultants may receive different levels of
compensation for selling one particular class of shares rather than another.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of a series or class when, in the judgment
of the Trustees, it is necessary or desirable to submit matters for a
shareholder vote. Shareholders have, under certain circumstances, the right to
communicate with other shareholders in connection with requesting a meeting of
shareholders for the purpose of removing one or more Trustees. Shareholders also
have, in certain circumstances, the right to remove one or more Trustees without
a meeting. No material amendment may be made to the Trust's Declaration of Trust
without the affirmative vote of the holders of a majority of the outstanding
shares of each portfolio affected by the amendment. The Trust's Declaration of
Trust provides that, at any meeting of shareholders of the Trust or of any
series or class, a Shareholder Servicing Agent may vote any shares as to which
such Shareholder Servicing Agent is the agent of record and which are not
represented in person or by proxy at the meeting, proportionately in accordance
with the votes cast by holders of all shares of that portfolio 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. Shares have no preemptive or conversion rights. Shares, when
issued, are fully paid and non-assessable, except as set forth below. Any series
or class may be terminated (i) upon the merger or consolidation with, or the
sale or disposition of all or substantially all of its assets to, another
entity, if approved by the vote of the holders of two-thirds of its outstanding
shares, except that if the Board of Trustees recommends such merger,
consolidation or sale or disposition of assets, the approval by vote of the
holders of a majority of the series' or class' outstanding shares will be
sufficient, or (ii) by the vote of the holders of a majority of its outstanding
shares, or (iii) by the Board of Trustees by written notice to the series' or
class' shareholders. Unless each series and class is so terminated, the Trust
will continue indefinitely.
Stock certificates are issued only upon the written request of a
shareholder, subject to the policies of the investor's Shareholder Servicing
Agent, but the Trust will not issue a stock certificate with respect to shares
that may be redeemed through expedited or automated procedures established by a
Shareholder Servicing Agent.
The Trust 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 Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides for indemnification and reimbursement of expenses out of the Trust
property for any shareholder held personally liable for the obligations of the
Trust. The Trust's Declaration of Trust also provides that the Trust shall
-43-
<PAGE>
maintain appropriate insurance (for example, fidelity bonding and errors and
omissions insurance) for the protection of the Trust, its shareholders,
Trustees, officers, employees and agents covering possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the property
of the Trust and that the Trustees will not be liable for any action or failure
to act, errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
The Board of Trustees has adopted a Code of Ethics addressing personal
securities transactions by investment personnel and access persons and other
related matters. The Code of Ethics substantially conforms to the
recommendations made by the Investment Company Institute ("ICI") (except where
noted) and includes such provisions as:
o Prohibitions on investment personnel acquiring securities in initial
offerings; o A requirement that access persons obtain prior to acquiring
securities in a private placement and that the officer granting such
approval have no interest in the issuer making the private placement;
o A restriction on access persons executing transactions for securities on a
recommended list until 14 days after distribution of that list;
o A prohibition on access persons acquiring securities that are pending
execution by one of the Portfolios until 7 days after the transactions of
the Portfolios are completed;
o A prohibition of any buy or sell transaction in a particular security in a
30-day period, except as may be permitted in certain hardship cases or
exigent circumstances where prior approval is obtained. This provision
differs slightly from the ICI recommendation;
o A requirement for pre-clearance of any buy or sell transaction in a
particular security after 30 days, but within 60 days;
o A requirement that any gift exceeding $75.00 from a customer must be
reported to the appropriate compliance officer;
o A requirement that access persons submit in writing any request to serve as
a director or trustee of a publicly traded company;
o A requirement that all securities transactions in excess of $1,000 be
pre-cleared, except that if a person has engaged in more than $10,000 of
securities transactions in a calendar quarter all securities of such person
require pre-clearance (this de minimus exception differs slightly from the
ICI recommendations);
o A requirement that all access persons direct their broker-dealer to submit
duplicate confirmation and customer statements to the appropriate
compliance unit; and
o A requirement that all access persons sign a Code of Ethics acknowledgment,
affirming that they have read and understood the Code and submit a personal
security holdings report upon commencement of employment or status and a
personal security transaction report within 10 days of each calendar
quarter thereafter.
-44-
<PAGE>
Principal Holders
As of __________, 1995, no persons owned beneficially, directly or
indirectly, 5% or more of the outstanding shares of each class of shares of the
Fund.
Specimen Computations of Offering Prices Per Shares
A Shares:
Net Asset Value and Redemption Price per Shares of Beneficial Interest
at ___________, 1996 $_____
[B Shares:
Net Asset Value and Redemption Price per Shares of Beneficial Interest
at __________, 1996....................................... $_____]
-45-
<PAGE>
RATINGS APPENDIX
Moody's Investors Service's Commercial Paper Ratings
Prime-1 -- Issuers rated Prime-1 (or related supporting
institutions) have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
o Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Prime-2 -- Issuers and Prime-2 (or related supporting
institutions) have a strong capacity for repayment of short-term obligations.
This will normally be evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage ratios, while sound will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.
Standard & Poor's Ratings Group Commercial Paper Ratings
A-1 -- This highest category indicates that the degree of
safety regarding timely payment is strong. Those issuers determined to possess
overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2 -- Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree of safety is not as
high as for issuers designated A-1.
--------------
Other nationally recognized statistical rating organizations
("NRSROs") have rating categories similar to those used by Moody's Investors
Service and Standard and Poor's Ratings Group.
After purchase by a Fund, a security may cease to be rated or
its rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require the Fund to sell such security. If a security is
backed by an unconditional demand feature, the issuer of the demand feature
rather than the issuer of the underlying security
A-1
<PAGE>
may be relied upon in determining whether a Fund's rating criteria have been
met. To the extent the ratings given by any NRSRO may change as a result of
changes in such organizations or in their rating systems, the Funds will attempt
to use comparable ratings as standards for investments in accordance with the
investment policies contained in the Prospectuses and in this Statement of
Additional Information.
A-2
<PAGE>
PART C
<PAGE>
MUTUAL FUND GROUP
PART C. OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
List all financial statements and exhibits filed as part of
the Registration Statement for the Vista Funds of Mutual Fund Group filed herein
as part of this post-effective amendment.
(a) Financial statements
In Part AFinancial Highlights
In Part BTo be filed by Amendment
In Part CNone.
(b) Exhibits:
Exhibit
Number
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 Specimen share certificate. (1)
5(a) Investment Advisory Agreements and Sub-Advisory Agreements(6)
5(b) Form of Investment Advisory Agreement for Vista Small Cap Equity Fund. (9)
5(c) Administration Agreement.(6)
5(d) Form of Interim Investment Advisory Agreement.(12)
5(e) Form of Proposed Investment Advisory Agreement.(12)
5(f) Form of Proposed Sub-Advisory Agreement between The Chase Manhattan Bank
and Chase Asset Management, Inc.(12)
5(g) Form of Administration Agreement.(12)
5(h) Form of Proposed Investment Subadvisory Agreement between The Chase
Manhattan Bank and [Chase Asset Management, Inc./Van Deventer & Hoch].
6(a) Distribution and Sub-Administration Agreement.(6)
6(b) Distribution and Sub-Administration Agreement dated August 21, 1995.(12)
7(a) Retirement Plan for Eligible Trustees.(12)
7(b) Deferred Compensation Plan for Eligible Trustees.(12)
8(a) Custodian Agreement. (1)
8(b) Sub-Custodian Agreement. (1)
9(a) Transfer Agency Agreement. (1)
9(b) Administrative Services Plan. (1)
9(c) Shareholder Servicing Agreement of Vista Mutual Funds. (1)
9(d) Form of Shareholder Servicing Agreement of Vista Premier Funds.(1)
9(e) Form of Shareholder Servicing Agreement. (12)
9(f) Agreement and Plan of Reorganization and Liquidation.(12)
10 Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel. (12)
11 Consent of KPMG Peat Marwick, LLP.(12)
12 None.
14 None.
C-1
<PAGE>
15(a) Rule 12b-1 Distribution Plan of Vista Mutual Funds including Selected
Dealer Agreement and Shareholder Service Agreement. (1)
15(b) Rule 12b-1 Distribution Plan of Vista Premier Funds including Selected
Dealer Agreement and Shareholder Service Agreement. (1)
15(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)
15(d) Form of Rule 12b-1 Distribution Plan for Class B shares of the Vista Prime
Money Market Fund.(8)
15(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)
15(f) Form of Rule 12b-1 Distribution Plan for Vista Small Cap Equity Fund.(9)
15(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)
15(h) Rule 12b-1 Distribution Plan - Class B Shares (including forms of Selected
Dealer Agreement and Shareholder Servicing Agreement).(12)
16 Schedule for Computation for Each Performance Quotation.(11)
17 None.
18 Form of Rule 18f-3 Multi-Class Plan.(12)
- ----------------------------
(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 Commission 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.
(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 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 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 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 herewith.
ITEM 25. Persons Controlled by or Under Common
Control with Registrant
Not applicable
C-2
<PAGE>
ITEM 26. Number of Holders of Securities
Number of Record
Title of Series Holders as of September 30, 1995
--------------- --------------------------------
A B Institutional
Shares Shares Shares
VISTA(SM) U.S. Government Income Fund 4,010 704 N/A
VISTA(SM) Growth and Income Fund 78,438 19,414 N/A
VISTA(SM) Capital Growth Fund 38,986 21,446 N/A
VISTA(SM) Balanced Fund 1,255 561 N/A
VISTA(SM) Equity Fund 70 - N/A
VISTA(SM) Bond Fund 78 - N/A
VISTA(SM) Short-Term Bond Fund 68 - N/A
VISTA(SM) Global Fixed Income Fund 157 55 N/A
VISTA(SM) International Equity Fund 2,664 1,096 N/A
VISTA(SM) Equity Income Fund 623 - N/A
IEEE Balanced Fund 432 - N/A
VISTA(SM) Asian Oceanic Shares Fund N/A N/A N/A
VISTA(SM) Japan Pacific Shares Fund N/A N/A N/A
VISTA(SM) European Shares Fund N/A N/A N/A
VISTA(SM) Small Cap Equity Fund 2,245 1746 N/A
ITEM 27. Indemnification
Reference is hereby made to Article V of the Registrant's Declaration
of Trust.
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser, administrator and distributor are insured under
an errors and omissions liability insurance policy. The Registrant and its
officers are also insured under the fidelity bond required by Rule 17g-1 under
the Investment Company Act of 1940.
Under the terms of the Registrant's Declaration of Trust, the Registrant may
indemnify any person who was or is a Trustee, officer or employee of the
Registrant to the maximum extent permitted by law; provided, however, that any
such indemnification (unless ordered by a court) shall be made by the Registrant
only as authorized in the specific case upon a determination that
indemnification of such persons is proper in the circumstances. Such
determination shall be made (i) by the Trustees, by a majority vote of a quorum
which consists of Trustees who are neither in Section 2(a)(19) of the Investment
Company Act of 1940, nor parties to the proceeding, or (ii) if the required
quorum is not obtainable or, if a quorum of such Trustees so directs, by
independent legal counsel in a written opinion. No indemnification will be
provided by the Registrant to any Trustee or officer of the Registrant for any
liability to the Registrant or shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of duty.
Insofar as the conditional advancing of indemnification monies for actions based
upon the Investment Company Act of 1940 may be concerned, such payments will be
made only on the following conditions: (i) the advances must be limited to
amounts used, or to be used, for the preparation or presentation of a defense to
the action, including costs connected with the preparation of a settlement; (ii)
advances may be made only upon receipt of a written promise by, or on behalf of,
the recipient to repay that amount of the advance which exceeds that amount to
which it is ultimately determined that he is entitled to receive from the
Registrant by reason of indemnification; and (iii) (a) such promise must be
secured by a surety bond, other suitable insurance or an equivalent form of
security which assures that any repayments may be obtained
C-3
<PAGE>
by the Registrant without delay or litigation, which bond, insurance or other
form of security must be provided by the recipient of the advance, or (b) a
majority of a quorum of the Registrant's disinterested, non-party Trustees, or
an independent legal counsel in a written opinion, shall determine, based upon a
review of readily available facts, that the recipient of the advance ultimately
will be found entitled to indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of it counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28. Business and Other Connections of Investment Adviser
The Chase Manhattan Bank, N.A. (the "Adviser") is a commercial bank
providing a wide range of banking and investment services.
To the knowledge of the Registrant, none of the Directors or executive
officers of the Adviser, except those described below, are or have been, at any
time during the past two years, engaged in any other business, profession,
vocation or employment of a substantial nature, except that certain Directors
and executive officers of the Adviser also hold or have held various positions
with bank and non-bank affiliates of the Adviser, including its parent, The
Chase Manhattan Corporation. Each Director listed below is also a Director of
The Chase Manhattan Corporation.
Principal Occupation or Other
Position with Employment of a Substantial
Name the Adviser Nature During Past Two Years
- ---- ----------- ----------------------------
Thomas G. Labreque Chairman of the Chairman, Chief Executive Officer
Board,and Director and a Director of The Chase
Manhattan Corporation and a
Director of AMAX, Inc.
Richard J. Boyle Vice Chairman of the Vice Chairman of the Board and a
Board and Director Director of The Chase Manhattan
Corporation and Trustee of
Prudential Realty Trust
C-4
<PAGE>
Principal Occupation or Other
Position with Employment of a Substantial
Name the Adviser Nature During Past Two Years
- ---- ----------- ----------------------------
M. Anthony Burns Director Chairman of the Board, President
and Chief Executive Officer of
Ryder System, Inc.
Joan Ganz Cooney Director Chairman of the Executive
Committee of the Board of Trustees,
formerly Chief Executive Officer of
Children's Television Workshop and
a Director of each of Johnson &
Johnson, Metropolitan Life
Insurance Company and Xerox
Corporation
Edward S. Finkelstein Director Retired Chairman and Chief
Executive Officer and Director of
R.H. Macy & Co., Inc. and a
Director of Time Warner Inc.
H. Laurance Fuller Director Chairman, President, Chief
Executive Officer and Director of
Amoco Corporation and Director of
Abbott Laboratories
Howard C. Kauffman Director Retired President of Exxon
Corporation and a Director of each
of Pfizer Inc. and Ryder System,Inc.
Paul W. MacAvoy Director Dean of Yale School of
Organization and Management
David T. McLaughlin Director President and Chief Executive
Officer of The Aspen Institute,
Chairman of Standard Fuse
Corporation and a Director of each
of ARCO Chemical Company and
Westinghouse Electric Corporation
Edmund T. Pratt, Jr. Director Chairman Emeritus, formerly
Chairman and Chief Executive
Officer, of Pfizer Inc. and a
Director of each of Pfizer, Inc.,
Celgene Corp., General Motors
Corporation and International Paper
Company
Henry B. Schacht Director Chairman and Chief Executive
Officer of Cummins Engine
Company, Inc. and a Director of
C-5
<PAGE>
Principal Occupation or Other
Position with Employment of a Substantial
Name the Adviser Nature During Past Two Years
- ---- ----------- ----------------------------
each of American Telephone and
Telegraph Company and CBS Inc.
Jairo A. Estrada Director Chairman of the Board and Chief
Executive Officer of Garden Way
Incorporated.
Donald H. Trautlein Director President and Chief Executive
Officer of The Aspen Institute,
Chairman of Standard Fuse
Corporation and a Director of each
of ARCO Chemical Company and
Westinghouse Electric Corporation
Kay R. Whitmore Director Chairman of the Board, President
and Chief Executive Officer and
Director of Eastman Kodak Company
James L. Ferguson Director Retired Chairman and Chief
Executive Officer of General Foods
Corporation
William H. Gray III Director
President and Chief Executive
Officer of the United Negro College
Fund, Inc
David T. Kearns Director Retired Chairman and Chief
Executive Officer of the Xerox
Corporation
Delano E. Lewis Director
President and Chief Executive
Officer of National Public Radio
John H. McArthur Director Dean of the Harvard Graduate
School of Business Administration
ITEM 29. Principal Underwriters
(a) Vista Broker-Dealer Services, Inc., a wholly-owned subsidiary of
BISYS Fund Services, Inc. is the underwriter for the Registrant.
(b) The following are the Directors and officers of Vista
Broker-Dealer Services, Inc., a wholly-owned subsidiary of BISYS Fund Services,
Inc. The principal business address of each of these persons, with the exception
of Mr. Spicer, is 125 West 55th Street, New York, New York 10022. The principal
business address of Mr. Spicer is One Bush Street, San Francisco, California
94104.
C-6
<PAGE>
Position and Offices Position and Offices
Name with Distributor with the Registrant
- ---- ---------------- -------------------
William B. Blundin Director and Chief Executive Officer None
Richard E. Stierwalt Director and Chief Operating Officer None
Timothy M. Spicer Director and Chairman of the Board None
Joseph Kissel President None
George Martinez Chief Compliance Officer Secretary and Assistant
and Secretary Treasurer
(c) Not applicable
ITEM 30. Location of Accounts and Records
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
Name Address
Vista Broker-Dealer Services, Inc. a wholly-owned 125 West 55th Street
subsidiary of BISYS Fund Services, Inc. New York, NY 10022
DST Systems, Inc. (transfer agent) 21 W. 10th Street
Kansas City, MO 64105
The Chase Manhattan Bank, N.A. (investment adviser 1211 Avenue of the
and custodian) Americas
New York, NY 10036
Chase Lincoln First Bank, N.A. (administrator) One Lincoln First Square
Rochester, NY 14363
ITEM 31. Management Services
Not applicable
ITEM 32. Undertakings
(1) Registrant undertakes that its trustees shall promptly
call a meeting of shareholders of the Trust for the purpose of voting upon the
question of removal of any such trustee or trustees when requested in writing so
to do by the record holders of not less than 10 per centum of the outstanding
shares of the Trust. In addition, the Registrant shall, in certain
circumstances, give such shareholders assistance in communicating with other
shareholders of a fund as required by Section 16(c) of the Investment Company
Act of 1940.
(2) The Registrant, on behalf of the Funds, undertakes,
provided the information required by Item 5A is contained in the latest annual
report to shareholders, to furnish to each person to whom a prospectus has been
delivered, upon their request and without charge, a copy of the Registrant's
latest annual report to shareholders.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to its Registration Statement on Form N-1A to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York and the State of New York on the 20th 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 Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
/s/ Fergus Reid, III Chairman and Trustee December 20, 1995
- ---------------------
Fergus Reid, III
/s/ William J. Armstrong Trustee December 20, 1995
- ------------------------------
William J. Armstrong
/s/ John R.H. Blum Trustee December 20, 1995
- ------------------
John R.H. Blum
/s/ Joseph J. Harkins Trustee December 20, 1995
- -------------------------------
Joseph J. Harkins
/s/ Richard E. Ten Haken Trustee December 20, 1995
- ------------------------
Richard E. Ten Haken
/s/ Stuart W. Cragin, Jr. Trustee December 20, 1995
- -------------------------
Stuart W. Cragin, Jr.
/s/ Irv Thode Trustee December 20, 1995
- -------------------------
Irv Thode
President
/s/ H. Richard Vartabedian and Trustee December 20, 1995
- -------------------------------
H. Richard Vartabedian
Treasurer and
/s/ Martin R. Dean Principal Financial December 20, 1995
- ---------------------- Officer
Martin R. Dean
*By:
Attorney-in-Fact
C-8
<PAGE>
EXHIBIT INDEX
Exhibit
Number
1(b) Certificate of Amendment to Declaration of Trust dated December 14, 1995.
1(c) Certificate of Amendment to Declaration of Trust dated October 19, 1995.
1(d) Certificate of Amendment to Declaration of Trust dated July 25, 1993.
5(d) Form of Interim Investment Advisory Agreement.
5(e) Form of Proposed Investment Advisory Agreement.
5(f) Form of Proposed Sub-Advisory Agreement between The Chase Manhattan Bank
and Chase Asset Management, Inc.
5(g) Form of Administration Agreement.
5(h) Form of Proposed Investment Subadvisory Agreement between The Chase
Manhattan Bank and [Chase Asset Management, Inc./Van Deventer & Hoch].
6(b) Distribution and Sub-Administration Agreement dated August 21, 1995.
7(a) Retirement Plan for Eligible Trustees.
7(b) Deferred Compensation Plan for Eligible Trustees.
9(e) Form of Shareholder Servicing Agreement.
9(f) Agreement and Plan of Reorganization and Liquidation.
10 Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel.
11 Consent of KPMG Peat Marwick, LLP.
15(g) Proposed Rule 12b-1 Distribution Plan - Class A Shares - Vista American
Value Fund (including forms of Selected Dealer Agreement and Shareholder
Servicing Agreement).
15(h) Rule 12b-1 Distribution Plan - Class B Shares (including forms of Selected
Dealer Agreement and Shareholder Servicing Agreement).
18 Form of Rule 18f-3 Multi-Class Plan.
Exhibit 1(b)
Certificate of Amendment to Declaration of Trust dated December 14, 1995
MUTUAL FUND GROUP
CERTIFICATION OF AMENDMENT
TO DECLARATION OF TRUST
The undersigned, constituting a majority of the Trustees of Mutual
Fund Group (the "Trust"), a business trust organized under the laws of the
Commonwealth of Massachusetts pursuant to a Declaration of Trust dated May 11,
1987, as amended and restated as of August 18, 1987, and as amended July 25,
1993 (the "Declaration"), do hereby certify, as provided by the provisions of
Section 9.3(d) of the Declaration, that in accordance with the provisions of the
second sentence of Section 9.3(a), a majority of the Trustees of the Trust, by
vote duly adopted by a majority of the Trustees on December 14, 1995 amended the
Declaration to amend Appendix I in its entirety to read as attached hereto.
This document may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this certificate
this 14th day of December, 1995.
__________________________________ ________________________________
Fergus Reid, III William J. Armstrong
__________________________________ ________________________________
John R.H. Blum Stuart W. Cragin, Jr.
__________________________________ ________________________________
Joseph J. Harkins Richard E. Ten Haken
__________________________________ ________________________________
Irv. L. Thode H. Richard Vartabedian
<PAGE>
Appendix I
MUTUAL FUND GROUP
Designation of Series of Shares of
Beneficial Interest (without par value)
Pursuant to Section 6.9 of the Declaration of Trust, dated May 11,
1987, as amended and restated as of August 18, 1987, and as amended July 25,
1993 (the "Declaration of Trust"), of the Mutual Fund Group (the "Trust"), the
Trustees of the Trust hereby designate series of Shares (as defined in the
Declaration of Trust), such series to have the following special and relative
rights:
1. The series shall be respectively designated as follows:
Vista U.S. Government Income Fund
Vista Balanced Fund
Vista Equity Income Fund
Vista Bond Fund
Vista Short Term Bond Fund
Vista Equity Fund
Vista Growth and Income Fund
Vista Capital Growth Fund
Vista International Equity Fund
Vista Global Fixed Income Fund
Vista IEEE Balanced Fund
Vista Small Cap Equity Fund
Vista Southeast Asian Fund
Vista Japan Fund
Vista European Fund
When Shares of any of the above series are made available to customers
of an entity with which the Trust has entered into a shareholder servicing or
similar agreement, such series may be referred to by the designation set forth
above with an identifying prefix other than the word "Vista," to denote the
services being offered by that entity to its customers who own Shares of that
series.
2. Each series shall be authorized to invest in cash,
securities, instruments, and other property as from time to time described in
the Trust's then currently effective registration statement under the Securities
Act of 1933 to the extent pertaining to the offering of Shares of such series.
Each Share of each series shall be redeemable, shall be entitled to one vote or
fraction thereof in respect of a fractional share on matters on which shares of
that series shall be entitled to vote, shall represent a pro rata beneficial
interest in the assets
<PAGE>
allocated or belonging to such series, and shall be entitled to receive its pro
rata share of the net assets of such series upon liquidation of the series, all
as provided in Section 6.9 of the Declaration of Trust.
3. Shareholders of each series shall vote separately as a class
on any matter to the extent required by, and any matter shall be deemed to have
been effectively acted upon with respect to such series as provided in, Rule
18f-2, as from time to time in effect, under the Investment Company Act of 1940,
as amended, or any successor rule, and by the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated
among these series as set forth in Section 6.9 of the Declaration of Trust.
5. Subject to the provisions of Section 6.9 and Article IX of
the Declaration of Trust, the Trustees (including any successor Trustees) shall
have the right at any time and from time to time to reallocate assets and
expenses or to change the designation of any series now or hereafter created, or
to otherwise change the special and relative rights of any such series.
Exhibit 1(c)
Certificate of Amendment to Declaration of Trust dated October 19, 1995
MUTUAL FUND GROUP
CERTIFICATION OF AMENDMENT
TO DECLARATION OF TRUST
The undersigned, constituting a majority of the Trustees of Mutual
Fund Group (the "Trust"), a business trust organized under the laws of the
Commonwealth of Massachusetts pursuant to a Declaration of Trust dated May 11,
1987, as amended and restated as of August 18, 1987, and as amended July 25,
1993 (the "Declaration"), do hereby certify, as provided by the provisions of
Section 9.3(d) of the Declaration, that in accordance with the provisions of the
second sentence of Section 9.3(a), a majority of the Trustees of the Trust, by
vote duly adopted by a majority of the Trustees on October 19, 1995, amended the
Declaration to amend Appendix I in its entirety to read as attached hereto.
This document may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this certificate
this 19th day of October, 1995.
_______________________________________ ____________________________________
Fergus Reid, III William J. Armstrong
_______________________________________ ____________________________________
John R.H. Blum Stuart W. Cragin, Jr.
_______________________________________ ____________________________________
Joseph J. Harkins Richard E. Ten Haken
_______________________________________ ____________________________________
Irv. L. Thode H. Richard Vartabedian
<PAGE>
Appendix I
MUTUAL FUND GROUP
Designation of Series of Shares of
Beneficial Interest (without par value)
Pursuant to Section 6.9 of the Declaration of Trust, dated May 11,
1987, as amended and restated as of August 18, 1987, and as amended July 25,
1993 (the "Declaration of Trust"), of the Mutual Fund Group (the "Trust"), the
Trustees of the Trust hereby designate series of Shares (as defined in the
Declaration of Trust), such series to have the following special and relative
rights:
1. The series shall be respectively designated as follows:
Vista U.S. Government Income Fund
Vista Balanced Fund
Vista Equity Income Fund
Vista Bond Fund
Vista Short Term Bond Fund
Vista Equity Fund
Vista Growth and Income Fund
Vista Capital Growth Fund
Vista International Equity Fund
Vista Global Fixed Income Fund
Vista IEEE Balanced Fund
Vista Small Cap Equity Fund
Vista Asian Oceanic Shares Fund
Vista Japan Pacific Shares Fund
Vista European Shares Fund
When Shares of any of the above series are made available to customers
of an entity with which the Trust has entered into a shareholder servicing or
similar agreement, such series may be referred to by the designation set forth
above with an identifying prefix other than the word "Vista," to denote the
services being offered by that entity to its customers who own Shares of that
series.
2. Each series shall be authorized to invest in cash,
securities, instruments, and other property as from time to time described in
the Trust's then currently effective registration statement under the Securities
Act of 1933 to the extent pertaining to the offering of Shares of such series.
Each Share of each series shall be redeemable, shall be entitled to one vote or
fraction thereof in respect of a fractional share on matters on which shares of
that series shall be entitled to vote, shall represent a pro rata beneficial
interest in the assets allocated or belonging to such series, and shall be
entitled to receive its pro rata
- 2 -
<PAGE>
share of the net assets of such series upon liquidation of the series, all as
provided in Section 6.9 of the Declaration of Trust.
3. Shareholders of each series shall vote separately as a class
on any matter to the extent required by, and any matter shall be deemed to have
been effectively acted upon with respect to such series as provided in, Rule
18f-2, as from time to time in effect, under the Investment Company Act of 1940,
as amended, or any successor rule, and by the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated
among these series as set forth in Section 6.9 of the Declaration of Trust.
5. Subject to the provisions of Section 6.9 and Article IX of
the Declaration of Trust, the Trustees (including any successor Trustees) shall
have the right at any time and from time to time to reallocate assets and
expenses or to change the designation of any series now or hereafter created, or
to otherwise change the special and relative rights of any such series.
- 3 -
Exhibit 1(d)
Certificate of Amendment to Declaration of Trust dated July 25, 1993
MUTUAL FUND GROUP
CERTIFICATION OF AMENDMENT
TO DECLARATION OF TRUST
The undersigned, constituting a majority of the Trustees of Mutual
Fund Group (the "Trust"), a business trust organized under the laws of the
Commonwealth of Massachusetts pursuant to a Declaration of Trust dated May 11,
1987, as amended and restated as of August 18, 1987 (the "Declaration"), do
hereby certify, as provided by the provisions of Section 9.3(d) of the
Declaration, that in accordance with the provisions of the second sentence of
Section 9.3(a), a majority of the Trustees of the Trust, by vote duly adopted by
a majority of the trustees on July 25, 1993, amended the Declaration as follows:
1. The paragraph prior to Section 6.9(a) is amended to read in its
entirety:
"Section 6.9. Series Designation. As set forth in Appendix I hereto,
the Trustees have authorized the division of Shares into series, as
designated and established pursuant to the provisions of Appendix I
and this Section 6.9. The Trustees, in their discretion, may authorize
the division of Shares into one or more additional series, and the
different series shall be established and designated, and the
variations in the relative rights, privileges and preferences as
between the different series shall be fixed and determined by the
Trustees upon and subject to the following provisions:"
2. Appendix I is amended in its entirety to read as attached hereto.
IN WITNESS WHEREOF, the undersigned have executed this certificate
this 25th day of July, 1993.
/s/ /s/
Fergus Reid, III William J. Armstrong
/s/ /s/
John R.H. Blum Joseph J. Harkins
/s/ /s/
Richard E. Ten Haken H. Richard Vartabedian
<PAGE>
Appendix I
MUTUAL FUND GROUP
Designation of Series of Shares of
Beneficial Interest (without par value)
Pursuant to Section 6.9 of the Declaration of Trust, dated May 11,
1987, as amended and restated as of August 18, 1987 (the "Declaration of
Trust"), of the Mutual Fund Group (the "Trust"), the Trustees of the Trust
hereby designate series of Shares (as defined in the Declaration of Trust), such
series to have the following special and relative rights:
1. The series shall be respectively designated as follows:
Vista U.S. Government Money Market Fund
Vista Global Money Market Fund
Vista Tax Free Money Market Fund
Vista California Tax Free Money Market Fund
Vista New York Tax Free Money Market Fund
Vista U.S. Government Income fund
Vista Tax Free Income Fund
Vista New York Tax Free Income Fund
Vista Growth and Income Fund
Vista Capital Growth Fund
Vista Equity Fund
Vista Bond Fund
Vista Short-Term Bond fund
Vista California Intermediate Tax Free Fund
Vista Equity Income Fund
Vista Balanced Fund
Vista IEEE Balanced Fund
Vista International Equity Fund
Vista Global Fixed Income Fund
When Shares of any of the above series are made available to customers
of an entity with which the Trust has entered into a shareholder servicing or
similar agreement, such series may be referred to by the designation set forth
above with an identifying prefix other than the word "Vista," to denote the
services being offered by that entity to its customers who own Shares of that
series.
2. Each series shall be authorized to invest in cash, securities,
instruments, and other property as from time to time described in the Trust's
then currently effective registration statement under the Securities Act of 1933
to the extent pertaining to the offering of Shares of such series. Each Share of
each series shall be redeemable, shall be entitled to
-1-
<PAGE>
one vote or fraction thereof in respect of a fractional share on matters on
which shares of that series shall be entitled to vote, shall represent a pro
rata beneficial interest in the assets allocated or belonging to such series,
and shall be entitled to receive its pro rata share of the net assets of such
series upon liquidation of the series, all as provided in Section 6.9 of the
Declaration of Trust.
3. Shareholders of each series shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to such series as provided in, Rule 18f-2,
as from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rule, and by the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated among
these series as set forth in Section 6.9 of the Declaration of Trust.
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall have
the right at any time and from time to time to reallocate assets and expenses or
to change the designation of any series now or hereafter created, or to
otherwise change the special and relative rights of any such series.
-2-
Exhibit 5(d)
Form of Interim Investment Advisory Agreement
FORM OF
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this day of , by and between MUTUAL FUND
(the "Trust") on behalf of the series of the Trust
(the "Fund") and THE CHASE MANHATTAN BANK, a New York State chartered banking
corporation (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Trust is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as amended (the
"Act"); and
WHEREAS, the Trust and the Adviser desire to enter into an agreement to
provide advisory services for the Fund on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. Appointment. The Adviser agrees, all as more fully set
forth herein, to act as investment adviser to the Fund with respect to
the investment of its assets and to supervise and arrange the purchase
of securities for and the sale of securities held in the portfolio of
the Fund.
2. Duties and Obligations of the Adviser With Respect
to Investments of Assets of the Fund.
(a) Subject to the succeeding provisions of this
section and subject to the direction and control of the Board
of Trustees of the Trust, the Adviser shall:
(i) supervise continuously the investment
program of the Fund and the composition of its
portfolio;
(ii) determine what securities shall be
purchased or sold by the Fund; and
(iii) arrange for the purchase and the sale
of securities held in the portfolio of the Fund.
(b) Any investment program furnished by the Adviser
under this section shall at all times conform to, and be in
accordance with, any requirements imposed by:
<PAGE>
(i) the provisions of the Act and of any
rules or regulations in force thereunder;
(ii) any other applicable provisions of
state and federal law;
(iii) the provisions of the Declaration of
Trust and By-Laws of the Trust, as amended from
time to time;
(iv) any policies and determinations of the
Board of Trustees of the Trust; and
(v) the fundamental policies of the Fund, as
reflected in its Registration Statement under the
Act, as amended from time to time.
(c) In making recommendations for the Fund, Trust
Division personnel of the Adviser will not inquire or take
into consideration whether the issuer of securities proposed
for purchase or sale for the Fund's account are customers of
the Commercial Division of the Adviser. In dealing with
commercial customers, the Commercial Division will not inquire
or take into consideration whether securities of those
customers are held by the Fund.
(d) The Adviser shall give the Fund the benefit of
its best judgment and effort in rendering services hereunder,
but the Adviser shall not be liable for any loss sustained by
the Fund in connection with the matters to which this
Agreement relates, including specifically but not limited to,
the calculation of net asset value and the adoption of any
investment policy or the purchase, sale or retention of any
security, whether or not such purchase, sale or retention
shall have been based upon its own investigation and research
or upon investigation and research made by any other
individual, firm or corporation, if such purchase, sale or
retention shall have been made and such other individual, firm
or corporation shall have been selected in good faith. Nothing
herein contained shall, however, be construed to protect the
Adviser against any liability to the Fund or its security
holders by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations and duties under
this Agreement.
(e) Nothing in this Agreement shall prevent the
Adviser or any affiliated person (as defined in the Act) of
the Adviser from acting as investment adviser or manager for
any other person, firm or corporation (including other
investment companies) and shall not in
- 2 -
<PAGE>
any way limit or restrict the Adviser or any such affiliated
person from buying, selling or trading any securities for its
or their own accounts or for the accounts of others for whom
it or they may be acting; provided, however, that the Adviser
expressly represents that it will undertake no activities
which, in its judgment, will adversely affect the performance
of its obligations to the Fund under this Agreement.
(f) The Fund will supply the Adviser with certified
copies of the following documents: (i) the Trust's Declaration
of Trust and By-Laws, as amended; (ii) resolutions of the
Trust's Board of Trustees and shareholders authorizing the
appointment of the Adviser and approving this Agreement; (iii)
the Trust's Registration Statement, as filed with the SEC; and
(iv) the Fund's most recent prospectus and statement of
additional information. The Fund will furnish the Adviser from
time to time with copies of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports
filed with the SEC.
(g) The Fund will supply, or cause its custodian bank
to supply, to the Adviser such financial information as is
necessary or desirable for the functions of the Adviser
hereunder.
3. Broker-Dealer Relationships. The Adviser is responsible for
decisions to buy and sell securities for the Fund, broker-dealer
selection and negotiation of its brokerage commission rates. The
Adviser's primary consideration in effecting a security transaction
will be execution at the most favorable price. The Fund understands
that a substantial majority of the Fund's portfolio transactions will
be transacted with primary market makers acting as principal on a net
basis, with no brokerage commissions being paid by the Fund. Such
principal transactions may, however, result in a profit to the market
makers. In certain instances the Adviser may make purchases of
underwritten issues at prices which include underwriting fees. In
selecting a broker or dealer to execute each particular transaction,
the Adviser will take the following into consideration; the best price
available; the reliability, integrity and financial condition of the
broker or dealer; the size of and difficulty in executing the order;
and the value of the expected contribution of the broker or dealer to
the investment performance of the Fund on a continuing basis.
Accordingly, the price to the Fund in any transaction may be less
favorable than that available from another broker or dealer if the
difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies as the Board of
Trustees may determine, the Adviser shall not be deemed to have acted
unlawfully or to have breached any duty
- 3 -
<PAGE>
created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides brokerage and
research services to the Adviser an amount of commission for effecting
a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting
that transaction, if the Adviser determines in good faith that such
amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Adviser's
overall responsibilities with respect to the Fund. The Adviser is
further authorized to allocate the orders placed by it on behalf of the
Fund to such brokers and dealers who also provide research or
statistical material, or other services to the Fund (which material or
services may also assist the Adviser in rendering services to other
clients). Such allocation shall be in such amounts and proportions as
the Adviser shall determine and the Adviser will report on said
allocations regularly to the Board of Trustees indicating the brokers
to whom such allocations have been made and the basis therefor.
4. Allocation of Expenses. The Adviser agrees that it will
furnish the Fund, at its expense, all office space and facilities,
equipment and clerical personnel necessary for carrying out its duties
under this Agreement and the keeping of certain accounting records of
the Fund. The Adviser agrees that it will supply to any sub-adviser or
administrator (the "Administrator") of the Fund all necessary financial
information in connection with the Administrator's duties under any
Agreement between the Administrator and the Trust. The Adviser will
also pay all compensation of all Trustees, officers and employees of
the Fund who are "affiliated persons" of the Adviser as defined in the
Act. All costs and expenses not expressly assumed by the Adviser under
this Agreement or by the Administrator under the administration
agreement between it and the Trust shall be paid by the Fund,
including, but not limited to (i) fees paid to the Adviser and the
Administrator; (ii) interest and taxes; (iii) brokerage commissions;
(iv) insurance premiums; (v) compensation and expenses of its Trustees
other than those affiliated with the Adviser or the Administrator; (vi)
legal, accounting and audit expenses; (vii) custodian and transfer
agent, or shareholder servicing agent, fees and expenses; (viii)
expenses, including clerical expenses, incident to the issuance,
redemption or repurchase of shares, including issuance on the payment
of, or reinvestment of, dividends; (ix) fees and expenses incident to
the registration under Federal or state securities laws of the Fund or
its shares; (x) expenses of preparing, setting in type, printing and
mailing prospectuses, statements of additional information, reports and
notices and proxy material to shareholders of the Fund;
- 4 -
<PAGE>
(xi) all other expenses incidental to holding meetings of the Fund's
shareholders; and (xii) such extraordinary expenses as may arise,
including litigation affecting the Fund and the legal obligations which
the Trust may have to indemnify its officers and Trustees with respect
thereto.
5. Compensation of the Adviser. (a) For the services to be
rendered and the expenses assumed by the Adviser, the Fund shall pay to
the Adviser monthly compensation at an annual rate, of % of the Fund's
average daily net assets, as set forth in Schedule A. Except as
hereinafter set forth, compensation under this Agreement shall be
calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If the Agreement becomes effective subsequent to
the first day of a month or shall terminate before the last day of a
month, compensation for that part of the month this Agreement is in
effect shall be prorated in a manner consistent with the calculation of
the fees as set forth above. Subject to the provisions of subsection
(b) hereof, payment of the Adviser's compensation for the preceding
month shall be made as promptly as possible after completion of the
computations contemplated by subsection (b) hereof.
(b) In the event the operating expenses of the Fund
including all investment advisory, sub-advisory and
administration fees, for any fiscal year ending on a date on
which this Agreement is in effect exceed the expense
limitations applicable to the Fund imposed by the securities
laws or regulations thereunder of any state in which the
Fund's shares are qualified for sale, as such limitations may
be raised or lowered from time to time, the Adviser shall
reduce its investment advisory fee, but not below zero, to the
extent of its share of such excess expenses; provided,
however, there shall be excluded from such expenses the amount
of any interest, taxes, brokerage commissions and
extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any
indemnification related thereto) paid or payable by the Fund.
Such reduction, if any, shall be computed and accrued daily,
shall be settled on a monthly basis and shall be based upon
the expense limitation applicable to the Fund as at the end of
the last business day of the month. Should two or more of such
expense limitations be applicable as at the end of the last
business day of the month, that expense limitation which
results in the largest reduction in the Adviser's fee shall be
applicable. For the purposes of this paragraph, the Adviser's
share of any excess expenses shall be computed by multiplying
such excess expenses by a fraction, the numerator of which is
the amount of the investment advisory fee which would
otherwise be payable to the Adviser for such fiscal year were
it not
- 5 -
<PAGE>
for this subsection 5(b) and the denominator of which is the
sum of all investment advisory and administrative fees which
would otherwise be payable by the Fund were it not for the
expense limitation provisions of any investment advisory or
administrative agreement to which the Fund is a party.
6. Duration, Amendment and Termination. (a) This Agreement
shall go into effect as to the Fund on the date set forth above (the
"Effective Date") and shall, unless terminated as hereinafter provided,
continue in effect for two years from the Effective Date and shall
continue from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the Board of
Trustees of the Trust, including the vote of a majority of the Trustees
who are not parties to this Agreement or "interested persons" (as
defined in the Act) of any such party cast in person at a meeting
called for the purpose of voting on such approval, or by the vote of
the holders of a "majority" (as so defined) of the outstanding voting
securities of the Fund and by such a vote of the Trustees.
(b) This Agreement may not be amended except in
accordance with the provisions of the Act, including
specifically, the provisions of the Act and the rules and
regulations thereunder regarding series votes by shareholders
of the Fund.
(c) This Agreement may be terminated by the Adviser
at any time without penalty upon giving the Fund sixty (60)
days' written notice (which notice may be waived by the Fund)
and may be terminated by the Fund at any time without penalty
upon giving the Adviser sixty (60) days' written notice (which
notice may be waived by the Adviser), provided that such
termination by the Fund shall be approved by the vote of a
majority of all the Trustees in office at the time or by the
vote of the holders of a majority (as defined in the Act) of
the voting securities of the Fund at the time outstanding and
entitled to vote. This Agreement may only be terminated in
accordance with the provisions of the Act, and shall
automatically terminate in the event of its assignment (as
defined in the Act).
7. Board of Trustees Meeting. The Fund agrees that notice of
each meeting of the Board of Trustees of the Trust will be sent to the
Adviser and that the Fund will make appropriate arrangements for the
attendance (as persons present by invitation) of such person or persons
as the Adviser may designate.
- 6 -
<PAGE>
8. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other
party at such address as such other party may designate for the receipt
of such notice. Until further notice to the other party, it is agreed
that the address of the Fund for this purpose shall be 125 West 55th
Street, New York, New York 10019, and that of the Adviser shall be One
Chase Manhattan Plaza, New York, New York 10081.
9. Questions of Interpretation. Any question of interpretation
of any term or provision of this Agreement having a counterpart in or
otherwise derived from a term or provision of the Act, as amended,
shall be resolved by reference to such term or provision of the Act and
to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules,
regulations or orders of the Securities and Exchange Commission issued
pursuant to said Act. In addition, where the effect of a requirement of
the Act, reflected in any provision of this Agreement is revised by
rule, regulation or order of the Securities and Exchange Commission,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers and their seals to
be hereunder affixed, all as of the day and year first above written.
MUTUAL FUND
Name:
Title:
ATTEST:
THE CHASE MANHATTAN BANK
Name:
Title:
ATTEST:
- 7 -
Exhibit 5(e)
Form of Proposed Investment Advisory Agreement
FORM OF
PROPOSED
INVESTMENT ADVISORY AGREEMENT
BETWEEN
MUTUAL FUND GROUP
AND
THE CHASE MANHATTAN BANK
AGREEMENT made this day of , 1996, by and between Mutual Fund Group, a
Massachusetts business trust which may issue one or more series of shares
(hereinafter the "Trust"), and The Chase Manhattan Bank, a New York state
chartered bank (hereinafter the "Adviser").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services in connection with the series of the Trust listed on Schedule
A (each, a "Fund" and collectively, the "Funds"), and the Adviser represents
that it is willing and possesses legal authority to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Structure of Agreement. The Trust is entering into this Agreement
on behalf of the Funds severally and not jointly. The responsibilities and
benefits set forth in this Agreement shall refer to each Fund severally and not
jointly. No individual Fund shall have any responsibility for any obligation
with respect to any other Fund arising out of this Agreement. Without otherwise
limiting the generality of the foregoing,
(a) any breach of any term of this Agreement regarding the Trust with
respect to any one Fund shall not create a right or obligation
with respect to any other Fund;
(b) under no circumstances shall the Adviser have the right to set
off claims relating to a Fund by applying property of any other
Fund; and
(c) the business and contractual relationships created by this
Agreement, the consideration for entering into this Agreement,
and the consequences of such
<PAGE>
relationships and consideration relate solely to the Trust and
the particular Fund to which such relationship and consideration
applies.
2. Delivery of Documents. The Trust has delivered to the Adviser
copies of each of the following documents and will deliver to it all future
amendments and supplements thereto, if any:
(a) The Trust's Declaration of Trust;
(b) The By-Laws of the Trust;
(c) Resolutions of the Board of Trustees of the Trust authorizing the
execution and delivery of this Agreement;
(d) The Trust's Registration Statement under the Securities Act of
1933, as amended (the "1933 Act"), and the Investment Company Act
of 1940, as amended (the "1940 Act"), on Form N-1A as filed with
the Securities and Exchange Commission (the "Commission") on July
18, 1994 and all subsequent amendments thereto relating to the
Funds (the "Registration Statement");
(e) Notification of Registration of the Trust under the 1940 Act on
Form N-8A as filed with the Commission; and
(f) Prospectuses and Statements of Additional Information of the
Funds (collectively, the "Prospectuses").
3. Appointment.
(a) General. The Trust hereby appoints the Adviser to act as
investment adviser to the Funds for the period and on the terms
set forth in this Agreement. The Adviser accepts such appointment
and agrees to furnish the services herein set forth for the
compensation herein provided.
(b) Employees of Affiliates. The Adviser may, in its discretion,
provide such services through its own employees or the employees
of one or more affiliated companies that are qualified to act as
an investment adviser to the Trust under applicable laws and are
under the control of The Chase Manhattan Corporation, the parent
of the Adviser; provided that (i) all persons, when providing
services hereunder, are functioning as part of an organized group
of persons, and (ii) such organized group of persons is managed
at all times by authorized officers of the Adviser.
-2-
<PAGE>
(c) Sub-Advisers. It is understood and agreed that the Adviser may
from time to time employ or associate with such other entities or
persons as the Adviser believes appropriate to assist in the
performance of this Agreement with respect to a particular Fund
or Funds (each a "Sub-Adviser"), and that any such Sub-Adviser
shall have all of the rights and powers of the Adviser set forth
in this Agreement; provided that a Fund shall not pay any
additional compensation for any Sub- Adviser and the Adviser
shall be as fully responsible to the Trust for the acts and
omissions of the Sub-Adviser as it is for its own acts and
omissions; and provided further that the retention of any
Sub-Adviser shall be approved in advance by (i) the Board of
Trustees of the Trust and (ii) the shareholders of the relevant
Fund if required under any applicable provisions of the 1940 Act.
The Adviser will review, monitor and report to the Trust's Board
of Trustees regarding the performance and investment procedures
of any Sub-Adviser. In the event that the services of any
Sub-Adviser are terminated, the Adviser may provide investment
advisory services pursuant to this Agreement to the Fund without
a Sub-Adviser and without further shareholder approval, to the
extent consistent with the 1940 Act. A Sub-Adviser may be an
affiliate of the Adviser.
4. Investment Advisory Services.
(a) Management of the Funds. The Adviser hereby undertakes to act as
investment adviser to the Funds. The Adviser shall regularly
provide investment advice to the Funds and continuously supervise
the investment and reinvestment of cash, securities and other
property composing the assets of the Funds and, in furtherance
thereof, shall:
(i) supervise all aspects of the operations of the Trust and
each Fund;
(ii) obtain and evaluate pertinent economic, statistical and
financial data, as well as other significant events and
developments, which affect the economy generally, the Funds'
investment programs, and the issuers of securities included
in the Funds' portfolios and the industries in which they
engage, or which may relate to securities or other
investments which the Adviser may deem desirable for
inclusion in a Fund's portfolio;
(iii) determine which issuers and securities shall be included in
the portfolio of each Fund;
(iv) furnish a continuous investment program for each Fund;
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<PAGE>
(v) in its discretion and without prior consultation with the
Trust, buy, sell, lend and otherwise trade any stocks, bonds
and other securities and investment instruments on behalf of
each Fund; and
(vi) take, on behalf of each Fund, all actions the Adviser may
deem necessary in order to carry into effect such investment
program and the Adviser's functions as provided above,
including the making of appropriate periodic reports to the
Trust's Board of Trustees.
(b) Covenants. The Adviser shall carry out its investment advisory
and supervisory responsibilities in a manner consistent with the
investment objectives, policies, and restrictions provided in:
(i) each Fund's Prospectus and Statement of Additional
Information as revised and in effect from time to time; (ii) the
Company's Trust Instrument, By-Laws or other governing
instruments, as amended from time to time; (iii) the 1940 Act;
(iv) other applicable laws; and (v) such other investment
policies, procedures and/or limitations as may be adopted by the
Company with respect to a Fund and provided to the Adviser in
writing. The Adviser agrees to use reasonable efforts to manage
each Fund so that it will qualify, and continue to qualify, as a
regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended, and regulations issued
thereunder (the "Code"), except as may be authorized to the
contrary by the Company's Board of Trustees. The management of
the Funds by the Adviser shall at all times be subject to the
review of the Company's Board of Trustees.
(c) Books and Records. The Adviser shall keep each Fund's books and
records required by applicable law to be maintained by the Funds
with respect to advisory services. The Adviser agrees that all
records which it maintains for a Fund are the property of the
Fund and it will promptly surrender any of such records to the
Fund upon the Fund's request. The Adviser further agrees to
preserve for the periods prescribed by the 1940 Act any such
records of the Fund required to be preserved by such Rule.
(d) Reports, Evaluations and other services. The Adviser shall
furnish reports, evaluations, information or analyses to the
Trust with respect to the Funds and in connection with the
Adviser's services hereunder as the Trust's Board of Trustees may
request from time to time or as the Adviser may otherwise deem to
be desirable. The Adviser shall make recommendations to the
Trust's Board of Trustees with respect to Trust policies, and
shall carry out such policies as are adopted by the Board of
Trustees. The Adviser shall, subject to review by the Board of
Trustees, furnish such other services as the Adviser shall from
time to time determine to be necessary or useful to perform its
obligations under this Agreement.
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<PAGE>
(e) Purchase and Sale of Securities. The Adviser shall place all
orders for the purchase and sale of portfolio securities for each
Fund with brokers or dealers selected by the Adviser, which may
include brokers or dealers affiliated with the Adviser to the
extent permitted by the 1940 Act and the Trust's policies and
procedures applicable to the Funds. The Adviser shall use its
best efforts to seek to execute portfolio transactions at prices
which, under the circumstances, result in total costs or proceeds
being the most favorable to the Funds. In assessing the best
overall terms available for any transaction, the Adviser shall
consider all factors it deems relevant, including the breadth of
the market in the security, the price of the security, the
financial condition and execution capability of the broker or
dealer, research services provided to the Adviser, and the
reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. In no event shall the
Adviser be under any duty to obtain the lowest commission or the
best net price for any Fund on any particular transaction, nor
shall the Adviser be under any duty to execute any order in a
fashion either preferential to any Fund relative to other
accounts managed by the Adviser or otherwise materially adverse
to such other accounts.
(f) Selection of Brokers or Dealers. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers
may be selected who also provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) to the Adviser, the Funds and/or the other
accounts over which the Adviser exercises investment discretion.
The Adviser is authorized to pay a broker or dealer who provides
such brokerage and research services a commission for executing a
portfolio transaction for a Fund which is in excess of the amount
of commission another broker or dealer would have charged for
effecting that transaction if the Adviser determines in good
faith that the total commission is reasonable in relation to the
value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular
transaction or the overall responsibilities of the Adviser with
respect to accounts over which it exercises investment
discretion. The Adviser shall report to the Board of Trustees of
the Trust regarding overall commissions paid by the Funds and
their reasonableness in relation to the benefits to the Funds.
(g) Aggregation of Securities Transactions. In executing portfolio
transactions for a Fund, the Adviser may, to the extent permitted
by applicable laws and regulations, but shall not be obligated
to, aggregate the securities to be sold or purchased with those
of other Funds or its other clients if, in the Adviser's
reasonable judgment, such aggregation (i) will result in an
overall economic benefit to the Fund, taking into consideration
the advantageous selling or purchase price, brokerage commission
and other expenses, and trading requirements, and (ii) is not
inconsistent with the policies set forth in the
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<PAGE>
Trust's registration statement and the Fund's Prospectus and
Statement of Additional Information. In such event, the Adviser
will allocate the securities so purchased or sold, and the
expenses incurred in the transaction, in an equitable manner,
consistent with its fiduciary obligations to the Fund and such
other clients.
5. Expenses. (a) The Adviser shall, at its expense, provide the Funds
with office space, furnishings and equipment and personnel required by it to
perform the services to be provided by the Adviser pursuant to this Agreement.
The Adviser also hereby agrees that it will supply to any sub-adviser or
administrator (the "Administrator") of a Fund all necessary financial
information in connection with the Administrator's duties under any Agreement
between the Administrator and the Trust.
(b) Except as provided in subparagraph (a), the Trust shall be
responsible for all of the Funds' expenses and liabilities, including, but not
limited to, taxes; interest; fees (including fees paid to its trustees who are
not affiliated with the Adviser or any of its affiliates); fees payable to the
Securities and Exchange Commission; state securities qualification fees;
association membership dues; costs of preparing and printing Prospectuses for
regulatory purposes and for distribution to existing shareholders; advisory and
administration fees; charges of the custodian and transfer agent; insurance
premiums; auditing and legal expenses; costs of shareholders' reports and
shareholders' meetings; any extraordinary expenses; and brokerage fees and
commissions, if any, in connection with the purchase or sale of portfolio
securities.
6. Compensation. (a) In consideration of the services to be rendered
by the Adviser under this Agreement, the Trust shall pay the Adviser monthly
fees on the first Business Day (as defined in the Prospectuses) of each month
based upon the average daily net assets of each Fund during the preceding month
(as determined on the days and at the time set forth in the Prospectuses for
determining net asset value per share) at the annual rate set forth opposite the
Fund's name on Schedule A attached hereto. If the fees payable to the Adviser
pursuant to this paragraph begin to accrue before the end of any month or if
this Agreement terminates before the end of any month, the fees for the period
from such date to the end of such month or from the beginning of such month to
the date of termination, as the case may be, shall be prorated according to the
proportion which such period bears to the full month in which such effectiveness
or termination occurs. For purposes of calculating each such monthly fee, the
value of the Funds' net assets shall be computed in the manner specified in the
Prospectuses and the Articles for the computation of the value of the Funds' net
assets in connection with the determination of the net asset value of shares of
the Funds' capital stock.
(b) If the aggregate expenses incurred by, or allocated to, each Fund
in any fiscal year shall exceed the lowest expense limitation, if applicable to
such Fund, imposed by state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, the Adviser shall reduce
its investment advisory fee, but not below zero, to the
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<PAGE>
extent of its share of such excess expenses; provided, however, there shall be
excluded from such expenses the amount of any interest, taxes, brokerage
commissions and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Such reduction, if any, shall be computed
and accrued daily, shall be settled on a monthly basis and shall be based upon
the expense limitation applicable to the Fund as at the end of the last business
day of the month. Should two or more of such expense limitations be applicable
at the end of the last business day of the month, that expense limitation which
results in the largest reduction in the Adviser's fee shall be applicable. For
the purposes of this paragraph, the Adviser's share of any excess expenses shall
be computed by multiplying such excess expenses by a fraction, the numerator of
which is the amount of the investment advisory fee which would otherwise be
payable to the Adviser for such fiscal year were it not for this subsection 6(b)
and the denominator of which is the sum of all investment advisory and
administrative fees which would otherwise be payable by the Fund were it not for
the expense limitation provisions of any investment advisory or administrative
agreement to which the Fund is a party.
(c) In consideration of the Adviser's undertaking to render the
services described in this Agreement, the Trust agrees that the Adviser shall
not be liable under this Agreement for any error of judgment or mistake of law
or for any act or omission or loss suffered by the Trust in connection with the
performance of this Agreement, provided that nothing in this Agreement shall be
deemed to protect or purport to protect the Investment Adviser against any
liability to the Trust or its stockholders to which the Adviser would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of the Adviser's duties under this Agreement or by reason of the
Adviser's reckless disregard of its obligations and duties hereunder or breach
of fiduciary duty with respect to receipt of compensation.
7. Non-Exclusive Services. Except to the extent necessary to perform
the Investment Adviser's obligations under this Agreement, nothing herein shall
be deemed to limit or restrict the right of the Adviser, or any affiliate of the
Adviser, including any employee of the Adviser, to engage in any other business
or to devote time and attention to the management or other aspects of any other
business, whether of a similar or dissimilar nature, or to render services of
any kind to any other corporation, firm, individual or association.
8. Effective Date; Modifications; Termination. This Agreement shall
become effective on the date hereof (the "Effective Date"), provided that it
shall have been approved by a majority of the outstanding voting securities of
each Fund, in accordance with the requirements of the 1940 Act, or such later
date as may be agreed by the parties following such shareholder approval.
(a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph, this Agreement shall continue in force for two years from the
Effective Date and
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<PAGE>
shall continue in effect from year to year thereafter, but only so long as the
continuance after such date shall be specifically approved at least annually by
vote of the Trustees of the Trust or by vote of a majority of the outstanding
voting securities of each Fund.
(b) This Agreement may be modified by mutual consent, such consent on
the part of the Trust to be authorized by vote of a majority of the outstanding
voting securities of each Fund.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this paragraph, the terms of any continuance or modification of this Agreement
must have been approved by the vote of a majority of those Trustees of the Trust
who are not parties to this Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
(d) Either party hereto may, at any time on sixty (60) days prior
written notice to the other, terminate this Agreement, without payment of any
penalty, by action of its Trustees or Board of Trustees, as the case may be, or
by action of its authorized officers or, with respect to a Fund, by vote of a
majority of the outstanding voting securities of that Fund. This Agreement may
remain in effect with respect to a Fund even if it has been terminated in
accordance with this paragraph with respect to the other Funds. This Agreement
shall terminate automatically in the event of its assignment as that term is
defined under the 1940 Act..
9. Board of Trustees Meetings. The Trust agrees that notice of each
meeting of the Board of Trustees of the Trust will be sent to the Adviser and
that the Trust will make appropriate arrangements for the attendance (as persons
present by invitation) of such person or persons as the Adviser may designate.
10. Governing Law. This Agreement shall be governed by the laws of the
State of New York.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, and their
respective seals to be hereunto affixed, all as of the date written above.
THE CHASE MANHATTAN BANK MUTUAL FUND GROUP
By: _________________________ By:_______________________
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<PAGE>
Schedule A
Fund: Fee:
1. Vista Short Term Bond Fund 0.25%
2. Vista U.S. Treasury Income Fund 0.30
3. Vista Bond Fund 0.30
4. Vista U.S. Government Securities Fund 0.30
5. Vista Equity Income Fund 0.40
6. Vista Large Cap Equity Fund 0.40
7. Vista Balanced Fund 0.50
8. Vista American Value 0.60
9. Vista Small Cap Equity Fund 0.65
10. Vista Southeast Asian Fund 1.00
11. Vista Japan Fund 1.00
12. Vista European Fund 1.00
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<PAGE>
Exhibit 5(f)
Form of Proposed Sub-Advisory Agreement between The
Chase Manhattan Bank and Chase Asset Management, Inc.
FORM OF
PROPOSED
INVESTMENT SUBADVISORY AGREEMENT
between
THE CHASE MANHATTAN BANK
and
CHASE ASSET MANAGEMENT, INC.
AGREEMENT made as of the ______ day of ___________, 1996, by and between The
Chase Manhattan Bank, a New York State chartered bank (the "Adviser"), and Chase
Asset Management, Inc., a [New York] corporation (the "Sub-Adviser").
WHEREAS, the Adviser is a registered investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Adviser provides investment advisory services to the
series of Mutual Fund Variable Annuity Trust, a Massachusetts business trust
(the "Trust"), an open-end, management investment company registered under the
Investment Trust Act of 1940, as amended (the "1940 Act") which serves as the
underlying investment for certain variable annuity contracts issued by insurance
company separate accounts, pursuant to an Investment Advisory Agreement dated
________, 1996 (the "Advisory Agreement"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish
investment subadvisory services in connection with the series of the Trust
listed on Schedule A (each, a "Portfolio" and collectively, the "Portfolios"),
and the Sub-Adviser represents that it is willing and possesses legal authority
to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment.
(a) General. The Adviser hereby appoints the Sub-Adviser to act as
investment subadviser to the Portfolios for the period and on
the terms set forth in this Agreement. The Sub-Adviser accepts
such appointment and agrees to furnish the services herein set
forth for the compensation herein provided.
(b) Employees of Affiliates. The Sub-Adviser may, in its
discretion, provide such services through its own employees or
the employees of one or more affiliated companies that are
qualified to act as an investment subadviser to the Portfolios
under applicable laws and are under the control of New Chase,
the parent of the
<PAGE>
Sub-Adviser; provided that (i) all persons, when providing
services hereunder, are functioning as part of an organized
group of persons, and (ii) such organized group of persons is
managed at all times by authorized officers of the SubAdviser.
2. Delivery of Documents. The Adviser has delivered to the
Sub-Adviser copies of each of the following documents along with all amendments
thereto through the date hereof, and will promptly deliver to it all future
amendments and supplements thereto, if any:
(a) the Trust's Declaration of Trust;
(b) the By-Laws of the Trust;
(c) resolutions of the Board of Trustees of the Trust authorizing
the execution and delivery of the Advisory Agreement and this
Agreement;
(d) the most recent Post-Effective Amendment to the Trust's
Registration Statement under the Securities Act of 1933, as
amended (the "1933 Act"), and the 1940 Act, on Form N-1A as
filed with the Securities and Exchange Commission (the
"Commission");
(e) Notification of Registration of the Trust under the 1940 Act
on Form N-8A as filed with the Commission; and
(f) the currently effective Prospectuses and Statements of
Additional Information of the Portfolios.
3. Investment Advisory Services.
(a) Management of the Portfolios. The Sub-Adviser hereby
undertakes to act as investment subadviser to the Portfolios.
The Sub-Adviser shall regularly provide investment advice to
the Portfolios and continuously supervise the investment and
reinvestment of cash, securities and other property composing
the assets of the Portfolios and, in furtherance thereof,
shall:
(i) obtain and evaluate pertinent economic, statistical
and financial data, as well as other significant
events and developments, which affect the economy
generally, the Portfolios' investment programs, and
the issuers of securities included in the portfolio
of each Portfolio and the industries in which they
engage, or which may relate to securities or other
investments which the Sub-Adviser may deem desirable
for inclusion in a Portfolio's portfolio;
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<PAGE>
(ii) determine which issuers and securities shall be
included in the portfolio of each Portfolio;
(iii) furnish a continuous investment program for each
Portfolio;
(iv) in its discretion, and without prior consultation,
buy, sell, lend and otherwise trade any stocks, bonds
and other securities and investment instruments on
behalf of each Portfolio; and
(v) take, on behalf of each Portfolio, all actions the
Sub-Adviser may deem necessary in order to carry into
effect such investment program and the Sub-Adviser's
functions as provided above, including the making of
appropriate periodic reports to the Adviser and the
Trust's Board of Trustees.
(b) Covenants. The Sub-Adviser shall carry out its investment
subadvisory responsibilities in a manner consistent with the
investment objectives, policies, and restrictions provided
in: (i) each Portfolio's Prospectus and Statement of
Additional Information as revised and in effect from time to
time; (ii) the Trust's Declaration of Trust, By-Laws or other
governing instruments, as amended from time to time; (iii)
the 1940 Act; (iv) the provisions of the Internal Revenue
Code of 1986, as amended, including Subchapters L and M,
relating to Variable Contracts and regulated investment
companies, respectively, (v) other applicable laws; and (vi)
such other investment policies, procedures and/or limitations
as may be adopted by the Trust with respect to a Portfolio
and provided to the Adviser in writing. The management of the
Portfolios by the Adviser shall at all times be subject to
the review of the Trust's Board of Trustees.
(c) Books and Records. Pursuant to applicable law, the
Sub-Adviser shall keep each Portfolio's books and records
required to be maintained by, or on behalf of, the Portfolios
with respect to subadvisory services rendered hereunder. The
Sub- Adviser agrees that all records which it maintains for a
Portfolio are the property of the Portfolio and it will
promptly surrender any of such records to the Portfolio upon
the Portfolio's request. The Sub-Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 under the
1940 Act any such records of the Portfolio required to be
preserved by such Rule.
(d) Reports, Evaluations and other services. The Sub-Adviser shall
furnish reports, evaluations, information or analyses to the
Adviser and the Trust with respect to the Portfolios and in
connection with the Sub-Adviser's services hereunder as the
Adviser and/or the Trust's Board of Trustees may request from
time to time or as the Sub-Adviser may otherwise deem to be
desirable. The Sub-Adviser shall make recommendations to the
Adviser and the Trust's Board of Trustees with
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<PAGE>
respect to the Trust's policies, and shall carry out such
policies as are adopted by the Board of Trustees. The
Sub-Adviser may, subject to review by the Adviser, furnish
such other services as the Sub-Adviser shall from time to time
determine to be necessary or useful to perform its obligations
under this Agreement.
(e) Purchase and Sale of Securities. The Sub-Adviser shall place
all orders for the purchase and sale of portfolio securities
for each Portfolio with brokers or dealers selected by the
Sub-Adviser, which may include brokers or dealers affiliated
with the Adviser or the Sub-Adviser to the extent permitted
by the 1940 Act and the Trust's policies and procedures
applicable to the Portfolios. The Sub-Adviser shall use its
best efforts to seek to execute portfolio transactions at
prices which, under the circumstances, result in total costs
or proceeds being the most favorable to the Portfolios. In
assessing the best overall terms available for any
transaction, the Sub-Adviser shall consider all factors it
deems relevant, including the breadth of the market in the
security, the price of the security, the financial condition
and execution capability of the broker or dealer, research
services provided to the Sub- Adviser, and the reasonableness
of the commission, if any, both for the specific transaction
and on a continuing basis. In no event shall the Sub-Adviser
be under any duty to obtain the lowest commission or the best
net price for any Portfolio on any particular transaction,
nor shall the Sub-Adviser be under any duty to execute any
order in a fashion either preferential to any Portfolio
relative to other accounts managed by the Sub-Adviser or
otherwise materially adverse to such other accounts.
(f) Selection of Brokers or Dealers. In selecting brokers or
dealers qualified to execute a particular transaction,
brokers or dealers may be selected who also provide brokerage
and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the
Sub-Adviser, the Portfolios, and/or the other accounts over
which the Sub-Adviser exercises investment discretion. The
Sub-Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission
for executing a portfolio transaction for a Portfolio which
is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if
the Sub- Adviser determines in good faith that the total
commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or
dealer, viewed in terms of either that particular transaction
or the overall responsibilities of the Sub-Adviser with
respect to accounts over which it exercises investment
discretion. The Sub-Adviser shall report to the Board of
Trustees of the Trust regarding overall commissions paid by
the Portfolios and their reasonableness in relation to their
benefits to the Portfolios.
(g) Aggregation of Securities Transactions. In executing
portfolio transactions for a Portfolio, the Sub-Adviser may,
to the extent permitted by applicable laws and
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<PAGE>
regulations, but shall not be obligated to, aggregate the
securities to be sold or purchased with those of other
Portfolios or its other clients if, in the Sub-Adviser's
reasonable judgment, such aggregation (i) will result in an
overall economic benefit to the Portfolio, taking into
consideration the advantageous selling or purchase price,
brokerage commission and other expenses, and trading
requirements, and (ii) is not inconsistent with the policies
set forth in the Trust's registration statement and the
Portfolio's Prospectus and Statement of Additional
Information. In such event, the Sub-Adviser will allocate the
securities so purchased or sold, and the expenses incurred in
the transaction, in an equitable manner, consistent with its
fiduciary obligations to the Portfolio and such other clients.
4. Representations and Warranties.
(a) The Sub-Adviser hereby represents and warrants to the Adviser
as follows:
(i) The Sub-Adviser is a corporation duly organized and
in good standing under the laws of the State of [New
York] and is fully authorized to enter into this
Agreement and carry out its duties and obligations
hereunder.
(ii) The Sub-Adviser is registered as an investment
adviser with the Commission under the Advisers Act,
and is registered or licensed as an investment
adviser under the laws of all applicable
jurisdictions. The SubAdviser shall maintain such
registrations or licenses in effect at all times
during the term of this Agreement.
(iii) The Sub-Adviser at all times shall provide its best
judgment and effort to the Adviser in carrying out
the Sub-Adviser's obligations hereunder.
(b) The Adviser hereby represents and warrants to the Sub-Adviser
as follows:
(i) The Adviser is a state chartered bank duly organized
and in good standing under the laws of the State of
New York and is fully authorized to enter into this
Agreement and carry out its duties and obligations
hereunder.
(ii) The Trust has been duly organized as a business
trust under the laws of the State of Massachusetts.
(iii) The Trust is registered as an investment company with
the Commission under the 1940 Act, and shares of the
each Portfolio are registered for offer and sale to
the public under the 1933 Act and all applicable
state securities laws where currently sold. Such
registrations will be kept in effect during the term
of this Agreement.
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<PAGE>
5. Compensation. (a) As compensation for the services which the
Sub-Adviser is to provide or cause to be provided pursuant to Paragraph 3, with
respect to each Portfolio, the Adviser shall pay to the Sub-Adviser (or cause to
be paid by the Trust directly to the SubAdviser) a fee, which shall be accrued
daily and paid in arrears on the first business day of each month, at an annual
rate to be determined between the parties hereto from time to time, as a
percentage of the average daily net assets of the Portfolio during the preceding
month (computed in the manner set forth in the Portfolio's most recent
Prospectus and Statement of Additional Information). Average daily net assets
shall be based upon determinations of net assets made as of the close of
business on each business day throughout such month. The fee for any partial
month shall be calculated on a proportionate basis, based upon average daily net
assets for such partial month. As a percentage of average daily net assets.
(b) The Sub-Adviser shall have the right, but not the
obligation, to voluntarily waive any portion of the sub-advisory fee from time
to time. Any such voluntary waiver will be irrevocable and determined in advance
of rendering sub-investment advisory services by the Sub-Adviser, and shall be
in writing and signed by the parties hereto.
(c) If the aggregate expenses incurred by, or allocated to,
each Portfolio in any fiscal year shall exceed the lowest expense limitation, if
applicable to such Portfolio, imposed by state securities laws or regulations
thereunder, as such limitations may be raised or lowered from time to time, the
Sub-Adviser shall reduce its investment advisory fee, but not below zero, to the
extent of its share of such excess expenses; provided, however, there shall be
excluded from such expenses the amount of any interest, taxes, brokerage
commissions and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Portfolio. Such reduction, if any, shall be
computed and accrued daily, shall be settled on a monthly basis and shall be
based upon the expense limitation applicable to the Portfolio as at the end of
the last business day of the month. Should two or more of such expense
limitations be applicable at the end of the last business day of the month, that
expense limitation which results in the largest reduction in the Sub-Adviser's
fee shall be applicable. For the purposes of this paragraph, the Sub-Adviser's
share of any excess expenses shall be computed by multiplying such excess
expenses by a fraction, the numerator of which is the amount of the investment
advisory fee which would otherwise be payable to the Sub-Adviser for such fiscal
year were it not for this subsection 5(b) and the denominator of which is the
sum of all investment advisory and administrative fees which would otherwise be
payable by the Portfolio were it not for the expense limitation provisions of
any investment advisory or administrative agreement to which the Portfolio is a
party.
6. Interested Persons. It is understood that, to the extent
consistent with applicable laws, the Trustees, officers and shareholders of the
Trust or the Adviser are or may be or become interested in the Sub-Adviser as
directors, officers or otherwise and that directors, officers and
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<PAGE>
shareholders of the Sub-Adviser are or may be or become similarly interested in
the Trust or the Adviser.
7. Expenses. The Sub-Adviser will pay all expenses incurred by it
in connection with its activities under this Agreement other than the cost of
securities (including brokerage commissions) purchased for or sold by the
Portfolios.
8. Non-Exclusive Services; Limitation of Sub-Adviser's Liability.
The services of the Sub-Adviser hereunder are not to be deemed exclusive, and
the Sub-Adviser may render similar services to others and engage in other
activities. The Sub-Adviser and its affiliates may enter into other agreements
with the Portfolios, the Trust or the Adviser for providing additional services
to the Portfolios, the Trust or the Adviser which are not covered by this
Agreement, and to receive additional compensation for such services. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Sub-Adviser, or
a breach of fiduciary duty with respect to receipt of compensation, neither the
Sub-Adviser nor any of its directors, officers, shareholders, agents, or
employees shall be liable or responsible to the Adviser, the Trust, the
Portfolios or to any shareholder of the Portfolios for any error of judgment or
mistake of law or for any act or omission in the course of, or connected with,
rendering services hereunder or for any loss suffered by the Adviser, the Trust,
a Portfolio, or any shareholder of a Portfolio in connection with the
performance of this Agreement.
9. Effective Date; Modifications; Termination. This Agreement
shall become effective on the date hereof (the "Effective Date") provided that
it shall have been approved by a majority of the outstanding voting securities
of each Portfolio, in accordance with the requirements of the 1940 Act, or such
later date as may be agreed by the parties following such shareholder approval.
(a) This Agreement shall continue in force for two years from the
Effective Date. Thereafter, this Agreement shall continue in
effect as to each Portfolio for successive annual periods,
provided such continuance is specifically approved at least
annually (i) by a vote of the majority of the Trustees of the
Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by a vote
of the Board of Trustees of the Trust or a majority of the
outstanding voting securities of the Portfolio.
(b) The modification of any of the non-material terms of this
Agreement may be approved by a vote of a majority of those
Trustees of the Trust who are not interested persons of any
party to this Agreement, cast in person at a meeting called
for the purpose of voting on such approval.
(c) Notwithstanding the foregoing provisions of this Paragraph 9,
either party hereto may terminate this Agreement as to any
Portfolio(s) at any time on sixty (60)
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<PAGE>
days' prior written notice to the other, without payment of
any penalty. A termination of the Sub-Adviser may be effected
as to any particular Portfolio by the Adviser, by a vote of
the Trust's Board of Trustees, or by vote of a majority of the
outstanding voting securities of the Portfolio. This Agreement
shall terminate automatically in the event of its assignment.
10. Limitation of Liability of Trustees and Shareholders. The
Sub-Adviser acknowledges the following limitation of liability:
The terms "Mutual Fund Variable Annuity Trust" and "Trustees of Mutual
Fund Variable Annuity Trust" refer, respectively, to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under the Declaration of Trust, to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of the State of
Massachusetts, such reference being inclusive of any and all amendments thereto
so filed or hereafter filed. The obligations of "Mutual Fund Variable Annuity
Trust" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities and
are not binding upon any of the Trustees, shareholders or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with the Trust or a Portfolio must look solely to the assets of the Trust or
Portfolio for the enforcement of any claims against the Trust or Portfolio.
11. Certain Definitions. The terms "vote of a majority of the
outstanding voting securities," "assignment," "control," and "interested
persons," when used herein, shall have the respective meanings specified in the
1940 Act. References in this Agreement to the 1940 Act and the Advisers Act
shall be construed as references to such laws as now in effect or as hereafter
amended, and shall be understood as inclusive of any applicable rules,
interpretations and/or orders adopted or issued thereunder by the Commission.
12. Independent Contractor. The Sub-Adviser shall for all purposes
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Board of Trustees of the Trust
from time to time, have no authority to act for or represent a Portfolio in any
way or otherwise be deemed an agent of a Portfolio.
13. Structure of Agreement. The Adviser and Sub-Adviser are
entering into this Agreement with regard to the respective Portfolios severally
and not jointly. The responsibilities and benefits set forth in this Agreement
shall be deemed to be effective as between the Adviser and Sub-Adviser in
connection with each Portfolio severally and not jointly. This Agreement is
intended to govern only the relationships between the Adviser, on the one hand,
and the SubAdviser, on the other hand, and is not intended to and shall not
govern (i) the relationship between the Adviser or Sub-Adviser and any
Portfolio, or (ii) the relationships among the respective Portfolios.
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<PAGE>
14. Governing Law. This Agreement shall be governed by the laws of
the State of New York, provided that nothing herein shall be construed in a
manner inconsistent with the 1940 Act or the Advisers Act.
15. Severability. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby and, to this extent, the
provisions of this Agreement shall be deemed to be severable.
16. Notices. Notices of any kind to be given to the Adviser
hereunder by the SubAdviser shall be in writing and shall be duly given if
mailed or delivered to the Adviser at
_________________________________________________________________________ or at
such other address or to such individual as shall be so specified by the Adviser
to the SubAdviser. Notices of any kind to be given to the Sub-Adviser hereunder
by the Adviser shall be in writing and shall be duly given if mailed or
delivered to the Sub-Adviser at
__________________________________________________________________________ or at
such other address or to such individual as shall be so specified by the
Sub-Adviser to the Adviser. Notices shall be effective upon delivery.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
written above.
CHASE ASSET MANAGEMENT, INC. THE CHASE MANHATTAN BANK
By:________________________ By:___________________________
Name: Name:
Title: Title:
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<PAGE>
Schedule A
Portfolio:
International Equity Portfolio
Capital Growth Portfolio
Growth and Income Portfolio
Asset Allocation Portfolio
Treasury Portfolio
Money Market Portfolio
i
Exhibit 5(g)
Form of Administration Agreement
FORM OF
ADMINISTRATION AGREEMENT
THIS AGREEMENT made this _______ day of __________, by and between
MUTUAL FUND __________ (the "Trust"), a Massachusetts business trust and THE
CHASE MANHATTAN BANK, a New York state chartered banking corporation (the
"Administrator").
WITNESSETH:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
FIRST: The Trust on behalf of each of its series and any new series to
be created hereby authorizes the Administrator to provide administrative
services to the Trust in accordance with the terms and conditions of this
Agreement. The Administrator's services shall be subject to the direction and
control of the Board of Trustees of the Trust and shall be performed under the
direction of the appropriate Trust officers. The Administrator's functions shall
be entirely ministerial in nature, and it shall not have any responsibility or
authority for the management of the Trust, the determination of its policies, or
for any matter pertaining to the distribution of securities issued by the Trust.
SECOND: The Administrator shall provide certain
administration services including:
(A) arranging for the maintenance of the Trust's books and
records except for: accounting books and records, sales literature and other
documents relating to the sale of securities issued by the Trust (other than
copies of such documents preserved as a record of presentations to the Board of
Trustees or Trust officers), and records pertaining to the ownership of
securities issued by the Trust;
(B) preparing applications for insurance for the Trust
and claims under any insurance policy;
<PAGE>
(C) preparing for the signature of the appropriate Trust
officer (or assist counsel and auditors in the preparation of) all required
Trust tax returns, proxy statements, semiannual reports to the Trust's
shareholders, semiannual reports to be filed with the Securities and Exchange
Commission, and updates to the Trust's Registration Statement under the
Investment Company Act of 1940 (the "Act");
(D) arranging for the printing and mailing (at the Trust's
expense) of proxy statements and other reports or other materials provided to
the Trust's shareholders;
(E) preparing applications and reports which may be necessary
to maintain on behalf of the Trust any registration of the Trust and/or the
shares of any series of the Trust under the securities or "bluesky" laws of any
state, province, or foreign country (the Trust shall pay for any filing or legal
fees in connection with such filings);
(F) preparing agendas and supporting documentation
for, and minutes of, Trustee and shareholder meetings;
(G) arranging for the computation of performance data
including net asset value and yield;
(H) arranging for the publication of current price
information in newspapers and publications;
(I) responding to all inquires or other communications from
shareholders of the Trust and other parties or, if the inquiry is more properly
responded to by the Trust's transfer agent or distributor, referring the
individual making the inquiry to the appropriate person;
(J) reviewing from time to time the portfolios of each series
of the Trust and transactions with brokers and dealers for compliance with
applicable law and Trust policy;
(K) coordinating all relationships between the Trust and its
contractors, including coordinating the negotiation of agreements, the review of
performance of agreements, and the exchange of information, provided that
coordination with the distributor shall be limited to the exchange of
information
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<PAGE>
necessary for the administration of the Trust and the reporting of that
information to the Board of Trustees and Trust officers.
THIRD: Any activities performed by the Administrator under this
Agreement shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the Act and of any rules or
regulations in force thereunder; (2) any other applicable provision of law; (3)
the provisions of the Agreement and Declaration of Trust and By-Laws of the
Trust as amended from time to time; (4) any policies of each series of the
Trust, as reflected in the then current Registration Statement of the Trust. As
used in this Agreement, the term "Registration Statement" shall mean the
Registration Statement most recently filed by the Trust with the Securities and
Exchange Commission and effective under the Securities Act of 1933, as amended,
as such Registration Statement is amended at such time, and the term
"Prospectus" and "Statement of Additional Information" shall mean for the
purposes of this Agreement the form of the then current prospectus and statement
of additional information for each series of the Trust.
FOURTH: Nothing in this Agreement shall prevent the Administrator or
any officer thereof from acting as administrator for any other person, firm or
corporation and shall not in any way limit or restrict the Administrator or any
of its directors, officers, employees or affiliates from buying, selling or
trading any securities for its own or their own accounts or for the accounts of
others for whom it or they may be acting, provided, however, that the
Administrator expressly represents that it will undertake no activities which,
in its judgment, will adversely affect the performance of its obligations to the
Trust under the Agreement.
FIFTH: The Administrator shall, at its own expense, provide
office space and facilities, equipment and personnel for the
performance of its functions hereunder.
SIXTH: The Trust shall pay the Administrator, as full
compensation for all services rendered hereunder, an annual fee
on behalf of each series payable monthly and computed on the net
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<PAGE>
asset value of the series at the end of each business day at the annual rates
set forth in Exhibit A hereto.
SEVENTH: In the event the operating expenses of any series of the
Trust, including all investment advisory, administration and sub-administrator
fees, but excluding brokerage commissions and fees, taxes, interest and
extraordinary expenses such as litigation, for any fiscal year ending on a date
on which this Agreement is in effect exceed the most restrictive expense
limitation applicable to the series imposed by the securities laws or
regulations thereunder of any state in which the shares of the series are
qualified for sale, as such limitations may be raised or lowered from time to
time, the Administrator shall reduce its administration fee to the extent of its
share of such excess expenses. The amount of any such reduction to be borne by
the Administrator shall be deducted from the monthly administration fee
otherwise payable to the Administrator during such fiscal year; and if such
amounts should exceed the monthly fee, the Administrator shall pay to such
series its share of such excess expenses no later than the last day of the first
month of the next succeeding fiscal year. For the purposes of this paragraph,
the term "fiscal year" shall exclude the portion of the current fiscal year
which shall have elapsed prior to the date hereof and shall include the portion
of the then current fiscal year which shall have elapsed at the date of
termination of this Agreement.
EIGHTH:
(A) This Agreement shall go into effect at the close of the
business on the date hereof, and, unless terminated as hereinafter provided,
shall continue in effect for two years thereafter and from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually by the Trust's Board of Trustees, including the vote of a
majority of the Trustees who are not parties to this Agreement or "interested
persons" (as defined in the Act) of any such party cast in person at a meeting
called for the purpose of voting on such approval, or by the vote of the holders
of a "majority" (as
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<PAGE>
so defined) of the outstanding voting securities of the applicable series and by
such vote of the Trustees.
(B) This Agreement may be terminated by the
Administrator at any time without penalty upon giving the Board of Trustees of
the Trust sixty (60) days' written notice (which notice may be waived by the
Trust) and may be terminated by the Board of Trustees of the Trust at any time
without penalty upon giving the Administrator sixty (60) days' written notice
(which notice may be waived by the Administrator), provided that such
termination by the Board of Trustees of the Trust shall be directed or approved
by the vote of a majority of all of its Trustees in office at the time,
including a majority of the Trustees who are not interested persons (as defined
in the Act) of the Trust, or by the vote of the holders of a majority (as
defined in the Act) of the voting securities of each series of the Trust at the
time outstanding and entitled to vote. This Agreement shall automatically
terminate in the event of its assignment, the term "assignment" for this purpose
having the meaning defined in Section 2(a)(4) of the Act.
NINTH: In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Administrator or any of its officers, directors or employees, the Trust
shall indemnify the Administrator which the Administrator may incur based on any
omission in the course of, or connected with, rendering services hereunder.
TENTH: A copy of the Agreement and Declaration of Trust of the Trust is
on file with the Secretary of the Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually, and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders individually
but are binding only upon the assets and property of the Trust.
ELEVENTH: Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed, postage paid, to the other party at such
address as such other party may designate for
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<PAGE>
the receipt of such notices. Until further notice to the other party, it is
agreed that the address of the Trust shall be 125 West 55th Street, New York, NY
10019, and the address of the Administrator shall be 1 Chase Square, Rochester,
NY 14643.
IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
ATTEST: MUTUAL FUND
____________________ By:___________________________
ATTEST: THE CHASE MANHATTAN BANK
____________________ By:___________________________
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Wednesday, December 27, 1995 6:00PM
KL2:117759.3
Exhibit 5(h)
Form of Proposed Investment Subadvisory Agreement
between The Chase Manhattan Bank and [Chase Asset
Management, Inc./Van Deventer & Hoch].
FORM OF
PROPOSED
INVESTMENT SUBADVISORY AGREEMENT
between
THE CHASE MANHATTAN BANK
and
[CHASE ASSET MANAGEMENT, INC./
VAN DEVENTER & HOCH]
AGREEMENT made as of the day of , 1996, by and between The Chase Manhattan Bank,
a New York State chartered bank (the "Adviser"), and [Chase Asset Management,
Inc./Van Deventer & Hoch, a [type of entity] (the "Sub-Adviser").
WHEREAS, the Adviser is a registered investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Adviser provides investment advisory services to the
series of Mutual Fund Group, a Massachusetts business trust (the "Trust"), which
is registered as an open-end, management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), pursuant to an Investment
Advisory Agreement dated , 1996 (the "Advisory Agreement"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish
investment subadvisory services in connection with the series of the Trust
listed on Schedule A (each, a "Fund" and collectively, the "Funds"), and the
Sub-Adviser represents that it is willing and possesses legal authority to so
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment.
(a) General. The Adviser hereby appoints the Sub-Adviser to act as
investment subadviser to the Funds for the period and on the
terms set forth in this Agreement. The Sub-Adviser accepts
such appointment and agrees to furnish the services herein set
forth for the compensation herein provided.
(b) Employees of Affiliates. The Sub-Adviser may, in its
discretion, provide such services through its own employees or
the employees of one or more affiliated companies that are
qualified to act as an investment subadviser to the Funds
under
<PAGE>
applicable laws and are under the control of The Chase
Manhattan Corporation,the indirect parent of the
Sub-Adviser; provided that (i) all persons, when providing
services hereunder, are functioning as part of an organized
group of persons, and (ii) such organized group of persons
is managed at all times by authorized officers of the
Sub-Adviser.
2. Delivery of Documents. The Adviser has delivered to the Sub-Adviser
copies of each of the following documents along with all amendments thereto
through the date hereof, and will promptly deliver to it all future amendments
and supplements thereto, if any:
(a) the Trust's Declaration of Trust ;
(b) the By-Laws of the Trust;
(c) resolutions of the Board of Trustees of the Trust authorizing
the execution and delivery of the Advisory Agreement and this
Agreement;
(d) the most recent Post-Effective Amendment to the Trust's
Registration Statement under the Securities Act of 1933, as
amended (the "1933 Act"), and the 1940 Act, on Form N-1A as
filed with the Securities and Exchange Commission (the
"Commission");
(e) Notification of Registration of the Trust under the 1940 Act
on Form N-8A as filed with the Commission; and
(f) the currently effective Prospectuses and Statements of
Additional Information of the Funds.
3. Investment Advisory Services.
(a) Management of the Funds. The Sub-Adviser hereby undertakes to
act as investment subadviser to the Funds. The Sub-Adviser
shall regularly provide investment advice to the Funds and
continuously supervise the investment and reinvestment of
cash, securities and other property composing the assets of
the Funds and, in furtherance thereof, shall:
(i) obtain and evaluate pertinent economic, statistical
and financial data, as well as other significant
events and developments, which affect the economy
generally, the Funds' investment programs, and the
issuers of securities included in the Funds'
portfolios and the industries in which they engage,
or which may relate to securities or other
investments which the Sub-Adviser may deem desirable
for inclusion in a Fund's portfolio;
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<PAGE>
(ii) determine which issuers and securities shall be
included in the portfolio of each Fund;
(iii) furnish a continuous investment program for each Fund;
(iv) in its discretion, and without prior consultation,
buy, sell, lend and otherwise trade any stocks, bonds
and other securities and investment instruments on
behalf of each Fund; and
(v) take, on behalf of each Fund, all actions the
Sub-Adviser may deem necessary in order to carry into
effect such investment program and the Sub-Adviser's
functions as provided above, including the making of
appropriate periodic reports to the Adviser and the
Trust's Board of Trustees.
(b) Covenants. The Sub-Adviser shall carry out its investment
subadvisory responsibilities in a manner consistent with the
investment objectives, policies, and restrictions provided in:
(i) each Fund's Prospectus and Statement of Additional
Information as revised and in effect from time to time; (ii) the
Trust's Declaration of Trust, By-Laws or other governing
instruments, as amended from time to time; (iii) the 1940 Act;
(iv) other applicable laws; and (v) such other investment
policies, procedures and/or limitations as may be adopted by the
Trust or the Adviser with respect to a Fund and provided to the
Sub-Adviser in writing. The Sub-Adviser agrees to use reasonable
efforts to manage each Fund so that it will qualify, and continue
to qualify, as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986, as amended, and regulations
issued thereunder (the "Code"), except as may be authorized to
the contrary by the Trust's Board of Trustees. The management of
the Funds by the Sub-Adviser shall at all times be subject to the
review of the Adviser and the Trust's Board of Trustees.
(c) Books and Records. Pursuant to applicable law, the Sub-Adviser
shall keep each Fund's books and records required to be
maintained by, or on behalf of, the Funds with respect to
subadvisory services rendered hereunder. The Sub-Adviser agrees
that all records which it maintains for a Fund are the property
of the Fund and it will promptly surrender any of such records to
the Fund upon the Fund's request. The Sub-Adviser further agrees
to preserve for the periods prescribed by Rule 31a- 2 under the
1940 Act any such records of the Fund required to be preserved by
such Rule.
(d) Reports, Evaluations and other services. The Sub-Adviser shall
furnish reports, evaluations, information or analyses to the
Adviser and the Trust with respect to the Funds and in connection
with the Sub-Adviser's services hereunder as the
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<PAGE>
Adviser and/or the Trust's Board of Trustees may request from
time to time or as the Sub-Adviser may otherwise deem to be
desirable. The Sub-Adviser shall make recommendations to the
Adviser and the Trust's Board of Trustees with respect to the
Trust's policies, and shall carry out such policies as are
adopted by the Board of Trustees. The Sub-Adviser may, subject to
review by the Adviser, furnish such other services as the
Sub-Adviser shall from time to time determine to be necessary or
useful to perform its obligations under this Agreement.
(e) Purchase and Sale of Securities. The Sub-Adviser shall place all
orders for the purchase and sale of portfolio securities for each
Fund with brokers or dealers selected by the Sub-Adviser, which
may include brokers or dealers affiliated with the Adviser or the
Sub-Adviser to the extent permitted by the 1940 Act and the
Trust's policies and procedures applicable to the Funds. The
Sub-Adviser shall use its best efforts to seek to execute
portfolio transactions at prices which, under the circumstances,
result in total costs or proceeds being the most favorable to the
Funds. In assessing the best overall terms available for any
transaction, the Sub- Adviser shall consider all factors it deems
relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution
capability of the broker or dealer, research services provided to
the Sub- Adviser, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis.
In no event shall the Sub-Adviser be under any duty to obtain the
lowest commission or the best net price for any Fund on any
particular transaction, nor shall the Sub-Adviser be under any
duty to execute any order in a fashion either preferential to any
Fund relative to other accounts managed by the Sub-Adviser or
otherwise materially adverse to such other accounts.
(f) Selection of Brokers or Dealers. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers
may be selected who also provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) to the Sub-Adviser, the Funds, and/or the
other accounts over which the Sub-Adviser exercises investment
discretion. The Sub-Adviser is authorized to pay a broker or
dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for a Fund which
is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if the Sub-
Adviser determines in good faith that the total commission is
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to accounts over
which it exercises investment discretion. The Sub-Adviser shall
report to the Board of Trustees of the Trust regarding overall
commissions paid by the Funds and their reasonableness in
relation to their benefits to the Funds.
- 4 -
<PAGE>
(g) Aggregation of Securities Transactions. In executing portfolio
transactions for a Fund, the Sub-Adviser may, to the extent
permitted by applicable laws and regulations, but shall not be
obligated to, aggregate the securities to be sold or purchased
with those of other Funds or its other clients if, in the
Sub-Adviser's reasonable judgment, such aggregation (i) will
result in an overall economic benefit to the Fund, taking into
consideration the advantageous selling or purchase price,
brokerage commission and other expenses, and trading
requirements, and (ii) is not inconsistent with the policies set
forth in the Trust's registration statement and the Fund's
Prospectus and Statement of Additional Information. In such
event, the Sub-Adviser will allocate the securities so purchased
or sold, and the expenses incurred in the transaction, in an
equitable manner, consistent with its fiduciary obligations to
the Fund and such other clients.
4. Representations and Warranties.
(a) The Sub-Adviser hereby represents and warrants to the Adviser as
follows:
(i) The Sub-Adviser is a corporation duly organized and
in good standing under the laws of the State of [New
York] and is fully authorized to enter into this
Agreement and carry out its duties and obligations
hereunder.
(ii) The Sub-Adviser is registered as an investment
adviser with the Commission under the Advisers Act,
and is registered or licensed as an investment
adviser under the laws of all applicable
jurisdictions. The SubAdviser shall maintain such
registrations or licenses in effect at all times
during the term of this Agreement.
(iii) The Sub-Adviser at all times shall provide its best
judgment and effort to the Adviser in carrying out
the Sub-Adviser's obligations hereunder.
(b) The Adviser hereby represents and warrants to the Sub-Adviser as
follows:
(i) The Adviser is a state chartered bank duly organized
and in good standing under the laws of the State of
New York and is fully authorized to enter into this
Agreement and carry out its duties and obligations
hereunder.
(ii) The Trust has been duly organized as a business trust
under the laws of the State of Massachusetts.
(iii) The Trust is registered as an investment company with
the Commission under the 1940 Act, and shares of the
each Fund are registered for offer and sale to the
public under the 1933 Act and all applicable state
securities
- 5 -
<PAGE>
laws where currently sold. Such registrations will be
kept in effect during the term of this Agreement.
5. Compensation. (a) As compensation for the services which the
Sub-Adviser is to provide or cause to be provided pursuant to Paragraph 3, with
respect to each Fund, the Adviser shall pay to the Sub-Adviser (or cause to be
paid by the Trust directly to the SubAdviser) a fee, which shall be accrued
daily and paid in arrears on the first business day of each month, at an annual
rate to be determined between the parties hereto from time to time, as a
percentage of the average daily net assets of the Fund during the preceding
month (computed in the manner set forth in the Fund's most recent Prospectus and
Statement of Additional Information). Average daily net assets shall be based
upon determinations of net assets made as of the close of business on each
business day throughout such month. The fee for any partial month shall be
calculated on a proportionate basis, based upon average daily net assets for
such partial month. As a percentage of average daily net assets.
(b) The Sub-Adviser shall have the right, but not the
obligation, to voluntarily waive any portion of the sub-advisory fee from time
to time. Any such voluntary waiver will be irrevocable and determined in advance
of rendering sub-investment advisory services by the Sub-Adviser, and shall be
in writing and signed by the parties hereto.
(c) If the aggregate expenses incurred by, or allocated to,
each Fund in any fiscal year shall exceed the lowest expense limitation, if
applicable to such Fund, imposed by state securities laws or regulations
thereunder, as such limitations may be raised or lowered from time to time, the
Sub-Adviser shall reduce its investment advisory fee, but not below zero, to the
extent of its share of such excess expenses; provided, however, there shall be
excluded from such expenses the amount of any interest, taxes, brokerage
commissions and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Such reduction, if any, shall be computed
and accrued daily, shall be settled on a monthly basis and shall be based upon
the expense limitation applicable to the Fund as at the end of the last business
day of the month. Should two or more of such expense limitations be applicable
at the end of the last business day of the month, that expense limitation which
results in the largest reduction in the Sub-Adviser's fee shall be applicable.
For the purposes of this paragraph, the Sub-Adviser's share of any excess
expenses shall be computed by multiplying such excess expenses by a fraction,
the numerator of which is the amount of the investment advisory fee which would
otherwise be payable to the Sub-Adviser for such fiscal year were it not for
this subsection 5(b) and the denominator of which is the sum of all investment
advisory and administrative fees which would otherwise be payable by the Fund
were it not for the expense limitation provisions of any investment advisory or
administrative agreement to which the Fund is a party.
6. Interested Persons. It is understood that, to the extent consistent with
applicable laws, the Trustees, officers and shareholders of the Trust or the
Adviser are or may be or
- 6 -
<PAGE>
become interested in the Sub-Adviser as directors, officers or otherwise and
that directors, officers and shareholders of the Sub-Adviser are or may be or
become similarly interested in the Trust or the Adviser.
7. Expenses. The Sub-Adviser will pay all expenses incurred by it in
connection with its activities under this Agreement other than the cost of
securities (including brokerage commissions) purchased for or sold by the Funds.
8. Non-Exclusive Services; Limitation of Sub-Adviser's Liability. The
services of the Sub-Adviser hereunder are not to be deemed exclusive, and the
Sub-Adviser may render similar services to others and engage in other
activities. The Sub-Adviser and its affiliates may enter into other agreements
with the Funds, the Trust or the Adviser for providing additional services to
the Funds, the Trust or the Adviser which are not covered by this Agreement, and
to receive additional compensation for such services. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Sub-Adviser, or a breach of fiduciary duty
with respect to receipt of compensation, neither the Sub-Adviser nor any of its
directors, officers, shareholders, agents, or employees shall be liable or
responsible to the Adviser, the Trust, the Funds or to any shareholder of the
Funds for any error of judgment or mistake of law or for any act or omission in
the course of, or connected with, rendering services hereunder or for any loss
suffered by the Adviser, the Trust, a Fund, or any shareholder of a Fund in
connection with the performance of this Agreement.
9. Effective Date; Modifications; Termination. This Agreement shall become
effective on the date hereof (the "Effective Date") provided that it shall have
been approved by a majority of the outstanding voting securities of each Fund,
in accordance with the requirements of the 1940 Act, or such later date as may
be agreed by the parties following such shareholder approval.
(a) This Agreement shall continue in force for two years from the
Effective Date and shall continue in effect from year to year
thereafter as to each Fund for successive annual periods,
provided such continuance is specifically approved at least
annually (i) by a vote of the majority of the Trustees of the
Trust who are not parties to this Agreement or interested persons
of any such party, cast in person at a meeting called for the
purpose of voting on such approval, and (ii) by a vote of the
Board of Trustees of the Trust or a majority of the outstanding
voting securities of the Fund.
(b) The modification of any of the non-material terms of this
Agreement may be approved by a vote of a majority of those
Trustees of the Trust who are not interested persons of any party
to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval.
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<PAGE>
(c) Notwithstanding the foregoing provisions of this Paragraph 9,
either party hereto may terminate this Agreement as to any
Fund(s) at any time on sixty (60) days' prior written notice to
the other, without payment of any penalty. A termination of the
Sub-Adviser may be effected as to any particular Fund by the
Adviser, by a vote of the Trust's Board of Trustees, or by vote
of a majority of the outstanding voting securities of the Fund.
This Agreement shall terminate automatically in the event of its
assignment.
10. Limitation of Liability of Trustees and Shareholders. The Sub-Adviser
acknowledges the following limitation of liability:
The terms "Mutual Fund Group" and "Trustees of Mutual Fund Group"
refer, respectively, to the trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Declaration of
Trust, to which reference is hereby made and a copy of which is on file at the
office of the Secretary of State of the State of Massachusetts, such reference
being inclusive of any and all amendments thereto so filed or hereafter filed.
The obligations of "Mutual Fund Group" entered into in the name or on behalf
thereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities and are not binding upon any of the
Trustees, shareholders or representatives of the Trust personally, but bind only
the assets of the Trust, and all persons dealing with the Trust or a Fund must
look solely to the assets of the Trust or Fund for the enforcement of any claims
against the Trust or Fund.
11. Certain Definitions. The terms "vote of a majority of the outstanding
voting securities," "assignment," "control," and "interested persons," when used
herein, shall have the respective meanings specified in the 1940 Act. References
in this Agreement to the 1940 Act and the Advisers Act shall be construed as
references to such laws as now in effect or as hereafter amended, and shall be
understood as inclusive of any applicable rules, interpretations and/or orders
adopted or issued thereunder by the Commission.
12. Independent Contractor. The Sub-Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Board of Trustees of the Trust from time to
time, have no authority to act for or represent a Fund in any way or otherwise
be deemed an agent of a Fund.
13. Structure of Agreement. The Adviser and Sub-Adviser are entering into
this Agreement with regard to the respective Funds severally and not jointly.
The responsibilities and benefits set forth in this Agreement shall be deemed to
be effective as between the Adviser and Sub-Adviser in connection with each Fund
severally and not jointly. This Agreement is intended to govern only the
relationships between the Adviser, on the one hand, and the Sub-Adviser, on the
other hand, and is not intended to and shall not govern (i) the relationship
between the Adviser or Sub-Adviser and any Fund, or (ii) the relationships among
the respective Funds.
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<PAGE>
14. Governing Law. This Agreement shall be governed by the laws of the
State of New York, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or the Advisers Act.
15. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
16. Notices. Notices of any kind to be given to the Adviser hereunder by
the SubAdviser shall be in writing and shall be duly given if mailed or
delivered to the Adviser at
_________________________________________________________________________ or at
such other address or to such individual as shall be so specified by the Adviser
to the SubAdviser. Notices of any kind to be given to the Sub-Adviser hereunder
by the Adviser shall be in writing and shall be duly given if mailed or
delivered to the Sub-Adviser at
__________________________________________________________________________ or at
such other address or to such individual as shall be so specified by the
Sub-Adviser to the Adviser. Notices shall be effective upon delivery.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
written above.
[Subadviser] , INC. CHASE MANHATTAN BANK
By: ___________________________ By:___________________________
Name: Name:
Title: Title:
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<PAGE>
Schedule A
Fund:
1. Vista Short Term Bond Fund
2. Vista U.S. Treasury Income Fund
3. Vista Bond Fund
4. Vista U.S. Government Securities Fund
5. Vista Equity Income Fund
6. Vista Blue Chip Equity Fund
7. Vista Growth and Income Fund
8. Vista Capital Growth Fund
9. Vista Balanced Fund
10. Vista Small Cap Equity Fund
11. Vista Global Fixed Income Fund
12. Vista International Equity Fund
13. Vista Southeast Asian Fund
14. Vista Japan Fund
15. Vista European Fund
[Schedule for Chase Asset Management, Inc.]
i
<PAGE>
Schedule A
Fund:
1. Vista American Value Fund
[Schedule for Van Deventer & Hoch]
i
Exhibit 6(b)
Distribution and Sub-Administration Agreement dated August 21, 1995
DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT
THIS AGREEMENT made as of the 21st day of August, 1995 by and between
MUTUAL FUND GROUP (the "Trust"), a Massachusetts business trust, and VISTA
BROKER-DEALER SERVICES, INC. (the "Distributor"), an indirect wholly owned
subsidiary of THE BISYS GROUP, INC., a Delaware corporation.
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
FIRST: The Trust on behalf of each of its series and any new
series to be created hereby appoints the Distributor as its
sub-administrator and as its exclusive underwriter to provide certain
administration services and to promote and arrange for the sale of
shares of beneficial interest of each series of the Trust in
jurisdictions wherein shares may legally be offered for sale. The Trust
shall notify the Distributor in writing of all states in which its
shares are qualified for offer and sale, including any limitations with
respect to offers or sales in such states. In addition, the Distributor
shall receive payment for certain distribution expenses pursuant to
Rule 12b-1 distribution plans ("12b-1 Plans") adopted by the Trust.
The Trust agrees to sell and deliver its unissued shares of
each series, as from time to time shall be effectively registered under
the Securities Act of 1933 (the "1933 Act"), upon the terms hereinafter
set forth.
SECOND: The Trust hereby authorizes the Distributor, subject
to law and the Declaration of Trust of the Trust (the "Declaration of
Trust"), to accept, for the account of each series of the Trust, orders
for the purchase of shares, satisfactory to the Distributor, as of the
time of receipt of such orders or as otherwise described in the then
current Prospectuses and Statements of Additional Information of the
Trust.
THIRD: The price at which the shares may be sold (the
"offering price") shall be the net asset value per share plus any sales
charge that may be imposed on any class of shares. For the purpose of
computing the offering price, the net asset value per share and the
sales charge, if any, shall be determined in the manner provided in the
Registration Statement of the Trust, as amended from time to time.
FOURTH: The Distributor shall use its best efforts with
reasonable promptness to promote and sell shares of each of the series
of the Trust. The Distributor, with the consent of the Trust, may
enter into agreements with selected broker-dealers ("Selected
Dealers") for the purpose of sale and redemption of shares of each of
the series of the Trust upon terms consistent with those found in this
Agreement. The Distributor shall not be obligated to sell any certain
number of
<PAGE>
shares of beneficial interest. Each series of the Trust reserves the
right to issue shares in connection with any merger or consolidation
of the Trust or any series with any other investment company or any
personal holding company or in connection with offers of exchange
exempted from Section 11(a) of the Investment Company Act of 1940 (the
"Act").
FIFTH: All sales literature and advertisements used by the
Distributor in connection with sales of shares of any series of the
Trust shall be subject to the approval of the Trust. The Trust
authorizes the Distributor in connection with the sale or arranging
for the sale of the shares to give only such information and to make
only such statements or representations as are contained in the then
current Prospectuses and Statements of Additional Information of the
Trust or in sales literature or advertisements approved for any series
by the Trust or in such financial statements and reports as are
furnished to the Distributor pursuant to this Agreement. The Trust
shall not be responsible in any way for any information, statements or
representations given or made by the Distributor or its representative
or agents other than such information, statements or representations
contained in the then current Prospectuses and Statement of Additional
Information or other financial statements of the Trust or any sales
literature or advertisements approved by the Trust.
SIXTH: The Distributor as agent of the Trust, and any
Selected Dealer entering into a Selected Dealer Agreement with the
Distributor are authorized, subject to the direction of the Trust, to
accept shares of the series of the Trust for redemption at their net
asset value less any applicable deferred sales charge, determined as
prescribed in the then current Prospectuses and Statement of
Additional Information of the Trust.
SEVENTH: The Trust shall cause to be delivered to the
Distributor all books, records, and other documents and papers
relating to the federal and state registration of Trust shares, as
well as all books, records and other documents and papers relating in
any way to the sub-administration of the Trust or the distribution of
Trust shares.
EIGHTH: The Trust shall bear:
(A) The costs and expenses incurred in connection
with the registration of the shares of each series of the
Trust under the 1933 Act (including any amendment to any
Registration Statement or Prospectuses or Statements of
Additional Information), and all expenses in connection with
preparing, printing and distributing the Prospectuses or
Statements of Additional Information except as set forth in
Paragraph NINTH hereof;
(B) the expenses of qualification of the shares of
each series of the Trust for sale in connection with such
public offerings in such states as shall be selected by the
Distributor and of continuing the qualification therein until
the Distributor notifies the Trust that it does not wish such
qualification continued; and
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<PAGE>
(C) all legal expenses in connection with the
foregoing.
NINTH: The Distributor shall provide certain
sub-administration and distribution services including:
(A) providing officers, clerical staff and office
space to use as the headquarters of the Trust;
(B) arranging for the printing, distribution and
filing of prospectuses and statements of additional
information;
(C) preparing, filing and maintaining all Trust
registrations with the securities regulatory agencies of all
states and other jurisdictions in which the Trust shares are
sold;
(D) making all required filings of advertising and
promotional materials with the National Association of
Securities Dealers, Inc.; and
(E) bearing the expenses of:
(i) the printing, distribution and filing of
prospectuses and statements of additional information
after such have been typeset (other than those
prospectuses and statements of additional information
required by applicable laws and regulations to be
distributed to the existing shareholders of the Trust
and pursuant to any 12b-1 Plan adopted by the Trust);
(ii) any promotional or sales literature
which are used by the Distributor or furnished by the
Distributor to purchasers or dealers in connection
with the Distributor's activities pursuant to this
Agreement (unless paid for by any 12b-1 Plan adopted
by the Trust);
(iii) any advertising used by the
Distributor in connection with such public offering
(unless paid for by any 12b-1 Plan adopted by the
Trust); and
(iv) all legal expenses in connection with
the foregoing.
TENTH: The Distributor will accept orders for shares of a
series of the Trust only to the extent of purchase orders actually
received and not in excess of such orders, and it will not avail
itself of any opportunity of making a profit by expediting or
withholding orders.
ELEVENTH: The Trust shall keep the Distributor fully informed
with regard to its affairs and shall furnish the Distributor with a
certified copy of all financial statements and any amendments to its
Registration Statement under the 1933 Act.
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<PAGE>
TWELFTH: The Trust shall register, from time to time as
necessary, additional shares with the Securities and Exchange
Commission, state and other regulatory bodies and to pay the related
filing fees therefor and to file such amendments, reports and other
documents as may be necessary in order that there may be no untrue
statement of a material fact in the Registration Statement, Prospectus
or Statements of Additional Information necessary in order that there
may be no omission to state a material fact therein, in light of the
circumstances under which they were made, not misleading. As used in
this Agreement, the term "Registration Statement" shall mean the
Registration Statement most recently filed by the Trust with the
Securities and Exchange Commission and effective under the 1933 Act, as
such Registration Statement is amended at such time, and the term
"Prospectus" and "Statement of Additional Information" shall mean for
the purposes of this Agreement the form of the then current
prospectuses and statements of additional information for each series
authorized by the Trust for use by the Distributor and by dealers.
THIRTEENTH:
(A) The Trust and the Distributor shall each comply
with all applicable provisions of the Act, the 1933 Act and
the rules and regulations of the National Association of
Securities Dealers, Inc. and of all other Federal and state
laws, rules and regulations governing the issuance and sale of
shares of the series of Trust.
(B) The Distributor shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the Distributor's part in the
performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement.
(C) In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations
or duties hereunder on the part of the Distributor or any of
its officers, directors or employees, the Trust agrees to
indemnify the Distributor and any controlling person of the
Distributor against any and all claims, demands, liabilities
and expenses (including reasonable attorney's fees) which the
Distributor may incur (i) based on any act or omission the
course of, or connected with, rendering services hereunder,
(ii) based on any representations made herein by the Trust;
(iii) based on any act or omission of any prior Distributor
(in its capacity as Distributor or Sub-Administrator),
Administrator or Adviser to the Trust, including the
registration or failure to register any shares of the Trust
in accordance with state or federal laws or resulting from or
relating to any books or records delivered to the Distributor
in connection with its responsibilities under this Agreement
and occurring prior to the date of this Agreement; and (iv)
under the 1933 Act, or common law or otherwise, arising out
of or based upon any
-4-
<PAGE>
alleged untrue statement of a material fact contained in any
Registration Statement, Statements of Additional Information
or Prospectuses of the Trust, or any omission to state a
material fact therein, the omission of which makes any
statement contained therein misleading, unless such statement
or omission was made in reliance upon, and in conformity with
written information furnished to the Trust in connection
therewith by or on behalf of the Distributor.
(D) The Distributor shall indemnify the Trust against
any and all claims, demands, liabilities and expenses which
the Trust may incur under the 1933 Act, or common law or
otherwise, arising out of or based upon any alleged untrue
statement of material fact contained in any Registration
Statement, Statements of Additional Information or
Prospectuses of the Trust, or any omission to state a material
fact therein if such statement or omission was made in
reliance upon, and in conformity with, written information
furnished to the Trust in connection therewith by the
Distributor.
FOURTEENTH: Nothing herein contained shall require the Trust
to take any action contrary to any provision of its Declaration of
Trust or to any applicable statute or regulation.
FIFTEENTH: The Trust shall pay the Distributor, as full
compensation for the sub-administration services rendered hereunder,
an annual fee on behalf of each series payable monthly and computed on
the net asset value of the series the end of each business day at the
annual rate of .05%.
SIXTEENTH:
(A) This Agreement shall go into effect at the close
of business on the date hereof, and, unless terminated as
hereinafter provided, shall continue in effect for six months
thereafter and from year to year thereafter, but only so long
as such continuance is specifically approved at least
annually by the Trust's Board of Trustees, including the vote
of a majority of the Trustees who are not parties to this
Agreement or "interested persons" (as defined in the Act) of
any such party cast in person at a meeting called for the
purpose of voting on such approval, or by the vote of the
holders of a "majority" (as so defined) of the outstanding
voting securities of the applicable series and by such vote
of the Trustees.
(B) This Agreement may be terminated by the
Distributor at any time without penalty upon giving the Board
of Trustees of the Trust sixty (60) days' written notice
(which notice may be waived by the Trust) and may be
terminated by the Board of Trustees of the Trust at any time
without penalty upon giving the Distributor sixty (60) days'
written notice (which may be waived by the Distributor),
provided that such termination by the Board of Trustees of
the Trust shall be directed or approved by the vote of a
majority of
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<PAGE>
all of its Trustees in office at the time, including a
majority of the Trustees who are not interested persons (as
defined in the Act) of the Trust, or by the vote of the
holders of a majority (as defined in the Act) of the voting
securities of each series of the Trust at the time outstanding
and entitled to vote. This Agreement shall automatically
terminate in the event of its assignment, the term
"Assignment" for this purpose having the meaning defined in
Section 2(a)(4) of the Act.
SEVENTEENTH: The Distributor may at any time or times in its
discretion and at its own expense appoint (and may at any time remove)
an agent or agents to carry out such of the provisions of Article
EIGHTH herein as the Distributor may from time to time direct;
provided, however, that the appointment of any agent shall not relieve
the Distributor of its responsibilities or liabilities hereunder.
EIGHTEENTH: In the event this Agreement is terminated, the
Distributor agrees to delete the word "Vista" from its name and to
discontinue any other use of the words "Vista" and "Vista Premier".
The adviser to the Trust, and certain of its affiliates, are entitled
to use such names and to grant to other investment companies,
administrators, investment advisers or broker-dealers the right to use
that name in connection with the business of operating or providing
services to management investment companies, as defined in the Act.
NINETEENTH: A copy of the Declaration of Trust is on file
with the Secretary of the Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually, and that the
obligations of this instrument are not binding upon any of the
Trustees or shareholders individually but are binding only upon the
assets and property of the Trust, and all persons dealing with any
class of shares of the Trust must look solely to the Trust property
belonging to such class for the enforcement of any claims against the
Trust.
TWENTIETH: Any notice under this Agreement shall be in
writing, addressed and delivered, or mailed, postage paid, to the
other party at such address as such other party may designate for the
receipt of such notices. Until further notice to the other party, it
is agreed that the address of the Trust and the Distributor shall be
125 West 55th Street, New York, NY 10019.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
ATTEST: MUTUAL FUND GROUP
_________________________________ By:_________________________________
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<PAGE>
ATTEST: VISTA BROKER-DEALER SERVICES, INC. an
indirect wholly owned subsidiary of THE BISYS
GROUP, INC.
_________________________________ By:_________________________________
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<PAGE>
EXHIBIT A
Mutual Fund Group
Schedule of
Distribution and
Sub-Administration Fees
The Trust shall pay the Distributor/Sub-Administrator, as full
compensation for all services rendered, an annual fee on behalf of each Fund
payable monthly and computed on the net asset value of the Fund at the end of
each business day at the annual following rates:
Fund Fee%
Vista U.S. Government Income Fund 0.05%
Vista Balanced Fund 0.05
Vista Equity Income Fund 0.05
Vista Growth & Income Fund 0.05
Vista Capital Growth Fund 0.05
Vista International Equity Fund 0.05
Vista Global Fixed Income Fund 0.05
Vista Large Cap Equity Fund 0.05
Vista Bond Fund 0.05
Vista Short-Term Bond Fund 0.05
Vista Small Cap Equity Fund 0.05
Vista European Fund 0.05
Vista Japan Fund 0.05
Vista Southeast Asian Fund 0.05
Vista American Value Fund 0.05
Revised as of ___________________
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<PAGE>
Exhibit 7(a)
Retirement Plan for Eligible Trustees
MUTUAL FUND GROUP
MUTUAL FUND TRUST
MUTUAL FUND VARIABLE ANNUITY TRUST
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
CAPITAL GROWTH PORTFOLIO
RETIREMENT PLAN FOR ELIGIBLE
TRUSTEES
Effective as of August 22, 1995
<PAGE>
RETIREMENT PLAN FOR ELIGIBLE
TRUSTEES
TABLE OF CONTENTS
Page
ARTICLE I DEFINITION OF TERMS AND CONSTRUCTION................... 1
1.1 Definitions............................................ 1
(a) "Accrued Benefit"............................... 1
(b) "Actuary"....................................... 2
(c) "Administrator"................................. 2
(d) "Board of Trustees"............................. 2
(e) "Code".......................................... 2
(f) "Compensation".................................. 2
(g) "Disability".................................... 2
(h) "Effective Date"................................ 2
(i) "Funds"......................................... 2
(j) "Normal Retirement Date"...................... 2
(k) "Participant"................................... 2
(l) "Plan".......................................... 2
(m) "Retirement".................................... 2
(n) "Retirement Benefit"............................ 2
(o) "Service"....................................... 2
(p) "Trustee"....................................... 3
(q) "Year of Service"............................... 3
1.2 Plurals and Gender..................................... 3
1.3 Headings............................................... 3
1.4 Severability........................................... 3
ARTICLE II PARTICIPATION........................................... 3
2.1 Participation.......................................... 3
2.2 Resumption Of Participation............................ 3
2.3 Determination of Eligibility........................... 4
ARTICLE III BENEFITS UPON RETIREMENT AND OTHER TERMINATION
OF SERVICE............................................. 4
3.1 Retirement............................................. 4
3.2 Termination of Service Before Vesting.................. 4
3.3 Benefits Calculated in the Aggregate for all
of the Funds......................................... 4
3.4 Forfeiture for Cause................................... 4
3.5 Death of Participant................................... 5
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<PAGE>
Page
ARTICLE IV SUSPENSION OF BENEFITS.................................. 5
4.1 Suspension of Benefits Upon Resumption of Service....... 5
ARTICLE V ADMINISTRATOR........................................... 5
5.1 Appointment of Administrator............................ 5
5.2 Powers and Duties of Administrator...................... 5
5.3 Action by Administrator................................. 6
5.4 Participation by Administrators......................... 6
5.5 Agents and Expenses..................................... 7
5.6 Allocation of Duties.................................... 7
5.7 Delegation of Duties.................................... 7
5.8 Administrator's Action Conclusive....................... 7
5.9 Records and Reports..................................... 7
5.10 Information from the Funds.............................. 7
5.11 Reservation of Rights by Boards of Trustees............. 8
5.12 Liability and Indemnification........................... 8
ARTICLE VI AMENDMENTS AND TERMINATION.............................. 8
6.1 Amendments.............................................. 8
6.2 Termination............................................. 9
ARTICLE VII CLAIMS PROCEDURE........................................ 9
7.1 Notice of Denial........................................ 9
7.2 Right to Reconsideration................................ 9
7.3 Review of Documents..................................... 10
7.4 Decision by Administrator............................... 10
7.5 Notice of Administrator................................. 10
ARTICLE VIII MISCELLANEOUS........................................... 10
8.1 Rights of Creditors..................................... 10
8.2 Liability Limited....................................... 10
8.3 Incapacity.............................................. 10
8.4 Payments Due Missing Persons............................ 11
8.5 Cooperation of Parties.................................. 11
8.6 Governing Law........................................... 11
8.7 Nonguarantee of Trusteeship............................. 12
8.8 Spendthrift Provision................................... 12
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<PAGE>
THE MUTUAL FUND GROUP
THE MUTUAL FUND TRUST
THE MUTUAL FUND VARIABLE ANNUITY TRUST
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
CAPITAL GROWTH PORTFOLIO
RETIREMENT PLAN FOR ELIGIBLE
TRUSTEES
PREAMBLE
Effective as of August 22, 1995 the regulated investment companies
managed or administered by The Chase Manhattan Bank, N.A., or its affiliates
(the "Funds") have adopted the RETIREMENT PLAN FOR ELIGIBLE TRUSTEES (the
"Plan") for the benefit of each of the trustees of each of the Funds who is not
an employee of the Funds' distributor, administrator or adviser, or any of their
affiliates. As the Plan does not benefit any employees of the Funds, it is not
intended to constitute an employee benefit plan within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
ARTICLE I
DEFINITION OF TERMS AND CONSTRUCTION
1.1 Definitions.
Unless a different meaning is plainly implied by the
context, the following terms as used in this Plan have the following meanings:
(a) "Accrued Benefit" means, as of any date prior to a
Participant's Normal Retirement Date, his Retirement Benefit commencing on his
Normal Retirement Date, but based upon his Compensation and Years of Service
computed as of such date of determination, as if his Service terminated on such
date.
(b) "Actuary" means the independent actuary selected by the
Administrator.
<PAGE>
(c) "Administrator" means the administrative committee
provided for in Article VI.
(d) "Board of Trustees" means the Board of Trustees of each
of the Funds.
(e) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
(f) "Compensation" means, for any Trustee, the aggregate
amount of trustee's fees paid or accrued by the Funds for such Trustee during
the twelve consecutive month period (including amounts of fees deferred with
respect to such period) that produces the highest such amount.
(g) "Disability" means the inability of the Participant to
participate in meetings of the Board, either in person or by telephone, for a
period of at least nine consecutive months.
(h) "Effective Date" means August 22, 1995.
(i) "Funds" means any series of a regulated investment
company, existing or to be created, managed or administered by The Chase
Manhattan Bank, N.A. or any of its affiliates, or any successor thereto that
adopts this Plan by operation of law or otherwise.
(j) "Normal Retirement Date" means, the first day of the
month coincident with or next following the date on which a Participant has
attained age 65 and completed at least five continuous Years of Service.
(k) "Participant" means a Trustee who has met all of the
eligibility requirements of the Plan and who is currently included in the Plan
as provided in Article II.
(l) "Plan" means this "Retirement Plan for Eligible
Trustees" as set forth herein or as amended from time to time.
(m) "Retirement" means a Trustee's termination of his active
Service with the Funds on or after his Normal Retirement Date, due to his death,
Disability, or voluntary or involuntary termination of his Service.
(n) "Retirement Benefit" means the benefit described under
Sections 3.1 to which a Participant is entitled on or after his Normal
Retirement Date.
(o) "Service" means an individual's serving as a Trustee of
one or more of the Funds (including service as a Trustee prior to the Effective
Date for the following Funds: Mutual Fund Group, Mutual Fund Trust, Mutual Fund
Variable Annuity Trust, Global Fixed Income Portfolio, Growth and Income
Portfolio, International Equity Portfolio, Capital Growth Portfolio, Pinnacle
Fund and the Park Avenue Funds).
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(p) "Trustee" means an individual who is a trustee of one or
more of the Funds which have adopted the Plan but who is not an employee of the
Funds' distributor, administrator or adviser, or any of their affiliates.
(q) "Year of Service" means a twelve consecutive month
period of Service.
1.2 Plurals and Gender.
Where appearing in the Plan, the masculine gender shall
include the feminine and neuter genders, and the singular shall include the
plural, and vice versa, unless the context clearly indicates a different
meaning.
1.3 Headings.
The headings and sub-headings in this Plan are inserted for
the convenience of reference only and are to be ignored in any construction of
the provisions hereof.
1.4 Severability.
In case any provision of this Plan shall be held illegal or
void, such illegality or invalidity shall not affect the remaining provisions of
this Plan, but shall be fully severable, and the Plan shall be construed and
enforced as if such illegal or invalid provisions were not a part of this Plan.
ARTICLE II
PARTICIPATION
2.1 Participation.
Each Trustee shall become a Participant hereunder on the
later of the effective date or the date his trusteeship of one or more of the
Funds commences. A Trustee shall cease to be a Participant upon termination of
his Service.
2.2 Resumption of Participation.
Any Participant whose Service terminates and who thereafter
again becomes a Trustee shall resume participation immediately upon again
becoming a Trustee.
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2.3 Determination of Eligibility
The Administrator shall determine the eligibility of
Trustees in accordance with the provisions of this Article.
ARTICLE III
BENEFITS UPON
RETIREMENT AND OTHER TERMINATION OF SERVICE
3.1 Retirement.
Upon Retirement, a Participant shall receive an annual
benefit from the Funds commencing on the first day of the month coincident with
or next following his Normal Retirement Date or his date of Retirement, if
later, equal to the product of (A) ten percent of his highest Compensation
multiplied by (B) the number of his complete Years of Service, not in excess of
ten Years of Service. Such amount shall be payable in monthly installments
ending with the payment for the month in which the Participant dies. Unless
otherwise determined by the Board, a Trustee shall retire no later than the
January 1 of the year following his attainment of age 73.
3.2 Termination of Service Before Retirement.
If a Participant's Service terminates by reason of
resignation, death, Disability or removal by the Board for cause (as defined in
Section 3.4) prior to his Normal Retirement Date, he shall not be entitled to
any benefits under this Plan. If a Participant's Service terminates for any
other reason and he has accumulated at least five continuous Years of Service,
he shall be entitled to his Accrued benefit determined as of such date of
termination.
3.3 Benefits Calculated in the Aggregate for all of the Funds.
A Participant's annual benefits payable hereunder shall be
based on the aggregate Compensation paid by the Funds and on the Participant's
Years of Service. Each Fund's share of the obligation to provide such benefits
shall be determined by use of accounting methods adopted by the Administrator.
3.4 Forfeiture for Cause.
Notwithstanding any other provision of this Plan to the
contrary, any benefits to which a Participant may otherwise be entitled
hereunder will be forfeited in the event the Administrator, in its sole
discretion, determines that a Participant's termination of Service is due to
such Participant's willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee.
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3.5 Death of Participant.
No benefits will be paid under this Plan with respect to a
Participant who dies whether prior to or after the commencement of his benefits.
ARTICLE IV
SUSPENSION OF BENEFITS
4.1 Suspension of Benefits Upon Resumption of Service.
In the case of a Participant who, at a time when he is
receiving Retirement Benefits under Article III, resumes Service with any Fund,
such Retirement Benefits shall be suspended until his subsequent Retirement, or
other termination of Service. Subject to the limitations of Section 3.1, in the
event of his Retirement or other termination of Service following such a
suspension, the monthly amount of his Retirement Benefits shall be adjusted, if
appropriate, to reflect any additional Years of Service completed by, and/or a
higher rate of Compensation received by, such Participant.
ARTICLE V
ADMINISTRATOR
5.1 Appointment of Administrator.
This Plan shall be administered by the Compensation
Committees of the Funds. The members of such committees shall not be "interested
persons" (within the meaning of Section 2(a)(19) of the Investment Company Act
of 1940) of any of the Funds. The term "Administrator" as used in this Plan
shall refer to the members of such committees, either individually or
collectively, as appropriate.
5.2 Powers and Duties of Administrator.
Except as provided below, the Administrator shall have the
following duties and responsibilities in connection with the administration of
this Plan:
(a) To promulgate and enforce such rules, regulations and
procedures as shall be proper for the efficient administration of the Plan;
(b) To determine all questions arising in the
administration, interpretation and application of the Plan, including questions
of eligibility and of the status and rights of Participants and any other
persons hereunder;
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(c) To decide any dispute arising hereunder; provided,
however, that no Administrator shall participate in any matter involving any
questions relating solely to his own participation or benefits under this Plan;
(d) To advise the Boards of Trustees of the Funds regarding
the known future need for funds to be available for distribution;
(e) To correct defects, supply omissions and reconcile
inconsistencies to the extent necessary to effectuate the Plan;
(f) To compute the amount of benefits and other payments
which shall be payable to any Participant in accordance with the provisions of
the Plan and to determine the person or persons to whom such benefits shall be
paid;
(g) To make recommendations to the Boards of Trustees of the
Funds with respect to proposed amendments to the Plan;
(h) To file all reports with government agencies,
Participants and other parties as may be required by law, whether such reports
are initially the obligation of the Funds, or the Plan;
(i) To engage the Actuary of the Plan and to cause the
liabilities of the Plan to be evaluated by the Actuary; and
(j) To have all such other powers as may be necessary to
discharge its duties hereunder.
5.3 Action by Administrator.
The Administrator may elect a Chairman and Secretary from
among its members and may adopt rules for the conduct of its business. A
majority of the members then serving shall constitute a quorum for the
transacting of business. All resolutions or other action taken by the
Administrator shall be by vote of a majority of those present at such meeting
and entitled to vote. Resolutions may be adopted or other action taken without a
meeting upon written consent signed by at least a majority of the members. All
documents, instruments, orders, requests, directions, instructions and other
papers shall be executed on behalf of the Administrator by either the Chairman
or the Secretary of the Administrator, if any, or by any member or agent of the
Administrator duty authorized to act on the Administrator's behalf.
5.4 Participation by Administrators.
No Administrator shall be precluded from becoming a
Participant in the Plan if he would be otherwise eligible, but he shall not be
entitled to vote or act upon matters or to sign any documents relating
specifically to his own participation under the Plan, except when such matters
or documents relate to benefits generally. If this disqualification results in
the lack of a quorum, then the Boards of Trustees, by majority vote of the
members of a majority of such
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Boards of Trustees (a "Majority Vote"), shall appoint a sufficient number of
temporary Administrators, who shall serve for the sole purpose of determining
such a question.
5.5 Agents and Expenses.
The Administrator may employ agents and provide for such
clerical, legal, actuarial, accounting, medical, advisory or other services as
it deems necessary to perform its duties under this Plan. The cost of such
services and all other expenses incurred by the Administrator in connection with
the administration of the Plan shall be allocated to each Fund pursuant to the
method utilized under Section 3.3 hereof with respect to costs related to
benefit accruals.
5.6 Allocation of Duties.
The duties, powers and responsibilities reserved to the
Administrator may be allocated among its members so long as such allocation is
pursuant to written procedures adopted by the Administrator, in which case no
Administrator shall have any liability, with respect to any duties, powers or
responsibilities not allocated to him, for the acts or omissions of any other
Administrator.
5.7 Delegation of Duties.
The Administrator may delegate any of its duties to
employees of one or more of the Funds, or to any other person or firm, provided
that the Administrator shall prudently choose such agents and rely in good faith
on their actions.
5.8 Administrator's Action Conclusive.
Any action on matters within the discretion of the
Administrator shall be final and conclusive.
5.9 Records and Reports.
The Administrator shall maintain adequate records of its
actions and proceedings in administering this Plan and shall file all reports
and take all other actions as it deems appropriate in order to comply with any
federal or state law.
5.10 Information from the Funds.
The Funds shall promptly furnish all information to the
Administrator to permit it to perform its duties under this Plan. The
Administrator shall be entitled to rely upon the accuracy and completeness of
all information furnished to it by the Funds, unless it knows or should have
known that such information is erroneous.
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5.11 Reservation of Rights by Boards of Trustees.
When rights are reserved in this plan to the Boards of
Trustees, such rights shall be exercised only by Majority Vote of the Boards of
Trustees, except where the Boards of Trustees, by unanimous written resolution,
delegate any such rights to one or more persons or to the Administrator. Subject
to the rights reserved to the Boards of Trustees as set forth in this Plan, no
member of the Boards of Trustees shall have any duties or responsibilities under
this Plan, except to the extent he shall be acting in the capacity of an
Administrator.
5.12 Liability and Indemnification.
(a) The Administrator shall perform all duties required of
it under this Plan in a prudent manner. The Administrator shall not be
responsible in any way for any action or omission of the Funds or their
employees in the performance of their duties and obligations as set forth in
this Plan. The Administrator also shall not be responsible for any act or
omission of any of its agents provided that such agents were prudently chosen by
the Administrator and that the Administrator relied in good faith upon the
action of such agents.
(b) Except for its own gross negligence, willful misconduct
or willful breach of the terms of this Plan, the Administrator shall be
indemnified and held harmless by the Funds against any and all liability, loss,
damages, cost and expense which may arise occurring by reason of, or be based
upon, any matter connected with or related to this Plan or its administration
(including, but not limited to, any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending any litigation, commenced or
threatened, or in settlement of any such claim).
ARTICLE VI
AMENDMENTS AND TERMINATION
6.1 Amendments.
The Boards of Trustees reserve the right at any time and
from time to time, and retroactively if deemed necessary or appropriate by it,
to amend in whole or in part by Majority Vote any or all of the provisions of
this Plan, provided that:
(a) No amendment shall make it possible for any part of a
Participant's or former Participant's Retirement Benefit to be used for, or
diverted to, purposes other than for the exclusive benefit of such Participant,
except to the extent otherwise provided in this Plan; and
(b) No amendment may reduce any Participant's or former
Participant's Retirement Benefit as of the effective date of the amendment.
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Amendments may be made in the form of Board of Trustees'
resolutions or separate written document.
6.2 Termination.
The Boards of Trustees reserve the right to terminate this
Plan at any time, in whole or in part, with respect to all or any individual
Trustee, by Majority Vote by giving to the Administrator notice in writing of
such termination. The Plan (or any part thereof) shall terminate upon the date
of receipt of such notice (or any subsequent specified date). If the Plan is
terminated, unless the Boards of Trustees determine otherwise, the present value
of each affected Participant's Retirement Benefit shall be paid as soon as
practicable after such termination. Such present value shall be determined using
(a) the mortality table prescribed under section 417(e)(3) of the Code and (b)
an interest rate equal to the annual rate of interest on U.S. Treasury
securities having a maturity period no greater than the mortality period
determined under (a).
ARTICLE VII
CLAIMS PROCEDURE
7.1 Notice of Denial.
If a Participant is denied any Retirement Benefit under this
Plan, either in total or in an amount less than the full Retirement Benefit to
which he would normally be entitled, the Administrator shall advise the
Participant in writing of the amount of his Retirement Benefit, if any, and the
specific reasons for the denial. The Administrator shall also furnish the
Participant at that time with a written notice containing:
(a) A specific reference to pertinent Plan provisions.
(b) A description of any additional material or information
necessary for the Participant to perfect his claim, if possible, and an
explanation of why such material or information is needed.
(c) An explanation of the Plan's claim review procedure.
7.2 Right to Reconsideration.
Within 60 days of receipt of the information stated in
Section 9.1 above, the Participant shall, if he desires further review, file a
written request for reconsideration with the Administrator.
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7.3 Review of Documents.
So long as the Participant's request for review is pending
(including the 60 day period in 9.2 above), the Participant or his duly
authorized representative may review pertinent Plan documents and may submit
issues and comments in writing to the Administrator.
7.4 Decision by Administrator.
A final and binding decision shall be made by the
Administrator within 60 days of the filing by the Participant of his request for
reconsideration, provided, however, that if the Administrator, in its
discretion, feels that additional time is necessary or desirable, this period
shall be extended an additional 60 days.
7.5 Notice of Administrator.
The Administrator's decision shall be conveyed to the
Participant in writing and shall include specific reasons for the provisions on
which the decision is based.
ARTICLE VIII
MISCELLANEOUS
8.1 Rights of Creditors.
(a) The Plan is unfunded. Neither the Participants nor any
other persons shall have any interest in any fund or in any specific asset or
assets of any of the Funds by reason of any Accrued or Retirement Benefit
hereunder, nor any rights to receive distribution of any Retirement Benefit
except and as to the extent expressly provided hereunder.
(b) The Accrued and Retirement Benefits of each Participant
are unsecured and shall be subject to the claims of the general creditors of the
Funds.
8.2 Liability Limited.
Neither the Funds, the Administrator, nor any agents,
employees, officers, trustees or shareholders of any of them, nor any other
person shall have any liability or responsibility with respect to this Plan,
except as expressly provided herein.
8.3 Incapacity.
If the Administrator shall receive evidence satisfactory to
it that a Participant entitled to receive any benefit under the Plan is, at the
time when such benefit becomes payable, physically or mentally incompetent to
receive such benefit and to give a valid release therefor, and that another
person or an institution is then maintaining or has custody of such Participant
and that no guardian, committee or other representative of the estate of such
Participant shall
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have been duly appointed, the Administrator may make payment of such benefit
otherwise payable to such Participant to such other person or institution, and
the release of such other person or institution shall be a valid and complete
discharge for the payment of such benefit.
8.4 Payments Due Missing Persons.
The Administrator shall make a reasonable effort to locate
all persons entitled to benefits under the Plan; however, notwithstanding any
provisions of this Plan to the contrary, if, after a period of 5 years from the
date such benefits first become due, any such persons entitled to benefits have
not been located, their rights under the Plan shall stand suspended. Before this
provision becomes operative, the Administrator shall send a certified letter to
all such persons at their last known address advising them that their benefits
under the Plan shall be suspended. Any such suspended amounts shall be held by
the Funds for a period of three additional years (or a total of 8 years from the
time the benefits first became payable) and thereafter such amounts shall be
forfeited.
8.5 Cooperation of Parties.
All parties to this Plan and any person claiming any
interest hereunder agree to perform any and all acts and execute any and all
documents and papers which are necessary or desirable for carrying out this Plan
or any of its provisions.
8.6 Governing Law.
All rights under the Plan shall be governed by and construed
in accordance with rules of Federal law applicable to such plans and, to the
extent not preempted, by the laws of the State of New York without regard to
principles of conflicts of law. No action shall be brought by or on behalf of
any Participant for or with respect to benefits due under this Plan unless the
person bringing such action has timely exhausted the Plan's claim review
procedure. Any such action must be commenced within three years. This three-year
period shall be computed from the earlier of (a) the date a final determination
denying such benefit, in whole or in part, is issued under the Plan's claim
review procedure or (b) the date such individual's cause of action first
accrued. Any dispute, controversy or claim arising out of or in connection with
this Plan (including the applicability of this arbitration provision) and not
resolved pursuant to the Plan's claim review procedure shall be determined and
settled by arbitration conducted by the American Arbitration Association ("AAA")
in the County and State of the Funds' principal place of business and in
accordance with the then existing rules, regulations, practices and procedures
of the AAA. Any award in such arbitration shall be final, conclusive and binding
upon the parties to the arbitration and may be enforced by either party in any
court of competent jurisdiction. Each party to the arbitration will bear its own
costs and fees (including attorney's fees).
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8.7 Nonguarantee of Trusteeship.
Nothing contained in this Plan shall be construed as a
guaranty or right of any Participant to be continued as a Trustee of one or more
of the Funds (or of a right of a Trustee to any specific level of Compensation)
or as a limitation of the right of the Funds to remove any of its trustees.
8.8 Spendthrift Provision.
A Participant's interest in his Accrued Benefit or
Retirement Benefit may not be transferred, alienated, assigned nor become
subject to execution, garnishment or attachment, and any attempt to do so will
render benefits hereunder immediately forfeitable.
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Exhibit 7(b)
Deferred Compensation Plan for Eligible Trustees
MUTUAL FUND GROUP
MUTUAL FUND TRUST
MUTUAL FUND VARIABLE ANNUITY TRUST
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
CAPITAL GROWTH PORTFOLIO
DEFERRED COMPENSATION PLAN FOR ELIGIBLE
TRUSTEES
<PAGE>
ARTICLE Page
1 Definitions........................................... 1
2 Deferrals............................................. 3
3 Payment of Benefits................................... 8
4 Beneficiaries........................................ 12
5 Administration and Reservation of Rights............. 14
<PAGE>
ARTICLE 1
DEFINITIONS
The following terms when used in this Plan have the designated
meanings unless a different meaning is clearly required by the context.
1.1 Account means the record maintained on the books of the Funds to
reflect deferrals of Compensation by a Participant pursuant to Section 2.2.
1.2 Beneficiary means the person or persons designated pursuant to
Article 4 to receive a benefit pursuant to Section 3.4.1 in the event of a
Participant's death before his benefit under this Plan has been paid.
1.3 Board means the board of Board of Trustees of each of the Funds.
1.4 Compensation means, for any Eligible Trustee, the amount of
trustee's fees paid or accrued by the Funds for such Trustee with respect to a
calendar year (prior to reduction for amounts deferred pursuant to this Plan).
1.5 Eligible Trustee means an individual who is a trustee of one or
more of the Funds which have adopted the Plan but who is not an employee of the
Funds' distributor, administrator or adviser, or any of their affiliates.
1.6 Funds means any series of a regulated investment company, existing
or to be created, managed or administered by The Chase Manhattan Bank, N.A. or
any of its affiliates.
<PAGE>
1.7 Participant means an Eligible Trustee who has deferred
Compensation pursuant to this Plan and who has an Account to which amounts stand
credited.
1.8 Payment Date means a date designated pursuant to Section 2.3 for
payment of some portion or all of a Participant's Account.
1.9 Plan means this "Deferred Compensation Plan for Eligible Trustees"
as set forth herein and as in effect from time to time.
1.10 Plan Administrator means the Compensation Committees of the Funds
and such individual or individuals appointed from time to time by such
Committees to assist in the administration of the Plan. The members of such
Compensation Committees shall not be "interested persons" (within the meaning of
Section 2(a)(19) of the Investment Company Act of 1940) of any of the Funds. The
term "Plan Administrator" as used in this Plan shall refer to the members of
such Committees, either individually or collectively, and their delegees, as
appropriate.
1.11 Termination of Service means cessation for any reason of a
Participant's service as Trustee of each of the Funds.
1.12 Valuation Date means the last business day of each calendar
quarter and any other day that the Plan Administrator makes a valuation of an
Account.
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ARTICLE 2
DEFERRALS
2.1 Accounts. The Funds shall establish an Account for each Eligible
Trustee who elects to defer Compensation pursuant to Section 2.2. Amounts
deferred pursuant to Section 2.2, and the value thereof determined pursuant to
Section 2.4, shall be credited to such Account.
2.2 Deferral of Compensation.
2.2.1 Initial Deferral Election. An Eligible Trustee may direct
the Funds to reduce the Compensation otherwise payable to him and to
pay the amount of such reduction to him in the future as deferred
compensation. A deferral direction pursuant to this Section 2.2 shall
be made in writing before the first day of the calendar year for which
such Compensation is paid, in such manner as the Plan Administrator
shall prescribe, shall be irrevocable and shall continue in effect for
all subsequent calendar years unless it is canceled or modified as
provided below. Notwithstanding the foregoing, (i) any Eligible
Trustee who is elected to the Board during a calendar year of the Fund
may elect before becoming a Trustee or within 30 days after becoming
an Eligible Trustee to defer any unpaid portion of his Compensation in
respect of such calendar year and the fees for any future meetings
during such calendar year by filing an election form with the Plan
Administrator, and (ii) Eligible Trustees may elect to defer any
unpaid portion of the retainer for the calendar year in which this
Plan is first adopted by the Board and any unpaid fees for any future
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meetings during such calendar year by submitting an election form to
the Plan Administrator within 30 days of such authorization.
2.2.2 Change in Deferral Election. A Participant may cancel or
modify the amount of his Compensation deferrals on a prospective basis
by submitting to the Plan Administrator a revised Compensation
deferral election form. Such change will be effective as of the first
day of the calendar year following the date such revision is submitted
to the Plan Administrator.
2.3 Payment Date.
2.3.1 Designation of Date. Each deferral direction given pursuant
to Section 2.2 shall include designation of the Payment Date for the
value of the amount deferred. Such Payment Date shall be the first day
of any calendar quarter, subject to the limitation set forth in
Section 2.3.3.
2.3.2 Extension of Date. One year before the Payment Date
initially designated pursuant to Section 2.3.1, the Participant may
irrevocably elect to extend such Payment Date to the first day of any
calendar quarter, subject to the limitation set forth in Section
2.3.3.
2.3.3 Limitation. An Eligible Trustee shall select a Payment Date
(or extended Payment Date) that is no sooner than the earlier of (a)
the January 1 that follows the third anniversary of the Participant's
deferral election made pursuant to Section 2.3.1 or 2.3.2 or (b) the
January 1 of the year in which the Participant attains age 74.
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2.3.4 Methods of Payments. A Participant may elect, at the time a
Payment Date is selected, to receive the amount which will become
payable as of such Payment Date in no more than ten annual
installments. Except as may be elected pursuant to this Section 2.3.4,
all amounts becoming payable under this Plan shall be paid in a single
sum.
2.3.5 Irrevocability. Except as provided in Section 2.3.2, a
designation of a Payment Date and an election of installment payments
shall be irrevocable; provided, however, that payment may be made on a
different date as provided in Section 3.4.
2.4 Value of Participants' Accounts. Compensation deferrals shall be
allocated to each Participant's Account on the first business day following the
date such Compensation is withheld from the Trustee's Compensation and shall be
deemed invested pursuant to this Section 2.4, as soon as practicable.
2.4.1 Crediting of Income, Gains and Losses. As of each Valuation
Date, income, gain and loss equivalents (determined as if the Account
is invested in the manner set forth below) attributable to the period
following the next preceding Valuation Date shall be credited to
and/or deducted from the Account.
2.4.2 Investment of Account Balance. The Participant may select,
from various options made available by the Funds, the Funds in which
all or part of his Account shall be deemed to be invested. The Funds
available to the
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Participant as of the date of inception of this Plan are listed on
Appendix B hereto.
2.4.2.1 The Participant shall make an investment designation
on a form provided by the Plan Administrator which shall remain
effective until another valid designation has been made by the
Participant as herein provided. The Participant may amend his
investment designation as of the end of each calendar quarter by
giving written direction to the Plan Administrator at least
thirty (30) days prior to the end of such calendar quarter. A
timely change to a Participant's investment designation shall
become effective on the first day of the calendar quarter
following receipt by the Plan Administrator.
2.4.2.2 Any changes to the Funds to be made available to the
Participant, and any limitation on the maximum or minimum
percentages of the Participant's Account that may be invested in
any particular Fund, shall be communicated from time-to-time to
the Participant by the Plan Administrator.
2.4.3 Default Provision. Except as provided below, the
Participant's Account shall be deemed to be invested in accordance
with his investment designations, provided such designations conform
to the provisions of this Section. Notwithstanding the above, the
Board, in its sole discretion, may disregard the Participant's
election and determine that all Compensation deferrals shall be deemed
to be invested in a Fund determined by the Board. In
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the event that any Fund under which any portion of the Participant's
Account is deemed to be invested ceases to exist, such portion of the
Account thereafter shall be deemed held in the successor to such Fund,
subject to subsequent deemed investment elections.
2.4.4 Regulatory Approvals. The use of the returns on the Funds
to determine the amount of the earnings credited to a Participant's
Account is subject to regulatory approval. Until such approval is
received, the Compensation deferrals of a Participant shall be
continuously credited with earnings in an amount determined by
multiplying the balance credited to the Account by an interest rate
equal to the yield on 90-day U.S. Treasury Bills (as determined by the
Plan Administrator at the beginning of each calendar quarter).
2.4.5 Statements. The Fund shall provide an annual statement to
the Participant showing such information as is appropriate, including
the aggregate amount credited to the Account, as of a reasonably
current date.
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ARTICLE 3
PAYMENT OF BENEFITS
3.1 Nonforfeitability. A Participant's right to a deferred amount of
Compensation and his right to the income and gains credited thereon, shall be
fully vested and nonforfeitable at all times.
3.2 Income. Any payment made pursuant to Sections 3.3, 3.4. or 3.5
shall include the income, gains and losses calculated in the manner described in
Section 2.4 through the end of the month preceding the month in which such
payment is made.
3.3 Time of Payment. Except as provided in Section 3.4, the amount
credited to the Account of each Participant shall become payable to the
Participant in cash as of the Payment Date designated pursuant to Section 2.3.
If the Participant has elected installment payments, such payments shall begin
within thirty days of the Payment Date. In any other case, payment shall be made
as a single sum within thirty days of the Payment Date.
3.4 Termination of Service. In the event of a Participant's
Termination of Service while amounts stand credited to his Account, such amounts
shall be disposed of as provided in this Section 3.4.
3.4.1 Death of Participant. If the Participant's Termination of
Service is on account of his death, or if he dies following
Termination of Service but while receiving installment payments, his
Account shall be paid as soon as practicable to his Beneficiary as a
single sum in cash.
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3.4.2 Termination. If the Participant's Termination of Service is
for a reason other than death, his Account shall be paid to him as a
single sum in cash; provided, however, that if the Participant had
elected installment payments pursuant to Section 2.3.4 for any
deferred Compensation, the amount of such deferred Compensation and
income, gains and losses credited thereon shall be paid in cash in the
number of installments thus elected. All payments pursuant to this
Section 3.4.2 shall be made or begin no more than three months after
the end of the calendar year in which Termination of Service occurs.
3.5 Withdrawal for Emergency Need.
3.5.1 Authorization. The Board may permit a Participant who
demonstrates an emergency need to withdraw from the Plan an amount no
greater than the amount determined by the Plan Administrator to be
reasonably necessary to satisfy such emergency need. Such withdrawal
shall be funded by drawing on deferred Compensation amounts (and
income thereon) in the order in which such amounts were originally
credited to the Participant's Account.
3.5.2 Emergency Need. For purposes of this Section 3.5, an
emergency need is a severe financial hardship of a Participant
resulting from (a) a sudden and unexpected illness of or accident to
the Participant or a dependent within the meaning of section 152(a) of
the Internal Revenue Code, or (b) a casualty loss to the Participant's
property or (c) other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the Participant's
control. A need is not an emergency need to the extent
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<PAGE>
that it is relieved by reimbursement or compensation by insurance or
otherwise, or by liquidation of the Participant's assets insofar as
such liquidation would not cause severe financial hardship, or by
cessation of deferrals under the Plan.
3.6 Source of Payment. The Compensation deferred pursuant to this Plan
(and the income, gains and losses credited thereon) shall be the general
obligation of the Funds. Each Fund's share of the obligation to provide such
amounts shall be determined by use of accounting methods adopted by the Plan
Administrator. The claim of a Participant or Beneficiary to a benefit shall at
all times be merely the claim of an unsecured creditor of the applicable Funds.
No trust, security, escrow, or similar account need be established for the
purpose of paying benefits hereunder. The Funds shall not be required to
purchase, hold or dispose of any investments pursuant to this Agreement;
however, if in order to cover its obligations hereunder the Fund elects to
purchase any investments the same shall continue for all purposes to be a part
of the general assets and property of the Fund, subject to the claims of its
general creditors and no person other than the Fund shall by virtue of the
provisions of this Agreement have any interest in such assets other than an
interest as a general creditor.
3.7 Withholding. All amounts credited to Participants' Accounts
pursuant to this Plan and all payments under the Plan shall be subject to any
applicable withholding requirements imposed by any tax (including, without
limitation, FICA) or other law. Each Fund shall have the right to require as a
condition of any crediting to a Participant's Account or of any payment
hereunder that the Participant remit to the Fund an amount sufficient in its
opinion to satisfy all applicable withholding requirements. With respect to
withholding
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<PAGE>
applicable to any payment made hereunder, a payee may discharge such obligation
by directing the Funds to withhold amounts payable under the Plan.
3.8 Right of Offset. Any amount payable pursuant to this Plan shall be
reduced at the discretion of the Plan Administrator to take account of any
amount due, and not paid, by the Participant to the Funds at the time payment is
to be made hereunder.
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<PAGE>
ARTICLE 4
BENEFICIARIES
4.1 Beneficiary Designation.
4.1.1 Designation. A Participant may from time to time designate,
in the manner specified by the Plan Administrator, a Beneficiary to
receive payment pursuant to Section 3.4 in the event of his death.
4.1.2 Absence of Beneficiary. In the event that there is no
properly designated Beneficiary living at the time of a Participant's
death, his benefit hereunder shall be paid to his estate.
4.2 Payment to Incompetent. If any person entitled to benefits under
this Plan shall be a minor or shall be physically or mentally incompetent in the
judgment of the Plan Administrator, such benefits may be paid in any one or more
of the following ways, as the Plan Administrator in his sole discretion shall
determine:
4.2.1 to the legal representatives of such minor or incompetent
person;
4.2.2 directly to such minor or incompetent person; or
4.2.3 to a parent or guardian of such minor or incompetent
person, to the person with whom such minor or incompetent person
resides, or to a custodian for such minor under the Uniform Gifts to
Minors Act (or similar statute) of any jurisdiction.
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<PAGE>
Payment to any person in accordance with the foregoing provisions of this
Section 4.2 shall to that extent discharge the applicable Funds and the Plan
Administrator, who shall not be required to see to the proper application of any
such payment.
4.3 Doubt as to Right to Payment. If any doubt exists as to the right
of any person to any benefits under this Plan or the amount or time of payment
of such benefits (including, without limitation, any case of doubt as to
identity, or any case in which any notice has been received from any other
person claiming any interest in amounts payable hereunder, or any case in which
a claim from other persons may exist by reason of community property or similar
laws), the Plan Administrator may, in his discretion, direct that payment of
such benefits be deferred until such right or amount or time is determined, or
pay such benefits into a court of competent jurisdiction in accordance with
appropriate rules of law, or direct that payment be made only upon receipt of a
bond or similar indemnification (in such amount and in such form as is
satisfactory to the Plan Administrator).
4.4 Spendthrift Clause. No benefit, distribution or payment under the
Plan may be anticipated, assigned (either at law or in equity), alienated or
subject to attachment, garnishment, levy, execution or other legal or equitable
process whether pursuant to a "qualified domestic relations order" as defined in
section 414(p) of the Internal Revenue Code or otherwise.
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<PAGE>
ARTICLE 5
ADMINISTRATION AND RESERVATION OF RIGHTS
5.1 Plan Administrator. Authority to administer the Plan shall be
vested in the Plan Administrator, who shall have the power and discretion to:
5.1.1 promulgate and enforce such rules, regulations and
procedures as shall be proper for the efficient administration of the
Plan;
5.1.2 determine all questions arising in the administration,
interpretation and application of the Plan, including questions of
eligibility and of the status and rights of Participants and any other
persons hereunder;
5.1.3 decide any dispute arising hereunder; provided, however,
that no Administrator shall participate in any matter involving any
questions relating solely to his own participation or benefits under
this Plan;
5.1.4 advise the Boards of Trustees of the Funds regarding the
known future need for funds to be available for distribution;
5.1.5 correct defects, supply omissions and reconcile
inconsistencies to the extent necessary to effectuate the Plan;
5.1.6 compute the amount of benefits and other payments which
shall be payable to any Participant in accordance with the provisions
of the Plan and to determine the person or persons to whom such
benefits shall be paid;
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<PAGE>
5.1.7 make recommendations to the Boards of Trustees of the Funds
with respect to proposed amendments to the Plan;
5.1.8 file all reports with government agencies, Participants and
other parties as may be required by law, whether such reports are
initially the obligation of the Funds, or the Plan; and
5.1.9 have all such other powers as may be necessary to discharge
its duties hereunder.
5.2 Claims Procedure. If the Plan Administrator denies any
Participant's or Beneficiary's claim for benefits under the Plan:
5.2.1 the Plan Administrator shall notify such Participant or
Beneficiary of such denial by written notice which shall set forth the
specific reasons for such denial; and
5.2.2 the Participant or Beneficiary shall be afforded a
reasonable opportunity for a full and fair review by the Board of the
decision to deny his claim for Plan benefits.
5.3 Action by Administrator. The Plan Administrator may elect a
Chairman and Secretary from among its members and may adopt rules for the
conduct of its business. A majority of the members then serving shall constitute
a quorum for the transacting of business. All resolutions or other action taken
by the Plan Administrator shall be by vote of a majority of those present at
such meeting and entitled to vote. Resolutions may be adopted or other
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<PAGE>
action taken without a meeting upon written consent signed by at least a
majority of the members. All documents, instruments, orders, requests,
directions, instructions and other papers shall be executed on behalf of the
Plan Administrator by either the Chairman or the Secretary of the Plan
Administrator, if any, or by any member or agent of the Plan Administrator duly
authorized to act on the Plan Administrator's behalf.
5.4 Participation by Plan Administrators. No Plan Administrator shall
be precluded from becoming a Participant in the Plan if he would be otherwise
eligible, but he shall not be entitled to vote or act upon matters or to sign
any documents relating specifically to his own participation under the Plan,
except when such matters or documents relate to benefits generally. If this
disqualification results in the lack of a quorum, then the Boards of Trustees,
by majority vote of the members of a majority of such Boards of Trustees (a
"Majority Vote"), shall appoint a sufficient number of temporary Plan
Administrators, who shall serve for the sole purpose of determining such a
question.
5.5 Agents and Expenses. The Plan Administrator may employ agents and
provide for such clerical, legal, actuarial, accounting, medical, advisory or
other services as it deems necessary to perform its duties under this Plan. The
cost of such services and all other expenses incurred by the Plan Administrator
in connection with the administration of the Plan shall be allocated to each
Fund pursuant to the method utilized under Section 3.6 hereof with respect to
costs related to benefit accruals.
5.6 Allocation of Duties. The duties, powers and responsibilities
reserved to the Plan Administrator may be allocated among its members so long as
such allocation is pursuant to written procedures adopted by the Plan
Administrator, in which case no Plan
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<PAGE>
Administrator shall have any liability, with respect to any duties, powers or
responsibilities not allocated to him, for the acts or omissions of any other
Plan Administrator.
5.7 Delegation of Duties. The Plan Administrator may delegate any of
its duties to employees of one or more of the Funds, or to any other person or
firm
5.8 Plan Administrator's Action Conclusive. Any action on matters
within the discretion of the Plan Administrator shall be final and conclusive.
5.9 Records and Reports. The Plan Administrator shall maintain
adequate records of its actions and proceedings in administering this Plan and
shall file all reports and take all other actions as it deems appropriate in
order to comply with any federal or state law.
5.10 Information from the Funds. The Funds shall promptly furnish all
information to the Plan Administrator to permit it to perform its duties under
this Plan. The Plan Administrator shall be entitled to rely upon the accuracy
and completeness of all information furnished to it by the Funds, unless it
knows or should have known that such information is erroneous.
5.11 Reservation of Rights by Boards of Trustees. When rights are
reserved in this plan to the Boards of Trustees, such rights shall be exercised
only by Majority Vote of the Boards of Trustees, except where the Boards of
Trustees, by unanimous written resolution, delegate any such rights to one or
more persons or to the Plan Administrator. Subject to the rights reserved to the
Boards of Trustees as set forth in this Plan, no member of the Boards of
Trustees shall have any duties or responsibilities under this Plan, except to
the extent he shall be acting in the capacity of an Plan Administrator.
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<PAGE>
5.12 Liability and Indemnification.
5.12.1 The Plan Administrator shall perform all duties required
of it under this Plan in a prudent manner. The Plan Administrator
shall not be responsible in any way for any action or omission of the
Funds or their employees in the performance of their duties and
obligations as set forth in this Plan. The Plan Administrator also
shall not be responsible for any act or omission of any of its agents
provided that such agents were prudently chosen by the Plan
Administrator and that the Plan Administrator relied in good faith
upon the action of such agents.
5.12.2 Except for its own gross negligence, willful misconduct or
willful breach of the terms of this Plan, the Plan Administrator shall
be indemnified and held harmless by the Funds against any and all
liability, loss, damages, cost and expense which may arise occurring
by reason of, or be based upon, any matter connected with or related
to this Plan or its administration (including, but not limited to, any
and all expenses whatsoever reasonably incurred in investigating,
preparing or defending any litigation, commenced or threatened, or in
settlement of any such claim.
5.12.3 Indemnity. The Funds shall indemnify and hold the Plan
Administrator and each employee, officer or trustee of the Funds
harmless against any and all loss, liability, claim, damage, cost and
expense which may arise by reason of, or be based upon, any matter
connected with or related to
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<PAGE>
the Plan or the administration of the Plan (including, but not limited
to, any and all expenses reasonably incurred in investigating,
preparing or defending against any litigation, commenced or
threatened, or in settlement of any such claim) to the fullest extent
permitted under applicable law, except when the same is judicially
determined to be due to the gross negligence or willful misconduct of
the Plan Administrator or such employee, officer or trustee.
5.13 Payment of Expenses. The Plan Administrator shall serve without
special compensation. All expenses of Plan administration shall be paid by the
Funds.
5.14 Right to Amend or Terminate. The Board may at any time amend the
Plan in any respect, retroactively or otherwise, or terminate the Plan. However,
no such amendment or termination shall reduce the amount standing credited to
any Participant's Account as of the date of such amendment or termination. In
the event of the termination of the Plan, the Board, in its sole discretion, may
choose to pay out Participants' Accounts prior to the designated Payment Dates.
Otherwise, following a termination of the Plan, income, gains and losses shall
continue to be credited to each Account in accordance with the provisions of
this Plan until the time such Accounts are paid out.
5.15 Usage. Whenever applicable, the masculine gender, when used in
the Plan, includes the feminine gender, and the singular includes the plural.
5.16 Separability. If any provision of the Plan is held invalid or
unenforceable, its invalidity or unenforceability shall not affect any other
provisions of the
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Plan, and the Plan shall be construed and enforced as if such provision had not
been included therein.
5.17 Captions. The captions in this document and in the table of
contents are inserted only as a matter of convenience and for reference and in
no way define, limit, enlarge or describe the scope or intent of the Plan and
shall in no way affect the Plan or the construction of any provision thereof.
5.18 Right of Discharge Reserved. Nothing contained in this Plan shall
be construed as a guaranty or right of any Participant to be continued as a
Trustee of one or more of the Funds (or of a right of a Trustee to any specific
level of Compensation) or as a limitation of the right of the Funds to remove
any of its trustees.
5.19 Governing Law and Construction. The Plan is intended to
constitute an unfunded, nonqualified deferred compensation arrangement. Except
to the extent preempted by Federal law, all rights under the Plan shall be
governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of law. No action shall be brought by
or on behalf of any Eligible Employee or Beneficiary for or with respect to
benefits due under this Plan unless the person bringing such action has timely
exhausted the Plan's claim review procedure. Any such action must be commenced
within three years. This three-year period shall be computed from the earlier of
(a) the date a final determination denying such benefit, in whole or in part, is
issued under the Plan's claim review procedure or (b) the date such individual's
cause of action first accrued. Any dispute, controversy or claim arising out of
or in connection with this Plan (including the applicability of this arbitration
provision) and not resolved pursuant to the Plan's claim review procedure
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shall be determined and settled by arbitration conducted by the American
Arbitration Association ("AAA") in the County and State of the Funds's principal
place of business and in accordance with the then existing rules, regulations,
practices and procedures of the AAA. Any award in such arbitration shall be
final, conclusive and binding upon the parties to the arbitration and may be
enforced by either party in any court of competent jurisdiction. Each party to
the arbitration will bear its own costs and fees (including attorney's fees.)
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Exhibit 9(e)
Form of Shareholder Servicing Agreement
FORM OF
PROPOSED
SHAREHOLDER SERVICING AGREEMENT
THIS AGREEMENT, dated as of , 19 by and between, on the one
hand, Mutual Fund ____________ (the "Trust"), a Massachusetts business trust
having its principal place of business at 125 W. 55th Street, New York, New York
10022 and, on other hand, The Chase Manhattan Bank, N.A., a national banking
association having its principal place of business at One Chase Manhattan Plaza,
New York, New York 10081, Global Securities Services Division, 4 Chase MetroTech
Center, 18th Floor, Brooklyn, New York 11245, and each other direct or indirect
subsidiary of The Chase Manhattan Corporation listed on Exhibit A hereto as it
may be amended from time to time hereafter, which is made a part hereof (each
such bank or other subsidiary referred to individually herein as the "Financial
Institution"), each Financial Institution on behalf of itself and each of its
components listed as an Agent on Exhibit A, each of which is a shareholder
servicing agent hereunder (each such Financial Institution and component thereof
referred to individually herein as the "Agent");
W I T N E S S E T H
WHEREAS, all transactions in Shares of Beneficial Interest (without par
value) of the Trust ("Shares") may be made only by investors who are customers
of and using the services of, a financial institution or broker-dealer which has
entered into a shareholder servicing or similar agreement with the Trust or its
distributor;
WHEREAS, the Financial Institution wishes to make it possible for its
customers (the "Customers") to purchase Shares and wishes to act as the
Customers' agent in performing certain administrative functions in connection
with purchases and redemptions of Shares from time to time upon the order and
for the account of Customers in connection with their investments in the Trust;
WHEREAS, the Financial Institution may also provide certain services to
the Trust relating to shareholders and their accounts; and
WHEREAS, it is in the interest of the Trust to avail itself of the
Agent's services and make the services of the Agent available to Customers who
are or may become shareholders of the Trust.
NOW THEREFORE, the Trust and the Financial Institution hereby agree as
follows:
1. Appointment. The Financial Institution, as Agent, hereby
agrees to perform certain services for the Trust and/or Customers as hereinafter
set forth. The Agent's appointment hereunder is non-exclusive, and the parties
recognize and agree that, from time
<PAGE>
to time, the Trust may enter into other shareholder servicing or similar
agreements, in writing, with other financial institutions.
2. Service to Be Performed.
2.1 Type of Service. To the extent directed by the Trust, the
Agent shall be responsible for performing some or all of the administrative and
servicing functions for shareholder accounts and series of the Trust, which
shall include without limitation the following Shareholder Liaison Services and
Other Services:
(a) Shareholder Liaison Services. The Agent shall
be responsible for (a) answering Customer inquiries regarding account status and
history, the manner in which purchases and redemptions of the Shares may be
effected, and certain other matters pertaining to the Trust; (b) assisting
Customers in designating and changing dividend options, account designations and
addresses; (c) providing necessary personnel and facilities to establish and
maintain certain shareholder accounts and records, as requested from time to
time by the Trust; (d) arranging for the wiring of funds; (e) transmitting and
receiving funds in connection with Customer orders to purchase or redeem shares;
(f) verifying Customer signatures on check writing drafts in connection with
redemption orders, transfers among and changes in Customerdesignated accounts;
(g) furnishing (either separately or on an integrated basis with other reports
sent to a Customer by the Agent) monthly and annual statements and confirmations
of all purchases and redemptions of Shares in a Customer's account; and (h)
providing such other related services as the Trust or a Customer may reasonably
request.
(b) Other Administrative Services. The Agent shall
also be responsible for (a) assisting in processing purchase and redemption
transactions; (b) transmitting proxy statements, annual reports, updating
prospectuses and other communications from the Trust to Customers; (c)
receiving, tabulating and transmitting to the Trust proxies executed by
Customers with respect to annual and special meetings of shareholders of the
Trust; (d) provide beneficial owners with statements showing their positions in
the various series of the Trust; (e) providing periodic statements showing a
Customer's account balances and, to the extent practicable, integration of such
information with information concerning other client transactions effected with
or through the Financial Institution; and (f) processing dividend payments.
The Agent shall provide all personnel and facilities necessary
in order for it to perform the functions described in sub-paragraphs 2.1(a) and
2.1(b) above with respect to its Customers.
The Agent understands that the Trust may contract with other
parties to perform certain of the functions enumerated above.
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<PAGE>
2.2 Standard of Services. All services to be rendered by the
Agent hereunder shall be performed in a professional, competent and timely
manner. The details of the operating standards and procedures to be followed by
the Agent in performance of the services described above shall be determined
from time to time by agreement between the Agent and the Trust.
3. Fees.
3.1 Fees from the Trust. In consideration for the services
described in Section 2.1(a) hereof relating to acting as liaison to shareholders
and providing personal services to shareholders, the Agent shall receive fees to
be paid in arrears periodically (but in no event less frequently than
semi-annually) at an annual rate of the average daily net assets set forth with
respect to the applicable Fund and Class of Shares so indicated on Schedule A
attached hereto represented by Shares owned during the period for which payment
is being made by Customers for whom the Agent is the holder or Agent of record
or with whom it maintains a servicing relationship. In consideration for the
services described in Section 2.1(b) hereof relating to other administrative
services and the incurring of expenses in connection therewith, the Agent shall
receive fees to be paid in arrears periodically (but in no event less frequently
than semi-annually) at an annual rate of the average daily net assets set forth
with respect to the applicable Fund and Class of Shares so indicated on Schedule
A attached hereto represented by Shares owned during the period for which
payment is being made by Customers for whom the Agent is the holder or Agent of
record or with whom it maintains a servicing relationship. For purposes of
determining the fees payable to the Agent hereunder, the value of the Trust's
net assets shall be computed in the manner specified in the Trust's then-current
prospectus and statement of additional information for computation of the net
asset value of the Trust's Shares. Any Agent may direct the Trust in writing
that its fees from the Trust for the services rendered hereunder and incurring
of expenses in connection therewith be paid to another Agent on a consolidated
basis. Any such consolidated payment to a designated Agent by the Trust shall
relieve the Trust of responsibility for payment of compensation it owes to any
other individual Agent and shall satisfy the Trust's fee payment obligations
hereunder with respect to all Agents.
3.2 Fees from Customers. It is agreed that the Financial
Institution may impose certain conditions on Customers, in addition to or
different from those imposed by the Trust, such as requiring a minimum initial
investment or charging Customers direct fees for the same or similar services as
are provided hereunder by the Financial Institution as Agent (which fees may
either relate specifically to the Financial Institution's services with respect
to the Trust or generally over services not limited to those with respect to the
Trust). The Financial Institution shall bill Customers directly for such fees.
In the event the Financial Institution charges Customers such fees, it shall
make appropriate prior written disclosure (such disclosure to be in accordance
with
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all applicable laws) to Customers both of any direct fees charged to the
Customer and of the fees received or to be received by it from the Trust
pursuant to Section 3.1 of this Agreement. It is understood, however, that in no
event shall the Financial Institution have recourse or access as Agent or
otherwise to the account of any shareholder of the Trust except to the extent
expressly authorized by law or by such shareholder, or to any assets of the
Trust, for payment of any direct fees referred to in this Section 3.2.
4. Information Pertaining to the Shares; Etc. The Agent and its
officers, employees and agents are not authorized to make any representations
concerning the Trust or the Shares to Customers or prospective Customers,
excepting only accurate communication of (i) factual information contained in
the then-current Trust prospectus and statement or additional information, (ii)
current and historical yield and other performance information for any or all of
the Trust portfolios, calculated by the Administrator of the Funds in accordance
with then-current rules and regulations of the Securities and Exchange
Commission (the "SEC"), and furnished to the Agent by the Trust and (iii) any
other factual information permitted to be communicated by the Agent and its
officers, employees and agents under then-current rules and regulations of the
SEC, National Association of Securities Dealers, Inc. and any other appropriate
regulatory, governmental or judicial authority. The Agent shall act as agent for
the Customer only in furnishing information regarding the Trust or the Shares
and shall have no authority to act as agent for the Trust.
Advance copies or proofs of all materials which are to be
generally circulated or disseminated by the Agent to Customers or prospective
Customers which identify or describe the Trust shall be provided to the Trust
(or its designee) at least 10 days prior to such circulation or dissemination
(unless the Trust consents in writing to a shorter period), and such materials
shall not be circulated or disseminated or further circulated or disseminated at
any time after the Trust shall have given written notice to the Agent of any
objection thereto.
Nothing in this Section 4 shall be construed to make the Trust
liable for the use of any information about the Trust which is disseminated by
the Agent.
5. Use of the Agent's Name. The Trust shall not use the name of the
Agent, in any prospectus, sales literature or other material relating to the
Trust in a manner not approved by the Agent prior thereto in writing; provided,
however, that the approval of the Agent shall not be required for any use of its
name which merely refers in accurate and factual terms to its appointment
hereunder or which is required by the SEC or any state securities authority or
any other appropriate regulatory, governmental or judicial authority; provided,
further, that in no event shall such approval be unreasonably withheld or
delayed.
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<PAGE>
6. Use of the Trust's Name. Without limiting the effect of Section 4
hereof, the Agent shall not use the name of the Trust on any checks, bank
drafts, bank statements or forms for other than internal use in a manner not
approved by the Trust prior thereto in writing; provided, however, that the
approval of the Trust shall not be required for the use of the Trust's name in
connection with communications permitted by Section 4 hereof or subject to
Section 4, to the extent the same may be applicable for any use of the Trust's
name which merely refers in accurate and factual terms to the Agent's role
hereunder or which is required by the SEC, or any state securities authority or
any other appropriate regulatory, governmental or judicial authority; provided,
further, that in no event shall such approval be unreasonably withheld or
delayed.
7. Security. The Agent represents and warrants that the various
procedures and systems which it has implemented (including provision for
twenty-four hours a day restricted access) with regard to safeguarding from loss
or damage attributable to fire, theft or any other cause that Trust's records
and other data and the Agent's records, data, equipment, facilities and other
property used in the performance of its obligations hereunder are adequate and
that it will make such changes therein from time to time as in its judgment are
required for the secure performance of its obligations hereunder. The parties
shall review such systems and procedures on a periodic basis, and the Trust
shall from time to time specify the types of records and other data of the Trust
to be safeguarded in accordance with this Section 7.
8. Compliance with Laws; Etc. The Agent shall comply with all
applicable federal and state laws and regulations, including securities laws.
The Agent represents and warrants to the Trust that the performance of all its
obligations hereunder will comply with all applicable laws and regulations, the
provisions of its charter documents and by-laws and all material contractual
obligations binding upon the Agent. The Agent furthermore undertakes that it
will promptly inform the Trust of any change in applicable laws or regulations
(or interpretations thereof) or in its charter or by-laws or material contracts
which would prevent or impair full performance of any of its obligations
hereunder.
9. Reports. To the extent requested by the Trust from time to time, the
Agent agrees that it will provide the Treasurer of the Trust with a written
report of the amounts expended by the Agent pursuant to this Agreement and the
purposes for which such expenditures were made. Such written reports shall be in
a form satisfactory to the Trust and shall supply all information necessary for
the Trust and the Trustees of the Trust to discharge their respective
responsibilities under applicable laws and regulations.
10. Record-Keeping.
10.1 Section 31(a), Etc. The Agent shall maintain
records in form acceptable to, and as directed by, the Trust in
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<PAGE>
compliance with applicable laws and the rules and regulations of the SEC,
including but not limited to the record-keeping requirements of Section 31(a) of
the Investment Company Act of 1940, as amended (the "1940 Act"), and the rules
thereunder. Such records shall be deemed to be the property of the Trust and
will be made available, at the Trust's request, for inspection and used by the
Trust, representatives of the Trust and governmental authorities. The Agent
agrees that, for so long as it retains any records of the Trust, it will meet
all reporting requirements, if any, pursuant to the 1940 Act with respect to
such records, as may be specified by the Trust from time to time.
10.2 Rules 17a-3 and 17a-4. The Agent shall maintain accurate
and complete records with respect to services performed by the Agent in
connection with the purchase and redemption of Shares. The Agent hereby
undertakes to permit examination of such records at any time or from time to
time during business hours by examiners or other representatives of the SEC or
other authorities and offices having regulatory authority over the Trust or any
dealer of the Shares, and to furnish to such authorities and offices or the SEC
at the location specified by any of them copies of any or all of such records as
may be requested by any of them. Such records shall include the data and be
maintained in the form and for the time periods specified in Schedule A attached
hereto and incorporated herein by reference ("Schedule A"). Compliance by the
Agent with the record keeping requirements specified in Schedule A and such
reporting requirements, if any, as may be specified by the Trust, from time to
time, shall be deemed to satisfy fully any obligation of the Agent hereunder to
comply with Rules 17a-3 and 17a-4 under the Securities Exchange Act of 1934
pursuant to which any dealer of the Shares must maintain certain records and
file reports or other documents. All such records maintained by the Agent
pursuant to this Section 10.2 of this Agreement shall be the property of such
dealer and will be made available for inspection and use by the Trust or such
dealer upon the request of either of them. If so requested by any such dealer,
the Agent shall confirm to such dealer its obligations under this Section 10.2
by a writing reasonably satisfactory to such dealer.
10.3 Identification, Etc. of Records. The Trust shall
from time to time specify to the Agent, and the Trust and the Agent shall
periodically review, the records to be maintained and the procedures to be
followed by the Agent in complying with the foregoing Sections 10.1 and 10.2.
10.4 Transfer of Customer Data. In the event this
Agreement is terminated or a successor to the Agent is appointed, or another
party is engaged by the Trust to provide some or all of the services enumerated
in Section 2 of this Agreement, the Agent shall, at the expense of the Trust,
transfer to such designee as the Trust may direct a certified list of
shareholders of the Trust as to whom the Agent provides services hereunder (with
name, address and tax identification or Social Security number), a complete
record of the account of each such shareholder and the
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<PAGE>
status thereof, and all other relevant books, records, correspondence, and other
data established or maintained by the Agent under this Agreement. In the event
this Agreement is terminated, the Agent will use its best efforts to cooperate
in the orderly transfer of such duties and responsibilities, including
assistance in the establishment of books, records and other data by the
successor.
10.5 Survival of Record-Keeping Obligations. The
record-keeping obligations imposed in this Section 10 shall survive the
termination of this Agreement.
10.6 Obligations Pursuant to Agreement Only. Nothing in
this Section 10 shall be construed to mean that the Agent would, by virtue of
its role hereunder, be required under applicable law to maintain the records
required to be maintained by it under this Section 10, but it is understood that
the Agent has agreed to do so in order to enable the Trust and its dealer or
dealers to comply with laws and regulations applicable to them.
11. Force Majeure. The Agent shall not be liable or responsible for
delays or errors by reason of circumstances beyond its control, including, but
not limited to, acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown, flood or catastrophe, Acts of God,
insurrection, war, riots or failure of communication or power supply.
12. Indemnification.
12.1 Indemnification of the Agent. Without limiting the
rights of the Agent under applicable law, the Trust will indemnify and hold the
Agent harmless from all losses, claims, damages, liabilities or expenses
(including reasonable fees and disbursements of counsel) from any claim, demand,
action or suit (collectively, "Claims") (a) arising in connection with
misstatements or omissions in the Trust's Prospectus, actions or inactions by
the Trust or any of its agents or contractors or the performance of the Agent's
obligations hereunder and (b) not resulting from (i) the bad faith or negligence
of the Agent, its directors, officers, employees or agents, or (ii) any breach
of applicable law by the Agent, its directors, officers, employees or agents,
other than any breach of applicable law due solely and directly to the Agent's
proper reliance upon an action or omission by the Trust or any of its agents or
contractors which constitutes a breach of applicable law by the Trust or any of
agents or contractors, or (iii) any action of the Agent, its directors,
officers, employees or agents which exceeds the legal authority of the Agent or
its authority hereunder, or (iv) any error or omission of the Agent, its
directors, officers, employees or agents with respect to the purchase,
redemption and transfer of Customer's Shares or the Agent's verification of any
Customer signature on check writing drafts. Notwithstanding anything herein to
the contrary, the Trust will indemnify and hold the Agent harmless from
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any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from any Claim as a result of
its acting in accordance with any written instructions reasonably believed by
the Agent to have been executed by any person duly authorized by the Trust, or
as a result of acting in reliance upon any instrument or stock certificate
reasonably believed by the Agent to have been genuine and signed, countersigned
or executed by a person duly authorized by the Trust, excepting only the gross
negligence or bad faith of the Agent.
In any case in which the Trust may be asked to indemnify or
hold the Agent harmless, the Trust shall be advised of all pertinent facts
concerning the situation in question and the Agent shall use reasonable care to
identify and notify the Trust promptly concerning any situation which presents
or appears likely to present a claim for indemnification against the Trust. The
Trust shall have the option to defend the Agent against any Claim which may be
the subject of indemnification hereunder. In the event that the Trust elects to
defend against such Claim, the defense shall be conducted by counsel chosen by
the Trust and satisfactory to the Agent. The Agent may retain additional counsel
at its expense. Except with the prior written consent of the Trust, the Agent
shall not confess any Claim or make any compromise in any case in which the
Trust will be asked to indemnify the Agent.
12.2 Indemnification of the Trust. Without limiting the
rights of the Trust under applicable law, the Agent will indemnify and hold the
Trust harmless from all losses, claims, damages, liabilities or expenses
(including reasonable fees and disbursements or counsel) from any Claim (a)
resulting from (i) the bad faith or negligence of the Agent, its directors,
officers, employees or agents, or (ii) any breach of applicable law by the
Agent, its directors, officers, employees or agents, other than any breach of
applicable law due solely and directly to the Agent's proper reliance upon an
action or omission by the Trust or its agents or contractors which constitutes a
breach of applicable law by the Trust or its agents or contractors or (iii) any
action of the Agent, its directors, officers, employees or agents which exceeds
the legal authority of the Agent or its authority hereunder, or (iv) any error
or omission of the Agent, its directors, officers, employees or agents with
respect to the purchase, redemption and transfer of Customers' Shares or the
Agent's verification of any Customer signature on check writing drafts, and (b)
not resulting from the Agent's actions in accordance with written instructions
reasonably believed by the Agent to have been executed by any person duly
authorized by the Trust, or in reliance upon any instrument or stock certificate
reasonably believed by the Agent to have been genuine and signed, countersigned
or executed by a person duly authorized by the Trust.
In any case in which the Agent may be asked to indemnify or
hold the Trust harmless, the Agent shall be advised of all pertinent facts
concerning the situation in question and the Trust shall use reasonable care to
identify and notify the Agent promptly
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<PAGE>
concerning any situation which presents or appears likely to present a claim for
indemnification against the Agent. The Agent shall have the option to defend the
Trust against any Claim which may be the subject of indemnification hereunder.
In the event that the Agent elects to defend against such Claim, the defense
shall be conducted by counsel chosen by the Agent and reasonably satisfactory to
the Trust. The Trust may retain additional counsel at its expense. Except with
the prior written consent of the Agent, the Trust shall not confess any Claim or
make any compromise in any case in which the Agent will be asked to indemnify
the Trust.
12.3 Survival of Indemnities. The indemnities granted by
the parties in this Section 12 shall survive the termination of this Agreement.
13. Insurance. The Agent shall maintain reasonable insurance
coverage against any and all liabilities which may arise in
connection with the performance of its duties hereunder.
14. Notices. All notices or other communication hereunder to
either party shall be in writing and shall be deemed sufficient if mailed to
such party at the address of such party set forth in the preamble of this
Agreement or at such other address as such party may have designated by written
notice to the other.
15. Further Assurances. Each party agrees to perform such further
acts and execute such further documents as are necessary to effectuate the
purposes hereof.
16. Termination. This Agreement may be terminated by the Trust,
without payment of any penalty, at any time upon not more than 60 days' nor less
than 30 days' notice, by a vote of a majority of the Board of Trustees of the
Trust who are not "interested persons" of the Trust (as defined in the 1940 Act)
and have no direct or indirect financial interest in the operation of the
Administrative Services Plan pursuant to which the Trust has entered into this
Agreement (the "Plan"), this Agreement or any other agreement related to such
Plan, or by "a vote of a majority of the outstanding voting securities" (as
defined int he 1940 Act) of the Trust. The Agent may terminate this Agreement
upon not more than 60 days' nor less than 30 days' notice to the Trust.
Notwithstanding anything herein to the contrary, but except as provided in
Section 19 of this Agreement, this Agreement may not be assigned and shall
terminate automatically without notice to either party upon any assignment. Upon
termination hereof, the Trust shall pay such compensation as may be due the
Agent as of the date of such termination.
17. Changes; Amendments. This Agreement may be changed or amended
only by written instrument signed by both parties.
18. Limitation of Shareholder Liability; Etc. The Agent hereby
agrees that obligations assumed by the Trust pursuant to
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this Agreement shall be limited in all cases to the Trust and its assets and
that the Agent shall not seek satisfaction of any such obligation from the
shareholders or any shareholder of the Trust. It is further agreed that the
Agent shall not seek satisfaction of any such obligations from the Board of
Trustees or any individual Trustee of the Trust.
19. Subcontracting by Agent. The Agent may, with the written
approval of the Trust (such approval not be unreasonably withheld or delayed),
subcontract for the performance of the Agent's obligations hereunder with any
one or more persons, including but not limited to any one or more persons which
is an affiliate of the Agent; provided, however, that the Agent shall be as
fully responsible to the Trust for the acts and omissions of any subcontractor
as it would be for its own acts or omissions.
20. Authority to Vote. The Trust hereby confirms that, pursuant to
the Declaration of Trust of the Trust, at any meeting of shareholders of the
Trust or of any series of the Trust, the Agent is authorized to vote any Shares
held in accounts as to which the Agent provides services hereunder, 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
otherwise represented at the meeting in person or by proxy and held in accounts
as to which the Agent provides services hereunder.
21. Several Nature of Agent's Obligation. Except as may be
otherwise provided in this Agreement, each entity names as an Agent in Exhibit A
hereto shall perform the services and other obligations required to be performed
for the Trust by an Agent hereunder to the extent that they relate to that Agent
and its Customers, and the Trust shall perform its responsibilities hereunder to
the extent that they apply to the Agent or its customers. Each Agent may
separately exercise any of its rights under this Agreement or may, from time to
time, with written notice to the Trust, allow another Agent to exercise these
rights on its behalf. In no event shall any Agent be liable for performance or
payment of all or any portion of another Agent's duties and obligations under
this Agreement.
22. Miscellaneous. This Agreement shall be construed and enforced
in accordance with and governed by the laws of the Commonwealth of
Massachusetts. The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument. This Agreement has been executed on behalf of the Trust by the
undersigned not individually, but in the capacity indicated.
23. Disclosure to Customers; etc. The Agent hereby represents that
any compensation payable to it pursuant to this
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Agreement in connection with investment of Customers' assets in Shares (a) will
be disclosed by the Agent to its Customers, (b) will be authorized by such
Customers, and (c) will not result in an excessive fee to the Agent.
MUTUAL FUND_____________
[Signature on Exhibit A]
FINANCIAL INSTITUTIONS
[Signatures on Exhibit A]
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<PAGE>
Schedule A
RECORDS ON SHARE TRANSACTIONS
I. With respect to the services to be performed by the Agent under this
Agreement, other than those services to be performed by DST Systems,
Inc. pursuant to the Transfer Agency Agreement, dated as of February 1,
1995, the Agent shall maintain records in compliance with applicable
requirements of Rules 17a-3 and 17a-4 under the Securities Exchange Act
of 1934.
Exhibit 9(f)
Agreement and Plan of Reorganization and Liquidation
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
<PAGE>
2
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 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"
<PAGE>
3
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 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.
<PAGE>
4
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 ________, 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. 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.
<PAGE>
5
(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.
(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.
<PAGE>
6
(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 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
<PAGE>
7
________, 1995, there were outstanding _______ shares of The Hanover
Short Term U.S. 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. 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 then 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, which would be violated
<PAGE>
8
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:
<PAGE>
9
(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 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
<PAGE>
10
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 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
<PAGE>
11
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.
<PAGE>
12
(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, SubTransfer Agency and Shareholder Servicing services, as the
case may be, such terminations to be effective as of the Effective Time
of the Reorganization.
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.
<PAGE>
13
(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; 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
<PAGE>
14
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 the best of such counsel's knowledge
after reasonable investigation no stop order has been issued or
threatened suspending its effectiveness; (v) to the best of 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 the best of 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 the best of 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 (i) 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;
<PAGE>
15
(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 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 shareholder's 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 ______________ 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
________________ 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
<PAGE>
16
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.
(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.
<PAGE>
17
(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
<PAGE>
18
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, 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 the best of 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 the best of 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 the best of
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. ____________ 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 other than the shares purchased by _____________ pursuant to
Section 7(f) hereof, and ____________ 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 other than the shares purchased by
_____________ pursuant to Section 7(f) hereof, 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
<PAGE>
19
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.
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
<PAGE>
20
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.
<PAGE>
21
(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
<PAGE>
22
(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
(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.
<PAGE>
23
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.
Attest: MUTUAL FUND GROUP
By:_________________________ By___________________________
Attest: THE HANOVER INVESTMENT FUNDS, INC.
By:_________________________ By___________________________
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
<PAGE>
SCHEDULE I
to Agreement
CORRESPONDING PORTFOLIOS OF THE HANOVER INVESTMENT FUNDS, INC.
AND MUTUAL FUND GROUP
Hanover Portfolios Corresponding MFG Portfolios
The Hanover Short Term U.S. Vista Short Term Bond Fund
Government 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 Vista Small Cap Equity Fund
Growth Fund
The Hanover American Value Fund Vista American Value Fund
Corresponding MFG Portfolios
<PAGE>
Exhibit 10
Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
9 1 9 T H I R D A V E N U E
NEW YORK, N.Y. 10022 3852
(212) 715 9100
FAX
(212) 715-8000
------
WRITER'S DIRECT NUMBER
(212) 715-9100
December 20, 1995
Mutual Fund Group
125 West 55th Street
New York, New York 10019
Re:Registration Statement on Form N-1A
File No. 811-5151
Gentlemen:
We hereby consent to the reference of our firm as counsel in this Registration
Statement on Form N-1A.
Very truly yours,
/s/Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
Exhibit 11
Consent of KPMG Peat Marwick, LLP
Independent Accountants' Consent
To the Shareholders and Directors of the Vista U.S. Government Securities Fund:
We consent to the use of our report dated January 20, 1995 with respect to The
Hanover U.S. Government Securities Fund incorporated herein by reference and to
the references to our Firm under the headings "Financial Highlights" in the
Prospectus and "Independent Auditors" in the Statement of Additional
Information.
KPMG Peat Marwick LLP
New York, New York
December 28, 1995
Exhibit 15(g)
Proposed Rule 12b-1 Distribution Plan - Class A Shares - Vista
American Value Fund (including forms of Selected Dealer
Agreement and Shareholder Servicing Agreement)
DRAFT
MUTUAL FUND GROUP
CLASS A SHARES
VISTA AMERICAN VALUE FUND SHARES
PROPOSED
PLAN FOR PAYMENT OF CERTAIN EXPENSES FOR
DISTRIBUTION OR SHAREHOLDER SERVICING ASSISTANCE
Distribution Plan (the "Plan") of MUTUAL FUND GROUP, a Massachusetts
business trust (the "Trust"), an open-end, non-diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"Act"), on behalf of the class of (i) shares designated as the Class A Shares of
its Vista U.S. Government Income Fund, Vista U.S. Government Securities Fund,
Vista Balanced Fund, Vista Equity Income Fund, Vista Bond Fund, Vista Short Term
Bond Fund, Vista Blue Chip Growth Fund, Vista Growth and Income Fund, Vista
Capital Growth Fund, Vista International Equity Fund, Vista Global Fixed Income
Fund, Vista Small Cap Equity Fund, Vista Southeast Asian Fund, Vista Japan Fund
and Vista European Fund Series, and the Class A Shares of any series of the
Trust which may be created in the future, and (ii) the shares of the Vista
American Value Fund, adopted pursuant to Section 12(b) of the Act and Rule 12b-1
promulgated thereunder ("Rule 12b-1").
1. Principal Underwriter. Vista Broker-Dealer Services, Inc., a
Delaware corporation ("the Distributor"), acts as the principal underwriter of
the shares of each series of the Trust pursuant to a Distribution and
Sub-Administration Agreement.
2. Distribution Payments. (a) The Trust may make payments periodically
(i) to the Distributor or to any broker-dealer (a "Broker") who is registered
under the Securities Exchange Act of 1934 and a member in good standing of the
National Association of Securities Dealers, Inc. and who has entered into a
selected dealer agreement with the Distributor in a form similar to the one
annexed hereto as Exhibit A or (ii) to other persons or organizations
("Servicing Agents") who have entered into shareholder processing and service
agreements with the Trust or with the Distributor, in a form similar to the one
annexed hereto as Exhibit B, with respect to Trust shares owned by shareholders
for which such broker is the dealer or holder of record or such Servicing Agent
has a servicing relationship.
(b) Payments may be made pursuant to the Plan for any advertising and
promotional expenses relating to selling efforts of the shares of each series of
the Trust, including but not limited to the incremental costs of printing
(excluding typesetting) of prospectuses, statements of additional information,
annual reports and other periodic reports for distribution to persons who are
not shareholders of the Trust; the costs of preparing and distributing any other
supplemental sales literature; expenses of certain personnel engaged in the
distribution of shares; costs of travel,
-1-
<PAGE>
office expenses (including rent and overhead), equipment, printing, delivery and
mailing costs incurred in the distribution of shares.
(c) The aggregate amount of payments by the Trust in a fiscal year, to
brokers, servicing agents, or the Distributor pursuant to paragraphs (a) and (b)
shall not exceed .25% of the average daily net assets of each series of the
Trust.
(d) The schedule of such fees and the basis upon which such fees will
be paid shall be determined from time to time by the Board of Trustees of the
Trust.
3. Reports. Quarterly, in each year that this Plan remains in effect,
the Trust and the Distributor shall prepare and furnish to the Board of Trustees
of the Trust a written report, complying with the requirements of Rule 12b-1,
setting forth the amounts expended by the Trust under the Plan and purposes for
which such expenditures were made.
4. Approval of Plan. This Plan shall become effective upon approval of
the Plan, the form of Selected Dealer Agreement and the form of Shareholder
Service Agreement, by the majority votes of both (a) the Trust's Board of
Trustees and the Qualified Trustees (as defined in Section 6), cast in person at
a meeting called for the purpose of voting on the Plan and (b) the outstanding
voting securities of each series of the Trust, as defined in Section 2(a)(42) of
the Act.
5. Term. This Plan shall remain in effect for one year from its
adoption date and may be continued thereafter if this Plan and all related
agreements are approved at least annually by a majority vote of the Trustees of
the Trust, including a majority of the Qualified Trustees, cast in person at a
meeting called for the purpose of voting on such Plan and agreements. This Plan
may not be amended in order to increase materially the amount to be spent for
distribution assistance without shareholder approval in accordance with Section
4 hereof. All material amendments to this Plan must be approved by a vote of the
Board of Trustees of the Trust, and of the Qualified Trustees (as hereinafter
defined), cast in person at a meeting called for the purpose of voting thereon.
6. Termination. This Plan may be terminated as to any series at any
time by a majority vote of the Trustees who are not interested persons (as
defined in Section 2(a)(19) of the Act) of the Trust and have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related to the Plan (the "Qualified Trustees") or by vote of a majority of the
outstanding voting securities of the Trust, as defined in Section 2(a)(42) of
the Act.
7. Nomination of "Disinterested" Trustees. While this Plan shall be in
effect, the selection and nomination of the "disinterested" trustees of the
Trust shall be committed to the discretion of the Qualified Trustees then in
office.
8. Miscellaneous. (a) Any termination or noncontinuance of (i) a
selected dealer agreement between the Distributor and a particular broker or
(ii) a shareholder service agreement between the Distributor or the Trust and a
particular person or organization, shall have no effect
-2-
<PAGE>
on any similar agreements between brokers or other persons and the Distributor
of the Trust pursuant to this Plan.
(b) Neither the Distributor nor the Trust shall be under any obligation
because of this Plan to execute any selected dealer agreement with any broker or
any shareholder service agreement with any person or organization.
(c) All agreements with any person or organization relating to the
implementation of this Plan shall be in writing and any agreement related to
this Plan shall be subject to termination, without penalty, pursuant to the
provisions of Section 6 hereof.
Dated: ________________, 1996
-3-
<PAGE>
EXHIBIT A
Vista Broker-Dealer Services, Inc.
125 West 55th Street
New York, New York 10019
Re: Selected Dealer Agreement for
Mutual Fund Group
Gentlemen:
We understand that Mutual Fund Group (the "Trust") has adopted plans
(the "Plans") pursuant to Rule 12b-1 of the Investment Company Act of 1940, as
amended (the "Act") for making payments to selected brokers for Trust
distribution assistance.
We desire to enter into an Agreement with you for the sale and
distribution of the shares of the Premier Funds of the Trust (the "shares") for
which you are Distributor and whose shares are offered to the public at net
asset value. Upon acceptance of this Agreement by you, we understand that we may
offer and sell the shares, subject, however, to all of the terms and conditions
hereof and to your right to suspend or terminate the sale of such securities.
1. We understand that the shares covered by this Agreement will be
offered and sold at net asset value without a sales charge. We further
understand that all purchase requests and applications submitted by us are
subject to acceptance or rejection in the Trust's discretion.
2. We certify that we are members of the National Association of
Securities Dealers, Inc. ("NASD") and agree to maintain membership in said
Association, or in the alternative, that we are foreign brokers not eligible for
membership in said Association. In either case, we agree to abide by all the
rules and regulations of the NASD which are binding upon underwriters and
brokers in the distribution of the shares of open-end investment companies,
including without limitation, Section 26 of Article III of the Rules of Fair
Practice, all of which are incorporated herein" as if set forth in full. We
further agree to comply with all applicable state and Federal laws and the rules
and regulations of authorized regulatory agencies. We agree that we will not
sell or offer for sale, the shares in any state or jurisdiction where they are
not exempt from or have not been qualified for sale.
3. We will offer and sell the Shares covered by this Agreement only in
accordance with the terms and conditions of its then current Prospectus, and we
will make no representations not included in said Prospectus or in any
authorized supplemental material supplied by you. We will use our best efforts
in the development and promotion of sales of the shares covered by this
Agreement and agree to be responsible for the proper instruction and training of
all sales personnel employed by us, in order that the shares will be offered in
accordance with the terms and conditions of this Agreement and all applicable
laws, rules and regulations. We agree to hold you harmless and indemnify you in
the event that we, or any of our sales representatives, should violate any law,
rule or regulation, or any provisions of this Agreement, which may result in
liability to you; and in the event you determine to refund any amount paid by
any investor by reason of any such violation on our part, we shall return to you
any distribution assistance payments previously paid or allowed by you to us
with respect to the transaction for which the refund is made. All expenses which
we incur in connection with our activities under this Agreement shall be borne
by us.
4. For purposes of this Agreement "Qualified Accounts" shall mean:
accounts of customers of ours who have purchased shares and who use our
facilities to communicate with the Trust or to effect redemptions or additional
purchases of shares and with respect to which we provide shareholder and
administration services, which services may include, without limitation:
answering inquiries regarding the Trust; assistance to customers in changing
dividend options, account designations and addresses; performance of
sub-accounting; establishment and maintenance of shareholder accounts and
records; processing purchase and redemption transactions; automatic investment
in Trust shares of customer account cash balances; providing periodic statements
showing a customer's account balance and
A-1
<PAGE>
the integration of such statements with those of other transactions and balances
in the customer's other accounts serviced by us; arranging for bank wires; and
such other shareholder services as you reasonably may request, to the extent we
are permitted by applicable statute, rule or regulation.
5. In consideration of the services and facilities described herein, we
shall be entitled to receive from you such fees as are set forth in the Plans
for Payment of Certain Expenses for Distribution or Shareholder Servicing
Assistance. We understand that the payment of such fees has been authorized
pursuant to Plans approved by the Board of Trustees and shareholders of certain
of the Funds comprising the Trust and shall be paid only so long as this
Agreement is in effect.
6. The frequency of payment, the terms of any right to sell in a
territory, and any other supplemental terms, conditions or qualifications for us
to receive such payments are subject to change by you from time to time, upon 30
days' written notice. Any orders placed after the effective date of such change
shall be subject to the fee rates in effect at the time of receipt of the
payment by the Trust or you. Such 30-day period may be waived at your sole
option in the event such change increases the distribution assistance payments
due us.
7. Payment for shares shall be made to the Trust and shall be received
by the Trust promptly after the acceptance of our order. If such payment is not
received by the Trust, we understand that the Trust reserves the right without
notice, forthwith to cancel the sale, or, at the Trust's option, to sell the
shares ordered by us back to the Trust in which latter case we may be held
responsible for any loss, including loss of profit, suffered by the Trust
resulting from our failure to make payments aforesaid.
8. Your obligations to us under this Agreement are subject to all the
provisions of any underwriting agreements you have or may enter into with the
Trust provided copies thereof have been provided to us. We understand and agree
that in performing our services covered by this Agreement we are acting as
principal, and you are in no way responsible for the manner of our performance
or for any of our acts or omissions in connection therewith. Nothing in this
Agreement or in the Plans shall be construed to constitute us or any of our
agents, employees or representatives as your agent, partner or employee, or the
agent, partner or employee of the Trust.
9. This Agreement shall terminate automatically (i) in the event of its
assignment, the term "assignment" for this purpose having the meaning defined in
Section 2(a)(4) of the Act or (ii) in the event the Plans are terminated.
10. This Agreement may be terminated at any time (without payment of
any penalty) by a majority of the "Qualified Trustees" as defined in the Plans
or by a vote of a majority of the outstanding voting securities of the Trust as
defined in the Plans (on not more than 60 days' written notice to us at our
principal place of business). We, on 60 days' written notice addressed to you at
your principal place of business, may terminate this Agreement. You may also
terminate this Agreement for cause on violation by us of any of the provisions
of this Agreement, said termination to become effective on the date of mailing
notice to us of such termination. Without limiting the generality of the
foregoing, any provision hereof to the contrary notwithstanding, our expulsion
from the NASD will automatically terminate this Agreement without notice; our
suspension from the NASD or violation of applicable state or Federal laws or
rules and regulations of authorized regulatory agencies will terminate this
Agreement effective upon date of mailing notice to us of such termination. Your
failure to terminate for any cause shall not constitute a waiver of your right
to terminate at a later date for any such cause.
11. All communications to you shall be sent to you at your offices at
156 West 56th Street, New York, New York 10019. Any notice to us shall be duly
given if mailed or telegraphed to us at the address shown on this Agreement.
A-2
<PAGE>
12. This Agreement shall become effective as of the date when it is
executed and dated by you below. This Agreement and all the rights and
obligations of the parties hereunder shall be governed by and construed under
the laws of the State of New York.
_____________________________________
(Broker/Dealer)
By__________________________________
Name:
Title:
____________________________________
(Address)
____________________________________
(City) (State) (Zip Code)
Accepted:
VISTA BROKER-DEALER SERVICES, INC.
Distributor
By:________________________________
Name:
Title:
Dated:
A-3
<PAGE>
EXHIBIT B
Mutual Fund Group
125 West 55th Street
New York, New York 10019
Re: Shareholder Service Agreement for
Mutual Fund Group
Gentlemen:
We understand that Mutual Fund Group (the "Trust") has adopted plans
(the "Plans"), on behalf of the existing series (the "Funds") of the Trust,
pursuant to Rule 12b-1 of the Investment Company Act of 1940, as amended (the
"Act"), for making payments to certain persons for distribution assistance and
shareholder servicing.
We desire to enter into an Agreement with the Trust for the servicing
of shareholders of, and the administration of shareholder accounts in, certain
Funds comprising the Trust. Subject to the Trust's acceptance of this Agreement,
the terms and conditions of this Agreement, shall be as follows:
1. We shall provide shareholder and administration services for certain
shareholders of the Funds who purchase shares of the Funds as a result of their
relationship to us, as further designated in Exhibit A hereto ("Qualified
Accounts"). Such services may include, without limitation, some or all of the
following: answering inquiries regarding the Funds; assistance in changing
dividend options, account designations and addresses; performance of
sub-accounting; establishment and maintenance of shareholder accounts and
records; assistance in processing purchase and redemption transactions;
providing periodic statements showing a shareholder's account balance and the
integration of such statements with those of other transactions and balances in
the shareholder's other accounts serviced by us, if any; and such other
information and services as the Trust reasonably may request, to the extent we
are permitted by applicable statute, rule or regulation to provide such
information or services.
2. If Fund shares are to be purchased or held by us on behalf of our
clients:
(i) Such shares will be registered in our name or in the name
of our nominee. The client will be the beneficial owner of the shares
of each Fund purchased and held by us in accordance with the client's
instructions and the client may exercise all rights of a shareholder of
a Fund. We agree to transmit to the Trust's transfer agent in a timely
manner, all purchase orders and redemption requests of our clients and
to forward to each client all proxy statements, periodic shareholder
reports and other communications received from the Trust by us on
behalf of our clients.
(ii) We agree to transfer to the Trust's transfer agent, on
the date such purchase orders are effective, federal funds in an amount
equal to the amount of all purchase orders placed by us on behalf of
our clients and accepted by the Trust (net of any redemption orders
placed by us on behalf of our clients). In the event that the Trust
fails to receive such federal funds on such date (other than through
the fault of the Trust or its transfer agent), we shall indemnify the
Trust against any expense (including overdraft charges) incurred by the
Trust as a result of its failure to receive such federal funds.
(iii) We agree to make available to the Trust, upon the
Trust's request, such information relating to our clients who are
beneficial owners of Fund shares and their transactions in Fund shares
as may be required by applicable laws and regulations or as may be
reasonably requested by the Trust.
B-1
<PAGE>
(iv) We agree to transfer record ownership of a client's
shares of a Fund to the client promptly upon the request of the client.
In addition, record ownership will be promptly transferred to the
client in the event that the person or entity ceases to be our client.
3. We shall provide to the Trust copies of the lists of members of our
organization, if any, and make available to the Trust any publications and other
facilities of our organization for the placement of advertisements or
promotional materials and sending information regarding the Funds, to enable the
Trust to solicit for sale and to sell shares to such members.
4. We shall provide such facilities and personnel (which may be all or
any part of the facilities currently used in our business, or all or any
personnel employed by us) as is necessary or beneficial for providing
information and services to shareholders maintaining Qualified Accounts with the
Trust, and to assist the Trust in servicing accounts of such shareholders.
5 Neither we nor any of our employees or agents are authorized to make
any representation concerning Fund shares except those contained in the then
current Prospectus for the applicable Fund, copies of which will be supplied by
the Trust to us; and we shall have no authority to act as agent for the Trust.
6. In consideration of the services and facilities described herein, we
shall be entitled to receive from each Fund such fees as are set forth in
Exhibit A hereto. We understand that the payment of such fees has been
authorized pursuant to the Plans approved by the Trustees and shareholders of
the Trust and shall be paid only so long as the Plans and this Agreement are in
effect.
7. The Trust reserves the right, at the Trust's discretion and without
notice, to suspend the sale of shares or withdraw the sale of shares of each
Fund.
8. This Agreement shall terminate automatically (i) in the event of
its assignment, the term "assignment" for this purpose having the meaning
defined in Section 2(a)(4) of the Act or (ii) in the event that the Plans
terminate.
9. This Agreement may be terminated at any time (without payment of any
penalty) by a majority of the "Qualified Trustees" as defined in the Plans or by
a vote of a majority of the outstanding voting securities of each Fund as
defined in the Plans (on not more than 60 days' written notice to us at our
principal place of business). We, on 60 days' written notice addressed to the
Trust at its principal place of business, may terminate this Agreement. The
Trust may also terminate this Agreement for cause on violation by us of any of
the provisions of this Agreement or in the event that the Plans shall terminate,
said termination to become effective on the date of mailing notice to us of such
termination. The Trust's failure to terminate for any cause shall not constitute
a waiver of its right to terminate at a later date for any such cause.
10. All communications to the Trust shall be sent to the Trust at the
address set forth above. Any notice to us shall be duly given if mailed or
telegraphed to us at the address set forth below.
B-2
<PAGE>
11. This Agreement shall become effective as of the date when it is
executed and dated by the Trust below. This Agreement and all the rights and
obligations of the parties hereunder shall be governed by and construed under
the laws of the State of New York.
___________________________________________
(Firm Name)
___________________________________________
(Address)
___________________________________________
(Firm Name)
___________________________________________
(City) (State) (Zip Code)
By:_______________________________________
Name:
Title:
Accepted:
MUTUAL FUND GROUP
By:_______________________________
Name:
Title:
Dated:
B-3
Exhibit 15(h)
Rule 12b-1 Distribution Plan - Class B Shares
(including forms of Selected Dealer Agreement
and Shareholder Servicing Agreement)
CLASS "B" SHARE
DISTRIBUTION PLAN
OF
MUTUAL FUND GROUP
Distribution Plan, dated as of November 17, 1994, of Mutual Fund
Group, a Massachusetts business trust (the "Trust"), with respect to Class B
shares to be issued by one or more series of the Trust.
Section 1. One or more series of the Trust as listed in Schedule A
(herein after each such series is referred to as a "Fund") may act as a
distributor of the shares of the Class B Shares (the "Shares") of which the Fund
is the issuer, pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "1940 Act") according to the terms of this Distribution Plan (the "Plan").
Section 2. Each Fund may incur as a distributor of the Shares,
expenses at the annual rate of 0.75% of the average daily net assets of each
class of Shares, subject to any applicable limitations imposed from time to time
by applicable rules of the National Association of Securities Dealers, Inc.
Section 3. Amounts set forth in Section 2 may be used to finance any
activity which is primarily intended to result in the sale of the Shares,
including, but not limited to, expenses of organizing and conducting sales
seminars, advertising programs, finders fees, printing of prospectuses and
statements of additional information (and supplements thereto) and reports for
other than existing shareholders, preparation and, distribution of advertising
material and sales literature, overhead, supplemental payments to dealers and
other institutions as asset-based sales charges or as payments of commissions or
service fees by Vista Broker Dealer Services, Inc. ("Distributors") as the
Fund's distributor in accordance with Section 4, and the costs of administering
the Plan. To the extent that amounts paid hereunder are not used specifically to
reimburse Distributors for any such expense, such amounts may be treated as
compensation for Distributors' distribution-related services. All amounts
expended pursuant to the Plan shall be paid to Distributors and are the legal
obligation of the Fund and not of Distributors. That portion of the amounts paid
under the Plan that is not paid or advanced by Distributors to dealers or other
institutions that provide personal continuing shareholder service as a service
fee pursuant to Section 4 shall be deemed as asset-based sales charge.
Section 4.
(a) Amounts expended by the Fund under the Plan may be used
in part for the implementation by Distributors of shareholder service
arrangements with respect to the Shares. The maximum service fee paid to any
service provider for acting as liaison to shareholders and providing personal
services to shareholders shall be twenty-five one-hundredths of one percent
(0.25%) per annum of the average daily net assets of the Shares attributable to
the customers of such service provider.
- 1 -
<PAGE>
(b) Pursuant to this program Distributors may enter into
agreements substantially in the form attached hereto as Exhibit A
("Service Agreements") with such broker-dealers ("Dealers") as may be
selected from time to time by Distributors for the provision of
distribution-related personal shareholder services in connection with
the sale of Shares to the Dealers' clients and customers ("Customers")
who may from time to time directly or beneficially own Shares. The
distribution-related personal continuing shareholder services to be
rendered by Dealers under the Service Agreements may include, but
shall not be limited to, the following: distributing sales literature;
answering routine Customer inquiries concerning the Fund and the
Shares; assisting Customers in changing dividend options, account
designations and addresses, and in enrolling in any of several
retirement plans offered in connection with the purchase of Shares;
assisting in the establishment and maintenance of customer accounts
and records and in the processing of purchase and redemption
transactions; investing dividends and capital gains distributions
automatically in shares and providing such other information and
services as the Fund or the Customer may reasonably request.
(c) Distributors may also enter into Bank Shareholder
Service Agreements substantially in the form attached hereto as
Exhibit B ("Bank Agreements") with selected banks acting in an agency
capacity for their customers ("Banks"). Banks acting in such capacity
will provide shareholder services to their customers as set forth in
the Bank Agreements from time to time.
Section 5. This Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority of both (a) the
Board of Trustees of the Fund and (b) those trustees of the Fund who are not
"interested persons" of the Fund (as defined in the 1940 Act) and have no direct
or indirect financial interest in the operation of this Plan or any agreements
related to it (the "Non-interested Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan or such agreements.
Section 6. Unless sooner terminated pursuant to Section 8, this Plan
shall continue in effect for a period of one year from the date it takes effect
and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided in Section 5.
Section 7. Distributors shall provide to the Board of Trustees and the
Board of Trustees shall review, at least quarterly, a written report of the
amounts so expended and the purposes for which such expenditures were made.
Section 8. This Plan may be terminated at any time by vote of a
majority of the Non-interested Trustees, or by vote of a majority of the
outstanding voting securities of the Shares.
- 2 -
<PAGE>
Section 9. Any agreement related to this Plan shall be made in
writing, and shall provide:
(a) that such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the
Non-interested Trustees or by a vote of the outstanding voting
securities of the Fund attributable to the Shares, on not more than
sixty (60) days' written notice to any other party to the agreement;
and
(b) that such agreement shall terminate automatically in the
event of the assignment.
Section 10. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved by a vote of at least a "majority of the outstanding
securities" (as defined in the 1940 Act) of the Shares, and no material
amendment to the Plan shall be made unless approved in the manner provided for
in Section 5 hereof.
- 3 -
<PAGE>
Schedule A
Funds in Program
Vista Balanced Fund Vista International Equity Fund
Vista Capital Growth Fund Vista Japan Fund
Vista European Fund Vista Small Cap Equity Fund
Vista Global Fixed Income Fund Vista Southeast Asian Fund
Vista Growth & Income Fund Vista U.S. Government Income Fund
Vista Equity Income Vista U.S. Government Securities Fund
Vista Equity Fund Vista Bond Fund
- 4 -
<PAGE>
EXHIBIT A
CLASS B SHARE
BANK SHAREHOLDER
SERVICE AGREEMENT
The undersigned _________________ ("Bank") desires to enter into an
Agreement with Vista Broker-Dealer Services, Inc. ("Distributors"), acting as
agent for Mutual Fund Group (the "Trust"), for servicing of Bank's agency
clients who hold Class B shares series of the Trust of, and the administration
of such shareholder accounts in the Class B shares of the series of Trust
(hereinafter referred to as the "Shares"). Subject to Distributors' acceptance
of this Agreement, the terms and conditions of this Agreement shall be as
follows:
1. Bank shall provide continuing personal shareholder and
administration services for holders of the Shares who are also Bank's
clients. Such services to Bank's clients may include, without limitations,
some or all of the following: answering shareholder inquiries regarding the
Shares and the Trust; performing subaccounting; establishing and
maintaining shareholder accounts and records; processing and bunching
customer purchase and redemption transactions; providing periodic
statements showing a shareholder's account balance and the integration of
such statements with those of other transactions and balances in the
shareholder's account, and the integration of such statements with those of
other transactions and balances in the shareholder's other accounts
serviced by Bank, forwarding prospectuses, proxy statements, reports and
notices to clients who are holders of Shares; and such other administrative
services as Distributors reasonably may request, to the extent Bank is
permitted by applicable statute, rule or regulations to provide such
services. Bank represents that it shall accept fees hereunder only so long
as it continues to provide personal shareholder services to shareholders of
the Trust.
2. The client will be the beneficial owner of the Shares
purchased and held by Bank in accordance with the client's instructions and
the client may exercise all applicable rights of a holder of such Shares.
Bank will transmit to the Trust's transfer agent, in a timely manner, all
purchase orders and redemption requests of Bank's clients and forward to
each client any proxy statements, periodic shareholder reports and other
communications received from Distributors by Bank on behalf of clients.
Distributors agrees to pay all out-of-pocket expenses actually incurred by
Distributors in connection with the transfer by Bank of such proxy
statements and reports to Bank's clients as required by applicable law or
regulation. Bank agrees to transfer record ownership of client's Shares to
the client promptly upon the request of a client. In addition record
ownership will be promptly transferred to the client in the event that the
person or entity ceases to be Bank's client.
3. Within five (5) business days of placing a purchase order
Bank agrees to send (i) a cashier's check to Distributors, or (ii) a wire
transfer to the Trust's
- 1 -
<PAGE>
transfer agent, in an amount equal to the amount of all purchase orders
placed by Bank on behalf of its clients and accepted by Distributors.
4. Bank agrees to make available to Distributors such
information related to clients who are beneficial owners of Shares and
their transactions in such Shares as may be required by applicable laws and
regulations or as may be reasonably requested by Distributors. The names of
Bank's customers shall remain Bank's sole property and shall not be used by
Distributors for any other purpose except as needed in the normal course of
business to holders of the Shares.
5. Except as may be provided in a separate written agreement
between Distributors and Bank, neither Bank nor any of its employees or
agents are authorized to assist in distribution of any of the Trust's
shares except those contained in the then current Prospectus applicable to
the Shares; and Bank shall have no authority to act as agent for
Distributors or the Trust.
6. In consideration of the services and facilities described
herein, Bank shall receive from Distributors on behalf of the Trust an
annual service fee, payable at such intervals as may be agreed upon by the
parties of a percentage of the aggregate average net asset value of the
Shares owned beneficially by Bank's clients during each payment period. We
understand that this Agreement and the payment of such service fees has
been authorized and approved by the Board of Trustees of the Trust and is
subject to limitations imposed by the National Association of Securities
Dealers, Inc. In cases where Distributor has advanced payments to Bank of
the first year's fee for shares sold with a contingent deferred sales
charge, no payments will be made to Bank during the first year the subject
Shares are held.
7. The Trust reserves the right, at its discretion and
without notice, to suspend the sale of any Shares or withdraw the sale of
Shares.
8. Bank understands that Distributors reserves the right to
amend this Agreement or Schedule A hereto at any time without Bank's
consent by mailing a copy of an amendment to Bank at the address set forth
below. Such amendment shall become effective on the date specified in such
amendment unless Bank elects to terminate this Agreement within thirty (30)
days of Bank's receipt of such amendment.
9. This Agreement may be terminated at any time by
Distributors on not less than 15 days' written notice to Bank at its
principal place of business. Bank, on 15 days' written notice addressed to
Distributors at its principal place of business, may terminate this
Agreement, said termination to become effective on the date of mailing
notice to Bank of such termination. Distributor's failure to terminate for
any cause shall not constitute a waiver of Distributor's right to terminate
at a later date for any such cause. This Agreement shall terminate
automatically in the event of its
- 2 -
<PAGE>
assignment, the term "assignment" for this purpose having the meaning
defined in Section 2 (a) (4) of the Investment Company Act of 1940, as
amended.
10. All communications to Distributors shall be sent to it
at 125 W. 55th Street, New York, NY 10022. Any notice to Bank shall be duly
given if mailed or telegraphed to Bank at this address shown on this
Agreement.
11. This Agreement shall become effective as of the date
when it is executed and dated below by Distributors. This Agreement and all
rights and obligations of the parties hereunder shall be governed by and
construed under the laws of the State of New York.
12. This Agreement shall be construed in accordance with the
laws of the State of New York.
Vista Broker-Dealer Services, Inc.
Date: __________________________ By: __________________________
The undersigned agrees to abide by the foregoing terms and conditions.
Date: _________________________ By: ___________________________
Signature
___________________________
Name Title
___________________________
Bank's Name
___________________________
Address
___________________________
City/State/Zip
Please sign both copies and return one copy of each to:
Vista Broker-Dealer Services, Inc.
125 W. 55th Street
New York, NY 10019
Attn:________________
- 3 -
<PAGE>
EXHIBIT B
SHAREHOLDER SERVICE AGREEMENT
FOR SALE OF CLASS B SHARES
This Shareholder Service Agreement (the "Agreement") has been adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act")
by each of the mutual funds (or designated classes of such funds) listed on
Schedule A to this Agreement (the "Funds"), under a Distribution Plan (the
"Plan") adopted pursuant to such Rule. This Agreement, between Vista
Broker-Dealer Services, Inc, ("Distributors"), solely as agent for the Funds,
and the undersigned authorized dealer ("Dealer") defines the services to be
provided by Dealer for which it is to receive payments pursuant to the Plan
adopted by each of the Funds. The Plan and the Agreement have been approved by a
majority of the directors or trustees of each of the Funds, including a majority
of the directors who are not interested persons of such Funds, and who have no
direct or indirect financial interest in the operation of the Plan or related
agreements (the "Non-interested Directors"), by votes cast in person at a
meeting called for the purpose of voting on the Plan. Such approval included a
determination that in the exercise of their reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit such Fund and its shareholders.
1. To the extent that Dealer provides distribution-related
continuing personal shareholder services to customers who may, from
time to time, directly or beneficially own Class B shares of the
Funds, including but not limited to, distributing sales literature,
answering routine customer inquiries regarding the Funds, assisting
customers in changing dividend options, accounting designation and
addresses, and in enrolling into any of several special investment
plans offered in connection with the purchase of the Funds' shares,
assisting in the establishment and maintenance of customer accounts
and records and in the processing of purchase and redemption
transactions, investing dividends and capital gains distributions
automatically in shares and providing such other services as the Funds
or the customer may reasonably request, Distributor solely as agent
for the Funds, shall pay Dealer a fee periodically or arrange for such
fee to be paid to Dealer.
2. The fee paid with respect to each Fund will be calculated
at the end of each payment period (as indicated in Schedule A) at the
annual rate set forth in Schedule A as applied to the average net
asset value of the Class B Shares of such Fund purchased or acquired
through exchange on or after the Plan Calculation Date shown for such
Fund on Schedule A. Fees calculated in this manner shall be paid to
Dealer only if Dealer is the dealer of record at the close of business
on the last business day of the applicable payment period, for the
account in which such Class B Shares are held. In cases where
Distributors has advanced payment to Dealer of the first year's fee
for shares sold subject to a contingent deferred sales charge, no
additional payments will be made to Dealer during the first year the
Class B Shares are held.
- 1 -
<PAGE>
3. Distributors reserve the right to withhold payment with
respect to the Class B Shares purchased by Dealer and redeemed or
repurchased by the Fund or by Distributor as Agent within fifteen (15)
business days after the date of Distributors' confirmation of such
purchase. Distributors reserve the right at any time to impose minimum
fee payment requirements before any periodic payments will be made to
Dealer hereunder.
4. Dealer shall furnish Distributors and the Funds with such
information as shall reasonably be requested either by the directors
of the Funds or by Distributors with respect to the fees paid to
Dealer pursuant to this Agreement.
5. Distributors shall furnish the directors of the Funds,
for their review on a quarterly basis, a written report of the amounts
expended under the Plan by Distributors and the purposes for which
such expenditures were made.
6. Neither Dealer nor any of its employees or agents are
authorized to make any representation concerning shares of the Funds
except those contained in the then current Prospectus for the Funds,
and Dealer shall have no authority to act as agent for the Funds or
for Distributors.
7. Distributors may enter into other similar Shareholder
Service Agreements with any other person without Dealer's consent.
8. This Agreement and Schedule A may be amended at any time
without your consent by Distributors mailing a copy of an amendment to
you at the address set forth below. Such amendment shall become
effective on the date specified in such amendment unless you elect to
terminate this Agreement within thirty (30) days of your receipt of
such amendment.
9. This Agreement may be terminated with respect to any Fund
at any time without payment of any penalty by the vote of a majority
of the directors of such Fund who are Non-interested Directors or by a
vote of a majority of the Fund's outstanding shares, on sixty (60)
days' written notice. It will be terminated by any act which
terminates either the Fund's Distribution Agreement with Distributors
or the Fund's Distribution Plan, and in any event, it shall terminate
automatically in the event of its assignment as that term is defined
in the 1940 Act.
10. The provisions of the Distribution Agreement between any
Fund and Distributors, insofar as they relate to the Plan, are
incorporated herein by reference. This Agreement shall become
effective upon execution and delivery hereof and shall continue in
full force and effect as long as the continuance of the Plan and this
related Agreement are approved at least annually by a vote of the
directors, including a majority of the Non-interested Directors, cast
in person at a meeting called for the purpose of voting thereon. All
communications to Distributors should be sent to the
- 2 -
<PAGE>
address shown at the bottom of this Agreement. Any notice to Dealer
shall be duly given if mailed or telephoned to you at the address
specified by Dealer below.
11 Dealer represents that it provides to customers who own
shares of the Funds personal services as defined from time to time in
applicable regulations of the National Association of Securities
Dealers, Inc. and that Dealer will continue to accept payments under
this Agreement only so long as Dealer provides such services.
12. This Agreement shall be construed in accordance with the
laws of the State of New York.
Vista Broker-Dealer Services, Inc.
Date: __________________________ By: __________________________
The undersigned agrees to abide by the foregoing terms and conditions.
Date: __________________________ By: ________________________________
Signature
______________________________
Name Title
______________________________
Bank's Name
______________________________
Address
______________________________
City/State/Zip
Please sign both copies and return one copy of each to:
Vista Broker-Dealer Services, Inc.
125 W. 55th Street
New York, NY 10019
Attn:________________
- 3 -
Exhibit 18
Form of Rule 18f-3 Multi-Class Plan
MUTUAL FUND GROUP
RULE 18f-3 MULTI-CLASS PLAN
I. Introduction.
Pursuant to Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act"), the following sets forth the method for
allocating fees and expenses among each class of shares of the underlying
investment funds of Mutual Fund Group (the "Trust") that issues multiple classes
of shares (the "Multi-Class Funds"). In addition, this Rule 18f-3 Multi-Class
Plan (the "Plan") sets forth the shareholder servicing arrangements,
distribution arrangements, conversion features, exchange privileges and other
shareholder services of each class of shares in the Multi-Class Funds.
The Trust is an open-end series investment company registered
under the 1940 Act the shares of which are registered on Form N-1A under the
Securities Act of 1933 (Registration Nos. 33-14196 and 811-5151). Upon the
effective date of this Plan, the Trust hereby elects to offer multiple classes
of shares in the Multi-Class Funds pursuant to the provisions of Rule 18f-3 and
this Plan. This Plan does not make any material changes to the class
arrangements and expense allocations previously approved by the Board of
Trustees of the Trust pursuant to the exemptive order issued by the Securities
and Exchange Commission to the Trust under Section 6(c) of the 1940 Act on July
17, 1990 (1940 Act Release No.
17590).
The Trust currently consists of the following sixteen separate
Funds: Vista Short Term Bond Fund, Vista U.S. Treasury Income Fund, Vista Bond
Fund, Vista U.S. Government Securities Fund, Vista Equity Income Fund, Vista
Large Cap Equity Fund, Vista Growth and Income Fund, Vista Capital Growth Fund,
Vista Balanced Fund, Vista American Value, Vista Small Cap Equity Fund, Vista
Global Fixed Income Fund, Vista International Equity Fund, Vista Southeast Asian
Fund, Vista Japan Fund and Vista European Fund.
Each of the following Funds is a Multi-Class Fund, authorized
to issue the following classes of shares representing interests in the same
underlying portfolio of assets of the respective Fund:
(i) the Vista U.S. Treasury Income Fund, Vista Balanced
Fund, Vista International Equity Fund, Vista Global
Fixed Income Fund, Vista Southeast Asian Fund, Vista
Japan Fund, Vista European Fund and
<PAGE>
VistaEquity Income Fund are authorized to issue Class A and
Class B shares;
(ii) the Vista Growth and Income Fund, Vista Capital
Growth Fund, Vista Small Cap Equity Fund, Vista Bond
Fund and Vista Large Cap Equity are authorized to
issue Class A, Class B and Institutional Shares
classes of shares; and
(iii) the Vista U.S. Government Securities Fund and Vista
Short Term Bond Fund are authorized to issue Class A
and Institutional Shares classes of shares.
II. Allocation of Expenses.
Pursuant to Rule 18f-3 under the 1940 Act, the Trust shall
allocate to each class of shares in a Multi-Class Fund (i) any fees and expenses
incurred by the Trust in connection with the distribution of such class of
shares under a distribution plan adopted for such class of shares pursuant to
Rule 12b-1, and (ii) any fees and expenses incurred by the Trust under a
shareholder servicing plan in connection with the provision of shareholder
services to the holders of such class of shares. In addition, pursuant to Rule
18f-3, the Trust may allocate the following fees and expenses to a particular
class of shares in a single MultiClass Fund:
(i) transfer agent fees identified by the transfer agent
as being attributable to such class of shares;
(ii) printing and postage expenses related to preparing
and distributing materials such as shareholder
reports, prospectuses, reports, and proxies to
current shareholders of such class of shares or to
regulatory agencies with respect to such class of
shares;
(iii) blue sky registration or qualification fees incurred
by such class of shares;
(iv) Securities and Exchange Commission registration fees
incurred by such class of shares;
(v) the expense of administrative personnel and services
(including, but not limited to, those of a fund
accountant or dividend paying agent charged with
calculating net asset values or determining or paying
dividends) as required to support the shareholders of
such class of shares;
(vi) litigation or other legal expenses relating solely to
such class of shares;
-2-
<PAGE>
(vii) Trustees fees incurred as result of issues relating
to such class of shares; and
(viii) independent accountants' fees relating solely to such
class of shares.
The initial determination of the class expenses that will be
allocated by the Trust to a particular class of shares and any subsequent
changes thereto will be reviewed by the Board of Trustees and approved by a vote
of the Trustees of the Trust, including a majority of the Trustees who are not
interested persons of the Trust. The Trustees will monitor conflicts of interest
among the classes and agree to take any action necessary to eliminate conflicts.
Income, realized and unrealized capital gains and losses, and
any expenses of a Multi-Class Fund not allocated to a particular class of such
Fund pursuant to this Plan shall be allocated to each class of the Fund on the
basis of the net asset value of that class in relation to the net asset value of
the Fund.
The Adviser, Distributor, Administrator and any other provider
of services to the Funds may waive or reimburse the expenses of a particular
class or classes, provided, however, that such waiver shall not result in cross
subsidization between the classes.
III. Class Arrangements.
The following summarizes the front-end sales charges,
contingent deferred sales charges, Rule 12b-1 distribution fees, shareholder
servicing fees, exchange privileges and other shareholder services applicable to
each class of shares of the Multi-Class Funds. Additional details regarding such
fees and services are set forth in each Fund's current Prospectus and Statement
of Additional Information.
A. Class A Shares -
1. Initial Sales Load: Up to 4.75% (of the offering
price).
2. Contingent Deferred Sales Charge: None.
3. Rule 12b-1 Distribution Fees: Up to 0.25% per
annum of the average daily net assets.
4. Shareholder Servicing Fees: Up to 0.25% per annum
of average daily net assets.
-3-
<PAGE>
5. Exchange Privileges: Subject to restrictions and
conditions set forth in the Prospectus, may be
exchanged for Class A shares of any other Fund.
6. Other Shareholder Services: As provided in the
Prospectus. Services do not differ from those
applicable to Class B shares.
B. Class B Shares -
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: 5% in the first
year, declining to 1% in the sixth year and
eliminated thereafter.
3. Rule 12b-1 Distribution Fees: Up to 0.75% per
annum of the average daily net assets.
4. Shareholder Servicing Fees: Up to 0.25% per annum
of the average daily net assets.
5. Conversion Features: convert to Class A shares on
the first business day of the month following the
eighth anniversary of the original purchase,
based on relative net asset values of the two
classes. Shares acquired by the reinvestment of
dividends and distributions are included in the
conversion.
6. Exchange Privileges: May be exchanged for Class B
shares of other Multi-class Funds.
7. Other Shareholder Services: As provided in the
Prospectus. Services do not differ from those
applicable to Class A shares.
C. Institutional Shares Class -
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Rule 12b-1 Distribution Fees: None.
4. Shareholder Servicing Fees: Up to 0.25% per annum
of the average daily net assets.
-4-
<PAGE>
5. Exchange Privileges: May be exchanged for
Institutional shares of other Multi-class Funds
at relative net asset value.
6. Other Shareholder Services: As provided in the
Prospectus.
IV. Conversions.
All Class B Shares of the Funds shall convert automatically to
Class A Shares in the ninth year after the date of purchase, together with the
pro rata portion of all Class B Shares representing dividends and other
distributions paid in additional Class B shares. The conversion will be effected
at the relative net asset values per share of the two classes on the first
business day of the month following the eighth anniversary of the original
purchase.
After conversion, the converted shares will be subject to an
asset-based sales charge and/or service fee (as those terms are defined in
Article III, Section 26 of the National Association Securities Dealers, Inc.
Rules of Fair Practice), if any, that in the aggregate are lower than the
asset-based sales charge and service fee to which they were subject prior to
that conversion. In no event will a class of shares have a conversion feature
that automatically would convert shares of such class into shares of a class
with a distribution arrangement that could be viewed as less favorable to the
shareholder from the point of view of overall cost.
The implementation of the conversion feature is subject to the
continuing availability of a ruling of the Internal Revenue Service, or of an
opinion of counsel or tax advisor, stating that the conversion of one class of
shares to another does not constitute a taxable event under federal income tax
law. The conversion feature may be suspended if such a ruling or opinion is not
available.
If a Fund implements any amendment to a Distribution Plan (or,
if presented to shareholders, adopts or implements any amendment of a
shareholder services plan) that the Board of Trustees determines would
materially increase the charges that may be borne by the Class A Shareholders
under such plan, the Class B Shares will stop converting to the Class A Shares
until the Class B Shares, voting separately, approve the amendment or adoption.
The Board of Trustees shall have sole discretion in determining whether such
amendment or adoption is to be submitted to a vote of the Class B Shareholders.
Should such amendment or adoption not be submitted to a vote of the Class B
Shareholders or, if submitted, should the Class B Shareholders fail to approve
such amendment or adoption, the Board of Trustees shall take such action as is
necessary to: (1) create a new class (the "New Class A Shares") which shall be
identical in all material respects to the Class A Shares as they existed prior
to the implementation of the amendment or adoption; and (2) ensure that the
existing Class B Shares will be exchanged or converted into New Class A Shares
no later than the date such Class B Shares were scheduled to convert to Class A
Shares. If deemed advisable by the Board of Trustees to implement the foregoing,
and at the sole discretion of the Board of
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Trustees, such action may include the exchange of all Class B Shares for a new
class (the "New Class B Shares"), identical in all respects to the Class B
Shares except that the New Class B Shares will automatically convert into the
New Class A Shares. Such exchanges or conversions shall be effected in a manner
that the Board of Trustees reasonably believes will not be subject to federal
taxation.
V. Board Review.
The Board of Trustees of the Trust shall review this Plan as
frequently as it deems necessary. Prior to any material amendment(s) to this
Plan, the Board of Trustees, including a majority of the Trustees that are not
interested persons of the Trust, shall find that the Plan, as proposed to be
amended (including any proposed amendments to the method of allocating class
and/or fund expenses), is in the best interest of each class of shares of a
Multi-Class Fund individually and the Fund as a whole. In considering whether to
approve any proposed amendment(s) to the Plan, the Trustees shall request and
evaluate such information as they consider reasonably necessary to evaluate the
proposed amendment(s) to the Plan. Such information shall address the issue of
whether any waivers or reimbursements of fees or expenses could be considered a
cross-subsidization of one class by another, and other potential conflicts of
interest between classes.
In making its determination to approve this Plan, the Trustees
have focused on, among other things, the relationship between or among the
classes and has examined potential conflicts of interest among classes
(including those potentially involving a crosssubsidization between classes)
regarding the allocation of fees, services, waivers and reimbursements of
expenses, and voting rights. The Board has evaluated the level of services
provided to each class and the cost of those services to ensure that the
services are appropriate and the allocation of expenses is reasonable. In
approving any subsequent amendments to this Plan, the Board shall focus on and
evaluate such factors as well as any others deemed necessary by the Board.
Adopted effective __________, 1996
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