As filed with the Securities and Exchange Commission on February 8, 1996
Registration No. 33-65473
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
[x] Pre-Effective Amendment No. 1
[ ] Post-Effective Amendment No.
(Check appropriate box or boxes)
MUTUAL FUND GROUP
(Exact Name of Registrant as Specified in Charter)
1-800-34-VISTA
(Area Code and Telephone Number)
125 West 55th Street
New York, New York 10019
(Address of Principal Executive Offices)
Name and Address of
Agent for Service:
Ann Bergin
Secretary
Mutual Fund Group
125 West 55th Street
New York, New York 10019
Copies to:
Marguerite Sheehan, Esq. Gary S. Schpero, Esq. Susan J. Penry-Williams, Esq.
Chemical Bank Simpson Thacher & Kramer, Levin, Naftalis,
270 Park Avenue Bartlett Nessen, Kamin & Frankel
New York, New York 10017 425 Lexington Avenue 919 Third Avenue
New York, New York 10017 New York, New York 10022
Approximate Date of Proposed Public Offering: As soon after the
effective date of this registration statement as is practicable.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
The Registrant has previously registered an indefinite number or amount
of its shares pursuant to Rule 24f-2 under the Investment Company Act of 1940
on July 16, 1987; accordingly, no fee is payable herewith. A Rule 24f-2
Notice for Registrant's fiscal year ended October 31, 1995 was filed on
November 27, 1995.
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<PAGE>
MUTUAL FUND GROUP
Cross Reference Sheet
Pursuant to Rule 481(a) Under the Securities Act of 1933
<TABLE>
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Form N-14 Item No. Location
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Prospectus/Proxy
Statement Caption
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<S> <C> <C>
Part A
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Item 1. Beginning of Registration Statement and Outside
Front Cover Page of Prospectus Cover Page
Item 2. Beginning and Outside Back Cover Page of
Prospectus Table of Contents
Item 3. Synopsis and Risk Factors Summary
Item 4. Information About the Transaction Summary; Reasons for the
Reorganization; Information About the
Reorganization; Comparative
Information on Shareholder Rights;
Agreement and Plan of Reorganization
and Liquidation
Item 5. Information About the Registrant Summary; Comparison of Investment
Objectives and Policies; Additional
Information About Vista
Item 6. Information About the Company Being Acquired Summary; Comparison of Investment
Objectives and Policies; Information
About Hanover
Item 7. Voting Information Voting Information
Item 8. Interest of Certain Persons and Experts Financial Statements and Experts
Item 9. Additional Information Required for Reoffering
by Persons Deemed to be Underwriters Not Applicable
Statement of Additional
Information Caption
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Part B
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Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. Additional Information About the Registrant Statement of Additional Information
Item 13. Additional Information About the Company Being
Acquired Not Applicable
Item 14. Financial Statements Historical Financial Statements; Pro
Forma Financial Statements; The
caption "Information about Hanover"
in the Prospectus
Part C
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</TABLE>
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration Statement.
<PAGE>
PART A
<PAGE>
PRELIMINARY COPY--For the Information of the
Securities and Exchange Commission Only
THE HANOVER INVESTMENT FUNDS, INC.
237 Park Avenue
New York, New York 10017
February , 1996
Dear Shareholder:
It's an exciting time for mutual fund investors and, I believe, an
especially exciting time for you as a Hanover Investment Funds shareholder.
That's because, in conjunction with the proposed merger of The Chemical
Banking Corporation and The Chase Manhattan Corporation, the Board of
Directors of your fund has been seeking ways to enhance your investment
relationship with us. I am writing today to ask you to vote on a proposed
reorganization that will allow your fund to operate more efficiently and
offer you substantial benefits as a shareholder.
We've considered a proposal that will combine each of the five currently
operational Hanover funds with an existing or newly-created fund in Mutual
Fund Group, better known as the Vista Family of Mutual Funds, which is advised
by Chase Manhattan. Vista is comprised of a family of 30 funds ranging from
stock and bond to money market funds and including both domestic and
international fund offerings.
Through the reorganization, your investment would be in a larger combined
fund family, allowing you as a shareholder to take advantage of the many
benefits that size and a diverse array of products offer. In addition, the
resulting increase in the assets under management of the Vista Funds should
enhance the ability of the funds' portfolio managers to buy and sell
securities on a more favorable basis. Larger transactions can often be
achieved at a better price, while giving the portfolio manager greater
flexibility and potentially increasing the funds' diversification.
The entire impact of the proposed reorganization is spelled out in the
enclosed Prospectus/Proxy Statement. After carefully considering all the
issues involved, your Board of Directors has unanimously concluded that the
proposal is in the best interests of your fund and its shareholders.
Therefore, we recommend that you vote in favor using the enclosed proxy card.
The value of your investment will not be affected by the reorganization.
Nor, in the opinion of legal counsel, will the transaction be subject to
federal income taxes.
I encourage you to complete and return your proxy card in the enclosed
postage-paid envelope as soon as possible, as your vote is important. Please
be advised that you may receive a mailing and proxy card on each Hanover
account you own, and that each proxy must be voted separately.
Thank you for your continuing support of The Hanover Investment Funds. We
look forward to serving you better in the near future as part of the Vista
Family of Mutual Funds. If you have any questions regarding the attached
proxy, please contact your investment representative or call your client
services representative at 1-800-821-2371.
Please also refer to the attached questions and answers which are
designed to help you cast your proxy as a shareholder, and are being provided
as a supplement to, not a substitute for, your proxy material which we urge
you to carefully review.
Sincerely yours,
W. Perry Neff
Chairman of the Board of Directors
The Hanover Investment Funds, Inc.
<PAGE>
Q. If shareholders approve the proxy proposals, what will happen?
A. In March, the Vista Funds and the Hanover Funds will be merged into one
combined fund family with approximately $18 billion in assets under
management. This family will employ the name "Vista Funds." In some cases,
current Vista and Hanover funds with overlapping objectives will be merged
together into a single fund. All shareholders in existing Hanover or Vista
funds will own shares in the merged funds, without paying additional
charges.
Q. As a shareholder, what do I need to do?
A. Just make sure you cast your proxy vote when you receive your ballot in
February. The directors of each fund are working to make sure this merger
goes smoothly. Shortly after the anticipated shareholder approval of the
merger, listings of daily fund prices and performance for most funds will
appear under the Vista heading in the business section of your local
newspaper and business periodicals. Your quarterly fund statements and
semi-annual reports will reflect that you are part of a larger Vista
family with more investment choices.
Q. Which funds are being combined and what do I do if I own one of them?
A. The following consolidation of funds will occur, upon shareholder
approval:
(bullet) Hanover 100% U.S. Treasury Securities Money Market Fund will be
combined with a newly created Vista fund called Vista 100% U.S.
Treasury Securities Money Market Fund. The resulting fund will
be called Vista 100% U.S. Treasury Securities Money Market Fund.
(bullet) Hanover U.S. Treasury Money Market Fund will be combined with
Vista Treasury Plus Money Market Fund. The resulting fund will be
called Vista Treasury Plus Money Market Fund.
(bullet) Hanover Government Money Market Fund will be combined with
Vista U.S. Government Money Market Fund. The resulting fund will
be called Vista U.S. Government Money Market Fund.
(bullet) Hanover Cash Management Fund will be combined with Vista Global
Money Market Fund. The resulting fund will be called Vista Cash
Management Fund.
(bullet) Hanover Tax Free Money Market Fund will be combined with Vista
Tax Free Money Market Fund. The resulting fund will be called
Vista Tax Free Money Market Fund.
(bullet) Hanover New York Tax Free Money Market Fund will be combined with
Vista New York Tax Free Money Market Fund. The resulting fund will
be called Vista New York Tax Free Money Market Fund.
(bullet) Hanover Short Term U.S. Government Fund will be combined with
Vista Short Term Bond Fund. The resulting fund will be called
Vista Short Term Bond Fund.
(bullet) Hanover U.S. Government Securities Fund will be combined with a
newly created Vista fund called Vista U.S. Government Securities
Fund. The resulting fund will be called Vista U.S. Government
Securities Fund.
(bullet) Hanover Blue Chip Growth Fund will be combined with Vista Equity
Fund. The resulting fund will be called Vista Large Cap Equity
Fund.
(bullet) Hanover Small Capitalization Growth Fund will be combined with
Vista Small Cap Equity Fund. The resulting fund will be called
Vista Small Cap Equity Fund.
(bullet) Hanover American Value Fund will be combined with a newly created
Vista fund called Vista American Value Fund. The resulting fund
will be called Vista American Value Fund.
The decisions as to which funds should be appropriately merged was based
upon a review of each fund's investment objectives and the selection of funds
which were similar. If you own any of the above funds, upon shareholder
approval you will automatically become a shareholder in the merged fund.
You don't need to do anything to continue your current investment program.
The complete details are contained in the proxy materials.
<PAGE>
Q. Will there be any change in how the funds are managed?
A. Under the plan, current shareholders of Hanover funds will gain the
investment expertise and discipline of Chase Manhattan. Chase has more
than 100 years of experience providing money management services to
individuals and institutions. Vista has built a reputation as one of the
most consistent performers among stock mutual funds through Chase's
proprietary 5-Step Stock-Selection Model.
Q. What research services will the funds rely upon?
A. The expanded group will have access to the research and analysis which has
helped Vista achieve recognition for outstanding performance. These
include Chase's global presence through research professionals in
strategic markets throughout the world and also the independent mutual
fund consulting group Chase hires to audit the portfolio management
practices of each Vista fund.
Q. What about shareholder services?
A. Current Hanover shareholders will be able to obtain fund information 24
hours per day via Tele-Vista, Vista's Voice Response Unit available at
1-800-34-VISTA.
Current Hanover shareholders who have already paid a sales charge will be
allowed to exchange into other funds of the larger Vista family without
paying an additional charge.
Q. How do I cast a proxy vote?
A. In mid-February, you will receive a proxy card and statement in the mail
for each fund in which you are a shareholder. Several shareholder election
items will appear on this card, and after you have reviewed the
accompanying proxy material carefully, you should cast your vote in each
of them. Then, return the postage-paid reply card in the mail prior to
March 19, 1996. That's all.
If you have any further questions, please call our customer service center,
between 8:00 AM and 6:00 PM EST, at 1-800-34-VISTA (84782).
<PAGE>
PRELIMINARY COPY--For the Information of the
Securities and Exchange Commission Only
THE HANOVER INVESTMENT FUNDS, INC.
237 Park Avenue
New York, New York 10019
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
February , 1996
Dear Shareholder:
A special meeting of shareholders of the portfolios of The Hanover
Investment Funds, Inc. ("Hanover") will be held on April 2, 1996 at 2:00
P.M. at the offices of The Chase Manhattan Bank, N.A., 101 Park Avenue, 17th
Floor, New York, New York 10178 for the following purposes:
1. To consider and act upon an Agreement and Plan of Reorganization and
Liquidation (the "Agreement") between Hanover and Mutual Fund Group ("Vista")
providing for:
(a) the transfer of all of the assets and liabilities of The Hanover
Short Term U.S. Government Fund to the Vista Short Term Bond Fund in
exchange for Class A Shares of the Vista Short Term Bond Fund, the
distribution of such shares to the shareholders of The Hanover Short Term
U.S. Government Fund and the subsequent termination of The Hanover Short
Term U.S. Government Fund (to be voted on only by the shareholders of The
Hanover Short Term U.S. Government Fund);
(b) the transfer of all of the assets and liabilities of The Hanover
U.S. Government Securities Fund to the Vista U.S. Government Securities
Fund (a newly created portfolio of Vista) in exchange for Institutional
Shares of the Vista U.S. Government Securities Fund, the distribution of
such shares to the shareholders of The Hanover U.S. Government Securities
Fund and the subsequent termination of The Hanover U.S. Government
Securities Fund (to be voted on only by the shareholders of The Hanover
U.S. Government Securities Fund);
(c) the transfer of all of the assets and liabilities of The Hanover
Blue Chip Growth Fund to the Vista Large Cap Equity Fund (currently known
as the Vista Equity Fund) in exchange for Institutional Shares of the
Vista Large Cap Equity Fund, the distribution of such shares to the
shareholders of The Hanover Blue Chip Growth Fund and the subsequent
termination of The Hanover Blue Chip Growth Fund (to be voted on only by
the shareholders of The Hanover Blue Chip Growth Fund);
(d) the transfer of all of the assets and liabilities of The Hanover
Small Capitalization Growth Fund to the Vista Small Cap Equity Fund in
exchange for Class A Shares and Institutional Shares of the Vista Small
Cap Equity Fund, the distribution of such Class A Shares to the
shareholders of Investor Shares of The Hanover Small Capitalization Growth
Fund and such Institutional Shares to the shareholders of CBC Benefit
Shares of The Hanover Small Capitalization Growth Fund, and the subsequent
termination of The Hanover Small Capitalization Growth Fund (to be voted
on only by the shareholders of The Hanover Small Capitalization Growth
Fund); and
(e) the transfer of all of the assets and liabilities of The Hanover
American Value Fund to the Vista American Value Fund (a newly created
portfolio of Vista) in exchange for shares of the Vista American Value
Fund, the distribution of such shares to the shareholders of The Hanover
American Value Fund and the subsequent termination of The Hanover American
Value Fund (to be voted on only by the shareholders of The Hanover
American Value Fund).
2. Transaction of such other business as may properly come before the
meeting.
The Board of Directors of Hanover has recently reviewed and unanimously
endorsed the proposals set forth in the accompanying Prospectus/Proxy
Statement. Approval of the Agreement will require the affirmative vote of the
holders of at least a majority of the outstanding shares of each portfolio of
Hanover (other than The Hanover
<PAGE>
Small Capitalization Growth Fund) entitled to vote on the matter and, in the
case of The Hanover Small Capitalization Growth Fund, the affirmative vote of
the holders of at least a majority of each of its outstanding Investor Shares
and CBC Benefit Shares entitled to vote on the matter. By approving the
Agreement, Hanover shareholders will be deemed to have waived temporarily
certain of Hanover's investment limitations insofar as they might be deemed
to apply to the transactions provided for therein. The Board of Directors
knows of no other business that will be acted upon at the meeting.
Each shareholder is invited to attend the Special Meeting in person.
Shareholders of record at the close of business on January 22, 1996 have the
right to vote at the Special Meeting.
A quorum for the Special Meeting for each Hanover portfolio will consist
of the presence in person or by proxy of shareholders entitled to cast a
majority of the votes of that portfolio entitled to be cast. In the event
that a quorum for any Hanover portfolio is not present at the Special
Meeting, or in the event that a quorum is present but sufficient votes to
approve any of the matters to be acted upon are not received, the persons
named as proxies may propose one or more adjournments of the Special Meeting
to permit further solicitation of proxies. Any such adjournment will require
the affirmative vote of a majority of those shares present or represented at
the meeting in person or by proxy. The persons named as proxies will vote
those proxies which they are entitled to vote FOR or AGAINST any such
proposal in their discretion. A stockholder vote may be taken on one or more
of the matters to be acted upon as described in the accompanying
Prospectus/Proxy Statement prior to any such adjournment if sufficient votes
have been received for approval.
Detailed information about the proposed transaction and the reasons for it
are contained in the enclosed materials. Please exercise your right to vote
by attending the Special Meeting or completing, dating and signing the
enclosed proxy card. A self-addressed, postage-paid envelope has been
enclosed for your convenience. It is very important that you vote and that
your voting instructions be received prior to the Special Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, THE BOARD OF
DIRECTORS SOLICITS YOUR PROXY AND STRONGLY INVITES YOUR PARTICIPATION BY
ASKING YOU TO REVIEW, COMPLETE AND RETURN YOUR PROXY AS SOON AS POSSIBLE.
NOTE: You may receive more than one proxy package if you hold shares in
more than one account or if you own shares in more than one portfolio which
is being reorganized. You must return separate proxy cards for separate
holdings. We have provided postage-paid return envelopes for each.
By Order of the Board of Directors
W. Perry Neff
Chairman of the Board and President
<PAGE>
PRELIMINARY COPY--For the Information of the
Securities and Exchange Commission Only
PROSPECTUS/PROXY STATEMENT DATED , 1996
Acquisition of the Assets of
THE HANOVER INVESTMENT FUNDS, INC.
237 Park Avenue
New York, New York 10017
1-800-821-2371
By and in Exchange for Shares of
MUTUAL FUND GROUP
125 West 55th Street
New York, New York 10019
1-800-34-VISTA
This Prospectus/Proxy Statement relates to the proposed transfer of all of
the assets and liabilities of each currently operational portfolio of The
Hanover Investment Funds, Inc. ("Hanover") to corresponding portfolios of
Mutual Fund Group ("Vista") having substantially similar investment
objectives (except as described herein) in exchange for shares of such
portfolios of Vista. Vista is an open-end investment company of the
management type offering shares in several portfolios, and, in some cases,
multiple classes of shares in each such portfolio. As a result of the
proposed transaction, each shareholder of a portfolio of Hanover will receive
that number of shares of the corresponding portfolio of Vista equal in value
at the date of the exchange to the value of such shareholder's shares of the
portfolio of Hanover at such date. The terms and conditions of these
transactions are more fully described in this Prospectus/Proxy Statement and
in the Agreement and Plan of Reorganization and Liquidation between Vista and
Hanover attached hereto as Exhibit A.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about Vista and its
portfolios that a prospective investor should know before investing. A
statement of additional information dated , 1996 (the "Statement of
Additional Information") containing additional information about Vista has
been filed with the Securities and Exchange Commission (the "Commission") and
is incorporated by reference into this Prospectus/Proxy Statement. Copies of
Hanover's current prospectuses may be obtained without charge by writing to
Hanover at its address noted above or by calling 1-800-821-2371. A copy of
the Statement of Additional Information may be obtained without charge by
writing to Vista at its address noted above or by calling 1-800-34-VISTA.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY
INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED
BY VISTA OR HANOVER.
INVESTMENTS IN VISTA PORTFOLIOS ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS
OF PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE VISTA PORTFOLIOS
ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
THE CHASE MANHATTAN BANK, N.A. OR ANY OF ITS AFFILIATES AND ARE NOT
FEDERALLY INSURED BY, OBLIGATIONS OF, OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
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Page
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Summary ................................................ 3
Reasons For the Reorganization ......................... 15
Information About the Reorganization ................... 16
Voting Information ..................................... 19
Comparison of Investment Objectives and Policies ....... 20
Comparative Information on Shareholder Rights .......... 36
Additional Information About Vista ..................... 39
Information About Hanover .............................. 68
Financial Statements and Experts ....................... 68
Legal Matters .......................................... 68
</TABLE>
EXHIBIT
A--Agreement and Plan of Reorganization and Liquidation between Mutual
Fund Group and The Hanover Investment Funds, Inc.
<PAGE>
SUMMARY
This summary is qualified by reference to the more complete information
contained in this Prospectus/Proxy Statement, the prospectuses of Hanover and
the Agreement and Plan of Reorganization and Liquidation attached to this
Prospectus/Proxy Statement as Exhibit A. The information concerning Hanover
contained or incorporated by reference into this Prospectus/Proxy Statement
has been furnished by Hanover, and the information concerning Vista contained
or incorporated by reference into this Prospectus/Proxy Statement has been
furnished by Vista.
Proposed Transaction. The Board of Directors of Hanover (the "Hanover
Board"), including the Directors who are not "interested persons" of Hanover
(the "Independent Directors"), has unanimously approved an Agreement and Plan
of Reorganization and Liquidation (the "Agreement") providing for the
transfer of all of the assets and liabilities (whether contingent or
otherwise) of each currently operational portfolio of Hanover (each, a
"Hanover Portfolio") to a corresponding portfolio of Vista (each, a "Vista
Portfolio") having a substantially similar investment objective (except as
described herein) in exchange for shares of the class or classes specified in
the table below of such Vista Portfolio. (The proposed transaction is
referred to in this Prospectus/Proxy Statement as the "Reorganization".) The
total value of all shares of each Vista Portfolio issued in the
Reorganization shall equal the total value of the net assets of the
corresponding Hanover Portfolio being acquired by such Vista Portfolio. In
connection with the Reorganization, shares of the class or classes of each
Vista Portfolio specified in the table below will be distributed to holders
of the shares of the respective class or classes of the corresponding Hanover
Portfolio as specified in the table below in liquidation of that Hanover
Portfolio. The number of full and fractional shares of a Vista Portfolio
received by a shareholder of the corresponding Hanover Portfolio will be
equal in value to the value of that shareholder's shares of the corresponding
Hanover Portfolio as of 4:00 p.m. (Eastern time) on the closing date of the
Reorganization. Upon completion of such distribution, Hanover will be
dissolved and will then deregister as an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), by filing the
appropriate application with the Commission and will also be terminated under
state law. As a result of the Reorganization, each holder of shares of the
Hanover Portfolio specified in the table below will become a holder of shares
of the specified class of the Vista Portfolio listed opposite the class of
shares held in such Hanover Portfolio (each Hanover or Vista Portfolio being
referred to herein as the "corresponding" Hanover or Vista Portfolio to the
respective Vista or Hanover Portfolio listed opposite its name). One of the
currently existing Vista Portfolios will be renamed in connection with the
Reorganization, as indicated in the table below.
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The Hanover Portfolio and Share Class Vista Portfolio and Share Class
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The Hanover Short Term U.S. Government Fund Vista Short Term Bond Fund
All Shares Class A Shares*
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The Hanover U.S. Government Securities Fund Vista U.S. Government Securities Fund**
All Shares Institutional Shares
- -------------------------------------------------------------------------------------------
The Hanover Blue Chip Growth Fund Vista Large Cap Equity Fund***
All Shares Institutional Shares+
- -------------------------------------------------------------------------------------------
The Hanover Small Capitalization Growth Fund Vista Small Cap Equity Fund
Investor Shares Class A Shares
CBC Benefit Shares Institutional Shares
- -------------------------------------------------------------------------------------------
The Hanover American Value Fund Vista American Value Fund++
All Shares Shares
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</TABLE>
*A share class of a currently existing Vista Portfolio that will be newly
created in connection with the Reorganization.
**Vista U.S. Government Securities Fund is a newly organized portfolio of
Vista created for the purpose of operating as a successor to The Hanover
U.S. Government Securities Fund in connection with the Reorganization.
***Currently known as the Vista Equity Fund.
+Currently known as Shares.
++Vista American Value Fund is a newly organized portfolio of Vista created
for the purpose of operating as a successor to The Hanover American Value
Fund in connection with the Reorganization.
Under the proposed Reorganization, shareholders of each Hanover Portfolio
other than The Hanover U.S. Government Securities Fund will receive shares in
a Vista Portfolio with a substantially similar investment objective
3
<PAGE>
and, except for certain differences between The Hanover Short Term U.S.
Government Fund and the Vista Short Term Bond Fund, similar investment
policies and restrictions. The Hanover U.S. Government Securities Fund and the
Vista U.S. Government Securities Fund have similar investment policies, but
the objective of the Vista U.S Government Securities Fund has been revised to
reflect a desire to manage the fund to maximize total return, consisting of
both income and capital appreciation. The Vista Short Term Bond Fund is
authorized to invest in a broader range of securities than The Hanover Short
Term U.S. Government Fund. See "Comparison of Investment Objectives and
Policies" below.
As set forth in the table above, pursuant to the proposed Reorganization,
the shareholders of each class of a Hanover Portfolio will receive shares of
the specified class of the corresponding Vista Portfolio. As used herein, the
"Shares" refers to the classes of shares of each Vista Portfolio to be
received by shareholders of the corresponding Hanover Portfolio pursuant to
the Reorganization, as set forth in the table above.
Under the proposed Reorganization, purchase, redemption and dividend
policies will remain substantially unchanged.
The investment advisers to the Hanover Portfolios are The Portfolio Group,
Inc. (with respect to The Hanover U.S. Government Securities Fund and The
Hanover Blue Chip Growth Fund), Texas Commerce Bank, National Association
(with respect to The Hanover Short Term U.S. Government Fund), Chemical Bank
New Jersey, National Association (with respect to The Hanover Small
Capitalization Growth Fund) and Van Deventer & Hoch ("VDH") (with respect to
The Hanover American Value Fund). The Portfolio Group, Inc., is a direct,
wholly-owned subsidiary of CBC and Texas Commerce Bank, National Association
and Chemical Bank New Jersey, National Association are each indirect,
wholly-owned subsidiaries of CBC. VDH is a 50%-owned indirect subsidiary of
CBC. The Chase Manhattan Bank, N.A. serves as the investment adviser to each
of the existing Vista Portfolios. Pursuant to the Bank Merger described below
under "Reasons for the Reorganization," The Chase Manhattan Bank, N.A. will
be merged with and into Chemical Bank, at which time Chemical Bank will
assume the Chase Manhattan name (as used herein, the term "Chase" refers to
The Chase Manhattan Bank, N.A. and its successor in the Bank Merger, and the
term "Adviser" means Chase (including its successor in the Bank Merger), in
its capacity as investment adviser to the Vista Portfolios). Following
consummation of the Reorganization involving Hanover and Vista, Chase will
serve as investment adviser to each of the Vista Portfolios. In addition,
Chase Asset Management, Inc. ("CAM"), a wholly-owned operating subsidiary of
Chase, will serve as the sub-investment adviser to each Vista Portfolio,
other than the Vista American Value Fund, following the consummation of the
Reorganization pursuant to an agreement with Chase and will manage each such
portfolio on a day-to-day basis. VDH, which currently serves as the
investment adviser to The Hanover American Value Fund, will serve as the
sub-investment adviser to the Vista American Value Fund following the
consummation of the Reorganization pursuant to an agreement with Chase and
will manage that portfolio on a day-to-day basis.
For the reasons set forth above and those set forth below under "Reasons
for the Reorganization," the Hanover Board, including all of the Independent
Directors, has unanimously concluded that the Reorganization would be in the
best interests of the shareholders of each Hanover Portfolio, and that the
interests of existing shareholders of each Hanover Portfolio would not be
diluted as a result of the transactions contemplated by the Reorganization.
For all of the reasons noted, the Hanover Board has unanimously recommended
approval of the Reorganization.
The consummation of the Reorganization is contingent on the satisfaction
of the conditions described below under "Information About the
Reorganization." Prior to or effective upon the consummation of the
Reorganization, it is anticipated that Vista will effect changes to certain
of its procedures and investment policies and limitations, as well as to the
composition of Vista's Board of Trustees (the "Vista Board") (collectively,
the "Related Changes"). However, the failure to effect any or all of the
Related Changes will not prevent the Reorganization from occurring.
Information contained herein with respect to Vista and the Vista Portfolios
describe the Related Changes where so indicated.
If the Reorganization were to have been consummated as of November 30,
1995, the approximate resulting aggregate net assets of the (1) Vista Short
Term Bond Fund would be $47,000,000, (2) Vista U.S. Government Securities
Fund would be $85,000,000, (3) Vista Large Cap Equity Fund would be
$117,000,000, (4) Vista Small Cap Equity Fund would be $113,000,000, and (5)
Vista American Value Fund would be $8,000,000.
Tax Consequences. Prior to the consummation of the Reorganization, counsel
to Hanover will issue an opinion that no gain or loss will be recognized by
the Vista Portfolios or the Hanover Portfolios or shareholders of the
4
<PAGE>
Hanover Portfolios for federal income tax purposes as a result of the
Reorganization. The holding period and tax basis of the shares of a Vista
Portfolio received by a shareholder of the corresponding Hanover Portfolio
will be the same as the holding period and tax cost basis of the
shareholder's shares of the corresponding Hanover Portfolio. In addition, the
holding period and tax basis of the assets of a Hanover Portfolio transferred
to the corresponding Vista Portfolio as a result of the Reorganization will
be the holding period and tax basis of those assets in the hands of that
Hanover Portfolio immediately prior to the Reorganization. For further
information about the tax consequences of the Reorganization, see
"Information about the Reorganization--Federal Income Tax Consequences."
Investment Objectives and Policies. The following table sets forth the
investment objective of each Hanover Portfolio and its corresponding Vista
Portfolio and their investment approach. Although each Hanover Portfolio and
its corresponding Vista Portfolio, except for the differences in the
investment objective between the Hanover U.S. Government Securities Fund and
the Vista U.S. Government Securities Fund and certain differences between The
Hanover Short Term U.S. Government Fund and the Vista Short Term Bond Fund,
have substantially similar investment objectives and similar policies, there
are certain differences in the investment policies and restrictions of the
portfolios that should be considered by shareholders of the Hanover
Portfolios. See "Comparison of Investment Objectives and Policies."
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Hanover Portfolio and
Corresponding Vista Portfolio Investment Objective and Approach
<S> <C>
- --------------------------------------------------------------------------------------------------------------
The Hanover Short Term U.S. Seeks to provide as high a level of current income as is consistent
Government Fund with the preservation of capital, by investing primarily in shorter-
term securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and repurchase agreements with respect
thereto.
- ---------------------------------------------------------------------------------------------------------------
Vista Short Term Bond Fund Seeks to provide a high level of current income, consistent with
preservation of capital, by investing primarily in a broad range of
short-term investment grade bonds and other fixed income securities.
- ----------------------------------------------------------------------------------------------------------------
The Hanover U.S. Government Seeks to provide as high a level of current income as is consistent
Securities Fund with the preservation of capital, by investing primarily in securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements with respect thereto.
- ----------------------------------------------------------------------------------------------------------------
Vista U.S. Government Seeks to provide as high a level of total return, consisting of income
Securities Fund and capital appreciation, as is consistent with the preservation of
capital, by investing primarily in securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, and repurchase
agreements with respect thereto.
- ----------------------------------------------------------------------------------------------------------------
The Hanover Blue Chip Growth Seeks to provide capital appreciation, by investing primarily in the
Fund equity securities of large, well-established companies with substantial
capitalization.
- -----------------------------------------------------------------------------------------------------------------
Vista Large Cap Equity Fund* Seeks to provide long-term growth of capital, by investing primarily in
the equity securities of established companies with substantial
capitalization.
- ------------------------------------------------------------------------------------------------------------------
The Hanover Small Seeks to provide capital appreciation, by investing primarily in the
Capitalization Growth Fund common stocks of smaller companies.
- ------------------------------------------------------------------------------------------------------------------
Vista Small Cap Equity Fund Seeks to provide long-term capital growth, by investing primarily in a
non-diversified portfolio of equity securities of smaller companies.
- ------------------------------------------------------------------------------------------------------------------
The Hanover American Value Seek to maximize total return, consisting of capital appreciation and
Fund and Vista American income, by investing primarily in the equity securities of
Value Fund well-established U.S. companies which, in the opinion of the Fund's
investment adviser, are undervalued by the market.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Currently known as the Vista Equity Fund.
5
<PAGE>
Additional Trust Portfolios. In addition to the Vista Portfolios referred
to above, Vista currently offers twelve additional portfolios,--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.
Vista may add additional portfolios from time to time in the future.
Fees and Expenses. The tables which follow set forth shareholder
transaction expenses, ratios of expenses to average net assets ("Expense
Ratios") and expense examples for the Hanover Portfolios for the year ended
November 30, 1995, as incurred after giving effect to certain voluntary fee
waivers and expense reimbursements during the period ("Current"-- Column 1),
as incurred without giving effect to such waivers and reimbursements ("Current
Contractual"--Column 2) and as are permitted to be incurred based upon the
maximum levels provided for under current contractual arrangements ("Maximum
Contractual"--Column 3), and the shareholder transaction expenses, pro-forma
expense ratios and expense examples for the Shares of the corresponding Vista
Portfolios as if the Reorganization had occurred at the commencement of the
fiscal year ended October 31, 1995 based upon the fee arrangements that will
be in place upon the consummation of the Reorganization, both reflecting the
commitment by Chase, as described below, voluntarily to waive fees and/or
reimburse expenses in an amount sufficient to maintain the expense ratios for
the Shares of the Vista Portfolios at the levels indicated for a period of at
least one year following consummation of the Reorganization
("Committed"--Column 4), and without giving effect to such commitment based
upon the maximum levels provided for under the contractual arrangements to be
in effect upon the consummation of the Reorganization ("Contractual"--Column 5).
As indicated in the tables below, after giving effect to the commitment by
Chase to maintain the "Total Fund Operating Expenses" of the Vista Portfolios
for a period of at least one year following the consummation of the
Reorganization, the Committed "Total Fund Operating Expenses" for Shares of
each Vista Portfolio for such one year period are lower than the Maximum
Contractual "Total Fund Operating Expenses" for the corresponding Hanover
Portfolio shares for the respective periods presented.
The Hanover Short Term U.S. Government Fund (Investor Shares)/
Vista Short Term Bond Fund (Class A Shares)
<TABLE>
<CAPTION>
Vista Pro-Forma
Combined Expense**
Ratios
Hanover Expense Ratios* (Unaudited)
---------------------------------- -----------------------
(1) (2) (3) (4) (5)
Current Maximum
Current Contractual Contractual Committed Contractual
------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Initial Sales Charge Imposed
on Purchases (as a percentage of
offering price) 0.00% 0.00% 0.00% 0.00%+ 0.00%+
Maximum Contingent Deferred Sales
Charge (as a percentage of
redemption proceeds) 0.00 0.00 0.00 0.00 0.00
Annual Fund Operating Expenses
(as a percentage of daily net
assets)
Investment Advisory Fee 0.00 0.35 0.35 0.00 0.25
Distribution Plan fee, Rule 12b-1 0.00 0.00 0.10 0.08 0.25
Administration Fee 0.00 0.04 0.04 0.02 0.10
Other Expenses
Sub-Administration Fee 0.00 0.03 0.03 0.05 0.05
Shareholder Servicing Fee 0.25 0.30 0.30 0.25 0.25
Other Operating Expenses *** 0.46 0.89 0.89 0.35 0.35
Total Other Expenses 0.71 1.22 1.22 0.65 0.65
Total Fund Operating Expenses 0.71 1.61 1.71 0.75 1.25
</TABLE>
6
<PAGE>
The Hanover U.S. Government Securities Fund (Investor Shares)/
Vista U.S. Government Securities Fund (Institutional Shares)
<TABLE>
<CAPTION>
Vista Pro-Forma Combined
Expense Ratios**
Hanover Expense Ratios* (Unaudited)
----------------------------------- ------------------------
(1) (2) (3) (4) (5)
Current Maximum
Current Contractual Contractual Committed Contractual
------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Initial Sales Charge Imposed
on Purchases (as a percentage of
offering price) 0.00% 0.00% 0.00% 0.00% 0.00%
Maximum Contingent Deferred Sales
Charge (as a percentage of
redemption proceeds) 0.00 0.00 0.00 0.00 0.00
Annual Fund Operating Expenses
(as a percentage of daily net
assets)
Investment Advisory Fee 0.45 0.50 0.50 0.30 0.30
Distribution Plan fee, Rule 12b-1 0.00 0.00 0.10 0.00 0.00
Administration Fee 0.00 0.04 0.04 0.10 0.10
Other Expenses
Sub-Administration Fee 0.00 0.03 0.03 0.05 0.05
Shareholder Servicing Fee 0.25 0.30 0.30 0.20 0.25
Other Operating Expenses *** 0.15 0.29 0.29 0.20 0.20
Total Other Expenses 0.40 0.62 0.62 0.45 0.50
Total Fund Operating Expenses 0.85 1.16 1.26 0.85 0.90
</TABLE>
The Hanover Blue Chip Growth Fund (Investor Shares)/
Vista Large Cap Equity Fund (Institutional Shares)
<TABLE>
<CAPTION>
Vista Pro-Forma
Combined Expense Ratios**
Hanover Expense Ratios* (Unaudited)
---------------------------------- ------------------------
(1) (2) (3) (4) (5)
Current Maximum
Current Contractual Contractual Committed Contractual
------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Initial Sales Charge Imposed
on Purchases (as a percentage of
offering price) 0.00% 0.00% 0.00% 0.00% 0.00%
Maximum Contingent Deferred Sales
Charge (as a percentage of
redemption proceeds) 0.00 0.00 0.00 0.00 0.00
Annual Fund Operating Expenses
(as a percentage of daily net
assets)
Investment Advisory Fee 0.60 0.70 0.70 0.00 0.40
Distribution Plan fee, Rule 12b-1 0.00 0.00 0.10 0.00 0.00
Administration Fee 0.00 0.04 0.04 0.10 0.10
Other Expenses
Sub-Administration Fee 0.00 0.03 0.03 0.05 0.05
Shareholder Servicing Fee 0.25 0.30 0.30 0.25 0.25
Other Operating Expenses *** 0.15 0.36 0.36 0.20 0.20
Total Other Expenses 0.40 0.69 0.69 0.50 0.50
Total Fund Operating Expenses 1.00 1.43 1.53 0.60 1.00
</TABLE>
7
<PAGE>
The Hanover Small Capitalization Growth Fund (Investor Shares)/
Vista Small Cap Equity Fund (Class A Shares)
<TABLE>
<CAPTION>
Vista Pro-Forma
Combined Expense Ratios**
Hanover Expense Ratios* (Unaudited)
----------------------------------- ------------------------
(1) (2) (3) (4) (5)
Current Maximum
Current Contractual Contractual Committed Contractual
------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Initial Sales Charge Imposed
on Purchases (as a percentage of
offering price) 0.00% 0.00% 0.00% 0.00%+ 0.00%+
Maximum Contingent Deferred Sales
Charge (as a percentage of
redemption proceeds) 0.00 0.00 0.00 0.00 0.00
Annual Fund Operating Expenses
(as a percentage of daily net
assets)
Investment Advisory Fee 0.75 0.75 0.75 0.65 0.65
Distribution Plan fee, Rule 12b-1 0.00 0.00 0.10 0.25 0.25
Administration Fee 0.00 0.04 0.04 0.10 0.10
Other Expenses
Sub-Administration Fee 0.00 0.03 0.03 0.05 0.05
Shareholder Servicing Fee 0.25 0.30 0.30 0.00 0.00
Other Operating Expenses *** 0.30 0.48 0.48 0.45 0.45
Total Other Expenses 0.55 0.81 0.81 0.50 0.50
Total Fund Operating Expenses 1.30 1.60 1.70 1.50 1.50
</TABLE>
The Hanover Small Capitalization Growth Fund (CBC Benefit Shares)/
Vista Small Cap Equity Fund (Institutional Shares)
<TABLE>
<CAPTION>
Vista Pro-Forma
Combined Expense Ratios**
Hanover Expense Ratios* (Unaudited)
---------------------------------- ------------------------
(1) (2) (3) (4) (5)
Current Maximum
Current Contractual Contractual Committed Contractual
------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Initial Sales Charge Imposed
on Purchases (as a percentage of
offering price) 0.00% 0.00% 0.00% 0.00% 0.00%
Maximum Contingent Deferred Sales
Charge (as a percentage of
redemption proceeds) 0.00 0.00 0.00 0.00 0.00
Annual Fund Operating Expenses
(as a percentage of daily net
assets)
Investment Advisory Fee 0.75 0.75 0.75 0.65 0.65
Distribution Plan fee, Rule 12b-1 0.00 0.00 0.00 0.00 0.00
Administration Fee 0.00 0.04 0.04 0.10 0.10
Other Expenses
Sub-Administration Fee 0.00 0.03 0.03 0.05 0.05
Shareholder Servicing Fee 0.00 0.00 0.00 0.00 0.25
Other Operating Expenses *** 0.30 0.39 0.39 0.30 0.30
Total Other Expenses 0.30 0.43 0.43 0.35 0.60
Total Fund Operating Expenses 1.05 1.22 1.22 1.10 1.35
</TABLE>
8
<PAGE>
The Hanover American Value Fund (Investor Shares)/
Vista American Value Fund (Shares)
<TABLE>
<CAPTION>
Vista Pro-Forma
Combined Expense Ratios**
Hanover Expense Ratios* (Unaudited)
---------------------------------- ------------------------
(1) (2) (3) (4) (5)
Current Maximum
Current Contractual Contractual Committed Contractual
------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Initial Sales Charge Imposed
on Purchases (as a percentage of
offering price) 0.00% 0.00% 0.00% 0.00% 0.00%
Maximum Contingent Deferred Sales
Charge (as a percentage of
redemption proceeds) 0.00 0.00 0.00 0.00 0.00
Annual Fund Operating Expenses
(as a percentage of daily net
assets)
Investment Advisory Fee 0.00 0.70 0.70 0.00 0.70
Distribution Plan fee, Rule 12b-1 0.00 0.00 0.10 0.00 0.25
Administration Fee 0.00 0.04 0.04 0.00 0.10
Other Expenses
Sub-Administration Fee 0.00 0.03 0.03 0.05 0.05
Shareholder Servicing Fee 0.25 0.30 0.30 0.12 0.25
Other Operating Expenses *** 0.98++ 1.01++ 1.01++ 1.15 1.15
Total Other Expenses 1.23 1.34 1.34 1.32 1.45
Total Fund Operating Expenses 1.23 2.08 2.18 1.32 2.50
</TABLE>
- -----------------
* The Current expense ratios presented in Column 1 above give effect to
certain voluntary fee waivers and/or expense reimbursements by certain
service providers to the respective Hanover Portfolios during the periods
presented. Absent such voluntary waivers and reimbursements the expense
ratios would be the Current Contractual expense ratios presented in
Column 2 above. Had Hanover's distributor incurred and sought reimbursement
for distribution expenses at the maximum level permitted under Hanover's
plan of distribution applicable to its Investor Shares, as more fully
described below, the expense ratios would be the Maximum Contractual expense
ratios presented in Column 3 above.
** The Committed expense ratios presented in Column 4 above reflect the
agreement by Chase voluntarily to waive fees payable to it and/or reimburse
expenses for a period of at least one year following the consummation of the
Reorganization to the extent necessary to prevent the annualized "Total Fund
Operating Expenses" for Shares of each Vista Portfolio for such period from
exceeding the amount indicated in Column 4 above. Absent such agreement,
the pro-forma "Total Fund Operating Expenses" would be the Contractual
expense ratios presented in Column 5 above. In addition, Chase has agreed to
waive fees payable to it and/or reimburse expenses for a two year period
following the consummation of the Reorganization to the extent necessary to
prevent the annualized "Total Fund Operating Expenses" for Institutional
Shares of the Vista Small Cap Equity Fund and for shares of the Vista
American Value Fund from exceeding 1.22% and 2.18%, respectively, of
average net assets during such period.
*** "Other Operating Expenses" include custody fees, transfer agency fees,
registration fees, legal fees, audit fees, directors' fees, insurance fees,
and other miscellaneous expenses. A shareholder may incur a $10.00 charge
for certain Vista Portfolio wire redemptions.
+ The Class A Shares of the Vista Short Term Bond Fund will be subject to a
sales charge at the time of purchase of up to 1.50% of the offering price,
and the Class A Shares of the Vista Small Cap Equity Fund are subject to a
sales charge at the time of purchase of up to 4.75% of the offering price;
however, there will be no such front-end sales charges assessed in
connection with the Reorganization, and shareholders of The Hanover Short
Term U.S. Government Fund and The Hanover Small Capitalization Growth Fund
that receive Class A Shares of the Vista Short Term Bond Fund and the Vista
Small Cap Equity Fund, respectively, in connection with the Reorganization
will not be assessed any front-end sales charges on subsequent purchases of
the Class A Shares of the respective Vista Portfolio for as long as they
remain shareholders in the respective Vista Portfolio.
++ The Hanover American Value Fund commenced operations on February 3, 1995;
the expense ratio presented is annualized.
Example: You would pay the following expenses on a $1,000 investment based
upon payment of operating expenses at the levels set forth in the tables
above, assuming (1) 5% annual return and (2) redemption at the end of each
time period.
9
<PAGE>
<TABLE>
<CAPTION>
Corresponding Vista
Portfolio Pro-Forma
Combined Expenses
Hanover Expenses (Unaudited)
---------------------------------- -------------------
(1) (2) (3) (4) (5)
Maximum
Current Contractual Contractual Committed Contractual
------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
The Hanover Short Term U.S.
Governnment Fund (Investor Shares)/
Vista Short Term Bond Fund
(Class A Shares)
1 Year 7 17 18 8 13
3 Years 23 51 54 24 40
5 Years 40 88 94 42 69
10 Years 88 192 203 93 151
The Hanover U.S. Governnment
Securities Fund (Investor Shares)/
Vista U.S. Government Securities
Fund (Institutional Shares)
1 Year 9 12 12 9 9
3 Years 27 37 39 27 29
5 Years 47 64 67 47 50
10 Years 105 142 150 105 112
The Hanover Blue Chip Growth Fund
(Investor Shares)/ Vista Large Cap
Equity Fund (Institutional Shares)
1 Year 10 15 16 6 10
3 Years 32 46 49 19 32
5 Years 56 79 84 33 55
10 Years 123 172 183 75 122
The Hanover Small Capitalization
Growth Fund (Investor Shares)/
Vista Small Cap Equity Fund
(Class A Shares)
1 Year 13 16 17 15 15
3 Years 41 51 54 47 47
5 Years 72 88 93 82 82
10 Years 158 191 202 179 179
The Hanover Small Capitalization
Growth Fund (CBC Benefit Shares)/
Vista Small Cap Equity Fund
(Institutional Shares)
1 Year 11 13 13 11 14
3 Years 34 39 39 35 43
5 Years 58 67 67 61 75
10 Years 129 148 148 134 162
The Hanover American Value Fund
(Investor Shares)/
Vista American Value Fund
1 Year 13 21 22 13 25
3 Years 39 66 69 42 78
5 Years 68 113 118 72 133
10 Years 150 243 253 159 284
</TABLE>
10
<PAGE>
The "Example" set forth above should not be considered a representation of
future expenses or annual return; actual expenses and annual return may be
greater or less than those shown.
A long-term shareholder in shares of a mutual fund with 12b-1 fees, such as
the Investor Shares of each Hanover Portfolio, the Class A Shares of the Vista
Short Term Bond Fund and the Vista Small Cap Equity Fund, and the Shares of the
Vista America Value Fund, may pay more than the economic equivalent of
the maximum front-end sales charge permitted by the rules of the National
Association of Securities Dealers, Inc.
The table which follows summarizes certain of the expense information
presented in the preceding tables. As indicated above, after giving effect to
the commitment by Chase to maintain the expense ratios of the Vista Portfolios
for a period of at least one year following the consummation of the
Reorganization, the Committed expense ratio for Shares of each Vista Portfolio
for such one year period is lower than the Maximum Contractual expense ratio
for the corresponding Hanover Portfolio shares for the respective periods
presented.
<TABLE>
<CAPTION>
Corresponding Vista
Portfolios
Pro-Forma Combined
Expense Ratios**
Hanover Expense Ratios* (Unaudited)
(1) (2) (3) (4) (5)
Current Maximum
Hanover Portfolios Current Contractual Contractual Committed Contractual
- ------------------------------------ ------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
The Hanover Short Term
U.S. Government Fund
Investor Shares+ 0.71% 1.61% 1.71% 0.75% 1.25%
The Hanover U.S. Government
Securities Fund
Investor Shares++ 0.85 1.16 1.26 0.85 0.90
The Hanover Blue Chip
Growth Fund
Investor Shares++ 1.00 1.43 1.53 0.60 1.00
The Hanover Small Capitalization
Growth Fund
Investor Shares+ 1.30 1.60 1.70 1.50 1.50
CBC Benefit Shares++ 1.05 1.22 1.22 1.10 1.35
The Hanover American Value Fund+++
Investor Shares 1.23 2.08 2.18 1.32 2.50
</TABLE>
* The Current expense ratios presented in Column 1 above give effect to
certain voluntary fee waivers and expense reimbursements by certain
service providers to the respective Hanover Portfolios during the periods
presented. Absent such voluntary waivers and reimbursements, the expense
ratios would be the Current Contractual expense ratios presented in Column
2 above. Had Hanover's distributor incurred and sought reimbursement for
distribution expenses at the maximum level permitted under Hanover's plan
of distribution applicable to its Investor Shares, as more fully described
below, the expense ratios would be the Maximum Contractual expense ratios
presented in Column 3 above.
** The Committed expense ratios presented in Column 4 above reflect the
agreement by Chase voluntarily to waive fees payable to it and/or
reimburse expenses for a period of at least one year following the
consummation of the Reorganization to the extent necessary to prevent the
annualized expense ratio for Shares of each Vista Portfolio for such
period from exceeding the amount indicated in Column 4. Absent such
agreement, the pro-forma expense ratios would be the Contractual expense
ratios presented in Column 5 above. In addition, Chase has agreed to waive
fees payable to it and/or reimburse expenses for a two year period
following the consummation of the Reorganization to the extent necessary to
prevent the annualized expense ratios for Institutional Shares of the
Vista Small Cap Equity Fund and for shares of the Vista American Value
Fund from exceeding 1.22% and 2.18%, respectively, of average net assets
during such period.
+ Ratios for the corresponding Vista Portfolio are for its Class A Shares.
++ Ratios for the corresponding Vista Portfolio are for its Institutional
Shares.
+++ The Hanover American Value Fund commenced operations on February 3, 1995;
the expense ratios presented are annualized.
11
<PAGE>
There can be no assurance that the foregoing pro-forma expense ratios
would have been the actual expense ratios for the Shares of the corresponding
Vista Portfolios had the Reorganization been consummated when assumed above,
or that the foregoing pro-forma Contractual expense ratios reflect the actual
expense ratios, absent waivers and reimbursements, that would be incurred by
the Shares of the corresponding Vista Portfolios indicated above if the
Reorganization is consummated.
The fee payable for investment advisory services by the Hanover Portfolios
is a monthly fee at the following annual rate of average daily net assets:
The Hanover Short Term U.S. Government Fund--.35%; The Hanover U.S.
Government Securities Fund--.50%; The Hanover Blue Chip Growth Fund--.70%;
The Hanover Small Capitalization Growth Fund--.75%; and The Hanover American
Value Fund--.70%. The fee which will be payable by each Vista Portfolio for
investment advisory services upon consummation of the Reorganization will be
a monthly fee at the following annual rate of average daily net assets: Vista
Short Term Bond Fund--.25%; Vista U.S. Government Securities Fund--.30%;
Vista Large Cap Equity Fund--.40%; Vista Small Cap Equity Fund-- .65% and
Vista American Value Fund--.70%.
Hanover has adopted a plan of distribution pursuant to Rule 12b-1 under the
1940 Act for the Investor Shares of the Hanover Portfolios which provides that
each Hanover Portfolio may pay to the distributor of Hanover's shares an annual
distribution fee of up to .10% of average net assets attributable to Investor
Shares as reimbursement for distribution expenses incurred. To date, the
distributor of Hanover's shares has not collected distribution fees under the
plan. The Institutional Shares of the Vista U.S. Government Securities Fund, the
Vista Large Cap Equity Fund, and the Vista Small Cap Equity Fund, following the
consummation of the Reorganization, will not be subject to a Rule 12b-1 plan or
any related distribution fees. Pursuant to Rule 12b-1 plans adopted by Vista,
the Shares of the Vista American Value Fund and the Class A Shares of the Vista
Short Term Bond Fund and the Vista Small Cap Equity Fund, following the
consummation of the Reorganization, will each be subject to an annual
distribution fee of up to .25% of average net assets as compensation for
distribution expenses incurred without regard to expenses actually incurred. The
shares of the Hanover Portfolios are currently subject to an annual shareholder
servicing fee payable monthly at an annual rate of up to .30% of average net
assets, while the Shares of the Vista Portfolios, other than the Class A Shares
of the Vista Small Cap Equity Fund, after the consummation of the
Reorganization, will be subject to an annual shareholder servicing fee of up to
.25% of average net assets. The Class A Shares of the Vista Small Cap Equity
Fund do not bear any shareholder servicing fees.
The aggregate fees payable by Hanover for administration and fund accounting
services are a monthly fee at an annual rate of .09% of the first $500 million
of average daily net assets of the Hanover Portfolios, 0.08% of the next $500
million of such assets, and 0.07% of such assets in excess of $1 billion, plus
$30,000 per year for each Hanover Portfolio. In contrast, the aggregate fees
that will be payable by Vista for administration and fund accounting services
upon consummation of the Reorganization will be a monthly fee at an annual rate
of .15% of average daily net assets of the Vista Portfolios, plus $45,000 per
year for each Vista Portfolio and a quotation fee of 50 (cents) per quote per
day. Hanover and Vista each pay fees for transfer agency services on a per
account basis, which may vary depending on the type of account involved. The
fees payable by Hanover for custody services are a monthly fee at an annual rate
of .020% of the first $250 million of the aggregate average daily net assets of
the Hanover Portfolios, .015% of the next $250 million of such assets and .005%
of such assets in excess of $500 million, plus a fee of $25.00 for each
transaction involving a security which is not book-entry, $15.00 for each
transaction involving a book-entry security, and $22.00 for each transaction
involving an option or futures contract. The fees that will be in effect for
each Vista Portfolio for custody services upon consummation of the
Reorganization are a monthly fee at an annual rate of .010% of the first $500
million of the aggregate average daily net assets, .0075% of the next $250
million of such assets and .005% of such assets in excess of $750 million, plus
a fee of $10.00 for each transaction involving a book-entry security, $20.00 for
each transaction involving a physical security and $10 for income collections.
In addition to the fees described above, each of the Hanover Portfolios
and Vista Portfolios bears certain additional fees and expenses relating to,
among other things, printing and audit, legal and other professional
services.
For more complete information regarding the historical and projected
expenses of the Vista Portfolios, see "Additional Information about Vista--A.
Expenses."
Distribution and Shareholder Servicing Arrangements. Hanover Funds
Distributor, Inc. acts as distributor for Hanover (the "Hanover Distributor")
and Vista Broker-Dealer Services, Inc. acts as distributor for Vista (the
12
<PAGE>
"Vista Distributor"). Hanover has adopted a plan (the "Hanover Distribution
Plan") pursuant to Rule 12b-1 under the 1940 Act for the Investor Shares of the
Hanover Portfolios. Under the Hanover Distribution Plan, each Hanover Portfolio
may, solely for the purpose of reimbursing the Hanover Distributor for
activities primarily intended to result in the sale of its Investor Shares,
spend up to .10% annually of its net assets attributable to Investor Shares in
accordance with the Hanover Distribution Plan. Activities for which the Hanover
Distributor may be reimbursed under the Hanover Distribution Plan include (but
are not limited to) the development and implementation of direct mail promotions
and advertising for the Hanover Portfolios and the preparation, printing and
distribution of prospectuses for Investor Shares of the Hanover Portfolios to
recipients other than existing shareholders.
Vista has also adopted plans of distribution (each, a "Vista Distribution
Plan") under Rule 12b-1 under the 1940 Act with respect to certain classes of
the Vista Portfolios. Under the Vista Distribution Plans, following the
consummation of the Reorganization, the Vista Short Term Bond Fund, the Vista
Small Cap Equity Fund and the Vista American Value Fund will each be
authorized to spend up to .25% annually of their respective average net
assets attributable to the Class A Shares thereof (or, in the case of the
Vista American Value Fund, up to .25% of the average net assets thereof) as
compensation to the Vista Distributor for distribution services provided by
it. A substantial portion of the distribution fees payable to the Vista
Distributor under the Vista Distribution Plans is paid by Vista Distributor
to non-affiliated broker-dealers for distribution services that they provide.
The fees payable to Vista Distributor under the Vista Distribution Plans will
be payable without regard to actual expenses incurred. As noted above,
following the consummation of the Reorganization, the Institutional Shares of
the Vista U.S. Government Securities Fund, the Vista Large Cap Equity Fund
and the Vista Small Cap Equity Fund will not be subject to a Rule 12b-1
distribution plan and will therefore bear no distribution fees.
Hanover and Vista are each authorized to enter into Shareholder Servicing
Agreements with financial institutions and selected dealers ("Shareholder
Servicing Agents") which provide certain shareholder administrative support
services. Chemical and certain of its affiliates, among others, currently act
as Shareholder Servicing Agents for the Hanover Portfolios. Each Hanover
Shareholder Servicing Agent is entitled to receive a fee at an annual rate of
up to .30% of the average daily net asset value of shares in each Hanover
Portfolio for which it acts as Shareholder Servicing Agent. Chase and certain
of its affiliates, among others, currently act as Shareholder Servicing Agents
for Vista. The fees payable by the Shares of the Vista Portfolios, other than
the Class A Shares of the Vista Small Cap Equity Fund, for shareholder
servicing following the Reorganization will be paid at an annual rate of up to
.25% of average net assets. The Class A Shares of the Vista Small Cap Equity
are not subject to any shareholder servicing fees.
Purchase and Redemption. All purchase orders for shares of Hanover
Portfolios must be placed through a Hanover Shareholder Servicing Agent or
the Hanover Distributor in accordance with procedures established by such
Hanover Shareholder Servicing Agents or the Hanover Distributor in connection
with requirements of the accounts of customers. Investor Shares and CBC
Benefit Shares of the Hanover Portfolios are not subject to any front-end or
contingent deferred sales charges.
All purchase orders for Shares of Vista Portfolios must be placed through a
Vista Shareholder Servicing Agent, brokers or certain financial institutions
which have entered into Selected Dealer Agreements with the Vista Distributor
("Selected Dealers"), or the Vista Distributor in accordance with procedures
established by such Vista Shareholder Servicing Agents, Selected Dealers or the
Vista Distributor in connection with requirements of the accounts of customers.
The Institutional Shares of the Vista Portfolios and the Shares of the Vista
American Value Fund will not be subject to any front-end or contingent deferred
sales charges. The Class A Shares of the Vista Short Term Bond Fund will be
subject to a sales charge at the time of purchase of up to 1.50% of the offering
price, which will be reduced for purchases in an amount greater than $100,000.
The Class A Shares of the Vista Small Cap Equity Fund are subject to a sales
charge at the time of purchase of up to 4.75% of the offering price, which is
also reduced for purchases in excess of $100,000. The sales charge applicable to
purchases of Class A Shares of the Vista Short Term Bond Fund and the Vista
Small Cap Equity Fund may also be waived or reduced in certain other instances.
There will be no such front-end sales charges assessed in connection with the
Reorganization. In addition, shareholders of The Hanover Short Term U.S.
Government Fund and The Hanover Small Capitalization Growth Fund that receive
Class A Shares of the Vista Short Term Bond Fund and the Vista Small Cap Equity
Fund,
13
<PAGE>
respectively, in connection with the Reorganization, will not be assessed any
front-end sales charges on subsequent purchases of the Class A Shares of the
respective Vista Portfolio for as long as they remain shareholders in the
respective Vista Portfolio.
The Hanover Portfolios do not have a minimum purchase amount. The minimum
initial purchase for Institutional Shares of the Vista Portfolios is $1,000,000,
and shareholders must maintain a minimum balance in Institutional Shares of the
Vista Portfolios of $1,000,000 at all times. The minimum initial purchase for
individuals for Class A Shares of the Vista Short Term Bond Fund and the Vista
Small Cap Equity Fund and for Shares of the Vista American Value Fund is $2,500.
These minimums will be waived for Hanover Portfolio shareholders that receive
Vista Portfolio shares in connection with the Reorganization. Each Hanover and
Vista Shareholder Servicing Agent may establish its own terms, conditions and
charges with respect to the services provided by it.
Hanover shares may be redeemed in accordance with instructions and
limitations established by a Shareholder Servicing Agent or through the
Hanover Distributor. Vista Portfolio shares may be redeemed either through a
Shareholder Servicing Agent or through the Vista Distributor. Redemption
orders for each Hanover Portfolio and the Shares of each Vista Portfolio are
effected at the net asset value per share next determined after the order is
received by the Hanover Distributor or Vista's transfer agent, as the case
may be. Each Hanover Portfolio and Vista Portfolio may suspend the right of
redemption or postpone the date of payment for shares for more than seven
days during any period when (i) trading on the New York Stock Exchange is
restricted; (ii) the Exchange is closed for other than customary weekend and
holiday closings; or (iii) an emergency exists as determined by the
Commission.
Dividends and Distributions. The Hanover Short Term U.S. Government Fund
and The Hanover U.S. Government Securities Fund declare dividends from
available net investment income daily and pay them monthly. The Hanover Blue
Chip Growth Fund, The Hanover Small Capitalization Growth Fund and The
Hanover American Value Fund pay dividends available from net investment
income annually. After the consummation of the Reorganization, the Vista
Short Term Bond Fund and the Vista U.S. Government will declare dividends
available from net investment income daily and pay them monthly, the Vista
Large Cap Equity Fund will pay dividends available from net investment income
quarterly, and the Vista Small Cap Equity Fund and the Vista American Value
Fund will pay dividends available from net investment income annually. Each
Hanover Portfolio and each Vista Portfolio distributes all of its net capital
gains, if any, at least annually.
Risk Factors. Because of the similarities of investment objectives and
policies of the Hanover Portfolios and the corresponding Vista Portfolios, the
risks associated with an investment in a Hanover Portfolio are generally the
same as those associated with an investment in the corresponding Vista
Portfolio, with the exception of investments in The Hanover Short Term U.S.
Government Fund and the Vista Short Term Bond Fund, as described below. These
investment risks, in general, are those typically associated with investing in
a managed portfolio of the specific types of instruments that each Hanover
Portfolio and each corresponding Vista Portfolio invests in. The risks of
investment in The Hanover U.S. Government Securities Fund and the Vista U.S.
Government Securities Fund relate primarily to exposure to interest rate risk
and risks associated with investment in certain instruments such as
mortgage-related securities. The risks of investment in The Hanover Blue Chip
Growth Fund and the Vista Large Cap Equity Fund relate primarily to
fluctuations in stock prices. The risks of investment in The Hanover Small
Capitalization Growth Fund and the Vista Small Cap Equity Fund relate to the
foregoing risk, as well as to the risks associated with investments in the
securities of smaller, less seasoned companies, which generally exhibit
greater volatility and are otherwise subject to greater risks than the
securities of larger, more established companies. The risks of investment in
The Hanover American Value Fund and the Vista American Value Fund relate to
fluctuations in stock prices and, since these portfolios may invest in
companies without regard to market capitalization, the foregoing risks of
investing in smaller, less seasoned companies. All of the foregoing portfolios
may invest to varying degrees in the securities of foreign issuers and certain
of the portfolios may invest in derivatives, which entail certain additional
risks.
Both The Hanover Short Term U.S. Government Fund and the Vista Short Term
Bond Fund invest primarily in obligations with short maturities and are
therefore subject to certain associated interest rate risks. However, as
discussed under "Comparison of Investment Objectives and Policies," The
Hanover Short Term U.S. Government Fund invests primarily in securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, and
repurchase agreements with respect thereto, while the Vista Short Term Bond
Fund invests primarily
14
<PAGE>
in investment grade fixed income securities of all types, issued by a broad
range of issuers. The Vista Short Term Bond Fund is subject to the additional
risks associated with investment grade issuers other than the U.S. Government.
In addition, the Vista Short Term Bond Fund, unlike The Hanover Short Term U.S.
Government Fund, has the ability to invest in the securities of foreign issuers,
which entail certain risks.
The Vista Small Cap Equity Fund is a non-diversified portfolio, unlike The
Hanover Small Capitalization Growth Fund, and therefore also bears the risks
related to its non-diversified status.
Further information relating to the risks associated with an investment in
these portfolios is set forth below under "Comparison of Investment
Objectives and Policies."
REASONS FOR THE REORGANIZATION
The Reorganization has been proposed by the Vista Board and the Hanover
Board as a result of the consequences of the merger (such merger being
referred to herein as the "Parent Merger"), announced in August 1995, of The
Chase Manhattan Corporation ("CMC") with and into Chemical Banking
Corporation ("CBC"). Pursuant to the merger agreement entered into between
CMC and CBC on August 27, 1995, the effectiveness of the Parent Merger is
subject to certain conditions, including the receipt of certain regulatory
approvals and the approval of the shareholders of CMC and CBC. Following the
Parent Merger, Chase, the principal operating subsidiary of CMC and the
investment adviser to each of the Vista Portfolios, will be merged (such
merger being referred to herein as the "Bank Merger") with and into Chemical,
a principal operating subsidiary of CBC, with the surviving entity being
renamed The Chase Manhattan Bank. CMC and CBC anticipate that the Parent
Merger will occur on or about March 31, 1996 and that the Bank Merger will
occur during July 1996. On December 11, 1995, the respective shareholders of
CMC and CBC voted to approve the Parent Merger.
In determining whether to recommend approval of the Reorganization to
shareholders of Hanover, the Hanover Board (including the independent Directors,
with the advice and assistance of independent legal counsel) made an inquiry
into a number of matters and considered the following factors, among others: (1)
the advantages to each Hanover Portfolio and corresponding Vista Portfolio as
well as to CBC and its affiliates following the Parent Merger of eliminating the
unnecessary competition and duplication of effort inherent in marketing funds
having similar investment objectives; (2) the compatibility of the investment
objectives, policies, restrictions and portfolios, as well as service features
available to shareholders of each Hanover Portfolio and each corresponding Vista
Portfolio; (3) the capabilities and resources of Chase (including Chemical as
its successor in the Bank Merger), its affiliates and other Vista service
providers in the areas of investment management, administration, fund
accounting, transfer agency, custody, marketing and shareholder servicing; (4)
expense ratios and available information regarding the fees and expenses of each
Hanover Portfolio, each corresponding Vista Portfolio and the relevant share
class thereof (historical and pro forma) as well as similar funds; (5) the
historical performance of the Vista Portfolios and the Hanover Portfolios; (6)
portfolio transaction policies of the Hanover Portfolios and the Vista
Portfolios; (7) the terms and conditions of the Reorganization and whether the
Reorganization would result in dilution of shareholder interests; (8) costs
incurred by each Hanover Portfolio and each corresponding Vista Portfolio as a
result of the Reorganization; (9) tax consequences of the Reorganization; (10)
possible alternatives to the Reorganization; and (11) the commitment of CBC and
its affiliates following the Parent Merger to maintain and enhance its position
in the mutual fund business and the prospects that the combination of the
respective portfolios will ensure the continued strength of the mutual fund
efforts of CBC and its affiliates for the benefit of shareholders of the Vista
Portfolios, including former shareholders of the Hanover Portfolios.
In reaching the decision to recommend that the shareholders of each
Hanover Portfolio vote to approve the Reorganization, the Hanover Board
concluded that the participation of each Hanover Portfolio in the
Reorganization is in the best interests of its respective shareholders and
would not result in the dilution of such shareholders' interests. Their
conclusion was based on a number of factors, including the following:
1. The Reorganization would permit the shareholders of The Hanover
Short Term U.S. Government Fund, The Hanover Blue Chip Growth Fund and The
Hanover Small Capitalization Growth Fund to pursue their investment goals
in respectively larger funds. Such larger funds should enhance the ability
of portfolio managers to effect their portfolio transactions on more
favorable terms and give portfolio managers greater investment flexibility
and the ability to select a larger number of portfolio securities, with
the attendant benefits
15
<PAGE>
of increased diversification. In addition, the shareholders of The Hanover
Short Term U.S. Government Fund will have the opportunity, through the
Reorganization, to become part of a portfolio that allows the portfolio
manager to select from a broader range of securities in order to pursue the
portfolio's objective of high current income consistent with the
preservation of capital. Because the Vista U.S. Government Securities Fund
and Vista American Value Fund have been newly organized to acquire the
assets of The Hanover U.S. Government Securities Fund and Hanover American
Value Fund, respectively, and will not commence operations until the
consummation of the Reorganization, the Vista U.S. Government Securities
Fund and the Vista American Value Fund, immediately following the
Reorganization, will not be larger than The Hanover U.S. Government
Securities Fund and The Hanover American Value Fund, respectively, but
should nonetheless benefit from being part of a larger, combined fund group.
2. Under the Reorganization, current shareholders of each of the
Hanover Portfolios would receive the investment advisory services of Chase
(including Chemical as its successor in the Bank Merger) and day-to-day
management by CAM (in the case of all Hanover Portfolios other than the
Hanover American Value Fund) or VDH (in the case of the Hanover American
Value Fund). Chase, including its predecessor organizations, has over 100
years of money management experience. Chase currently manages 30 mutual
fund portfolios, which invest in a broad array of assets and include money
market, debt and equity, and domestic as well as international,
portfolios. Also included among Chase's accounts are commingled trust
funds and a broad spectrum of individual trust and investment management
portfolios with varying investment objectives. CAM is registered with the
Commission as an investment adviser and was formed for the purpose of
providing discretionary investment advisory services to institutional
clients and to consolidate Chase's investment management function, and the
same individuals who serve as portfolio managers for CAM also serve as
portfolio managers for Chase. Current shareholders of The Hanover American
Value Fund would continue, under the Reorganization, to receive the
day-to-day investment management services of VDH. VDH was organized in
1969 and is a general partnership which is equally owned by individuals
who serve VDH in key professional capacities and CBC Holdings
(California), a wholly-owned subsidiary of CBC. VDH provides a wide range
of asset management services to individuals, corporations, private and
charitable trusts, endowments, foundations and retirement funds.
3. Through the Reorganization, shareholders of the Hanover Portfolios
would become shareholders in a larger combined fund family consisting of a
wide range of stock, bond and money market funds, including both domestic
and international portfolios.
4. It is expected that the Reorganization will lead to a more focused
marketing and distribution effort with respect to the Vista Portfolios,
thereby reducing potential investor confusion and promoting asset growth
in such portfolios.
INFORMATION ABOUT THE REORGANIZATION
Agreement and Plan of Reorganization and Liquidation. The following summary of
the Agreement is qualified in its entirety by reference to the form of the
Agreement attached to this Prospectus/Proxy Statement as Exhibit A. The
Agreement, to which Vista and Hanover are parties, provides that the Vista Short
Term Bond Fund will acquire all of the assets and liabilities of The Hanover
Short Term U.S. Government Fund in exchange for Class A Shares of the Vista
Short Term Bond Fund, the Vista U.S. Government Securities Fund will acquire all
of the assets and liabilities of The Hanover U.S. Government Securities Fund in
exchange for Institutional Shares of the Vista U.S. Government Securities Fund,
the Vista Large Cap Equity Fund will acquire all of the assets and liabilities
of The Hanover Blue Chip Growth Fund in exchange for Institutional Shares of the
Vista Large Cap Equity Fund, the Vista Small Cap Equity Fund will acquire all of
the assets and liabilities of The Hanover Small Capitalization Growth Fund in
exchange for Class A Shares and Institutional Shares of the Vista Small Cap
Equity Fund, and the Vista American Value Fund will acquire all of the assets
and liabilities of The Hanover American Value Fund in exchange for shares of the
Vista American Value Fund. Subject to the satisfaction of the conditions
described below, such acquisitions shall take place on May 6, 1996 or such
other date as may be agreed upon by the parties (the "Closing Date"). The net
asset value per Share for each Vista Portfolio will be determined by dividing
each portfolio's net assets attributable to such class of its shares by the
total number of its outstanding shares of such class.
16
<PAGE>
Vista Portfolio securities will be valued in accordance with the valuation
practices of the Vista Portfolios, which are described below under
"Additional Information About Vista--F. Other Information Concerning Shares
of Vista."
As promptly as practicable after the Closing Date, each Hanover Portfolio
will liquidate and distribute pro rata to its shareholders of record as of 4:00
p.m. (New York time) on the Closing Date the shares of the corresponding Vista
Portfolio received by that Hanover Portfolio in the Reorganization as follows:
holders of Investor Shares of The Hanover Short Term U.S. Government Fund will
receive Class A Shares of the Vista Shares of the Vista Short Term Bond Fund,
holders of Investor Shares of The Hanover U.S. Government Securities Fund will
receive Institutional Shares of the Vista U.S. Government Securities Fund,
holders of Investor Shares of The Hanover Blue Chip Growth Fund will receive
Institutional Shares of the Vista Large Cap Equity Fund, holders of Investor
Shares of The Hanover Small Capitalization Growth Fund will receive Class A
Shares of the Vista Small Cap Equity Fund, holders of CBC Benefit Shares of The
Hanover Small Capitalization Growth Fund will receive Institutional Shares of
the Vista Small Cap Equity Fund, and holders of Investor Shares of The Hanover
American Value Fund will receive shares of the Vista American Value Fund. Such
liquidation and distribution will be accomplished by the establishment of
accounts on the share records of the Vista Portfolios in the names of the
shareholders of the corresponding Hanover Portfolio, each account representing
the respective pro rata number of shares of such Vista Portfolio due the
shareholder. After such distribution and the winding up of its affairs, the
Hanover Portfolios will be terminated and Hanover will be dissolved and will be
deregistered as an investment company under the 1940 Act.
The Vista Board and the Hanover Board have each determined, with respect
to their respective portfolios that are parties to the Reorganization, that
the interests of existing shareholders of such portfolios will not be diluted
as a result of the transactions contemplated by the Reorganization and that
participation in the Reorganization is in the best interests of each such
portfolio's shareholders.
Certain of the existing investment limitations of the Hanover Portfolios
that require shareholder approval for amendment prohibit the Hanover
Portfolios from purchasing common stock or investing more than a stated
percentage of its assets in an issuer's securities. By approving the
Agreement, the shareholders of the Hanover Portfolios will be deemed to have
agreed to waive temporarily these limitations insofar as they might be deemed
to apply to the Reorganization.
The consummation of the Reorganization is subject to the conditions set
forth in the Agreement, including that the Parent Merger be consummated and
that the majority of the shareholders of each Hanover Portfolio approve the
Reorganization. The Agreement may be terminated and the Reorganization
abandoned at any time prior to the Closing Date, before or after approval by
the shareholders of the Hanover Portfolios, by either Hanover or Vista if (i)
any condition or covenant set forth in the Agreement has not been fulfilled
or waived by the party entitled to its benefits, (ii) there has been a
material breach by the other party or (iii) the Vista Board or the Hanover
Board, as the case may be, determines that proceeding with the Reorganization
is not in the best interests of that party's shareholders. The Agreement
provides that either party may waive compliance with any of the covenants or
conditions made therein for its benefit, except for certain conditions
regarding the receipt of regulatory approvals.
The expenses of the Reorganization, including the cost of a proxy
soliciting agent that has been retained (see "Voting Information"), will be
borne by CBC and/or CMC.
Approval of the Agreement will require the affirmative vote of the holders of
at least a majority of the outstanding shares of each portfolio of Hanover
(other than The Hanover Small Capitalization Growth Fund) entitled to vote on
the matter and, in the case of The Hanover Small Capitalization Growth Fund, the
affirmative vote of the holders of at least a majority of each of its
outstanding Investor Shares and CBC Benefit Shares entitled to vote on the
matter. If the Reorganization is not approved by the shareholders of each
Hanover Portfolio or is not consummated for any other reason, the Hanover Board
will consider other possible courses of action. Approval of the Agreement by the
shareholders of each Hanover Portfolio will also constitute approval of
Hanover's dissolution and deregistration under the 1940 Act following
consummation of the Reorganization. See "Voting Information" below.
THE HANOVER BOARD HAS UNANIMOUSLY RECOMMENDED
APPROVAL OF THE AGREEMENT.
Description of Shares of Vista. Shareholders of each Hanover Portfolio
will be issued Shares of the corresponding Vista Portfolio in accordance with
the procedures provided for in the Agreement as described above. Each
17
<PAGE>
such share will be fully paid and non-assessable when issued with no personal
liability attaching to the ownership thereof and transferable without
restrictions and will have no preemptive or conversion rights.
Federal Income Tax Consequences. As a condition to the consummation of the
Reorganization, Hanover and Vista will each receive an opinion from Simpson
Thacher & Bartlett to the effect that, on the basis of existing provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), current
administrative rules and court decisions, for federal income tax purposes: (1)
the Reorganization will constitute a reorganization within the meaning of
Section 368(a)(1) of the Code with respect to each Hanover Portfolio and its
corresponding Vista Portfolio; (2) no gain or loss will be recognized by any of
the Hanover Portfolios or the corresponding Vista Portfolios upon the transfer
of all of the assets and labilities, if any, of each Hanover Portfolio to its
corresponding Vista Portfolio solely in exchange for corresponding Vista
Portfolio shares or upon the distribution of the shares of the corresponding
Vista Portfolios to the shareholders of the Hanover Portfolios solely in
exchange for all of their shares of the Hanover Portfolios; (3) no gain or loss
will be recognized by shareholders of any of the Hanover Portfolios upon the
exchange of such Hanover Portfolio's shares solely for shares of its
corresponding Vista Portfolio; (4) the holding period and tax basis of the
corresponding Vista Portfolio shares received by each shareholder of each
Hanover Portfolio pursuant to the Reorganization will be the same as the holding
period (provided the shares of the Hanover Portfolios were held as a capital
asset on the date of the Reorganization) and tax basis of the shares of the
Hanover Portfolio held by the shareholder immediately prior to the
Reorganization; and (5) the holding period and tax basis of the assets of each
of the Hanover Portfolios acquired by its corresponding Vista Portfolio will be
the same as the holding period and tax basis of those assets to each of the
Hanover Portfolios immediately prior to the Reorganization. The payment by CBC
and/or CMC of certain expenses of Hanover and Vista which are directly related
to the Reorganization will not affect such opinion. However, no opinion will be
given as to any other federal income tax consequences of the payment of such
expenses.
Capitalization. The following tables show the capitalization of each
Hanover Portfolio and the corresponding Vista Portfolio as of November 30,
1995, and on a pro forma combined basis as of that date for the
Reorganization giving effect to the proposed acquisition of assets at net
asset value.
<TABLE>
<CAPTION>
Vista Short Term The Hanover Short Pro Forma
Bond Fund Term Government Fund Combined
---------------- -------------------- ----------------
<S> <C> <C> <C>
Net Assets
Class A Shares (1) $ 0 $9,738,073 $ 9,738,073
Institutional Shares $36,898,821 $ 0 $36,898,821
Net Asset Value per Share
Class A Shares -- $ 9.82 $ 10.10
Institutional Shares $ 10.10 -- $ 10.10
Shares Outstanding
Class A Shares (1) 0 991,301 964,166
Institutional Shares 3,653,349 -- 3,653,349
</TABLE>
<TABLE>
<CAPTION>
Vista U.S. The Hanover U.S.
Government Government Pro Forma
Securities Fund (2) Securities Fund Combined
------------------- ---------------- -----------
<S> <C> <C> <C>
Net Assets
Class A Shares $0 -- $ 0
Institutional Shares (1) $0 $84,796,897 $84,796,897
Net Asset Value per Share
Class A Shares -- -- --
Institutional Shares (1) -- $ 10.18 $ 10.18
Shares Outstanding
Class A Shares 0 -- 0
Institutional Shares (1) 0 8,333,486 8,333,486
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Vista Large Cap The Hanover Blue Pro Forma
Equity Fund Chip Fund Combined
-------------------- -------------------- ----------------
<S> <C> <C> <C>
Net Assets
Class A Shares $ 0 -- $ 0
Class B Shares $ 0 -- $ 0
Institutional Shares (1) $ 56,354,677 $ 60,399,951 $116,754,628
Net Asset Value per Share
Class A Shares -- -- --
Class B Shares -- -- --
Institutional Shares (1) $ 12.81 $ 13.00 $ 12.81
Shares Outstanding
Class A Shares 0 -- 0
Class B Shares 0 -- 0
Institutional Shares (1) 4,399,272 4,645,789 9,114,335
</TABLE>
<TABLE>
<CAPTION>
The Hanover Small
Vista Small Cap Capitalization Pro Forma
Equity Fund Growth Fund Combined
-------------------- -------------------- ----------------
<S> <C> <C> <C>
Net Assets
Class A Shares (1) $49,508,702 $ 10,536,728 $60,045,430
Class B Shares $24,631,588 -- $24,631,588
Institutional Shares (1) 0 $ 28,333,964 $28,333,964
Net Asset Value per Share
Class A Shares (1) $ 15.07 $ 11.15 $ 15.07
Class B Shares $ 15.82 -- $ 15.82
Institutional Shares (1) -- $ 11.20 $ 15.07
Shares Outstanding
Class A Shares 3,285,249 944,998 3,984,435
Class B Shares 1,556,990 -- 1,556,990
Institutional Shares 0 2,529,829 1,880,157
</TABLE>
<TABLE>
<CAPTION>
Vista American Value Hanover American Pro Forma
Fund (3) Value Fund Combined
-------------------- -------------------- ----------------
<S> <C> <C> <C>
Net Assets $ 0 $8,398,590 $ 8,398,590
Net Asset Value per Share -- $ 12.11 $ 12.11
Shares Outstanding 0 693,525 693,525
</TABLE>
(1) Information presented for the corresponding Hanover Portfolio is for the
class or classes of shares that will receive the class of shares of the
corresponding Vista Portfolio indicated pursuant to the Reorganization.
(2) The Vista U.S. Government Securities Fund has been newly organized to
acquire the assets of The Hanover U.S. Government Securities Fund; no
shares are outstanding at November 30, 1995.
(3) The Vista American Value Fund has been newly organized to acquire the
assets of The Hanover American Value Fund; no shares are outstanding at
November 30, 1995.
VOTING INFORMATION
Proxies from the shareholders of each Hanover Portfolio are being
solicited by the Hanover Board for the Special Meeting of Shareholders to be
held on March 15, 1996 at the offices of The Chase Manhattan Bank, N.A., 101
Park Avenue, 17th Floor, New York, New York 10178, at 2:00 P.M. or at such
later time as necessary by adjournment. A proxy may be revoked at any time
before the meeting by oral or written notice to Hanover. Unless revoked, all
valid proxies will be voted in accordance with the specification thereon, or
in the absence of specification, for approval of the Agreement. Approval of
the Agreement will require the affirmative vote of the holders of at least a
majority of the outstanding shares of each portfolio of Hanover (other than
The Hanover Small Capitalization Growth Fund) entitled to vote thereon and,
in the case of The Hanover Small Capitalization Growth Fund, the affirmative
vote of the holders of at least a majority of each of its outstanding
Investor Shares and CBC Benefit Shares
19
<PAGE>
entitled to vote thereon. Approval of the Agreement by the shareholders of
each Hanover Portfolio will also constitute approval of Hanover's dissolution
and deregistration under the 1940 Act following consummation of the
Reorganization.
Proxies are to be solicited by mail. Additional solicitations may be made
by telephone, telegram or personal contact by officers, employees or agents of
CBC and its affiliates. Each Hanover Portfolio has retained Chemical Mellon
Shareholder Services, LLC, 85 Challenger Road, Overpeck Center, Ridgefield
Park, New Jersey, 07660 to assist in the solicitation of proxies in connection
with the Reorganization. The cost of solicitation, is estimated to be $5,000
and will be paid by CBC and/or CMC.
Under the Agreement, shareholders of each Hanover Portfolio will receive
shares of a particular class of the corresponding Vista Portfolio, as
described above, with an aggregate net asset value equal to the value of the
shareholder's investment in each Hanover Portfolio at the effective time of
the transaction. This method of valuation is also consistent with
interpretations of Rule 22c-1 under the 1940 Act by the Commission's Division
of Investment Management. Any shareholder of a Hanover Portfolio may redeem
his or her shares at the then current net asset value prior to the Closing
Date.
Shareholders of the Hanover Portfolios of record at the close of business
on January 22, 1996 will be entitled to vote at the Special Meeting or any
adjournment of the meeting. The holders of a majority of the shares
outstanding of each such Hanover Portfolio at the close of business on that
date present in person or represented by proxy will constitute a quorum for
the meeting; however, as noted above, the affirmative vote of at least a
majority of the shares outstanding of each Hanover Portfolio (including, in
the case of The Hanover Small Capitalization Growth Fund, a majority of each
of the Investor Shares and CBC Benefit Shares outstanding) at the close of
business on that date is required to approve the Reorganization. Shareholders
are entitled to one vote for each share held and fractional votes the
fractional shares held. As of January 22, 1996, as shown on the books of
Hanover, there were issued and outstanding 1,026,973 shares of The Hanover
Short Term U.S. Government Fund, 8,034,944 shares of The Hanover U.S.
Government Securities Fund, 4,517,928 shares of The Hanover Blue Chip Growth
Fund, 4,436,351 shares of The Hanover Small Capitalization Growth Fund
(consisting of Investor Shares and CBC Benefit Shares), and 746,390 shares of
The Hanover American Value Fund. The votes of the shareholders of the
corresponding Vista Portfolios are not being solicited to approve the
Reorganization, since their approval or consent is not required with respect
to the Reorganization. Their votes are being solicited, however, in connection
with the approval of certain of the Related Changes.
The Agreement was approved for Hanover by unanimous vote of the Hanover
Board, including all of the Directors then serving who were not interested
persons of Hanover or Vista (other than in their capacity as Trustees or
Directors of Vista or Hanover, as the case may be).
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Vista Portfolio and the corresponding
Hanover Portfolio are substantially similar except as described below. In
seeking to achieve its investment objective, each Vista Portfolio is guided
by investment policies and restrictions that are substantially similar,
except as otherwise noted below, as those of the corresponding Hanover
Portfolio.
The investment objective and policies of each of the Vista Portfolios,
after giving effect to the Related Changes except where otherwise indicated,
are set forth below, together with a discussion of the primary differences,
if any, from those of the respective corresponding Hanover Portfolios.
Because the value of securities and the income derived therefrom may
fluctuate according to the earnings of the issuers and changes in economic
and market conditions, there can be no assurance that the investment
objective of any of the Vista Portfolios will be achieved.
A. VISTA SHORT TERM BOND FUND
The investment objective of the Vista Short Term Bond Fund is to provide a
high level of current income, consistent with preservation of capital. The
investment objective of the Vista Short Term Bond Fund may not be changed
unless approved by the holders of a majority of the Vista Short Term Bond
Fund's outstanding shares.
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The Vista Short Term Bond Fund seeks to provide a high level of current
income, consistent with preservation of capital, by investing primarily in a
broad range of short-term, investment-grade bonds and other fixed-income
securities. The Vista Short Term Bond Fund will invest at least 65% of its
net assets in bonds which have a maturity of less than three years. In
addition, all of the Vista Short Term Bond Fund's assets will have dollar
weighted average maturities which do not exceed three years. Securities with
put features will measure their maturity based on the next put date, which
must fall within the three year limit.
The Vista Short Term Bond Fund normally will invest substantially all of
its assets in investment-grade, fixed-income securities of all types.
Investment-grade, fixed-income securities are considered to be securities
rated in the category Baa or higher by Moody's Investors Service, Inc.
("Moody's"), BBB or higher by Standard & Poor's Corporation ("S&P") or the
equivalent by another nationally recognized statistical rating organization
("NRSRO"), and unrated securities that are of equivalent quality in the
Adviser's opinion. Securities rated in the category Baa by Moody's or BBB by
S&P lack certain investment characteristics and may be deemed to be
"speculative" in nature. Fixed-income securities in the Vista Short Term Bond
Fund's portfolio may include, in any proportion, bonds, notes,
mortgage-backed securities, asset-backed securities, government and
government agency obligations, zero coupon securities and convertible
securities, and short-term obligations such as bankers' acceptances,
certificates of deposit, repurchase agreements and commercial paper. For a
description of these types of securities, see "F. Additional Information on
Investment Policies and Techniques" below and "Investment Objectives,
Policies and Restrictions" in the statement of additional information
relating to the Vista Short Term Bond Fund (as well as the Vista Large Cap
Equity Fund) dated March 1, 1995 (the "Vista Equity/Bond SAI"), which is
incorporated into the Statement of Additional Information by reference.
Fixed-income securities (except for securities with floating or variable
interest rates) are generally considered to be interest rate sensitive, which
means that their value (and the Vista Short Term Bond Fund's share prices)
will tend to decrease when interest rates rise and increase when interest
rates fall. Securities with shorter maturities generally provide greater
price stability than longer-term securities and are less affected by changes
in interest rates.
Mortgage-backed securities issued or guaranteed by certain agencies of the
U.S. Government such as the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA") or the Federal
Home Loan Mortgage Association ("FHLMC") typically may be prepaid by the
issuer without penalty; thus, when prevailing interest rates decline, the
value of these securities is not likely to rise on a comparable basis with
other debt securities that are not so prepayable. The proceeds of prepayments
and scheduled payments of principal of these securities will be reinvested by
the Vista Short Term Bond Fund at then prevailing interest rates, which may
be lower than the rate of interest on the securities on which these payments
are received. See "F. Additional Information on Investment Policies and
Techniques--Mortgage-Related Securities" below.
In making investment decisions for the Vista Short Term Bond Fund, the
Adviser will consider many factors in addition to current yield, including
the preservation of capital, maturity and yield to maturity. The Adviser will
adjust the Vista Short Term Bond Fund's investments in particular securities
or in types of debt securities in response to its appraisal of changing
economic conditions and trends. The Adviser may sell securities in
anticipation of a market decline or purchase securities in anticipation of a
market rise. In addition, the Adviser may sell one security and purchase
another security of comparable quality and maturity to take advantage of what
the Adviser believes to be short-term differentials in market values or yield
disparities. See "F. Additional Information on Investment Policies and
Techniques--Portfolio Management and Turnover." The Vista Short Term Bond
Fund's investments, other than those backed by the U.S. Government, are
subject to the ability of the issuer to make payment at maturity.
The Vista Short Term Bond Fund may invest without limitation in high
quality, short-term money market instruments, as described below under "F.
Additional Information on Investment Policies and Techniques."
The Vista Short Term Bond Fund may enter into transactions in derivatives
and related instruments. The information presented below under "F. Additional
Information on Investment Policies and Techniques" contains a more complete
description of these instruments, as well as further information concerning
the investment policies and techniques of the Vista Short Term Bond Fund. In
addition, the Vista Equity/Debt SAI includes a further discussion of these
instruments which may be entered into by the Vista Short Term Bond Fund. The
use of such instruments involves transaction costs and certain risks, which
are discussed in the Vista Equity/Bond SAI.
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Although the Vista Short Term Bond Fund's investment objective may not be
changed without shareholder approval, such approval is not required to change
any of the other investment policies described above, or any of the
investment policies described below in "F. Additional Information on
Investment Policies and Techniques" other than policies identified as
fundamental.
Differences with The Hanover Short Term U.S. Government Fund.
The Vista Short Term Bond Fund is permitted to invest without limitation
in investment-grade, fixed-income securities of all types. In contrast, The
Hanover Short Term U.S. Government Fund is required under normal
circumstances to invest at least 65% of its assets in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, and
repurchase agreements with respect to such securities and expects that
substantially all of its assets will be so invested. Accordingly, the Vista
Short Term Bond Fund is permitted to invest in a broader range of securities
which, while of investment-grade quality, may be of lesser credit quality
than the securities in which The Hanover Short Term U.S. Government Fund is
permitted to invest.
Although the Vista Short Term Bond Fund invests at least 65% of its assets
in bonds which have a maturity of less than three years, The Hanover Short
Term U.S. Government Fund has no restriction on the maturity of any
individual asset it acquires. However, both the Vista Short Term Bond Fund
and The Hanover Short Term U.S. Government Fund maintain dollar-weighted
average portfolio maturities of three years or less.
For a discussion of certain additional differences between the Vista Short
Term Bond Fund and The Hanover Short Term U.S. Government Fund, see "F.
Additional Information on Investment Policies and Techniques" and "G.
Investment Limitations."
B. VISTA U.S. GOVERNMENT SECURITIES FUND
The investment objective of the Vista U.S. Government Securities Fund is
to provide investors with as high a level of total return, consisting of
income and capital appreciation, as is consistent with the preservation of
capital. The investment objective of the Vista Short Term Bond Fund may not
be changed unless approved by the holders of a majority of the Vista U.S.
Government Securities Fund's outstanding shares.
Under normal circumstances, at least 65% of the value of the Vista U.S.
Government Securities Fund's total assets will be invested in securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, as described below ("U.S. Government Securities"), and
repurchase agreements with respect thereto. Guarantees of principal and
interest on obligations that may be purchased by the Vista U.S. Government
Securities Fund are not guarantees of the market value of such obligations,
nor do they extend to the value of shares of the Vista U.S. Government
Securities Fund. There is no restriction on the maturity of the Vista U.S.
Government Securities Fund's portfolio or any individual portfolio security.
The Adviser will be free to take advantage of the entire range of maturities
of securities eligible for inclusion in the Vista U.S. Government Securities
Fund's portfolio and may adjust the average maturity of the Vista U.S.
Government Securities Fund's portfolio from time to time, depending on its
assessment of the relative yields available on securities of different
maturities and its expectations of future changes in interest rates. Since
the Vista U.S. Government Securities Fund invests extensively in U.S.
Government Securities, certain of which have less credit risk than that
associated with other securities, the level of income achieved by the Vista
U.S. Government Securities Fund may not be as high as that of other funds
which invest in lower quality securities.
The Vista U.S. Government Securities Fund may invest in U.S. Treasury
obligations, which are backed by the full faith and credit of the U.S.
Government as to payment of principal and interest. U.S. Treasury obligations
consist of bills, notes and bonds, which generally differ in their interest
rates and maturities.
The Vista U.S. Government Securities Fund may invest in securities issued
or guaranteed by U.S. Government agencies and instrumentalities, including
obligations that are supported by: (i) the full faith and credit of the U.S.
Treasury (e.g., direct pass-through certificates of GNMA); (ii) the limited
authority of the issuer or guarantor to borrow from the U.S. Treasury (e.g.,
obligations of Federal Home Loan Banks); or (iii) only the credit of the
issuer or guarantor (e.g., obligations of FHLMC). In the case of obligations
not backed by the full faith and credit of the U.S. Treasury, the agency
issuing or guaranteeing the obligation is principally responsible for
ultimate repayment. Other agencies and instrumentalities that issue or
guarantee debt securities and that have been established or spon-
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sored 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 Vista U.S. Government Securities Fund may invest extensively in
mortgage-backed securities issued or guaranteed by certain agencies of the
U.S. Government such as GNMA, FNMA or FHLMC. Mortgage-backed securities
typically may be prepaid by the issuer without penalty; thus, when prevailing
interest rates decline, the value of these securities is not likely to rise
on a comparable basis with other debt securities that are not so prepayable.
The proceeds of prepayments and scheduled payments of principal of these
securities will be reinvested by the Vista U.S. Government Securities Fund at
then prevailing interest rates, which may be lower than the rate of interest
on the securities on which these payments are received. The Vista U.S.
Government Securities Fund will not invest in principal-only or interest-only
stripped mortgage-backed securities. See "F. Additional Information on
Investment Policies and Techniques--Mortgage-Related Securities" below.
The Vista U.S. Government Securities Fund may invest the portion of its
assets not invested in U.S. Government Securities and repurchase agreements
with respect thereto in non-convertible corporate debt securities of domestic
and foreign issuers, such as bonds and debentures. Such securities must be
rated, at the time of investment, at least in the category A or the
equivalent by Moody's, S&P, Fitch, Duff & Phelps ("D&P") or another NRSRO, or
if unrated, such securities must be of comparable quality as determined by
the Adviser.
Fixed-income securities (except for securities with floating or variable
interest rates) are generally considered to be interest rate sensitive, which
means that their value (and the Vista U.S. Government Securities Fund's share
prices) will tend to decrease when interest rates rise and increase when
interest rates fall. Securities with shorter maturities generally provide
greater price stability than longer-term securities and are less affected by
changes in interest rates. There is no restriction on the maturity of the
Vista U.S. Government Securities Fund's portfolio or any individual portfolio
security, and to the extent the Vista U.S. Government Securities Fund invests
in securities with longer maturities, the volatility of the Vista U.S.
Government Securities Fund in response to changes in interest rates can be
expected to be greater than if the Vista U.S. Government Securities Fund had
invested in comparable securities with shorter maturities.
The Vista U.S. Government Securities Fund may, at any time, hold up to 35%
of the value of its total assets in high quality, short-term money market
instruments, as described below under "F. Additional Information on
Investment Policies and Techniques." When a temporary defensive posture in
the market is appropriate in the Adviser's opinion, the Vista U.S. Government
Securities Fund may invest without limitation in these instruments.
The Vista U.S. Government Securities Fund may enter into transactions in
derivatives and related instruments. The information presented below under
"F. Additional Information on Investment Policies and Techniques" contains a
more complete description of these instruments, as well as further
information concerning the investment policies and techniques of the Vista
U.S. Government Securities Fund. In addition, the statement of additional
information relating to the Vista U.S. Government Securities Fund dated the
date hereof (the "Vista U.S. Government SAI"), which is incorporated into the
Statement of Additional Information by reference, includes a further
discussion of these instruments which may be entered into by the Vista U.S.
Government Securities Fund. The use of such instruments involves transaction
costs and certain risks, which are discussed in the New Vista SAI.
Although the Vista U.S. Government Securities Fund's investment objective
may not be changed without shareholder approval, such approval is not
required to change any of the other investment policies described above, or
any of the investment policies described below in "F. Additional Information
on Investment Policies and Techniques" other than policies identified as
fundamental.
Differences with The Hanover U.S. Government Securities Fund
The investment objective of the Vista U.S. Government Securities Fund is
oriented towards total return, consisting of income and capital appreciation,
while the investment objective of The Hanover U.S. Government Securities Fund
is oriented towards current income. This difference reflects a desire to
manage the new portfolio with a view towards capital appreciation
opportunities in addition to current income.
In contrast to the Vista U.S. Government Securities Fund, The Hanover U.S.
Government Securities Fund has a stated current intention not to engage in
certain derivatives transactions, although it is authorized to engage in a
broad range of such transactions.
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Because the Vista U.S. Government Securities Fund has been created for the
purpose of operating as a successor to The Hanover U.S. Government Securities
Fund in connection with the Reorganization, the investment policies and
restrictions of the Vista U.S. Government Securities Fund and The Hanover
U.S. Government Securities Fund are otherwise substantially identical, except
for certain differences discussed below under "F. Additional Information on
Investment Policies and Techniques" and "G. Investment Limitations."
C. VISTA LARGE CAP EQUITY FUND
The investment objective of the Vista Large Cap Equity Fund is to provide
its shareholders with long-term growth of capital. The Vista Large Cap Equity
Fund seeks to provide long-term growth of capital by investing primarily in a
diversified portfolio of equity securities of established companies with
substantial market capitalizations. Under normal market conditions, the Vista
Large Cap Equity Fund will invest at least 80% of its total assets in equity
securities and at least 65% of its total assets in equity securities of
established companies with substantial market capitalizations. Such companies
typically have a large number of publicly held shares and high trading
volume, resulting in a high degree of liquidity.
The Adviser seeks to purchase the equity securities of companies that are
expected to demonstrate greater long-term earnings growth than either their
industry competitors or the average company included in the S&P 500 Composite
Stock Index. These companies generally tend to have strong management
organizations. The Adviser will evaluate such well-known and established
companies by assessing the strongest sectors of the market over the economic
cycle, identifying those companies with favorable earnings prospects, and
then selecting the most attractive values. The Adviser will consider industry
diversification as an important factor and will try to maintain
representation in a variety of market sectors, although sector emphasis will
shift as a result of changes in the outlook for earnings among market
sectors.
The Vista Large Cap Equity Fund may invest up to 20% of its net assets in
convertible securities. In addition, the Vista Large Cap Equity Fund may
invest up to 20% of its total assets in the equity securities of foreign
issuers, including Depositary Receipts. Investment in foreign securities and
Depositary Receipts involves certain risks. See "F. Additional Information on
Investment Policies and Techniques--Foreign Securities" below.
The Vista Large Cap Equity Fund may invest the portion of its assets not
invested in equity securities in high quality, short-term money market
instruments and repurchase agreements, as described below under "F.
Additional Information on Investment Policies and Techniques." When a
temporary defensive posture in the market is appropriate in the Adviser's
opinion, the Vista Large Cap Equity Fund may invest without limitation in
these instruments. To the extent that the Vista Large Cap Equity Fund
deviates from its investment policies during temporary defensive periods, its
investment objective may not be achieved.
The Vista Large Cap Equity Fund may enter into transactions in derivatives
and related instruments. The information presented below under "F. Additional
Information on Investment Policies and Techniques" contains a more complete
description of these instruments, as well as further information concerning
the investment policies and techniques of the Vista Large Cap Equity Fund. In
addition, the Vista Equity/Debt SAI includes a further discussion of these
instruments which may be entered into by the Vista Large Cap Equity Fund. The
use of such instruments involves transaction costs and certain risks, which
are discussed in the Vista Equity/Bond SAI.
Shareholder approval is not required to change the investment objective or
any of the investment policies described above, or any of the investment
policies described below in "F. Additional Information on Investment
Policies and Techniques" other than policies identified as fundamental.
The Vista Large Cap Equity Fund, which invests primarily in equity
securities, is designed for investors who are able to accept fluctuations in
equity values and the resulting fluctuation in the Vista Large Cap Equity
Fund's net asset value.
Differences with The Hanover Blue Chip Growth Fund
The stated investment objective of the Vista Large Cap Equity Fund refers
to long-term growth of capital, while the stated investment objective of The
Hanover Blue Chip Growth Fund refers simply to capital appreciation. The
differences in language, however, do not reflect an actual difference in the
objectives for which the respective funds
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are managed. The Vista Large Cap Equity Fund's investment objective is a
non-fundamental policy, and therefore may be changed without shareholder
approval, while The Hanover Blue Chip Growth Fund's investment objective is a
fundamental policy, and therefore may not be changed without shareholder
approval.
Although the Vista Large Cap Equity Fund has a stated policy to invest at
least 80% of its total assets in equity securities under normal market
conditions, The Hanover Blue Chip Growth Fund has no similar stated policy.
However, like the Vista Large Cap Equity Fund, under normal circumstances The
Hanover Blue Chip Growth Fund invests at least 65% of its total assets in
equity securities of established companies with substantial market
capitalizations.
The Hanover Blue Chip Growth Fund has a stated policy of investing
primarily in companies with at least a five-year operating history, while the
Vista Large Cap Equity Fund has no comparable stated policy. However, both
the Hanover Blue Chip Growth Fund and the Vista Large Cap Equity Fund limit
their investments in equity securities of companies with less than a
three-year operating history to no more than 10% of their respective total
assets.
In contrast to the Vista Large Cap Equity Fund's 20% limitation on
investment in convertible securities, The Hanover Blue Chip Growth Fund may
invest without limitation in convertible securities.
The Vista Large Cap Equity Fund's investments in securities of foreign
issuers are limited to 20% of its total assets, while The Hanover Blue Chip
Growth Fund's investments in equity securities of foreign issuers are limited
to 35% of its total assets.
In contrast to the Vista Large Cap Equity Fund, The Hanover Blue Chip
Growth Fund has a stated current intention not to engage in certain
derivatives transactions, although it is authorized to engage in a broad
range of such transactions.
For a discussion of certain additional differences between the Vista Large
Cap Equity Fund and The Hanover Blue Chip Growth Fund, see "F. Additional
Information on Investment Policies and Techniques" and "G. Investment
Limitations."
D. VISTA SMALL CAP EQUITY FUND
The investment objective of the Vista Small Cap Equity Fund is to provide
its shareholders with long-term capital growth. Current income, if any, is a
consideration incidental to the Vista Small Cap Equity Fund's objective of
growth of capital. The investment objective of the Vista Small Cap Equity
Fund may not be changed unless approved by the holders of a majority of the
Vista Small Cap Equity Fund's outstanding shares.
Under normal market conditions, the Vista Small Cap Equity Fund will
invest at least 80% of its total assets in equity securities and at least 65%
of its total assets in equity securities of smaller companies (i.e., those
with market capitalizations of $750 million or less at the time of purchase).
The Adviser intends to utilize both quantitative and fundamental research to
identify undervalued equity securities with a catalyst for positive change.
Dividend income, if any, is a consideration incidental to the Vista Small Cap
Equity Fund's objective of growth of capital. There can be no assurance that the
methodology employed will satisfy the Vista Small Cap Equity Fund's objective of
long term capital growth. An investor should be aware that investment in small
capitalization issuers may be more volatile than investments in issuers with
larger market capitalizations due to the lack of diversification in the business
activities, limited product lines, markets or financial resources, and
corresponding greater susceptibility to changes in the business cycle of small
capitalization issuers. The equity securities of small capitalization companies
as a group may not respond to general market rallies or downturns as much as
other types of equity securities. This investment policy involves the risks that
the changes or trends identified by the Adviser will not occur or will not be as
significant as projected and that, even if the changes or trends develop, the
particular issues held by the Vista Small Cap Equity Fund will not benefit as
anticipated from such changes or trends.
The Vista Small Cap Equity Fund may invest up to 20% of its total assets
in the equity securities of foreign issuers, including Depositary Receipts.
Investment in foreign securities and Depositary Receipts involves certain
risks. See "F. Additional Information on Investment Policies and
Techniques--Foreign Securities" below.
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The Vista Small Cap Equity Fund may invest the portion of its assets not
invested in equity securities in high quality, short-term money market
instruments and repurchase agreements, as described below under "F.
Additional Information on Investment Policies and Techniques." When a
temporary defensive posture in the market is appropriate in the Adviser's
opinion, the Vista Small Cap Equity Fund may invest without limitation in
these instruments. To the extent that the Vista Small Cap Equity Fund
deviates from its investment policies during temporary defensive periods, its
investment objective may not be achieved.
The Vista Small Cap Equity Fund may enter into transactions in derivatives
and related instruments. The information presented below under "F. Additional
Information on Investment Policies and Techniques" contains a more complete
description of these instruments, as well as further information concerning
the investment policies and techniques of the Vista Small Cap Equity Fund. In
addition, the statement of additional information relating to Class A Shares
of the Vista Small Cap Equity Fund, dated June 19, 1995, and the statement of
additional information relating to Institutional Shares of the Vista Small
Cap Equity Fund, dated Janaury 8, 1996 (collectively, the "Vista Small Cap
SAI"), which are each incorporated into the Statement of Additional
Information by reference, include a further discussion of these instruments
which may be entered into by the Vista Small Cap Equity Fund. The use of such
instruments involves transaction costs and certain risks, which are discussed
in the Vista Small Cap SAI.
Although the Vista Small Cap Equity Fund's investment objective may not be
changed without shareholder approval, such approval is not required to change
any of the other investment policies described above, or any of the
investment policies described below in "F. Additional Information on
Investment Policies and Techniques" other than policies identified as
fundamental.
The Vista Small Cap Equity Fund is aggressively managed and, therefore,
the value of its shares is subject to greater fluctuation and an investment
in its shares involves the assumption of a higher degree of risk than would
be the case with an investment in a conservative equity fund or a growth fund
investing entirely in proven growth equities. Given the above-average
investment risk inherent in the Vista Small Cap Equity Fund, investment in
shares of the Vista Small Cap Equity Fund should not be considered a complete
investment program and may not be appropriate for all investors.
Differences with The Hanover Small Capitalization Growth Fund
The stated investment objective of the Vista Small Cap Equity Fund is
long-term capital appreciation, while the stated investment objective of The
Hanover Small Capitalization Growth Fund refers simply to capital
appreciation. The differences in language, however, do not reflect an actual
difference in the objectives for which the respective funds are managed.
The Vista Small Cap Equity Fund is non-diversified and, as such, is not
subject to the diversification requirements set forth in the 1940 Act, and
may have a larger position in a single issuer than would be the case if the
Vista Small Cap Equity Fund were diversified. In contrast, The Hanover Small
Capitalization Growth Fund is diversified, and is subject to a fundamental
investment limitation that, with respect to 75% of its total assets, no more
than 5% may be invested in the securities of any one issuer, subject to
certain exceptions. The investment return on a non-diversified portfolio
typically is dependent upon the performance of a smaller number of securities
relative to the number of securities held in a diversified portfolio. The
Vista Small Cap Equity Fund's ability to assume large positions in the
obligations of a small number of issuers may affect the value of the Vista
Small Cap Equity Fund's portfolio to a greater extent than that of a
diversified portfolio like The Hanover Small Capitalization Growth
Fund in the event of changes in the financial condition or in the market's
assessment of the issuers, and the Vista Small Cap Equity Fund's shares may
be more susceptible to any single economic, political or regulatory
occurrence than the shares of The Hanover Small Capitalization Growth Fund.
In contrast to the Vista Small Cap Equity Fund, which has a stated policy
to invest at least 80% of its total assets in equity securities and at least
65% of its total assets in equity securities of companies with market
capitalizations of $750 million or less under normal market conditions, The
Hanover Small Capitalization Growth Fund has a stated policy to invest at
least 65% of its total assets in common stocks of companies with market
capitalizations of less than $800 million and a majority of its total assets
in common stocks of companies with market capitalizations of $500 million or
less under normal market conditions.
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In contrast to the Vista Small Cap Equity Fund's policy which allows it to
invest up to 20% of its total assets in equity securities of foreign issuers,
including Depositary Receipts, The Hanover Small Capitalization Growth Fund's
comparable policy provides only that it may invest up to 20% of its total
assets in certain types of Depositary Receipts.
In contrast to the Vista Small Cap Equity Fund, The Hanover Small
Capitalization Growth Fund is not authorized to engage in any derivatives
transactions.
For a discussion of certain additional differences between the Vista Small
Cap Equity Fund and The Hanover Small Capitalization Growth Fund, see "F.
Additional Information on Investment Policies and Techniques" and "G.
Investment Limitations."
E. VISTA AMERICAN VALUE FUND
The investment objective of the Vista American Value Fund is to maximize
total return, consisting of capital appreciation (both realized and
unrealized) and income, by investing primarily in the equity securities of
well established U.S. companies (i.e., companies with at least a five-year
operating history) which, in the opinion of VDH, are undervalued by the
market. The investment objective of the Vista American Value Fund may not be
changed unless approved by the holders of the Vista American Value Fund's
outstanding shares.
The equity securities in which the Vista American Value Fund invests
generally consist of common stock, preferred stock and securities convertible
into or exchangeable for common or preferred stock. Under normal market
conditions, at least 65% of the value of the Vista American Value Fund's
total assets will be invested in the equity securities of U.S. companies. The
Vista American Value Fund may invest in companies without regard to market
capitalization, although it generally does not expect to invest in companies
with market capitalizations of less than $200 million. The securities in
which the Vista American Value Fund invests are expected to be either listed
on an exchange or traded in an over-the-counter market. The Vista American
Value Fund may invest up to 20% of the value of its total assets in the
equity securities of foreign issuers, including American Depositary Receipts
("ADRs"), which are described under "F. Additional Information on Investment
Policies and Techniques--Foreign Securities." The Vista American Value Fund
expects that investments in foreign issuers, if any, will generally be in
companies which generate substantial revenues from U.S. operations and which
are listed on U.S. securities exchanges. Investment in foreign securities and
ADRs involves certain risks, as described under "F. Additional Information on
Investment Policies and Techniques--Foreign Securities" below.
In selecting investments for the Vista American Value Fund, VDH generally
seeks companies which it believes exhibit characteristics of financial
soundness and are undervalued by the market. In seeking to identify
financially sound companies, VDH looks for companies with strongly
capitalized balance sheets, an ability to generate substantial cash flow,
relatively low levels of leverage, an ability to meet debt service
requirements and a history of paying dividends. In seeking to identify
undervalued companies, VDH looks for companies with substantial tangible
assets such as land, timber, oil and other natural resources, or important
brand names, patents, franchises or other intangible assets which may have
greater value than what is reflected in the company's financial statements.
VDH will often select investments for the Vista American Value Fund which are
considered to be unattractive by other investors or are unpopular with the
financial press.
Although the Vista American Value Fund invests primarily in equity
securities, it may invest up to 25% of the value of its total assets in high
quality, short-term money market instruments, repurchase agreements and cash.
In addition, the Vista American Value Fund may make substantial temporary
investments in investment grade U.S. debt securities and invest without limit
in money market instruments when VDH believes a defensive posture is
warranted. See "F. Additional Information on Investment Policies and
Techniques--Money Market Instruments" below. To the extent that the Vista
American Value Fund deviates from its investment policies during temporary
defensive periods, its investment objective may not be achieved.
The Vista American Value Fund may invest up to 5% of the value of its
total assets (at the time of investment) in warrants or rights (other than
those acquired in units or attached to other securities) which entitle the
holder to buy equity securities at a specific price during or at the end of a
specific period of time. The Vista American Value Fund will not invest more
than 2% of the value of its total assets in warrants or rights which are not
listed on the New York or American Stock Exchanges.
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The Vista American Value Fund may also engage in certain other activities
and utilize certain other strategies, as described and subject to the
limitations and risks described under "F. Additional Information on
Investment Policies and Techniques." The Vista American Value Fund has no
current intention to engage in the various investment strategies described
under "F. Additional Information on Investment Policies and
Techniques--Derivatives and Related Instruments," but it is authorized to
engage in all of those strategies. A description of these investment
strategies and certain risks associated therewith is contained under the
caption "F. Additional Information on Investment Policies and Techniques" in
this prospectus and in the statement of additional information relating to
the Vista American Value Fund dated the date hereof (the "Vista American
Value SAI"), which is incorporated into the Statement of Additional
Information by reference.
Although the Vista American Value Fund's investment objective may not be
changed without shareholder approval, such approval is not required to change
any of the other investment policies described above, or any of the
investment policies described below in "F. Additional Information on
Investment Policies and Techniques" other than policies identified as
fundamental.
Differences with The Hanover American Value Fund
Because the Vista American Value Fund has been created for the purpose of
operating as a successor to The Hanover American Value Fund in connection
with the Reorganization, the investment objective, policies and restrictions
of the Vista American Value Fund and The Hanover American Value Fund are
substantially identical.
F. ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND TECHNIQUES
Money Market Instruments. Subject to the limitations set forth above, the
Vista Portfolios may invest in cash or high-quality, short-term money market
instruments. Such instruments may include U.S. Government Securities;
commercial paper of domestic and, except with respect to the Vista American
Value Fund, foreign issuers rated, at the time of purchase, at least in the
category P-1 by Moody's, A-1 by S&P, F-1 by Fitch or D-1 by D&P, rated
comparably by another NRSRO, or, if not rated, of comparable quality as
determined by their investment adviser; certificates of deposit, banker's
acceptances or time deposits and repurchase agreements. See "Investment
Objectives, Policies and Restrictions" in the Vista Equity/Bond SAI and the
Vista Small Cap SAI. The Vista Portfolios limit their investments in U.S.
bank obligations to obligations of U.S. banks that have more than $1 billion
in total assets at the time of investment and are subject to regulation by
the U.S. Government. The Vista Portfolios, other than the Vista American
Value Fund, limit their investments in foreign bank obligations to
obligations of foreign banks that at the time of investment have more than
$10 billion, or the equivalent in other currencies, in total assets, and have
branches or agencies in the United States. The Vista American Value Fund does
not invest in foreign bank obligations. Each Vista Portfolio may also invest
in obligations of foreign branches of U.S. banks, as well as obligations of
U.S. branches of foreign banks, if such Vista Portfolio is permitted to
invest directly in obligations of the U.S. bank or foreign bank,
respectively, in accordance with the foregoing limitations. Investments in
foreign securities involve certain risks which are described under "Foreign
Securities" below.
Repurchase Agreements. When appropriate, each Vista Portfolio may, like
the Hanover Portfolios, enter into repurchase agreements (a purchase of and
simultaneous commitment to resell a security at an agreed-upon price and date
which is usually not more than seven days from the date of purchase). The
Vista Portfolios will enter into repurchase agreements only with
counterparties which are member banks of the Federal Reserve System and secu-
rity dealers believed creditworthy and only if fully collateralized by U.S.
Government obligations or other securities in which the Vista Portfolio is
permitted to invest. In the event the seller fails to pay the agreed-to sum
on the agreed-upon delivery date, the underlying security could be sold by
the Vista Portfolio, but the Vista Portfolio might incur a loss in doing so,
and in certain cases may not be permitted to sell the security. As an
operating policy, each Vista Portfolio, through its custodian bank, takes
constructive possession of the collateral underlying repurchase agreements.
Additionally, procedures have been established for each Vista Portfolio to
monitor, on a daily basis, the market value of the collateral underlying all
repurchase agreements to ensure that the collateral is at least 102% of the
value of the repurchase agreements. Investments by a Vista Portfolio in
repurchase agreements maturing in more than seven days are subject to the
restrictions on investments in illiquid securities discussed below under
"Illiquid Securities."
Reverse Repurchase Agreements. The Vista U.S. Government Securities Fund
and the Vista American Value Fund, like each Hanover Portfolio, may enter
into reverse repurchase agreements to avoid selling securities during
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unfavorable market conditions to meet redemptions. Pursuant to a reverse
repurchase agreement, the Vista U.S. Government Securities Fund or the Vista
American Value Fund will sell portfolio securities and agree to repurchase
them from the buyer at a particular date and price. Whenever a Vista
Portfolio enters into a reverse repurchase agreement, it will establish a
segregated account in which it will maintain liquid assets in an amount at
least equal to the repurchase price marked to market daily (including accrued
interest), and will subsequently monitor the account to ensure that such
equivalent value is maintained. A Vista Portfolio pays interest on amounts
obtained pursuant to reverse repurchase agreements. Reverse repurchase
agreements are considered to be borrowings by a Vista Portfolio under the
1940 Act and are subject to the limitations with respect to entering reverse
repurchase agreements included in the investment limitations discussed under
"G. Investment Restrictions" below.
The Vista Short Term Bond Fund, Vista Large Cap Equity Fund and Vista
Small Cap Equity Fund currently are not permitted to enter into reverse
repurchase agreements. Upon consummation of the Reorganization, each of these
Vista Portfolios will have the ability to enter into reverse repurchase
agreements as described above if approval is obtained from the shareholders
of such Vista Portfolio.
Zero Coupon Securities. The Vista Short Term Bond Fund and Vista U.S.
Government Securities Fund, like the corresponding Hanover Portfolios, each
may invest without limitation in zero coupon securities, subject to their
respective investment objectives and policies. Zero coupon securities may be
issued by both governmental and private issuers. Zero coupon securities are
debt securities that do not pay regular interest payments. Instead, zero
coupon securities are sold at substantial discounts from their value at
maturity. When a zero coupon security is held to maturity, its entire return,
which consists of the amortization of discount, comes from the difference
between its purchase price and maturity value. Because interest on a zero
coupon security is not distributed on a current basis, it tends to be subject
to greater price fluctuations in response to changes in interest rates than
are ordinary interest-paying debt securities with similar maturities. The
risk is greater when the period to maturity is longer. The value of zero
coupon securities appreciates more during periods of declining interest rates
and depreciates more during periods of rising interest rates. Under the
stripped bond rules of the Code, investments by the Fund in zero coupon
securities will result in the accrual of interest income on such investments
in advance of the receipt of the cash corresponding to such income. Among the
zero coupon securities in which such Vista Portfolios may invest are STRIPS.
See "STRIPS" below.
Zero coupon securities may also be created when a dealer deposits a U.S.
Treasury security or a federal agency security with a custodian for and then
sells the coupon payments and principal payment that will be generated by
this security separately. Proprietary receipts, such as Certificates of
Accrual on Treasury Securities ("CATS"), Treasury Investment Growth Receipts
("TIGRs") and generic Treasury Receipts ("TRs") are stripped U.S. Treasury
securities separated into their component parts through custodial arrangement
established by their broker sponsors. Vista has been advised that the staff
of the Division of Investment Management of the Securities and Exchange
Commission does not consider privately stripped obligations to be U.S.
Government securities, as defined in the 1940 Act. Therefore the Vista U.S.
Government Securities Fund will not treat such obligations as U.S. Government
Securities.
STRIPS. Each Vista Portfolio other than the Vista American Value Fund may,
subject to its investment objective and policies, invest up to 20% of its
total assets in separately traded principal and interest components of secu-
rities backed by the full faith and credit of the United States Treasury. The
principal and interest components of United States Treasury bonds with
remaining maturities of longer than ten years are eligible to be traded
independently under the Separate Trading of Registered Interest and Principal
of Securities ("STRIPS") program. Under the STRIPS program, the principal and
interest components are separately issued by the United States Treasury at
the request of depository financial institutions, which then trade the
component parts separately. The interest component of STRIPS may be more
volatile than that of United States Treasury bills with comparable
maturities. Bonds issued by the Resolution Funding Corporation and other U.S.
Government agencies may also be stripped.
In contrast to the Vista Short Term Bond Fund and the Vista U.S.
Government Securities Fund, The Hanover Short Term U.S. Government Fund and
The Hanover U.S. Government Securities Fund each may invest without
limitation in STRIPS. The prospectuses for the other Hanover Portfolios do
not refer to an ability to invest in STRIPS.
When-Issued or Forward Delivery Purchases. Each of the Vista Portfolios,
like the Hanover Portfolios, may purchase new issues of securities in which
it is permitted to invest on a "when-issued" or, with respect to existing
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issues, on a "forward delivery" basis, which means that the securities will
be delivered at a future date beyond the customary settlement time. There is
no limit as to the amount of the commitments which may be made by a Vista
Portfolio to purchase securities on a "when-issued" or "forward delivery"
basis. A Vista Portfolio does not pay for such obligations or start earning
interest on them until the contractual settlement date. Although commitments
to purchase "when-issued" or "forward delivery" securities will only be made
with the intention of actually acquiring them, these securities may be sold
before the settlement date if deemed advisable by a Vista Portfolio's
investment adviser.
While it is not intended that such purchases would be made for speculative
purposes, purchases of securities on a "when-issued" or "forward delivery"
basis can involve more risk than other types of purchases. For example, when
the time comes to pay for a "when-issued" or "forward delivery" security, a
Vista Portfolio's portfolio securities may have to be sold in order to meet
payment obligations, and a sale of securities to meet such obligations
carries with it a greater potential for the realization of capital gain or
loss. Also, if it is necessary to sell the "when-issued" or "forward
delivery" security before delivery, a Vista Portfolio may incur a loss
because of market fluctuations since the time the commitment to purchase the
"when-issued" or "forward delivery" security was made. For additional
information concerning these risks and other risks associated with the
purchase of "when-issued" or "forward delivery" securities as well as other
aspects of the purchase of securities on a "when-issued" or "forward
delivery" basis, see "Investment Objective, Policies and
Restrictions--Investment Policies: When-Issued and Forward Delivery
Purchases" in the Vista Equity/Bond SAI, the Vista Small Cap SAI, the Vista
U.S. Government SAI and the Vista American Value SAI.
Stand-By Commitments. The Vista U.S. Government Securities Fund and the
Vista Small Cap Equity Fund each may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities held in their portfolios. In a put transaction, a Vista Portfolio
acquires the right to sell a security at an agreed upon price within a
specified period prior to its maturity date, and a stand-by commitment
entitles a Vista Portfolio to same-day settlement and to receive an exercise
price equal to the amortized cost of the underlying security plus accrued
interest, if any, at the time of exercise. In the event that the party
obligated to purchase the underlying security from a Vista Portfolio defaults
on its obligation to purchase the underlying security, then the Vista
Portfolio might be unable to recover all or a portion of any loss sustained
from having to sell the security elsewhere. Acquisition of puts will have the
effect of increasing the cost of the securities subject to the put and
thereby reducing the yields otherwise available from such securities. The
Vista Short Term Bond Fund and Vista Large Cap Equity Fund currently are not
permitted to enter into put transactions except with respect to U.S.
Government securities. Upon consummation of the Reorganization, each of these
Vista Portfolios will have the ability to enter into put transactions,
including stand-by commitments, with respect to any securities held in their
portfolios if approval is obtained from the shareholders of such Vista
Portfolio.
The Hanover Short Term U.S. Government Fund and The Hanover U.S.
Government Securities Fund each may enter into put transactions, including
stand-by commitments, with respect to securities held in their portfolios.
The Hanover Blue Chip Growth Fund, The Hanover Small Capitalization Growth
Fund and The Hanover American Value Fund do not enter into such transactions.
Variable Rate Securities and Participation Certificates. The variable rate
demand instruments that may be purchased by the Vista U.S. Government
Securities Fund and the Vista Short Term Bond Fund are obligations (including
bonds, notes, certificates of deposit and commercial paper) that provide for
a periodic adjustment in the interest rate paid on the instrument and/or
permit the holder to demand payment upon a specified number of days' notice
of the principal balance plus accrued interest either from the issuer or by
drawing on a bank letter of credit, a guarantee or insurance issued with
respect to such instrument. Such variable rate securities include
participation certificates issued by a bank, insurance company or other
financial institution, and in variable rate securities owned by such
institutions or affiliated organizations. Participation certificates are pro
rata interests in securities held by others; certificates of indebtedness or
safekeeping are documentary receipts for such original securities held in
custody by others. Participation certificates may be deemed illiquid
securities (see "Investment Objectives, Policies and Restrictions--Investment
Policies: Variable Rate Securities and Participation Certificates" in the
Vista Equity/Bond SAI and the Vista U.S. Government SAI).
The Adviser will monitor on an on-going basis the ability of the
underlying issuers to meet their demand obligations. Although variable rate
securities may be sold, it is intended that they be held until an interest
reset date,
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except under certain specified circumstances (see "Investment
Objectives, Policies and Restrictions--Investment Policies: Variable Rate
Securities and Participation Certificates" in the Vista Equity/Bond SAI and
the Vista U.S. Government SAI).
As a result of the variable rate nature of these investments, a Vista
Portfolio's yield will decline and its shareholders will forego the
opportunity for capital appreciation during periods when prevailing interest
rates have declined. Conversely, during periods where prevailing interest
rates have increased, the Vista Portfolio's yield will increase and its
shareholders will have reduced risk of capital depreciation.
In contrast, neither The Hanover Short Term U.S. Government Fund's
prospectus nor The Hanover U.S. Government Securities Fund's prospectus
refers to an ability to invest in variable rate securities or participation
certificates.
Illiquid Securities. Not more than 10% of the total assets of the Vista
Short Term Bond Fund or Vista Large Cap Equity Fund, and not more than 15% of
the total assets of the Vista Small Cap Equity Fund, may be invested in
securities which are subject to legal or contractual restrictions on resale,
including securities that are not readily marketable and repurchase
agreements maturing in more than seven days. Upon consummation of the
Reorganization, each of these Vista Portfolios instead will be prohibited
from investing 15% or more of its total assets in illiquid securities if
approval of such change is obtained from the shareholders of such Vista
Portfolio. In addition, the Vista U.S. Government Securities Fund and Vista
American Value Fund may not invest 15% or more of their respective total
assets in illiquid securities. Each Hanover Portfolio may not invest 15% or
more of its total assets in illiquid securities.
In addition, the Hanover Portfolios, as well as the Vista U.S. Government
Securities Fund and the Vista American Value Fund, may elect to treat as
liquid, in accordance with procedures established by the Hanover Board and
the Vista Board, respectively, certain investments in restricted securities
for which there may be a secondary market of qualified institutional buyers
as contemplated by Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act") and commercial obligations issued in reliance on the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act. Upon consummation of the Reorganization, the
Vista Short Term Bond Fund, Vista Small Cap Equity Fund and Vista Large Cap
Equity Fund each will be permitted to treat as liquid the foregoing
instruments in accordance with the procedures established by the Vista Board,
subject to shareholder approval of the changes with respect to each such
Vista Portfolio described in the preceding paragraph.
Mortgage-Related Securities. The Vista Short Term Bond Fund and the Vista U.S.
Government Securities Fund, like The Hanover Short Term U.S. Government Fund and
The Hanover U.S. Government Securities Fund, may invest without limitation in
mortgage-related securities. Mortgage pass-through securities are securities
representing interests in "pools" of mortgages in which payments of both
interest and principal on the securities are made monthly, in effect "passing
through" monthly payments made by the individual borrowers on the residential
mortgage loans which underlie the securities (net of fees paid to the issuer or
guarantor of the securities). Early repayment of principal on mortgage
pass-through securities (arising from prepayments of principal due to sale of
the underlying property, refinancing, or foreclosure, net of fees and costs
which may be incurred) may expose the Vista Short Term Bond Fund or Vista U.S.
Government Securities Fund to a lower rate of return upon reinvestment of
principal. Also, if a security subject to prepayment has been purchased at a
premium, in the event of prepayment the value of the premium would be lost. Like
other fixed-income securities, when interest rates rise, the value of a
mortgage-related security generally will decline; however, when interest rates
decline, the value of mortgage-related securities with prepayment features may
not increase as much as other fixed-income securities.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of the U.S. Government (in the case of securities
guaranteed by GNMA); or guaranteed by agencies or instrumentalities of the
U.S. Government (in the case of securities guaranteed by FNMA or FHLMC, which
are supported only by the discretionary authority of the U.S. Government to
purchase the agency's obligations). Mortgage-related securities issued by
FNMA include Guaranteed Mortgage Pass-Through Certificates, also known as
"Fannie Maes," which are guaranteed as to timely payment of principal and
interest by FNMA, and mortgage-related securities issued by the FHLMC include
Mortgage Par-
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ticipation Certificates, also known as "Freddie Macs," which are
guaranteed as to timely payment of interest and timely or ultimate payment of
principal on the underlying mortgage loans by FHLMC. Mortgage pass-through
securities created by non-governmental issuers (such as commercial banks,
savings and loan institutions, private mortgage insurance companies, mortgage
bankers and other secondary market issuers) may be supported by various forms
of insurance or guarantees, including individual loan, title, pool and hazard
insurance, and letters of credit, which may be issued by governmental
entities, private insurers or the mortgage poolers.
The Vista U.S. Government Securities Fund, like The Hanover U.S.
Government Securities Fund, and the Vista Short Term Bond Fund, unlike The
Hanover Short Term U.S. Government Fund, may also invest in investment grade
Collateralized Mortgage Obligations ("CMOs") which are hybrid instruments
with characteristics of both mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and prepaid principal on a CMO are
paid, in most cases, monthly. CMOs may be collateralized by whole mortgage
loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by GNMA, FHLMC or FNMA. CMOs may be issued
through real estate mortgage investment conduits or REMICs. CMOs are
structured into multiple classes, with each class bearing a different
expected average life or stated maturity. Monthly payments of principal,
including prepayments, are first returned to investors holding the shortest
maturity class; investors holding the longer maturity classes receive
principal only after the first class has been retired. To the extent a
particular CMO is issued by an investment company, the Vista U.S. Government
Securities Fund's ability to invest in such CMOs will be limited. See
"Limiting Investment Risks" in the Vista U.S. Government SAI.
The Vista Short Term Bond Fund and the Vista U.S. Government Securities
Fund expect that governmental, government-related or private entities may
create mortgage loan pools and other mortgage-related securities offering
mortgage pass-through and mortgage-collateralized investments in addition to
those described above. As new types of mortgage-related securities are
developed and offered to investors, the Vista Short Term Bond Fund's and the
Vista U.S. Government Securities Fund's investment adviser will, consistent
with their investment objectives, policies and quality standards, consider
making investments in such new types of mortgage-related securities.
Unlike the Vista Short Term Bond Fund, The Hanover Short Term U.S.
Government Fund's investments in mortgage-related securities are limited to
mortgage-related U.S. Government Securities.
Asset-Backed Securities. The Vista U.S. Government Securities Fund, like
The Hanover U.S. Government Securities Fund, and the Vista Short Term Bond
Fund, unlike The Hanover Short Term U.S. Government Fund, may purchase
asset-backed securities, subject to the Vista Short Term Bond Fund's and the
Vista U.S. Government Securities Fund's respective investment objectives and
policies. Asset-backed securities represent a participation in, or are
secured by and payable from, a stream of payments generated by particular
assets, most often a pool of assets similar to one another, such as motor
vehicle receivables and credit card receivables.
Corporate Reorganizations. The Vista American Value Fund, like The Hanover
American Value Fund, may invest without limitation in securities for which a
tender or exchange offer has been made or announced and in securities of
companies for which a merger, consolidation, liquidation or similar
reorganization proposal has been announced if, in the judgment of the relevant
investment adviser, there is a reasonable prospect of capital appreciation
significantly greater than the added portfolio turnover expenses inherent in the
short-term nature of such transactions. The principal risk is that such offers
or proposals may not be consummated within the time and under the terms
contemplated at the time of the investment, in which case, unless such offers or
proposals are replaced by equivalent or increased offers or proposals which are
consummated, the Vista American Value Fund may sustain a loss.
Portfolio Management and Turnover. It is intended that the portfolio of
each Vista Portfolio will be fully managed by buying and selling securities
and, in the case of Vista Portfolios that invest in fixed-income securities,
holding certain securities to maturity. The frequency of a Vista Portfolio's
portfolio transactions--the Vista Portfolio's portfolio turnover rate--will
vary from year to year depending upon market conditions. Each Vista Portfolio
will engage in portfolio trading if its investment adviser believes a
transaction, net of costs (including custodian charges), will help it achieve
its investment objective. The investment policies of the Vista Portfolios may
lead to frequent changes in investments, particularly in periods of rapidly
changing market conditions or interest rates. High portfolio turnover rates
would generally result in higher transaction costs, including brokerage
commissions or
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dealer mark-ups and other transaction costs on the sale of
securities and reinvestment in other securities. High portfolio turnover
rates would also make it more difficult for the relevant Vista Portfolios to
satisfy the requirement for qualification as a regulated investment company
under the Code, that less than 30% of a Vista Portfolio's gross income in any
tax year be derived from gains on the sale of securities held for less than
three months. For a description of the strategies that may be used by the
Adviser (or VDH, with respect to the Vista American Value Fund) in managing
the portfolios of the Vista Portfolios, which may include adjusting the
average maturity of the Vista Short Term Bond Fund's or the Vista U.S.
Government Securities Fund's portfolio in anticipation of a change in
interest rates, see "Investment Objectives, Policies and
Restrictions--Investment Policies: Portfolio Management" in the Vista
Equity/Bond SAI, the Vista Small Cap SAI, the Vista U.S. Government SAI and
the Vista American Value SAI.
Generally, the primary consideration in placing the Vista Portfolios'
portfolio securities transactions with broker-dealers for execution is to
obtain, and maintain the availability of, execution at the most favorable
prices and in the most effective manner possible. For a complete discussion
of portfolio transactions and brokerage allocation, see "Investment
Objectives, Policies and Restrictions--Investment Policies; Portfolio
Transactions and Brokerage Allocation" in the Vista Equity/Bond SAI, the
Vista Small Cap SAI, the Vista U.S. Government SAI and the Vista
AmericanValue SAI.
Portfolio Securities Lending. Although the Vista Portfolios do not intend
to engage in such activity in the ordinary course of business, each Vista
Portfolio is permitted to lend its securities to broker-dealers and other
institutional investors in order to generate additional income. Such loans of
portfolio securities may not exceed 30% of the value of a Vista Portfolio's
total assets. In connection with such loans, a Vista Portfolio will receive
collateral consisting of cash, cash equivalents, U.S. Government securities
or irrevocable letters of credit issued by financial institutions. Such
collateral will be maintained at all times in an amount equal to at least
102% of the current market value of the securities loaned plus accrued
interest. A Vista Portfolio can earn income through the investment of such
collateral. A Vista Portfolio continues to be entitled to the interest
payable or any dividend-equivalent payments received on a loaned security
and, in addition, receive interest on the amount of the loan. However, the
receipt of any dividend-equivalent payments by a Vista Portfolio on a loaned
security from the borrower will not qualify for the dividends-received
deduction. Such loans will be terminable at any time upon specified notice. A
Vista Portfolio might experience risk of loss if the institutions with which
it has engaged in portfolio loan transactions breach their agreements with
such Vista Portfolio. The risk in lending portfolio securities, as with other
extensions of secured credit, consist of possible delays in receiving
additional collateral or in the recovery of the securities or possible loss
of rights in the collateral should the borrower experience financial
difficulty. Loans will be made only to firms deemed by the relevant Vista
Portfolio's investment adviser to be of good standing and will not be made
unless, in the judgment of the investment adviser, the consideration to be
earned from such loans justifies the risk.
Each Hanover Portfolio is similarly authorized to lend portfolio
securities with a value not in excess of one-third of the value of its
respective total assets.
Foreign Securities. Among the securities in which the Vista Large Cap
Equity Fund, Vista Small Cap Equity Fund and Vista American Value Fund may
invest are securities of foreign issuers, although none of such Vista
Portfolios currently intends to invest more than 20% of its total assets in
such securities. The Vista U.S. Government Securities Fund may invest in
foreign obligations issued or guaranteed by foreign governments and
supranational entities, to the extent consistent with its investment policies
described above. In addition, each Vista Portfolio (other than the Vista
American Value Fund) may invest the portion of its assets not invested as
described above in commercial paper of foreign issuers and foreign bank
obligations, as described under "Money Market Instruments." Foreign
securities may represent a greater degree of risk (e.g., risk related to
exchange rate fluctuation, tax provisions, war or expropriation) than do
securities of domestic issuers.
Investing in securities issued by foreign corporations and governments
involves considerations and possible risks not typically associated with
investing in securities issued by domestic corporations and the U.S.
Government. The values of foreign investments are affected by changes in
currency rates or exchange control regulations, application of foreign tax
laws, including withholding taxes, changes in governmental administration or
economic or monetary policy (in the U.S. or other countries) or changed
circumstances in dealings between countries. Costs are incurred in connection
with conversions between various currencies. In addition, foreign brokerage
commissions
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are generally higher than in the United States, and foreign securities markets
may be less liquid, more volatile and less subject to governmental supervision
than in the United States. Investments in foreign countries could be affected by
other factors not present in the United States, including expropriation,
confiscatory taxation, lack of uniform accounting and auditing standards and
potential difficulties in enforcing contractual obligations and could be subject
to extended settlement periods.
The Vista U.S. Government Securities Fund may invest in securities issued
by supranational organizations such as: The World Bank, which was chartered
to finance development projects in developing member countries; the European
Community, which is a twelve-nation organization engaged in cooperative
economic activities; the European Coal and Steel Community, which is an
economic union of various European nations' steel and coal industries; and
the Asian Development Bank, which is an international development bank
established to lend funds, promote investment and provide technical
assistance to member nations of the Asian and Pacific regions.
The Vista Large Cap Equity Fund and the Vista Small Cap Equity Fund may
invest their assets in securities of foreign issuers in the form of ADRs,
European Depositary Receipts ("EDRs"), or other similar securities
representing securities of foreign issuers (collectively, "Depositary
Receipts"), and the Vista American Value Fund may invest its assets in ADRs.
ADRs are receipts typically issued by an American bank or trust company
evidencing ownership of the underlying foreign securities. EDRs are receipts
issued by a European financial institution evidencing a similar arrangement.
Generally, ADRs, in registered form, are designed for use in U.S. securities
markets and EDRs, in bearer form, are designed for use in European securities
markets. The Vista Portfolios treat Depositary Receipts as interests in the
underlying securities for purposes of their investment policies. The Vista
Portfolios will limit their investment in Depositary Receipts not sponsored
by the issuer of the underlying securities to no more than 5% of the value of
their respective net assets (at the time of investment). See the Vista
American Value SAI for certain risks related to unsponsored Depositary
Receipts.
Other Investment Companies. Each Vista Portfolio, like each Hanover
Portfolio, may invest up to 10% of the value of its total assets in shares of
other investment companies, subject to such investments being consistent with
its overall objective and policies, and subject to the limitations of the
1940 Act and the Vista Portfolios' respective investment limitations as
described in the Vista Equity/Bond SAI, the Vista Small Cap SAI, the Vista
U.S. Government SAI and the Vista American Value SAI.
Derivatives and Related Instruments. Each Vista Portfolio may invest its
assets in derivative and related instruments to hedge various market risks, to
manage the effective maturity or duration of debt instruments held by such Vista
Portfolio, or, with respect to certain strategies, to increase such Vista
Portfolios income or gain. Such investments will be subject only to the Vista
Portfolio's investment objective and polices and the requirement that, to
avoid leveraging the Vista Portfolio, the Vista Portfolio maintains
segregated accounts consisting of liquid assets, such as cash, U.S.
Government securities, or other high-grade debt obligations (or, as permitted
by applicable regulation, enter into certain offsetting positions) to cover
its obligations under such instruments with respect to positions where there
is no underlying portfolio asset.
The value of some derivative or similar instrument in which the Vista
Portfolios invest may be particularly sensitive to changes in prevailing
interest rates or other economic factors, and--like other investment of the
Vista Portfolios--the ability of a Vista Portfolio to successfully utilize these
instruments may depend in part upon the ability of its investment adviser to
forecast interest rates and other economic factors correctly. If a Vista
Portfolio's investment adviser incorrectly forecasts such factors and has
taken positions in derivative or similar instruments contrary to prevailing
market trends, the Vista Portfolios could be exposed to the risk of a loss.
The Vista Portfolios might not employ any or all of the instruments described
herein, and no assurance can be given that any strategy used will succeed.
To the extent permitted by the investment objective and policies of each
Vista Portfolio, and as described more fully in the Vista Equity/Bond SAI,
the Vista Small Cap SAI, the Vista U.S. Government SAI and the Vista American
Value SAI, a Vista Portfolio may (i) purchase, write and exercise call and
put options on securities, securities indexes and foreign currencies
(including using options in combination with securities, other options or
derivative instruments); (ii) enter into futures contracts and options on
futures contracts; (iii) employ forward currency and interest-rate
contracts; (iv) purchase and sell mortgage-backed and asset backed
securities; and (v) purchase and sell structured products.
Risk Factors. As explained more fully in the Vista Equity/Bond SAI, the
Vista Small Cap SAI and the New Vista SAI, there are a number of risks
associated with the use of derivatives and related instruments. There can
34
<PAGE>
be no guarantee that there will be a correlation between price movements in a
hedging vehicle and in the portfolio assets being hedged. An incorrect
correlation could result in a loss on both the hedged assets in a Vista
Portfolio and the hedging vehicle so that the Vista Portfolio return might have
been greater had hedging not been attempted. This risk is particularly acute in
the case of "cross-hedges" between currencies. The investment adviser may
incorrectly forecast interest rates, market values or other economic factors in
utilizing a derivatives strategy. In such a case, the Vista Portfolio may have
been in a better position had it not entered into such strategy. Hedging
strategies, while reducing risk of loss, can also reduce the opportunity for
gain. In other words, hedging usually limits both potential losses as well as
potential gains. Strategies not involving hedging may increase the risk to a
Vista Portfolio. Certain strategies, such as yield enhancement, can have
speculative characteristics and may result in more risk to a Vista Portfolio
than hedging strategies using the same instruments. There can be no assurance
that a liquid market will exist at a time when a Vista Portfolio seeks to close
out an option, futures contract or other derivative or related position. Many
exchanges and boards of trade limit the amount of fluctuation permitted in
option or futures contract prices during a single day; once the daily limit has
been reached on a particular contract, no trades may be made that day at a price
beyond that limit. In addition, certain instruments are relatively new and
without a significant trading history. As a result, there is no assurance that
an active secondary market will develop or continue to exist. Activities of
large traders in the futures and securities markets involving arbitrage,
"program trading," and other investment strategies may cause price distortions
in these markets. In certain instances, particularly those involving
over-the-counter transactions, forward contracts, foreign exchanges or foreign
boards of trade, there is a greater potential that a counterparty or broker may
default or be unable to perform on its commitments. In the event of such a
default, a Vista Portfolio may experience a loss. In transactions involving
currencies, the value of the currency underlying an instrument may fluctuate due
to many factors, including economic conditions, interest rates, governmental
policies and market forces.
G. INVESTMENT RESTRICTIONS
In addition to the investment restrictions discussed above, each Vista
Portfolio has adopted certain fundamental investment restrictions which are
set forth in the Vista Equity/Bond SAI and the Vista Small Cap SAI. Such
investment restrictions are substantially similar to those of the
corresponding Hanover Portfolio, except to the extent otherwise noted in the
preceding discussion or below.
The Hanover Short Term U.S. Government Fund, The Hanover Blue Chip Growth
Fund and The Hanover Small Capitalization Growth Fund, each of which is a
diversified fund, each have a fundamental investment restriction prohibiting
it, with respect to 75% of its total assets, from investing more than 5% of
its total assets in the securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. The corresponding Vista Portfolios have no similar
fundamental policies. However, as diversified funds, each of the Vista Short
Term Bond Fund and Vista Large Cap Equity Fund is required by the 1940 Act to
comply with the same issuer diversification requirements applicable to the
corresponding Hanover Portfolios. The Vista Small Cap Equity Fund, which
unlike The Hanover Small Capitalization Growth Fund is a non-diversified
fund, is not subject to a fundamental issuer diversification policy. However,
the Vista Small Cap Equity Fund must nonetheless satisfy certain issuer
diversification requirements in order to qualify as a regulated investment
company under Subchapter M of the Code, which are more fully described under
"Tax Matters--Qualification as a Regulated Investment Company" in the Vista
Small Cap SAI.
While the Vista Short Term Bond Fund, Vista Large Cap Equity Fund and
Vista Small Cap Equity Fund each have a fundamental investment restriction
which states an intention to borrow only from banks and only to meet
redemptions, the Hanover Portfolios, as well as the Vista U.S. Government
Securities Fund and the Vista American Value Fund, each have a fundamental
investment restriction with respect to borrowing which permits them to enter
into reverse repurchase agreements in accordance with their respective
investment policies in amounts not in excess of one-third of the value of
their assets, less bank borrowings outstanding for temporary purposes.
However, the Hanover Portfolios, as well as the Vista U.S. Government
Securities Fund and the Vista American Value Fund, each have a
non-fundamental policy stating that they will enter into reverse repurchase
agreements only to avoid selling portfolio securities to meet redemptions.
Both the Vista and Hanover restrictions provide that the relevant Portfolios
may not purchase additional portfolio securities while borrowings and reverse
repurchase agreements exceed 5% of the value of its total assets. Upon
consummation of the Reorganization, as a matter of fundamental policy, the
Vista Short Term Bond Fund, Vista Large Cap Equity Fund and Vista Small Cap
Equity Fund each will
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<PAGE>
have the same ability to enter into reverse repurchase agreements as
described above for the Hanover Portfolios if approval of such change is
obtained from the shareholders of such Vista Portfolio.
The Hanover Portfolios and the Vista Short Term Bond Fund, the Vista Large
Cap Equity Fund and the Vista Small Cap Equity Fund each have a fundamental
investment restriction prohibiting them from engaging in short sales of
securities. However, The Hanover Blue Chip Growth Fund and Hanover Small
Capitalization Growth Fund are subject to an exception which permits them to
engage in short sales "against the box," subject to certain limitations,
while of such Vista Portfolios, only the Vista Small Cap Equity Fund is
subject to a similar exception. In addition, the Vista Small Cap Equity Fund
also currently states that it has no current intention of engaging in short
sales. The Vista U.S. Government Securities Fund and the Vista American Value
Fund have no fundamental investment restriction regarding short sales. Upon
consummation of the Reorganization, each of the Vista Short Term Bond Fund,
the Vista Large Cap Equity Fund and the Vista Small Cap Equity Fund, as a
matter of nonfundamental policy, instead will be prohibited from engaging in
short sales other than short sales "against the box," provided that such
restriction will not be applied to limit otherwise permissible derivatives
and related transactions, if approval of the foregoing revised policy is
obtained from the shareholders of such Vista Portfolio.
While the Hanover Portfolios each have a fundamental investment
restriction limiting the ability to purchase securities of other investment
companies, the Vista Portfolios have no corresponding fundamental investment
restriction. However, each Vista Portfolio, as a matter of law, is subject to
the same limitations. In addition, while the Vista Short Term Bond Fund, the
Vista Large Cap Equity Fund and the Vista Small Cap Equity Fund each have a
fundamental investment restriction prohibiting them from purchasing
securities of any issuer if such purchase would cause more than 10% of the
voting securities of such issuer to be held by such Vista Portfolio, the
Hanover Portfolios and the Vista U.S. Government Securities Fund and the
Vista American Value Fund have no such fundamental investment restriction.
However, the Hanover Portfolios and the Vista U.S. Government Securities Fund
and the Vista American Value Fund, as diversified portfolios, are subject to
the same limitation as a matter of law. Upon consummation of the
Reorganization, each of the Vista Short Term Bond Fund, the Vista Large Cap
Equity Fund and the Vista Small Cap Equity Fund, as a matter of
nonfundamental policy, instead will be prohibited with respect to 75% of its
assets from holding more than 10% of the outstanding voting securities of an
issuer if shareholder approval of the foregoing revised policy is obtained
from the shareholders of such Vista Portfolio.
Following consummation of the Reorganization, each Vista Portfolio, as a
matter of fundamental policy, will be permitted to seek to achieve its
investment objective by investing all of its investable assets in an
investment company having substantially the same investment objective and
policies as such Vista Portfolio, if approval is obtained from the
shareholders of such Vista Portfolio with respect to the adoption of such new
fundamental policy. The Hanover Portfolios have no similar fundamental policy.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS
General. As a Massachusetts business trust, the operation of Vista will be
governed by the Declaration of Trust of Vista (the "Declaration of Trust")
and applicable Massachusetts law rather than by the Articles of Incorporation
(the "Articles") of Hanover and applicable Maryland law. Certain differences
between the two forms of organization are summarized below.
Shares of Portfolios. Interests in Hanover are represented by transferable
shares of stock, par value $.001 per share. The Articles authorize Hanover to
issue 200 million shares of stock. The Hanover Board may, without shareholder
approval, increase the number of authorized shares and divide authorized but
unissued stock into an unlimited number of separate portfolios or series, and
classes thereof. Currently, all the authorized stock of Hanover is divided
into ten separate series (corresponding to the five Hanover Portfolios and
five additional portfolios that have not to date commenced investment
operations). The Hanover Board has authorized each Hanover Portfolio to issue
multiple classes of shares. Shares of each class of a Hanover Portfolio
represent interests in such portfolio in proportion to each share's net asset
value. All shares of Hanover have equal voting rights and will be voted in
the aggregate, and not by series or class, except where voting by series or
class is required by law or where the matter involved affects only one series
or class. Each share of a Hanover Portfolio is entitled to dividends and
distributions out of the assets of that Hanover Portfolio, as declared by the
Hanover Board in its discretion. Maryland law does not require a registered
investment company to hold annual meetings of shareholders in any year in which
36
<PAGE>
the election of directors is not required under the 1940 Act, and it is
anticipated that annual shareholder meetings will be held only when
specifically required by the 1940 Act. There are no conversion or preemptive
rights in connection with shares of Hanover.
Vista has an unlimited number of authorized shares of beneficial interest,
currently without par value, which may be divided into portfolios or series
and classes thereof. Upon consummation of the Reorganization, the par value
of the shares of Vista will be $.001, subject to shareholder approval of such
change. Each Vista Portfolio is one portfolio of Vista, and may issue
multiple classes of shares. The Vista Small Cap Equity Fund currently issues
two classes of shares. Upon consummation of the Reorganization, each of the
Vista Portfolios, other than the Vista American Value Fund, will offer
multiple classes of shares to the public. Each share of a portfolio or class
of Vista represents an equal proportionate interest in that portfolio or
class with each other share of that portfolio or class. The shares of each
portfolio or class of Vista participate equally in the earnings, dividends
and assets of the particular portfolio or class. Fractional shares have
proportionate rights to full shares. Expenses of Vista which are not
attributable to a specific portfolio or class are allocated to all the
portfolios of Vista in a manner believed by management of Vista to be fair
and equitable. Generally, shares of each portfolio or class will be voted
separately, for example to approve an investment advisory agreement or
distribution plan, but shares of all series and classes vote together, to the
extent required by the 1940 Act, including the election or selection of
trustees and independent accountants. Vista is not required to hold regular
annual meetings of shareholders, but may hold special meetings from time to
time. There are no conversion or preemptive rights in connection with shares
of Vista.
Shareholder Voting Rights. Each Director of Hanover holds office, unless
sooner removed, until his successor is elected and qualified. Any Director
may be removed, with or without cause, by the affirmative vote of a majority
of the shares entitled to vote, at any meeting of the shareholders, and the
vacancy caused by such removal may be filled by the shareholders at any
meeting called for the purpose. A vacancy in the Hanover Board resulting from
the resignation of a Director or otherwise may be filled by a vote of a
majority of the remaining Directors then in office. However, under the 1940
Act, no vacancy may be filled by Directors unless immediately thereafter at
least two-thirds of the Directors holding office shall have been elected to
such office by the shareholders. Special meetings of shareholders for any
purpose or purposes may be called by Hanover's chairman, president or a
majority of the Hanover Board, and upon the written request of the
shareholders holding at least 10% of the shares of Hanover outstanding and
entitled to vote at such meeting. Business transacted at any special meeting
of shareholders shall be limited to the purposes stated in the notice of such
meeting sent to shareholders.
Vista is not required to hold annual meetings of shareholders but will hold
special meetings of shareholders of a portfolio or class when the Trustees deem
such a meeting to be necessary or desirable. A vacancy in the Vista Board
resulting from the resignation of a Trustee or otherwise may be filled by a vote
of a majority of the remaining Trustees then in office. However, under the 1940
Act, no vacancy may be filled by Trustees unless immediately thereafter at least
two-thirds of the Trustees holding office shall have been elected to such office
by the shareholders. In addition, Trustees may be removed from office by a vote
of holders of shares representing two-thirds of the outstanding shares of each
portfolio of Vista at a meeting duly called for the purpose. A meeting of
shareholders shall be held upon the written request of the holders of shares
representing not less than 10% of the outstanding shares entitled to vote on the
matters specified in the written request. Upon written request by the holders of
shares representing at least $25,000 or 1% of the outstanding shares of Vista
stating that such shareholders wish to communicate with the other shareholders
for the purpose of obtaining the signatures necessary to demand a meeting to
consider removal of a Trustee, the Trustees will within five business days after
receipt of such request either provide a list of shareholders or inform such
applicants as to the approximate number of shareholders and the approximate
costs of mailing the request to them. If the second option is chosen by the
Trustees, then the Trustees are generally obligated, upon written request of the
applicants, to mail the requested materials to all shareholders of record (at
the expense of the requesting shareholders). Except as set forth above, the
Trustees may continue to hold office and may appoint successor Trustees.
Shareholder Liability. Under Maryland law, Hanover shareholders have no
personal liability for Hanover's acts or obligations. Under Massachusetts
law, shareholders of Vista could, under certain circumstances, be held
personally liable as partners for the obligations of Vista. However, Vista
Agreement disclaims shareholder liability for acts or obligations of Vista
and provides for indemnification and reimbursement of expenses out of Vista
property for any shareholder held personally liable for the obligations of
Vista. The Declaration of Trust also provides that
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<PAGE>
Vista shall maintain appropriate insurance (for example, fidelity bonding and
errors and omissions insurance) for the protection of Vista, its shareholders,
Trustees, officers, employees and agents covering possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which both inadequate
insurance existed and Vista itself was unable to meet its obligations.
Liability of Directors and Trustees. Under Maryland law and the Articles,
directors and officers of Hanover are not liable to the corporation or its
stockholders for money damages, except to the extent that (1) it is proved
that such person actually received an improper benefit or profit in money,
property, or services for the amount of the benefit for profit in money,
property, or services actually received, or (2) a judgment or other final
adjudication adverse to such person is entered in a proceeding based on a
finding that the person's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action
adjudicated. However, a director or officer of Hanover is liable to the
extent his actions are the result of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office ("Disabling Conduct"). In the event of any litigation against the
Directors or officers of Hanover, Hanover's By-Laws require that Hanover
indemnify a Director or officer for certain expenses and to advance money for
such expenses provided that (a) the court or other body before whom the
proceeding to which the Director or officer is a party was brought (i)
dismisses the proceeding for insufficiency of evidence of any Disabling
Conduct or (ii) reaches a final decision on the merits that the Director or
officer was not liable by reason of Disabling Conduct; or (b) in the absence
of such a decision, there is a reasonable determination, based upon a review
of the facts, that the Director or officer was not liable by reason of
Disabling Conduct, which determination shall be made by: (i) the vote of a
majority of a quorum of the Directors who are neither "interested persons" of
Hanover as defined in the 1940 Act nor parties to the proceeding; or (ii) an
independent legal counsel in a written opinion. Under the Declaration of
Trust, the Trustees of Vista are personally liable only for bad faith,
willful misfeasance, gross negligence or reckless disregard of their duties
as Trustees. Under the Declaration of Trust, a Trustee or officer of Vista
will generally be indemnified against all liability and against all expenses
reasonably incurred or paid by him in connection with any claim, action, suit
or by proceeding in which he becomes involved as a party or otherwise by
virtue of his being or having been a Trustee or officer and against amounts
paid or incurred by him in the settlement thereof.
The foregoing is only a summary of certain of the major differences
between Hanover, its Articles and By-Laws and Maryland law and Vista, its
Declaration of Trust and By-Laws and Massachusetts law. Shareholders may wish
to refer directly to the provisions of Hanover's Articles and By-Laws,
Maryland law and Vista's Declaration of Trust and By-Laws and Massachusetts
law for a more thorough comparison.
38
<PAGE>
ADDITIONAL INFORMATION ABOUT VISTA
A. EXPENSES
The following expense tables are provided to assist investors in
understanding the various costs and expenses that an investor will indirectly
incur as a beneficial owner of Shares in each of the Vista Portfolios. The
table reflects information for the twelve months ended October 31, 1995 for
the Vista Short Term Bond Fund, the Vista Large Cap Equity Fund and the Vista
Small Cap Equity Fund, in each case restated to reflect the fee arrangements
that will be in effect commencing on the Closing Date as if these
arrangements had been in effect during that period and assuming that the
Reorganization had occurred at the beginning of that period. Because the
Vista U.S. Government Securities Fund and the Vista American Value Fund will
not commence operations until the Closing Date, information for those
portfolios reflects estimated annual expenses for the 1996 fiscal year.
<TABLE>
<CAPTION>
Vista Vista U.S. Vista
Short Government Vista Large Small Cap Vista Small
Term Bond Securities Cap Equity Equity Cap Equity
Fund Fund Fund Fund Fund Vista
(Class A (Institutional (Institutional (Class A (Institutional American
Shares) Shares) Shares) Shares) Shares) Value Fund
--------- -------------- -------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Initial Sales Charge Imposed on
Purchases (as a percentage of offering
price) 1.50%* 0.00% 0.00% 4.75%* 0.00% 0.00%
Maximum Contingent Deferred Sales Charge
(as a percentage of redemption
proceeds) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Annual Fund Operating Expenses (as a
percentage of average daily net assets)
Investment Advisory Fee (after estimated
waivers, where indicated) 0.00%** 0.30% 0.00%** 0.65% 0.65% 0.00%**
Rule 12b-1 Distribution Plan fee (after
estimated waivers, where indicated) 0.08%*** 0.00% 0.00% 0.25% 0.00% 0.00%***
Administration Fee (after estimated
waivers, where indicated) 0.02%**** 0.10% 0.10% 0.10% 0.10% 0.00%****
Other Expenses
Sub-Administration Fee 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%
Shareholder Servicing Fee (after
estimated waivers, where indicated) 0.25% 0.20%+ 0.25% 0.00% 0.00%+ 0.12%+
Other Operating Expenses++ 0.35% 0.20% 0.20% 0.45% 0.30% 1.15%
Total Other Expenses 0.65% 0.45% 0.50% 0.50% 0.35% 1.32%
Total Fund Operating Expenses (after
waivers of fees)+++ 0.75% 0.85% 0.60% 1.50% 1.10% 1.32%
</TABLE>
* There will be no front-end sales charges assessed in connection with the
Reorganization, and shareholders of The Hanover Short Term U.S. Government
Fund and The Hanover Small Capitalization Growth Fund that receive Class A
Shares of the Vista Short Term Bond Fund and the Vista Small Cap Equity
Fund, respectively, in connection with the Reorganization will not be
assessed any front-end sales charges on subsequent purchases of the
Class A Shares of the respective Vista Portfolio for as long as they
remain shareholders in the respective Vista Portfolio.
** "Advisory Fees" for the Vista Short Term Bond Fund, Vista Large Cap Equity
Fund and Vista American Value Fund reflect estimated fee waivers pursuant
to the agreement described below; absent such waivers, "Advisory Fees"
would be 0.25% for Vista Short Term Bond Fund, 0.40% for Vista Large Cap
Equity Fund and 0.70% for Vista American Value Fund.
*** "Rule 12b-1 Distribution Plan Fees" for the Vista Short Term Bond Fund
Class A Shares and Vista American Value Fund reflect estimated fee waivers
pursuant to the agreement described below; absent such waivers, "Rule
12b-1 Distribution Plan Fees" would be 0.25% for each such class of each
such Vista Portfolio. Vista Large Cap Equity Fund Institutional Shares,
Vista Small Cap Equity Fund Institutional Shares and Vista U.S. Government
Securities Fund Institutional Shares do not bear Rule 12b-1 Distribution
Plan Fees.
**** "Administration Fees" for Vista Short Term Bond Fund and the Vista
American Value Fund reflect estimated fee waivers pursuant to the
agreement described below; absent such waivers, "Administration Fees"
would be 0.10% for such Vista Portfolios.
+ "Shareholder Servicing Fees" for the Vista U.S. Government Securities Fund
and the Vista Small Cap Equity Fund Institutional Shares and the Vista
American Value Fund reflect estimated fee waivers pursuant to the
agreement described below; absent such waivers, "Shareholder Servicing
Fees" would be 0.25% for such classes of such Vista Portfolios.
++ "Other Operating Expenses" include custody fees, transfer agency fees,
registration fees, legal fees, audit fees, directors' fees, insurance
fees, and other miscellaneous expenses. A shareholder may incur a $10.00
charge for certain wire redemptions.
+++ "Total Fund Operating Expenses" reflect the agreement by Chase voluntarily
to waive fees payable to it and /or reimburse expenses for a period of at
least one year following the consummation of the Reorganization to the
extent necessary to prevent "Total Fund Operating Expenses" of Shares of
each Vista Portfolio for such period from exceeding the amounts indicated
in the table. In addition, Chase has agreed to waive fees payable to it
and/or reimburse expenses for a two year period following the consummation
of the Reorganization to the extent necessary to prevent "Total Fund
Operating Expenses" for Institutional Shares of the Vista Small Cap Equity
Fund and for shares of the Vista American Value Fund from exceeding 1.22%
and 2.18%, respectively, of average net assets during such period.
39
<PAGE>
Example: You would pay the following expenses on a $1,000 investment in
the Shares of the Vista Portfolio indicated based upon payment by the Vista
Portfolios of operating expenses at the levels set forth in the table above,
assuming (1) 5% annual return and (2) redemption at the end of each time
period, based upon estimated actual expenses. In the case of Class A Shares
of the Vista Short Term Bond Fund and the Vista Small Cap Equity Fund, the
figures assume the deduction at the time of purchase of the maximum initial
sales charge.
<TABLE>
<CAPTION>
Vista Vista Vista
Short Term U.S. Government Large Cap
Bond Fund Securities Fund Equity Fund
(Class A Shares) (Institutional Shares) (Institutional Shares)
---------------- ---------------------- ----------------------
<S> <C> <C> <C>
1 Year $ 23 $ 9 $ 6
3 Years 39 27 19
5 Years 56 47 33
10 Years 107 105 75
Vista Small Cap Vista Small
Equity Fund Cap Equity Fund Vista American
(Class A Shares) (Institutional Shares) Value Fund
----------------- ---------------------- --------------
1 Year $ 62 $ 11 $ 13
3 Years 93 35 42
5 Years 125 61 72
10 Years 218 134 159
</TABLE>
The "Example" set forth above should not be considered a representation
of future expenses or annual return of Shares of a Vista Portfolio; actual
expenses and annual return may be greater or less than those shown.
A long-term shareholder in shares of a mutual fund with 12b-1 fees, such
as the Class A Shares of the Vista Short Term Bond Fund and the Vista Small
Cap Equity Fund, and the Shares of the Vista American Value Fund, may pay
more than the economic equivalent of the maximum front-end sales charge
permitted by rules of the National Association of Securities Dealers, Inc.
B. FINANCIAL HIGHLIGHTS
The following financial highlights for Vista Small Cap Equity Fund and
Vista Large Cap Equity Fund are supplemented by financial statements and
accompanying notes appearing in Vista's Annual Reports to shareholders for
the fiscal year ended October 31, 1995, which are incorporated by reference
into the Vista SAI. The financial statements and notes thereto, as well as
the financial information set forth in the tables below with respect to each
of the periods commencing after June 30, 1992, for Vista Small Cap Equity Fund
and Vista Large Cap Equity Fund, have been audited by Price Waterhouse LLP,
independent accountants, whose reports expressed an unqualified opinion
thereon. The information on selected per share data and ratios with respect
to the fiscal year ended June 30, 1992 and the period November 30, 1990 to
June 30, 1991 have been audited by other independent accountants whose report
expressed an unqualified opinion thereon.
The financial highlights for The Hanover U.S. Government Securities Fund
for each of the years in the two year period ended November 30, 1995 and for
the period from February 19, 1993 (commencement of operations) to
November 30, 1993 and The Hanover American Value Fund for the period from
February 3, 1995 (commencement of operations) to November 30, 1995 have been
audited by KPMG Peat Marwick LLP, independent certified public accountants,
whose report thereon is included in the Annual Report to Shareholders.
40
<PAGE>
The following information should be read in conjunction with the related
financial statements and notes thereto which are incorporated by reference
into the Statement of Additional Information.
The information presented below for the Vista Large Cap Equity Fund
relates to the single class of shares thereof being offered prior to the
Closing Date. Such shares will be denominated Institutional Shares as of the
Closing Date.
Investors are advised that the Financial Highlights presented below should
not be viewed as indicative of future financial results of the Vista
Portfolios.
Vista Large Cap Equity Fund(1)
<TABLE>
<CAPTION>
July 1,
Year Year Year 1992** Year November 30,
ended ended ended to ended 1990*
October 31, October 31, October 31, October 31, June 30, to
1995 1994 1993 1992 1992 June 30, 1991
----------- ----------- ----------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of period $ 13.16 $ 13.65 $ 12.56 $ 12.50 $ 11.43 $ 10.00
Income from Investment Operations:
Net investment income 0.277 0.298 0.302 0.080 0.240 0.170
Net gains (losses) on Securities
(both realized and unrealized) 1.744 0.263 1.153 0.500 1.230 1.350
------- -------- --------- --------- -------- ----------
Total from Investment
Operations 2.021 0.561 1.455 0.580 1.470 1.520
--------- --------- --------- --------- -------- ----------
Less Distributions:
Dividends from net investment
income 0.282 0.290 0.304 0.140 0.290 0.090
Distributions from capital gains 2.659 0.761 0.062 0.380 0.110 0.000
--------- --------- --------- --------- -------- ----------
Total Distributions 2.941 1.051 0.366 0.520 0.400 0.090
--------- --------- --------- --------- -------- ----------
Net Asset Value, End of Period $ 12.24 $ 13.16 $ 13.65 $ 12.56 $ 12.50 $ 11.43
========= ========= ========= ========= ======== ==========
Total Return 20.41% 4.37% 11.73% 4.78% 12.99% 15.25%
Ratios/Supplemental Data:
Net Assets, End of Period
(000 omitted) $55,417 $67,818 $120,635 $106,088 $92,261 $95,440
Ratio of expenses to average net
assets# 0.31% 0.31% 0.31% 0.30% 0.30% 0.28%
Ratio of net Investment Income to
Average Net Assets# 2.41% 2.30% 2.30% 1.96% 2.29% 2.81%
Ratio of expenses without waivers
and assumption of expenses to
Average Net Assets# 0.90% 0.95% 0.88% 0.80% 1.02% 1.13%
Ratio of net Investment Income
without waivers and assumption
of expenses to Average Net
Assets# 1.82% 1.66% 1.73% 1.46% 1.57% 1.96%
Portfolio turnover rate 45% 53% 33% 5% 14% 19%
</TABLE>
(1) Currently known as the Vista Equity Fund.
* Commencement of operations.
# Short periods have been annualized.
** In 1992, the Vista Large Cap Equity Fund's fiscal year-end was changed
from June 30 to October 31.
41
<PAGE>
Vista Small Cap Equity Fund
<TABLE>
<CAPTION>
December 20, 1994*
through
October 31, 1995
--------------------
Class A Shares
--------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.00
Income from Investment Operations:
Net investment income 0.060
Net gains (losses) on Securities (both realized and unrealized) 5.056
-------
Total from Investment Operations: 5.116
-------
Less Distributions:
Dividends from net investment income 0.042
Distributions from capital gains 0.004
-------
Total Distributions 0.046
-------
Net Asset Value, End of Period $ 15.07
=======
Total Return (1) 51.25%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $43,739
Ratio of expenses to average net assets# 1.51%
Ratio of net Investment Income to Average Net Assets# 0.52%
Ratio of expenses without waivers and assumption of expenses to
Average Net Assets# 2.67%
Ratio of net Investment Income without waivers and assumption of expenses
to Average Net Assets# (0.64)%
Portfolio turnover rate 75%
</TABLE>
# Annualized.
* Commencement of operations.
(1) Total rates of return are calculated before taking into account any sales
load for Class A shares.
42
<PAGE>
The Hanover U.S. Government Securities Fund
(For an Investor Share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Year Ended Period Ended
November 30, November 30, November 30,
1995 1994 1993*
------------ ------------ ------------
Investor Investor Investor
Shares Shares Shares
------------ ------------ ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.23 $ 10.27 $ 10.00
Income from Investment Operations:
Net investment income 0.56 0.50 0.34
Net gains on Securities (both
realized and unrealized) 0.95 (0.94) 0.27
------------ ----------- ------------
Total from Investment Operations 1.51 (0.44) 0.61
Less Distributions:
Dividends from net investment income (0.56) (0.50) (0.34)
Distributions from capital gains -- (0.10) --
------------ ----------- ------------
Total Distributions (0.56) (0.60) (0.34)
------------ ----------- ------------
Net Asset Value, End of Period $ 10.18 $ 9.23 $ 10.27
============ =========== ============
Total Return** 16.82% (4.41)% 6.16%+
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $83,304 $83,649 $86,089
Ratio of Expenses to Average Net Assets++ 0.85% 0.85% 0.85%+++
Ratio of net investment income to Average Net
Assets 5.78% 5.15% 4.26%+++
Portfolio Turnover Rate 220.12% 134.29% 37.45%
</TABLE>
* The Hanover U.S. Government Securities Fund commenced operations on
February 19, 1993.
** Until February 28, 1994, Investor Shares of The Hanover U.S. Government
Securities 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 1.11%, 1.04% and 1.04%
(annualized), respectively.
+++ Annualized.
43
<PAGE>
The Hanover American Value Fund
<TABLE>
<CAPTION>
Period Ended
November 30,
1995*
------------
Investor
Shares
------------
<S> <C>
Net Asset Value, Beginning of Period $10.00
Income from Investment Operations:
Net investment income 0.18
Net gains on Securities (both realized and
unrealized) 2.00
-------
Total from Investment Operations 2.18
-------
Less Distributions:
Dividends from net investment income (0.07)
Distributions from capital gains --
-------
Total Distributions (0.07)
-------
Net Asset Value, End of Period $12.11
Total Return+ 21.80%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $8,399
Ratio of Expenses to Average Net Assets+++ 1.23%++
Ratio of net investment income to Average Net Assets 1.97%++
Portfolio Turnover Rate 11.28%
</TABLE>
* The Hanover American Value Fund commenced operations on February 3, 1995.
+ Total Return not annualized.
++ Annualized.
+++ Ratio of expenses before effect of waivers was 2.03% (annualized).
C. MANAGEMENT OF THE PORTFOLIOS
Adviser and Sub-Advisers
Chase acts as investment adviser to each existing Vista Portfolio and will
act as investment adviser to each Vista Portfolio effective upon the Closing
Date. Upon consummation of the Bank Merger, Chase's successor will continue
to act as investment adviser to each Vista Portfolio. As used herein, the
term "Adviser" means Chase (including its successor in the Bank Merger), in
its capacity as investment adviser to the Vista Portfolios. Under the
Investment Advisory Agreement between the Adviser and Vista with respect to
each Vista Portfolio that will take effect as of the Closing Date, the
Adviser will have responsibility for investment decisions for each such Vista
Portfolio. For its services under each such Investment Advisory Agreement,
the Adviser will receive an annual fee computed daily and paid monthly at an
annual rate equal to .25% for the Vista Short Term Bond Fund, .30% for the
Vista U.S. Government Securities Fund, .40% for the Vista Large Cap Equity
Fund, .65% for the Vista Small Cap Equity Fund and .60% for the Vista
American Value Fund.
Effective upon the Closing Date, CAM will act as the sub-investment
adviser to each Vista Portfolio, other than the Vista American Value Fund,
pursuant to a separate Sub-Investment Advisory Agreement between CAM and
Chase. Under the Sub-Investment Advisory Agreement, CAM will make investment
decisions for, and be responsible for the day-to-day management of, each such
portfolio. For its services under such Sub-Investment Advisory Agreement, CAM
will be entitled to receive, with respect to each such Vista Portfolio, such
compensation, payable by the Adviser out of its advisory fee, as shall be
agreed to from time to time between the Adviser and CAM.
Effective upon the Closing Date, VDH will act as the sub-investment
adviser to the Vista American Value Fund pursuant to a separate Sub-Investment
Advisory Agreement between Chase and VDH. Under the Sub-
44
<PAGE>
Investment Advisory Agreement, VDH will make innvestment decisions for, and be
responsible for the day-to-day management of, the Vista American Value Fund.
For its services under the Sub-Investment Advisory Agreement
relating to the Vista American Value Fund, VDH will be entitled to receive
such compensation, payable by the Adviser out of its advisory fee, as shall
be agreed to from time to time between the Adviser and VDH.
The Adviser, CAM and VDH may each, from time to time, voluntarily waive
all or a portion of the fees payable to it under an Investment Advisory
Agreement or a Sub-Investment Advisory Agreement, as the case may be.
The Adviser is currently a wholly-owned subsidiary of CMC, a registered
bank holding company, and is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. Effective upon consummation of the Parent Merger, the
Adviser will be a wholly-owned subsidiary of CBC, and CBC will be renamed
"The Chase Manhattan Corporation." Upon consummation of the Bank Merger, the
Adviser will continue to be a wholly-owned subsidiary of CBC. The Adviser's
headquarters is currently located at One Chase Manhattan Plaza, New York, New
York 10081. The Adviser, including its predecessor organizations, has over
100 years of money management experience and renders investment advisory
services to others. Also included among the Adviser's accounts are commingled
trust funds and a broad spectrum of individual trust and investment
management portfolios. These accounts have varying investment objectives.
CAM is a wholly-owned operating subsidiary of Chase, and upon consummation
of the Bank Merger, will be a wholly-owned operating subsidiary of the
Adviser. CAM is registered with the Commission as an investment adviser and
was formed for the purpose of providing discretionary investment advisory
services to institutional clients and to consolidate Chase's investment
management function, and the same individuals who serve as portfolio managers
for CAM also serve as portfolio managers for Chase. CAM is located at 1211
Avenue of the Americas, New York, New York 10036.
Linda Struble is responsible for the day-to-day management of the Vista
Short Term Bond Fund for the Adviser and, effective upon consummation of the
Reorganization, will continue to manage such Vista Portfolio for CAM. Ms.
Struble is the manager of the Adviser's fixed income trading unit, and in
such capacity she also manages fixed income assets for fiduciary accounts at
the Chase Manhattan Regional Bank. Ms. Struble has 27 years of experience in
banking and investment management, and began her financial career with
Lincoln First Bank in 1968. Ms. Struble managed several of the Lincoln First
Bank's Trinity mutual funds and joined Vista as a portfolio manager when the
Trinity funds merged with Vista in 1993. In addition to her portfolio
management duties, Ms. Struble is a contributor to several investment policy
committees including the Chase Asset Management Investment Policy Committee,
the Chase Regional Bank Investment Policy Committee and the Regional Bank
Credit Policy Committee.
Effective upon consummation of the Reorganization, John Schmucker will be
responsible for the day-to-day management of the Vista U.S. Government
Securities Fund for CAM. Mr. Schmucker currently manages The Hanover U.S.
Government Securities Fund and is a Vice President and Senior Fixed Income
Portfolio Manager at The Portfolio Group (the investment adviser for The
Hanover U.S. Government Securities Fund). Prior to joining The Portfolio
Group in 1992, Mr. Schmucker was the Chief Investment Officer of Chemical
Bank's Official Institutions Group. Previously, he was a portfolio manager
with Henry Kaufman & Company, Inc.
Effective upon consummation of the Reorganization, Karen L. Shapiro will
be responsible for the day-to-day management of the Vista Large Cap Equity
Fund. Ms. Shapiro currently manages The Hanover Blue Chip Growth Fund and is
a Vice President and Senior Portfolio Manager at The Portfolio Group (the
investment adviser for The Hanover Blue Chip Growth Fund) and a member of its
Investment Committee. Prior to joining The Portfolio Group in 1992, Ms.
Shapiro was a Portfolio Manager in the Personal Investment Consulting
Department at Manufacturers Hanover Trust Company.
David Klassen and Jill Greenwald are responsible for the day-to-day
management of the Vista Small Cap Equity Fund for the Adviser and, effective
upon consummation of the Reorganization, will continue to co-manage such
Vista Portfolio for CAM. Mr. Klassen joined the Vista management team in 1992
and was named head of Vista equity management in 1995. He also co-manages the
Vista Capital Growth Fund and manages the Vista Growth and Income Fund. Prior
to his association with Vista, Mr. Klassen held investment management
positions at Dean Witter Reynolds, Inc. for 11 years. Ms. Greenwald joined
Vista in 1992 and has concentrated on fundamental research for small-cap
companies in numerous industries. Prior to joining Vista, Ms. Greenwald had
management responsibility for a pool of small-cap equities at Prudential
Equity Investors. Before her tenure at Prudential, Ms. Greenwald was an
equity analyst and senior analyst at Fred Alger Management, Inc. for six
years.
45
<PAGE>
VDH was organized in 1969. The firm is a general partnership which is
equally owned by individuals who serve VDH in key professional capacities and
CBC Holdings (California), a wholly-owned subsidiary of CBC. VDH
provides a wide range of asset management services to individuals,
corporations, private and charitable trusts, endowments, foundations and
retirement funds. The principal business address of VDH is 800 North Brand
Boulevard, Suite 300, Glendale, California 91203.
Richard D. Trautwein serves as executive Vice President at VDH and,
effective upon the Closing Date, will be primarily responsible for the
day-to-day management of the Vista American Value Fund's portfolio. Mr.
Trautwein joined VDH in 1972, heads the firm's portfolio strategy group and
is a member of the firm's investment policy committee. He has been primarily
responsible for day-to-day management of The Hanover American Value Fund
since its inception.
Certain Relationships and Activities. Chase and its affiliates may have
deposit, loan and other commercial banking relationships with the issuers of
securities purchased on behalf of any of the Vista Portfolios, including
outstanding loans to such issuers which may be repaid in whole or in part
with the proceeds of securities so purchased. Chase and its affiliates deal,
trade and invest for their own accounts in U.S. Government obligations, and
municipal obligations. Chase and its affiliates may sell U.S. Government
obligations and municipal obligations to, and purchase them from, other
investment companies sponsored by the Vista Distributor or affiliates of the
Vista Distributor. The Adviser will not invest any Vista Portfolio assets in
any U.S. Government obligations, municipal obligations or commercial paper
purchased from itself or any affiliate, although under certain circumstances
such securities may be purchased from other members of an underwriting
syndicate in which the Adviser or an affiliate is a non-principal member.
This restriction may limit the amount or type of U.S. Government obligations,
municipal obligations or commercial paper available to be purchased on behalf
of any Vista Portfolio. The Adviser has informed Vista that in making its
investment decisions, it does not obtain or use material inside information
in the possession of any other division or department of such Adviser or in
the possession of any affiliate of such Adviser, including the division of
Chase that performs services for Vista as Custodian. Shareholders of the
Vista Portfolios should be aware that, subject to applicable legal or
regulatory restrictions, Chase and its affiliates may exchange among
themselves certain information about the shareholders and their accounts.
Administrator
Pursuant to an Administration Agreement (the "Administration Agreement"),
Chase serves as administrator of Vista (in such capacity, the
"Administrator"). The Administrator provides certain administrative services,
including, among other responsibilities, coordinating relationships with
independent contractors and agents, preparing for signature by officers and
filing of certain documents required for compliance with applicable laws and
regulations excluding those of the securities laws of the various states;
preparing financial statements; arranging for the maintenance of books and
records; and providing office facilities necessary to carry out the duties
thereunder. The Administrator is entitled to receive from each existing Vista
Portfolio, and will be entitled to receive from each Vista Portfolio
effective upon the Closing Date, a fee computed daily and paid monthly at an
annual rate equal to .10% of such Vista Portfolio's average daily net assets.
However, the Administrator may, from time to time, voluntarily waive all or a
portion of its fees payable under the Administration Agreement. The
Administrator, pursuant to the terms of the Administration Agreement, shall
not have any responsibility or authority for each Vista Portfolio's
investments, the determination of investment policy, or for any matter
pertaining to the distribution of Vista Portfolio shares.
Regulatory Matters. Banking laws and regulations, including the
Glass-Steagall Act as currently interpreted by the Board of Governors of the
Federal Reserve System, prohibit a bank holding company registered under the
Bank Holding Company Act of 1956, as amended, or any affiliate thereof from
sponsoring, organizing, controlling, or distributing the shares of a
registered, open-end investment company continuously engaged in the issuance
of its shares, and prohibit banks generally from issuing, underwriting,
selling or distributing securities, but do not prohibit such a bank holding
company or affiliate from acting as investment adviser, administrator,
transfer agent, or custodian to such an investment company or from purchasing
shares of such a company as agent for and upon the order of a customer.
Chemical, Chase, Hanover and Vista believe that Chase, VDH, or any other
affiliate of Chemical or Chase, may perform the investment advisory,
administrative, custody and transfer agency services for Vista, as the case
may be, described in this Prospectus/Proxy Statement, and that Chase, VDH or
any other affiliate of Chemical or Chase, subject to such banking laws and
regulations, may perform the shareholder services contemplated
46
<PAGE>
by this Prospectus/Proxy Statement, without violation of such banking laws or
regulations. However, future changes in legal requirements relating to the
permissible activities of banks and their affiliates, as well as future
interpretations of present requirements, could prevent Chase, VDH or any other
affiliate of Chemical or Chase from continuing to perform investment
advisory, administrative or custody services for Vista, as the case may be,
or require Chase, VDH or any other affiliate of Chemical or Chase to alter or
discontinue the services provided by it to shareholders of Vista Portfolios.
If Chase, VDH or any other affiliate of Chemical or Chase were prohibited
from performing investment advisory, administrative, custody or transfer
agency services for Vista, as the case may be, it is expected that the Vista
Board would recommend to Vista's shareholders that they approve new
agreements with another entity or entities qualified to perform such services
and selected by the Board of Trustees. If Chase, VDH or any other affiliate
of Chemical or Chase were required to discontinue all or part of its
shareholder servicing activities, its customers would be permitted to remain
the beneficial owners of Trust shares and alternative means for continuing
the servicing of such customers would be sought. Vista does not anticipate
that investors would suffer any adverse financial consequences as a result of
these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state laws.
D. PURCHASES AND REDEMPTIONS OF SHARES
Purchases
Institutional Shares of the Vista U.S. Government Securities Fund, the
Vista Large Cap Equity Fund and the Vista Small Cap Equity Fund and Shares of
the Vista American Value Fund. The Institutional Shares of the Vista U.S.
Government Securities Fund, the Vista Large Cap Equity Fund and the Vista
Small Cap Equity Fund and the shares of the Vista American Value Fund are
continuously offered for sale without a sales load at the net asset value
next determined through the Vista Distributor after an order is received and
accepted by a Shareholder Servicing Agent if it is transmitted by the Vista
Distributor prior to 4:00 p.m., Eastern time, on any business day during
which the New York Stock Exchange is open for trading ("Fund Business Day").
(See "Other Information Concerning Shares of Vista--Net Asset Value.") Shares
of these Vista Portfolios are offered exclusively to customers of a
Shareholder Servicing Agent (i.e., a financial institution, such as a federal
or state-chartered bank, trust company or savings and loan association that
has entered into a shareholder servicing agreement with Vista) or to
customers of brokers or certain financial institutions which have entered
into Shareholder Servicing Agreements with the Vista Distributor. An investor
may purchase Shares of the Vista Portfolios by authorizing his or her
Shareholder Servicing Agent, broker or financial institution to purchase such
shares on his behalf through the Vista Distributor, which the Shareholder
Servicing Agent, broker or financial institution must do promptly.
Class A Shares of the Vista Short Term Bond Fund and the Vista Small Cap
Equity Fund. Class A Shares are sold to investors subject to an initial sales
charge, and may be purchased through Shareholder Servicing Agents and through
selected financial service firms, such as broker-dealer firms and banks
("Dealers") who have entered into a selected dealer agreement with the Vista
Distributor, at the public offering price which is computed once daily as of
4:00 p.m., Eastern time, on any Fund Business Day. (See "Other Information
Concerning Shares of Vista--Net Asset Value.") The public offering price of
Class A Shares is the next determined net asset value, plus the applicable
initial sales charge. Orders received by Dealers prior to 4:00 p.m. are
confirmed at the offering price effective at such time, provided the order is
received by the Transfer Agent prior to its close of business.
The Vista Small Cap Equity Fund also offers Class B shares in addition to
the Class A Shares. The principal difference between these share classes is
that the Class A Shares are subject to a front-end sales charge, as described
above, while the Class B shares are offered for sale at net asset value
without the imposition of a sales charge, but are subject to a contingent
deferred sales charge upon certain redemptions. In addition, the ongoing
distribution fees payable by the Class B shares are higher than those payable
by the Class A Shares and the Class B Shares bear a shareholder servicing
fee. Investors may call Vista at 1-800-34-VISTA to obtain additional
information concerning the Class B Shares.
General. Shareholder Servicing Agents may offer services to their customers,
including specialized procedures for the purchase and redemption of Shares of
the Vista Portfolios, such as pre-authorized or systematic pur-
47
<PAGE>
chase and redemption programs and "sweep" checking programs. Each Shareholder
Servicing Agent may establish its own terms, conditions and charges, including
limitations on the amounts of transactions, with respect to such services.
Charges for these services may include fixed annual fees, transaction fees,
account maintenance fees and minimum account balance requirements. The effect of
any such fees will be to reduce the yield on the investment of customers of that
Shareholder Servicing Agent. Conversely, certain Shareholder Servicing Agents
may (although they are not required by Vista to do so) credit to the accounts of
their customers from whom they are already receiving other fees an amount not
exceeding the fees for their services as Shareholder Servicing Agents if they
receive such fees (see "Shareholder Servicing Agents, Transfer Agent and
Custodian"), which will have the effect of increasing the yield on the
investment of customers of that Shareholder Servicing Agent. Shareholder
Servicing Agents may also increase or reduce the minimum dollar amount required
to invest in a Vista Portfolio and waive any applicable holding periods.
Orders for shares received and accepted prior to 4:00 p.m. will be
entitled to all dividends declared on such day. All share purchases must be
paid for in U.S. dollars, and checks must be drawn on U.S. banks. In the
event a check used to pay for shares purchased is not honored by the bank on
which it is drawn, the purchase order will be cancelled and the shareholder
will be liable for any losses or expenses incurred by Vista or its agents.
Dealers and Shareholder Servicing Agents are responsible for forwarding
orders for the purchase of shares on a timely basis.
Vista reserves the right to cease offering its shares for sale at any
time, to reject any order for the purchase of shares and to cease offering
any services provided by a Shareholder Servicing Agent. Shares of the Vista
Portfolios will be maintained in book entry form, and no certificates
representing shares owned will be issued to shareholders, except that Vista
Short Term Bond Fund and Vista Small Cap Equity Fund Class A Share
certificates will be issued upon request.
The minimum initial purchase for Institutional Shares of the Vista
Portfolios is $1,000,000, and shareholders must maintain a minimum balance in
Institutional Shares of the Vista Portfolios of $1,000,000 at all times. The
minimum initial purchase for individuals for Class A Shares of the Vista
Short Term Bond Fund and the Vista Small Cap Equity Fund and for Shares of
the Vista American Value Fund is $2,500. These minimums will be waived for
Hanover Portfolio shareholders that receive Vista Portfolio shares in
connection with the Reorganization. In contrast, the Hanover Portfolios do
not have a minimum purchase amount.
Systematic Investment Plan. A shareholder may establish a monthly
investment plan by which investments are automatically made to his/her Vista
account through Automatic Clearing House (ACH) deductions from a checking
account. The minimum monthly investment through this plan is $100.
Shareholders may choose either to have these investments made during the
first or third week each month. Please note that your initial ACH
transactions may take up to 10 days from the receipt of your request to be
established.
Shareholders electing to start this Systematic Investment Plan when
opening an account should complete Section 8 of the account application.
Current shareholders may begin a Systematic Investment Plan at any time by
sending a signed letter with signature guarantee to the Vista Service Center,
P.O. Box 419392, Kansas City, MO 64141-6392. This letter should contain your
Vista account number, the desired amount and cycle of the systematic
investment, and must include a voided check from the checking account for
which debits are to be made. A signature guarantee may be obtained from a
bank, trust company, broker-dealer or other member of the national securities
exchange. Please note that a notary public cannot provide signature
guarantees.
Initial Sales Charges--Class A Shares
Vista Short Term Bond Fund. The public offering price of Class A Shares of
the Vista Short Term Bond Fund is the next determined net asset value, plus
any applicable initial sales charge, which will vary with the size of the
purchase as shown in the following table:
48
<PAGE>
<TABLE>
<CAPTION>
Sales Charge
----------------------
% of Concession
% of Net to Dealers
Offering Amount % of
Amount of Purchase Price Invested Offering Price
- ----------------------- --------- --------- --------------
<S> <C> <C> <C>
Less than $100,000 1.50 1.52 1.00
$100,000 to $249,999 1.00 1.00 0.50
$250,000 to $499,999 0.50 0.50 0.25
$500,000 to $999,999 0.25 .25 0.25
$1,000,000 and over -- -- --
</TABLE>
Vista Small Cap Equity Fund. The public offering price of Class A Shares
of the Vista Small Cap Equity Fund is the next determined net asset value,
plus any applicable initial sales charge, which will vary with the size of
the purchase as shown in the following table:
<TABLE>
<CAPTION>
Sales Charge
--------------------------
Concession
% of to Dealers
% of Net % of
Offering Amount Offering
Amount of Purchase Price Invested Price
--------------------------- ----------- ----------- ---------------
<S> <C> <C> <C>
Less than $100,000 4.75 4.98 4.00
$100,000 to $249,999 3.75 3.90 3.25
$250,000 to $499,999 2.50 2.56 2.25
$500,000 to $999,999 2.00 2.04 1.75
$1,000,000 to $2,499,999 -- -- 1.00
$2,500,000 to $9,999,999 -- -- 0.75
$10,000,000 to $49,999,999 -- -- 0.50
$50,000,000 and over -- -- 0.20
</TABLE>
The initial sales charge on Class A Shares of the Vista Short Term Bond
Fund and the Vista Small Cap Equity Fund varies with the size of the purchase
as shown in the tables above. The reduced charges apply to the aggregate of
purchases of Class A Shares made at one time by "any person," which term
includes, among others, an individual, spouse and children under the age of
21, or a Trustee or other fiduciary of a Trust estate or fiduciary account.
The Vista Distributor may compensate Dealers for sales of $1,000,000 or more
from its own resources and/or the Rule 12b-1 distribution plan applicable to
Class A Shares.
Upon notice to Dealers with whom it has sales agreements, Vista
Distributor may reallow up to the full applicable initial sales charge on
Class A Shares of the Vista Short Term Bond Fund and the Vista Small Cap
Equity Fund and such Dealer may therefore be deemed an "underwriter" under
the Securities Act of 1933, as amended, during such periods. For a three-year
period concluding July 19, 1996 for activities in maintaining and servicing
accounts of customers invested in the Vista Small Cap Equity Fund, Associated
Securities Corp. ("Associated Securities") may receive payments from Chase
based, in part, on the amount of the aggregate asset values of the Vista
Small Cap Equity Fund (and other Vista funds) in the accounts of shareholders
attributable to Associated Securities and the length of time such assets are
in such accounts.
In addition, under an arrangement between Associated Securities and the
Vista Distributor, Associated Securities will be entitled to receive either
50% or 70% of the difference between the total front-end sales load and that
portion paid to selling group member broker-dealers.
The Vista Distributor may, from time to time, provide promotional
incentives to certain Dealers whose representatives have sold or are expected
to sell significant amounts of the Vista Short Term Bond Fund and the Vista
Small Cap Equity Fund or other portfolios of Vista. At various times the
Vista Distributor may implement programs under which a Dealer's sales force
may be eligible to win cash awards for certain sales efforts or under which
the Vista Distributor will reallow an amount not exceeding the total
applicable initial sales charges on the sales of Class A Shares generated by
the Dealer during such programs to any Dealer that sponsors sales contests or
recognition programs conforming to criteria established by the Vista
Distributor or participates in sales programs sponsored
49
<PAGE>
by the Vista Distributor. The Vista Distributor may provide marketing services
to Dealers with whom it has sales agreements, consisting of written
informational material relating to sales incentive campaigns conducted by such
Dealers for their representatives.
Purchases of Class A Shares of the Vista Short Term Bond Fund
and the Vista Small Cap Equity Fund at Net Asset Value
Shareholders As of November 30, 1990
Shareholders of record of any portfolio of Vista as of November 30, 1990, may
purchase Class A Shares of the Vista Short Term Bond Fund and the Vista Small
Cap Equity Fund at Net Asset Value without an initial sales charge for as long
as they continue to own Class A Shares of any portfolio of Vista, provided there
is no change in account registration. However, once a shareholder closes his or
her account by redeeming all shares, he or she will lose this privilege after 30
days. This provision applies to accounts registered in the name of the
shareholder and his or her spouse and children under 21 and for IRAs in their
names.
Shareholders of Certain Hanover Portfolios
Holders of Investor Shares of The Hanover Short Term U.S. Government Fund
and The Hanover Small Capitalization Growth Fund at the time of the
consummation of the Reorganization may thereafter purchase Class A Shares of
the Vista Short Term Bond Fund and the Vista Small Cap Equity Fund,
respectively, at Net Asset Value without an initial sales charge for as long
as they continue to own Class A shares of the Vista Short Term Bond Fund or
the Vista Small Cap Equity Fund, respectively, provided there is no change in
account registration. However, once a shareholder closes his or her account
by redeeming all shares, he or she will lose this privilege after 30 days.
This provision applies to accounts registered in the name of the shareholder
and his or her spouse and children under 21 and for IRAs in their names.
Shareholders Who Are Eligible Persons
There is no initial sales charge on Class A Shares purchased by the
following "Eligible Persons": (a) Active or retired Trustees, Directors,
officers, partners or employees (including their spouses, children, siblings
and parents) of the Adviser, Vista Distributor, Vista's Transfer Agent or any
affiliates or subsidiaries thereof; (b) employees (including their spouses
and children under 21) of Dealers having a selected dealer agreement with the
Vista Distributor; or (c) any qualified retirement plan or IRA established
for the benefit of a person in (a) or (b).
Qualified and Other Retirement Plans
No initial sales charge will apply to the purchase of Class A Shares by:
An investor seeking to invest the proceeds of a qualified retirement plan,
where a portion of the plan was invested in Vista; any qualified retirement
plan with 50 or more participants; or an individual participant in a
tax-qualified plan making a tax-free rollover or transfer of assets from the
plan in which the Adviser serves as Trustee or custodian of the plan or
manages some portion of the plan's assets.
Purchases Through Investment Advisers, Brokers or Financial Planners
Purchases of Class A Shares may be made with no initial sales charge
applied through an investment adviser, broker, or financial planner who
charges a fee for their services. Purchases of Class A Shares may be made
with no initial sales charge by an investment adviser, broker or financial
planner, provided such purchases are preapproved and are placed through an
omnibus account with Vista.
Purchases Through a Bank As Fiduciary
Purchases of Class A Shares may be made with no initial sales charge in
accounts opened by a bank, trust company or thrift institution which is
acting as a fiduciary (i.e., exercises investment authority with respect to
such accounts), provided that appropriate notification of such fiduciary
relationship is reported at the time of the investment to Vista, the Vista
Distributor or the Transfer Agent.
Vista reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
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Reduced Initial Sales Charges on Class A Shares
of the Vista Short Term Bond Fund and the Vista Small Cap Equity Fund
Cumulative Quantity Discount. Class A Shares may be purchased by any person at
a reduced initial sales charge which is determined by (a) aggregating the dollar
amount of the new purchase and the greater of the purchaser's total (i) net
asset value or (ii) cost of any shares acquired and still held in the Vista
Short Term Bond Fund or the Vista Small Cap Equity Fund, respectively, or any
other Vista portfolio, including any Vista-affiliated money market portfolio
acquired by exchange for which a sales charge had been incurred and (b) applying
the initial sales charge applicable to such aggregate dollar value. The
privilege of the cumulative quantity discount is subject to modification or
discontinuance at any time with respect to all Class A Shares purchased
thereafter. Group Purchases. An individual who is a member of a qualified group
(as hereinafter defined) may also purchase Class A Shares at the reduced sales
charge applicable to the group taken as a whole. The reduced initial sales
charge is based upon the aggregate dollar value of Class A Shares of the related
portfolio previously purchased and still owned by the group plus the securities
currently being purchased and is determined as stated above under "Cumulative
Quantity Discount." For example, if members of the group had previously invested
and still held $90,000 of Class A Shares of the Vista Small Cap Equity Fund and
now were investing $15,000, the initial sales charge would be 3.75%. In order to
obtain such discount, the purchaser or investment dealer must provide the
Transfer Agent with sufficient information, including the purchaser's total
cost, at the time of purchase to permit verification that the purchaser
qualifies for a cumulative quantity discount, and confirmation of the order is
subject to such verification. Information concerning the current initial sales
charge applicable to a group may be obtained by contacting the Transfer Agent.
A "qualified group" is one which (i) has been in existence for more than
six months, (ii) has a purpose other than acquiring Class A Shares at a
discount and (iii) satisfies uniform criteria which enables the Vista
Distributor to realize economies of scale in its costs of distributing Class
A Shares. A qualified group must have more than 10 members, must be available
to arrange for group meetings between representatives of Vista and the
members, must agree to include sales and other materials related to Vista in
its publications and mailings to members at reduced or no cost to the Vista
Distributor, and must seek to arrange for payroll deduction or other bulk
transmission of investments of Vista. This privilege is subject to
modification or discontinuance at any time with respect to all Class A Shares
purchased thereafter.
Statement of Intention. Investors in Class A Shares of the Vista Short
Term Bond Fund and the Vista Small Cap Equity Fund may also qualify for
reduced sales charges by signing a Statement of Intention (the "Statement").
This enables the investor to aggregate purchases of Class A Shares in the
related portfolio with purchases of Class A Shares of any other portfolio of
Vista (or if a portfolio has only one class, shares of such portfolio),
including shares of any Vista-affiliated money market portfolio, acquired by
exchange, during a 13-month period. The sales charge is based on the total
amount to be invested in Class A Shares during the 13-month period. All Class
A Shares or other qualifying shares of these portfolios currently owned by
the investor will be credited as purchases (at their current offering prices
on the date the Statement is signed) toward completion of the Statement. A
90-day back-dating period can be used to include earlier purchases at the
investor's cost. The 13-month period would then begin on the date of the
first purchase during the 90-day period. No retroactive adjustment will be
made if purchases exceed the amount indicated in the Statement. A shareholder
must notify the Transfer Agent or the Vista Distributor whenever a purchase
is being made pursuant to a Statement.
The Statement is not a binding obligation on the investor to purchase the
full amount indicated; however, on the initial purchase, if required (or
subsequent purchases if necessary), 5% of the dollar amount specified in the
Statement will be held in escrow by the Transfer Agent in Class A Shares
registered in the shareholder's name in order to assure payment of the proper
sales charge. If total purchases pursuant to the Statement (less any
dispositions and exclusive of any distributions on such shares automatically
reinvested) are less than the amount specified, the investor will be
requested to remit to the Transfer Agent an amount equal to the difference
between the sales charge paid and the sales charge applicable to the
aggregate purchases actually made. If not remitted within 20 days after
written request, an appropriate number of escrowed shares will be redeemed in
order to realize the difference. This privilege is subject to modification or
discontinuance at any time with respect to all shares purchased thereunder.
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Reinstatement Privilege. Class A shareholders of the Vista Short Term Bond
Fund and the Vista Small Cap Equity Fund have a one time privilege of
reinstating their investment in the applicable portfolio, subject to the
terms of exchange (see "Exchange Privilege") at net asset value next
determined. A written request for reinstatement must be received by the
Transfer Agent within 90 calendar days of the redemption, accompanied by
payment for the shares (not in excess of the redemption). This privilege is
subject to modification or discontinuance at any time with respect to all
shares purchased thereafter.
Redemptions
A shareholder may redeem all or any portion of the Shares in his account on
any Fund Business Day at the net asset value next determined after a redemption
request in proper form is furnished by the shareholder to his Shareholder
Servicing Agent (in the case of Class A Shares of the Vista Short Term Bond
Fund, the request may also be made to the shareholder's Dealer, and in the case
of Class A Shares of the Vista Small Cap Equity Fund, such request must be made
to the shareholder's Dealer) and transmitted by it to and received by Vista's
Transfer Agent. Therefore, redemptions will be effected on the same day the
redemption order is received only if such order is received prior to 4:00 p.m.,
Eastern time, on any Fund Business Day. The proceeds of a redemption normally
will be paid on the next Fund Business Day after the redemption is effected, but
in any event within seven days. The forwarding of proceeds from redemption of
shares which were recently purchased by check may be delayed up to 15 days. A
shareholder who is a customer of a Shareholder Servicing Agent, or, in the case
of Class A Shares of the Vista Short Term U.S. Government Fund and the Vista
Small Cap Equity Fund, a Dealer, may redeem his Fund shares by authorizing his
Shareholder Servicing Agent, his Dealer (if applicable), their respective
agents, or, except in the case of Class A Shares of the Vista Short Term Bond
Fund and the Vista Small Cap Equity Fund, the Transfer Agent, to redeem such
shares. The signature of both shareholders is required for any written
redemption requests (other than those by check) from a joint account. In
addition, a redemption request may be deferred for up to 15 calendar days if the
Transfer Agent has been notified of a change in either the address or the bank
account registration previously listed in Vista's records.
The value of Shares of a Vista Portfolio redeemed may be more or less than
the shareholder's cost, depending on portfolio performance during the period
the shareholder owned his shares. Redemptions of shares are taxable events on
which the shareholder may recognize a gain or loss. Although Vista generally
retains the right to pay the redemption price of shares in kind with
securities (instead of cash), Vista has filed an election under Rule 18f-1
committing to pay in cash all redemptions by a shareholder of record up to
the amounts specified in the rule (approximately $250,000).
The payment of redemption requests may be wired directly to a previously
designated domestic commercial bank account or mailed to the shareholder's
address of record. However, all telephone redemption requests in excess of
$25,000 will be wired directly to such previously designated bank account,
for the protection of shareholders. Normally, redemption payments will be
transmitted on the next business day following receipt of the request
(provided it is made prior to 4:00 p.m., Eastern time, on any day redemptions
may be made). Redemption payments requested by telephone may not be available
in a previously deposited bank account for up to four days. For telephone
redemptions, call the Vista Service Center at 1-800-34-VISTA.
The right of any shareholder to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds
postponed during any period in which the New York Stock Exchange is closed
(other than weekends or holidays) or trading on such Exchange is restricted
or, to the extent otherwise permitted by the 1940 Act, if an emergency
exists.
If a redeeming shareholder of the Vista Small Cap Equity Fund owns both
Class A or Class B Shares of such portfolio (the Class B Shares are subject
to a contingent deferred sales charge upon certain redemptions), unless the
shareholder specifically requests otherwise, the Class A Shares will be
redeemed before any Class B Shares.
Automatic Redemption Plan. A shareholder owning $10,000 or more of the
Shares of a Vista Portfolio as determined by the then current net asset value
may provide for the payment monthly or quarterly of any requested dollar
amount (subject to limits) from his account to his order. A sufficient number
of full and fractional shares will be redeemed so that the designated payment
is received on approximately the 1st day of the month following the end of
the selected payment period.
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Redemption of Accounts of Less than $500. Vista may involuntarily redeem the
shares of any shareholder, if at such time, the aggregate net asset value of
the shares in such shareholder's account is less than $500. In the event of
any such redemption, a shareholder will receive at least 60 days' notice prior
to the redemption.
Exchange Privileges
Shareholders of Class A Shares of the Vista Short Term Bond Fund and the Vista
Small Cap Equity Fund may exchange, at respective net asset value, Class A
Shares for Class A Shares of the other Vista portfolios which have a similar
class of shares, in accordance with the terms of the then current prospectus of
the portfolio being acquired. No initial sales charge is imposed on the Class A
shares being acquired through an exchange, except that to the extent that a
shareholder paid a lower initial sales charge for the shares being tendered for
exchange than the sales charge that was applicable, at the time the exchanged
shares were purchased, to the shares being acquired in the exchange, then the
shareholder will be charged the difference as a sales charge upon such exchange.
Class A Shares may only be exchanged into the same class of another Vista
portfolio and only if the account registrations are identical.
With respect to exchanges from any Vista-affiliated money market
portfolio, shareholders must have acquired their shares in such money market
portfolio by exchange from one of the other portfolios in Vista, or any
exchange directly from one of such money market portfolios will be done at
relative net asset value plus the appropriate sales charge.
The Prospectus relating to the portfolio shares being acquired in an
exchange should be reviewed before effecting any exchange and retained for
future reference. You should note that any such exchange, which may only be
made in states where shares of the other portfolios are qualified for sale,
may create a gain or loss to be recognized for federal income tax purposes.
Arrangements have been made for the acceptance of instructions by telephone
to exchange shares if certain preauthorizations or indemnifications are
accepted and on file. The exchange privilege may be modified or discontinued
at any time without notice.
Market Timing. The exchange privilege is not intended as a vehicle for
short-term trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. In order to limit
excessive exchange activity and other circumstances where the Trustees or
relevant investment adviser believes doing so would be in the best interest
of a Vista Portfolio, Vista reserves the right to revise or terminate the
exchange privilege, limit the amount or number of exchanges or reject any
exchange. In addition, any shareholder who makes more than ten exchanges of
shares involving a Vista Portfolio in a year or three in a calendar quarter
will be charged a $5.00 administration fee for each such exchange.
General
The Vista Portfolios have established certain procedures and restrictions,
subject to change from time to time, for purchase, redemption, and exchange
orders, including procedures for accepting telephone instructions and
effecting automatic investments and redemptions. Vista's Transfer Agent may
defer acting on a shareholder's instructions until it has received them in
proper form. In addition, the privileges described in this Prospectus/Proxy
Statement are not available until a completed and signed account application
has been received by the Transfer Agent. Telephone transaction privileges are
made available to shareholders automatically upon opening an account unless
the privilege is declined in section 6 of the Account Application. To provide
evidence of telephone instructions, the Transfer Agent will record telephone
conversations with shareholders. Vista will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. In the event
Vista does not employ such reasonable procedures, it may be liable for losses
due to unauthorized or fraudulent instructions.
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, Vista or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service
options chosen by the shareholder or joint shareholders in his or their
latest account application or other written request for services, including
purchasing, exchanging, or redeeming shares of Vista and depositing and
withdrawing monies from the bank account specified in the Bank Account
Registration section of the share-
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holder's latest account application or as otherwise properly specified to
Vista in writing. Shareholders agree to release and hold harmless Vista, the
Adviser, the Administrator, any Shareholder Servicing Agent or sub-agent and
broker-dealer, and the officers, directors, employees and agents thereof against
any claim, liability, loss, damage and expense for any act or failure to act in
connection with Vista shares, any related investment account, any privileges or
services selected in connection with such investment account, or any written or
oral instructions or requests with respect thereto, or any written or oral
instructions or requests from someone claiming to be a shareholder if Vista or
any of the above-described parties follow instructions which they reasonably
believe to be genuine and act in good faith by complying with the procedures
that have been established for fund accounts and services.
Shareholders purchasing their shares through a Shareholder Servicing Agent may
not assign, transfer or pledge any rights or interest in any Vista Portfolio
Shares or any investment account established with a Shareholder Servicing
Agent to any other person without the prior written consent of such Shareholder
Servicing Agent, and any attempted assignment, transfer or pledge without such
consent may be disregarded.
Vista may require signature guarantees for changes that shareholders
request be made in Vista records with respect to their accounts, including
but not limited to, changes in the bank account specified in the Bank Account
Registration, or for any written requests for additional account services
made after a shareholder has submitted an initial account application to
Vista. Vista may also refuse to accept or carry out any transaction that does
not satisfy any restrictions then in effect.
E. TAX MATTERS
The following discussion is addressed primarily to noncorporate investors
and is for general information only. A prospective investor including a
corporate investor should also review the more detailed discussion of federal
income tax considerations relevant to each Vista Portfolio that is contained
in the Vista Equity/Bond SAI and the Vista Small Cap SAI. In addition, each
prospective investor should consult with his own tax advisers as to the tax
consequences of an investment in the Vista Portfolios, including the status
of distributions from a Vista Portfolio in his or her own state and locality.
Vista intends to qualify each Vista Portfolio each year and elect that
each Vista Portfolio be treated as a separate "regulated investment company"
under Subchapter M of the Code. If a Vista Portfolio qualifies as a
"regulated investment company" and all of its taxable income, if any, is
distributed to its shareholders in accordance with the timing requirements
imposed by the Code, it will not be subject to federal income tax on the
amounts so distributed. If for any taxable year a Vista Portfolio does not
qualify for the treatment as a regulated investment company, all of its
taxable income will be subject to tax at regular corporate rates without any
deduction for distributions to its shareholders, and such distributions will
be taxable to shareholders to the extent of each Vista Portfolio's current
and accumulated earnings and profits.
Vista is organized as a Massachusetts business trust and, under current
law, Vista is not liable for any income or franchise tax in the Commonwealth
of Massachusetts as long as each Vista Portfolio (and each other series of
Vista) qualifies as a regulated investment company under the Code.
Distributions by a Vista Portfolio of its taxable ordinary income (net of
expenses) and the excess, if any, of its net short-term capital gain over its
net long-term capital loss are generally taxable to shareholders as ordinary
income. Such distributions are treated as dividends for federal income tax
purposes. A portion of the ordinary income dividends paid by each Vista
Portfolio with respect to a year (which cannot exceed the aggregate amount of
its share of qualifying dividends received by such Vista Portfolio from
domestic corporations during the year) may qualify for the 70%
dividends-received deduction for corporate shareholders, but any such
dividends-received deduction will not be allowed in computing a corporate
shareholder's adjusted current earnings, upon which is based a corporate
preference item which may be subject to an alternative minimum tax or to the
environmental superfund tax. Distributions by each Vista Portfolio of the
excess, if any, of its net long-term capital gain over its net short-term
capital loss are designated as capital gain dividends and are taxable to
shareholders as long-term capital gains, regardless of the length of time a
shareholder has held his shares. Ordinary income dividends and capital gain
dividends from each Vista Portfolio may also be subject to state and local
taxes.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend
or capital gain dividend. Those investors purchasing shares just prior to an
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ordinary income dividend or capital gain dividend will be taxed on the entire
amount of the dividend received, even though the net asset value per share on
the date of such purchase reflected the amount of such dividend.
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of a Vista Portfolio. In general, distributions by a Vista Portfolio are taken
into account by shareholders in the year in which they are made. However,
certain distributions made during January will be treated as having been paid by
a Vista Portfolio and received by the shareholders on December 31 of the
preceding year. A statement setting forth the federal income tax status of all
distributions made (or deemed made) during the calendar year, including any
portions which constitute ordinary income dividends, capital gains dividends and
exempt interest dividends will be sent to each shareholder of a Vista Portfolio
promptly after the end of each calendar year.
Any loss realized upon a taxable disposition of shares within six months from
the date of their purchase will be treated as a long-term capital loss to the
extent of any capital gain dividends received on such shares. All or a portion
of any loss realized upon a taxable disposition of shares of a Vista Portfolio
may be disallowed if other shares of such portfolio are purchased within 30 days
before or after such disposition.
Under the backup withholding rules of the Code, certain shareholders may
be subject to 31% withholding of federal income tax on distributions and
redemption payments made by a Vista Portfolio. Generally, shareholders are
subject to backup withholding if they have not provided a Vista Portfolio
with a correct taxpayer identification number and certain required
certifications.
F. OTHER INFORMATION CONCERNING SHARES OF VISTA
Net Asset Value
The net asset value of each class of each Vista Portfolio is determined
once daily based upon prices determined as of the close of regular trading on
the New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m.), on each Fund Business Day, by dividing the net assets
of the portfolio attributable to such class by the total number of the
portfolio's outstanding shares of such class. Values of assets held by a Vista
Portfolio (i.e., the value of its investment in such portfolio and in other
assets) are determined on the basis of their market or other fair value, as
described in the Vista Equity/Bond SAI and the Vista Small Cap SAI. A share's
net asset value is effective for orders received by a Shareholder Servicing
Agent (or Dealer, if applicable) prior to its calculation and received by the
Vista Distributor prior to the close of business, usually 4:00 p.m., Eastern
time, on the Fund Business Day on which such net asset value is determined.
The net asset values per share of each class of a Vista Portfolio may
differ slightly due to differing class-specific expenses, and are calculated
separately.
Net Income, Dividends and Capital Gain Distributions
Substantially all of the available net investment income of the Vista
Short Term Bond Fund and the Vista U.S. Government Securities Fund is
declared daily and paid monthly as a dividend to the respective shareholders.
Substantially all of the available net investment income of the Vista Large
Cap Equity Fund is paid to shareholders quarterly (in the months of March,
June, September and December) and substantially all of the available net
investment income of the Vista Small Cap Equity Fund and the Vista American
Value Fund is paid annually to the respective shareholders. Each Vista
Portfolio will distribute its net realized short-term and long-term capital
gains, if any, to its shareholders at least annually. Each Vista Portfolio's
net investment income consists of the interest income earned on its
portfolio, less expenses. Dividends paid on each class of a Vista Portfolio's
shares are calculated at the same time.
Each Vista Portfolio intends to make additional distributions to the
extent necessary to avoid application of the 4% nondeductible excise tax on
certain undistributed income and net capital gains of mutual funds imposed by
Section 4982 of the Code.
Subject to the policies of the shareholder's Shareholder Servicing Agent,
a shareholder may elect to receive dividends and capital gains distributions
from a Vista Portfolio in either cash or additional shares of the same class
(if applicable).
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Distribution Plans and Distribution and
Sub-Administration Agreement
The Trustees have adopted the Vista Distribution Plans applicable to the
Shares of the Vista American Value Fund and the Class A Shares of the Vista
Short Term Bond Fund and the Vista Small Cap Equity Fund in accordance with Rule
12b-1 under the 1940 Act, and, effective upon the Closing Date, a Vista
Distribution Plan will be in effect for such Shares of the Vista Portfolios. The
Vista Trustees have concluded that there is a reasonable likelihood that the
Vista Distribution Plans will benefit Vista and its shareholders. Effective upon
consummation of the Reorganization, the Institutional Shares of the Vista U.S.
Government Securities Fund, the Vista Large Cap Equity Fund and the Vista Small
Cap Equity Fund will not be subject to a Rule 12b-1 plan and will therefore not
be subject to any related distribution fees.
The Vista Distribution Plans applicable to Class A Shares of the Vista
Short Term Bond Fund, Class A Shares of the Vista Small Cap Equity Fund and
shares of the Vista American Value Fund, as in effect upon consummation of
the Reorganization, will provide that the applicable shares of each such
Vista Portfolio may pay distribution fees (the "Distribution Fee"), including
payments to the Vista Distributor, at an annual rate not to exceed .25% of
such shares' average daily net assets for distribution services. The Vista
Distributor may use all or a portion of such Distribution Fee to pay for the
expenses of printing prospectuses and reports used for sales purposes,
expenses related to the preparation and printing of sales literature and
other such distribution-related expenses. The Distribution Fee is not
directly tied to the Vista Distributor's expenses, therefore the amount of
the Distribution Fee paid by the Class A Shares of the Vista Short Term Bond
Fund, the Class A Shares of the Vista Small Cap Equity Fund and the shares of
the Vista American Value Fund during any year may be more or less than actual
expenses incurred pursuant to the applicable Vista Distribution Plan. For
this reason, this type of distribution fee arrangement is characterized by
the staff of the Commission as being of the "compensation variety" (in
contrast to "reimbursement" arrangements, by which a distributor's
compensation is directly linked to its expenses). The Vista Short Term Bond
Fund (with respect to its Class A Shares), the Vista Small Cap Equity Fund
(with respect to its Class A Shares) and the Vista American Value Fund are
not liable for any distribution expenses incurred in excess of the
Distribution Fee paid. Each class of shares of the Vista Short Term Bond Fund
and the Vista Small Cap Equity Fund is entitled to exclusive voting rights
with respect to matters concerning its respective Vista Distribution Plan (if
any).
The Distribution and Sub-Administration Agreement (the "Distribution
Agreement") provides that the Vista Distributor acts as the principal
underwriter of shares of each existing Vista Portfolio and will act in such
capacity for each Vista Portfolio effective upon the Closing Date. Under the
Distribution Agreement, the Vista Distributor bears the expenses of printing,
distributing and filing prospectuses and statements of additional information
and reports used for sales purposes, and of preparing and printing sales
literature and advertisements not paid for by the Distribution Plans. In
addition, the Vista Distributor provides certain sub-administration services,
including providing officers, clerical staff and office space. The Vista
Distributor receives a fee for sub-administration from each Vista Portfolio
at an annual rate equal to 0.05% of such portfolio's average daily net
assets, on an annualized basis for Vista's then-current fiscal year. Other
funds which have investment objectives similar to those of each Vista
Portfolio, but which do not pay some or all of such fees from their assets,
may offer a higher return, although investors would, in some cases, be
required to pay a sales charge or a redemption fee.
The Vista Distributor has agreed to use a portion of its distribution and
sub-administration fee to pay for certain expenses of Vista incurred in
connection with organizing new series of Vista and certain other ongoing
expenses of Vista. The Vista Distributor may, from time to time, waive all or
a portion of the fees payable to it under the Distribution Agreement.
Expenses
Each of the Vista Portfolios intends to pay all of its pro rata share of
Vista's expenses, including the compensation of the Trustees; all fees under
the Distribution Plans for that Vista Portfolio (see "Purchases and
Redemptions of Shares--Distribution Plan and Agreement"); governmental fees;
interest charges; taxes; membership dues in the Investment Company Institute;
fees and expenses of independent accountants, of legal counsel and of any
transfer agent and dividend disbursing agent; expenses of distributing and
redeeming shares and servicing shareholder accounts; expenses of preparing,
printing and mailing prospectus, reports, notices, proxy statements and
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reports to shareholders and to governmental officers and commissions; expenses
connected with the execution, recording and settlement of portfolio security
transactions; insurance premiums; fees and expenses of the Custodian, including
safekeeping of funds and securities and maintaining required books and accounts;
expenses of calculating the net asset value of such portfolio; expenses of
shareholder meetings; and the advisory fee payable to the relevant investment
adviser under the related Investment Advisory Agreement, the administrative fee
payable to the Administrator under the Administration Agreement and the
sub-administration fee payable to the Vista Distributor under the Distribution
Agreement. Expenses relating to the issuance, registration and qualification of
shares of a Vista Portfolio and the preparation, printing and mailing of
prospectuses for such purposes are borne by such portfolio except that the
Distribution Agreement requires the Vista Distributor to pay for prospectuses
which are to be used for sales to prospective investors.
With respect to the Vista Portfolios that offer multiple classes of
shares, each class thereof will pay those expenses allocable to the class,
including: distribution fees, shareholder servicing fees and expenses;
expenses of preparing, printing and mailing prospectuses, reports, notices,
and proxy statements to shareholders and government offices or agencies;
expenses of shareholder meetings; expenses relating to the registration and
qualification of shares of the particular class and the preparation, printing
and mailing of prospectuses for such purposes (except that the Distribution
Agreement requires the Vista Distributor to pay for prospectuses which are to
be used for sales to prospective investors).
Description of Shares, Voting Rights and Liabilities
Vista is an open-end management investment company organized as a
Massachusetts business trust under the laws of the Commonwealth of
Massachusetts in 1987.
Vista has reserved the right to create and issue additional series and
classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or
class. The shares of each series or class participate equally in the
earnings, dividends and assets of the particular series or class. Expenses of
Vista which are not attributable to a specific series or class are allocated
among all the series in a manner believed by management of Vista to be fair
and equitable. Shares have no preemptive or conversion rights. Shares when
issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each whole share held, and each
fractional share shall be entitled to a proportionate fractional vote, except
that trust shares held in the treasury of Vista shall not be voted. Shares of
each series or class generally vote separately, for example to approve an
investment advisory agreement or distribution plan, but shares of all series
and classes vote together, to the extent required under the 1940 Act, in the
election or selection of Trustees and independent accountants.
The categories of investors that are eligible to purchase shares may be
different for each class of a Vista Portfolio's shares. In addition, classes
of Vista Portfolio shares may be subject to differences in sales charge
arrangements, ongoing distribution and service fee levels, and levels of
certain other expenses, which may affect the relative performance of the
different classes of a Vista Portfolio's shares. Investors may call Vista at
1-800-34-VISTA to obtain additional information about the classes of shares
of the Vista Portfolios that are offered. Any person entitled to receive
compensation for selling or servicing shares of a Vista Portfolio may receive
different levels of compensation with respect to one class of shares of such
Vista Portfolio over another.
Vista is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of a series or class or of all series
and classes when in the judgment of the Trustees it is necessary or desirable
to submit matters for a shareholder vote. A Trustee of Vista may in
accordance with certain rules of the Commission be removed from office when
the holders of record of not less than two-thirds of the outstanding shares
either present a written declaration to Vista's Custodian or vote in person
or by proxy at a meeting called for this purpose. In addition, the Trustees
will promptly call a meeting of shareholders to remove a Trustee(s) when
requested to do so in writing by record holders of not less than 10% of the
outstanding shares of Vista. Finally, the Trustees shall, in certain
circumstances, give such shareholders access to a list of the names and
addresses of all other shareholders or inform them of the number of
shareholders and the cost of mailing their request. Vista's Declaration of
Trust provides that, at any meeting of shareholders, a Shareholder Servicing
Agent may vote any shares as to which such Shareholder Servicing Agent is the
agent of record and which are otherwise not represented in person or by proxy
57
<PAGE>
at the meeting, proportionately in accordance with the votes cast by holders
of all shares of the same series otherwise represented at the meeting in
person or by proxy as to which such Shareholder Servicing Agent is the agent
of record. Any shares so voted by a Shareholder Servicing Agent will be
deemed represented at the meeting for purposes of quorum requirements.
Shareholders of each series or class would be entitled to share pro rata in
the net assets of that series or class available for distribution to
shareholders upon liquidation of that series or class.
Vista is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for
its obligations. However, the risk of a shareholder incurring financial loss
on account of shareholder liability is limited to circumstances in which both
inadequate insurance exists and Vista itself is unable to meet its
obligations.
G. SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
Shareholder Servicing Agents
The shareholder servicing agreement with each Shareholder Servicing Agent
for Vista provides that such Shareholder Servicing Agent will, as agent for
its customers, perform various services, including but not limited to the
following: answer customer inquiries regarding account status and history,
the manner in which purchases and redemptions of shares may be effected for
each Vista Portfolio or class of shares as to which the Shareholder Servicing
Agent is so acting and certain other matters pertaining to a Vista Portfolio
or class of shares; assist shareholders in designating and changing dividend
options, account designations and addresses; provide necessary personnel and
facilities to establish and maintain shareholder accounts and records; assist
in processing purchase and redemption transactions; arrange for the wiring of
funds; transmit and receive funds in connection with customer orders to
purchase or redeem shares; verify and guarantee shareholder signatures in
connection with redemption orders and transfers and changes in
shareholder-designated accounts; furnish (either separately or on an
integrated basis with other reports sent to a shareholder by a Shareholder
Servicing Agent) monthly and year-end statements and confirmations of
purchases and redemptions; transmit, on behalf of each Vista Portfolio or
class of shares, proxy statements, annual reports, updated prospectuses and
other communications to shareholders; receive, tabulate and transmit to the
Vista Portfolios proxies executed by shareholders with respect to meetings of
shareholders of each Vista Portfolio or class of shares; vote the outstanding
shares of each Vista Portfolio or class of shares whose shareholders do not
transmit executed proxies or attend shareholder meetings in the same
proportion as the votes cast by other shareholders of such Vista Portfolio or
class represented at the shareholder meeting as to which such Shareholder
Servicing Agent is the agent of record and provide such other related
services as the Vista Portfolios or a shareholder may request. For performing
these services, each Shareholder Servicing Agent will be entitled to receive,
effective upon the Closing Date, an annual fee of up to .25% of the average
daily net assets represented by shares owned during the period for which
payment is being made by investors for whom such Shareholder Servicing Agent
maintains a servicing relationship. Each Shareholder Servicing Agent may,
from time to time, voluntarily waive a portion of the fees payable to it. In
addition, Chase may provide other related services to Vista for which it may
receive compensation. There are no shareholder servicing agreements in effect
with respect to the Class A Shares of the Vista Small Cap Equity Fund, and
such shares therefore bear no shareholder servicing fees.
The Shareholder Servicing Agent, and its affiliates, agents and
representatives acting as Shareholder Servicing Agents, may establish
custodial investment accounts ("Accounts"), known as Chase Investment
Accounts or by any other name designated by a Shareholder Servicing Agent.
Through such Accounts, customers can purchase, exchange and redeem Vista
Portfolio shares, receive dividends and distributions on Vista Portfolio
investments, and take advantage of any services related to an Account offered
by such Shareholder Servicing Agent from time to time. All Accounts and any
related privileges or services shall be governed by the laws of the State of
New York, without regard to its conflicts of laws provisions.
The Glass-Steagall Act and other applicable laws generally prohibit
federally chartered or supervised banks from publicly underwriting or
distributing certain securities such as each Vista Portfolio's shares. Vista,
on behalf of the Vista Portfolios, will engage banks, including Chase and its
affiliates, as Shareholder Servicing Agents only to perform advisory,
custodian, administrative and shareholder servicing functions as described
above. While the matter is not free from doubt, the management of Vista
believes that such laws should not preclude a bank, including
58
<PAGE>
a bank which acts as investment adviser, custodian or administrator, or in all
such capacities for Vista, from acting as a Shareholder Servicing Agent.
However, possible future changes in federal law or administrative or judicial
interpretations of current or future law, could prevent a bank from continuing
to perform all or a part of its servicing activities. If that occurred, the
bank's shareholder clients would be permitted to remain as shareholders and
alternative means for continuing the servicing of such shareholders would be
sought. In such event, changes in the operation of each Vista Portfolio might
occur and a shareholder serviced by such bank might no longer be able to avail
himself of any automatic investment or other services then being provided by
such bank. Vista does not expect that shareholders would suffer any adverse
financial consequences as a result of these occurrences.
Transfer Agent and Custodian
DST Systems, Inc. ("DST") acts as transfer agent and dividend disbursing
agent (the "Transfer Agent") for Vista. In this capacity, DST maintains the
account records of all shareholders in the existing Vista Portfolios and will
maintain such records for each Vista Portfolio effective upon the Closing
Date, including statement preparation and mailing. DST also is responsible
for disbursing dividend distributions to shareholders. From time to time, DST
and/or the Vista Portfolios may contract with other entities to perform
certain services for the Transfer Agent. For its services as Transfer Agent,
DST receives such compensation as is from time to time agreed upon by Vista
and DST. DST's address is 127 W. 10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the
assets of each existing Vista Portfolio, and will act as the custodian for
each Vista Portfolio effective upon the Closing Date. For its services as
Custodian, Chase receives compensation as is from time to time agreed upon by
Vista and Chase. The Custodian's responsibilities include safeguarding and
controlling each Vista Portfolio's cash and securities, handling the receipt
and delivery of securities, determining income and collecting interest on
each Vista Portfolio's investments, maintaining books of original entry for
portfolio and fund accounting and other required books and accounts, and
calculating the daily net asset value of shares of each Vista Portfolio.
Portfolio securities and cash may be held by sub-custodian banks if such
arrangements are reviewed and approved by the Trustees. The internal division
of Chase which serves as Vista's Custodian does not determine the investment
policies of the Vista Portfolios or decide which securities will be bought or
sold on behalf of the Vista Portfolios or otherwise have access to or share
material inside information with the internal division that performs advisory
services for the Vista Portfolios.
Tax Sheltered Retirement Plans
Shares of the Vista Portfolios are offered in connection with the
following qualified prototype retirement plans: IRA, Rollover IRA, SEP-IRA,
Profit-Sharing, and Money Purchase Pension Plans which can be adopted by
self-employed persons ("Keogh") and by corporations, and 403(b) Retirement
Plans. Call or write the Transfer Agent for more information.
H. YIELD AND PERFORMANCE INFORMATION
From time to time, each Vista Portfolio may use hypothetical investment
examples and performance information in advertisements, shareholder reports
or other communications to shareholders. Because such performance information
is based on historical earnings, it should not be considered as an indication
or representation of the performance of any Vista Portfolio, or class
thereof, in the future. From time to time, the performance and yield of the
Vista Portfolios, and classes thereof, may be quoted and compared to those of
other mutual funds with similar investment objectives, unmanaged investment
accounts, including savings accounts, or other similar products and to stock
or other relevant indices or to rankings prepared by independent services or
other financial or industry publications that monitor the performance of
mutual funds. For example, the performance of a Vista Portfolio or its
classes may be compared to data prepared by Lipper Analytical Services, Inc.
or Morningstar Mutual Funds on Disc, widely recognized independent services
which monitor the performance of mutual funds. Performance and yield data as
reported in national financial publications including, but not limited to,
Money Magazine, Forbes, Barron's, The Wall Street Journal and The New York
Times, or in local or regional publications, may also be used in comparing
the performance and yield of a Vista Portfolio or its classes. Additionally,
Vista may, with proper authorization, reprint articles written about Vista
and provide them to prospective shareholders.
59
<PAGE>
Each Vista Portfolio may provide period and average annual "total rates of
return." The "total rate of return" refers to the change in the value of an
investment in a Vista Portfolio or class thereof over a period (which period
shall be stated in any advertisement or communication with a shareholder) based
on any change in net asset value per share including the value of any shares
purchased through the reinvestment of any dividends or capital gains
distributions declared during such period. Period total rates of return may be
annualized. An annualized total rate of return assumes that the period total
rate of return is generated over a 52-week period, and that all dividends and
capital gains are reinvested; annualized total rates of return will be slightly
higher than period total rates of return (if the periods are shorter than one
year) because of the compounding effect of the assumed investment. For Class A
Shares of the Vista Short Term Bond Fund and the Vista Small Cap Equity Fund,
the average annual total rate of return figures will assume payment of the
maximum initial sales load at the time of purchase. For a class of shares, one-,
five-, and ten-year periods will be shown, unless the class has been in
existence for a shorter period.
Unlike some bank deposits or other investments which pay a fixed yield for
a stated period of time, the yield (where applicable) and the net asset value
of a Vista Portfolio, or class of shares thereof, will vary based on a number
of factors including interest rates (for certain Vista Portfolios), the
current market value of the securities held by the portfolio and changes in
the portfolio's expenses. The Adviser, the Shareholder Servicing Agent, the
Administrator and the Vista Distributor may voluntarily waive a portion of
their fees on a month-to-month basis. In addition, the Vista Distributor may
assume a portion of a Vista Portfolio's operating expenses on a
month-to-month basis. These actions would have the effect of increasing the
net income (and therefore the yield and total rate of return) of the Vista
Portfolio or class of shares thereof during the period such waivers are in
effect. These factors and possible differences in the methods used to
calculate the yields and total rates of return should be considered when
comparing the yields or total rates of return of the Vista Portfolios and
classes of shares thereof to yields and total rates of return published for
other investment companies and other investment vehicles (including different
classes of shares). Vista is advised that certain Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding the Shareholder Servicing
Agent fees received (see "Purchases and Redemptions of Shares--Purchases"),
which will have the effect of increasing the net return on the investment of
customers of those Shareholder Servicing Agents. Such customers may be able
to obtain through their Shareholder Servicing Agents quotations reflecting
such increased return. See the Vista Equity/Bond SAI and the Vista Small Cap
SAI for further information concerning the calculation of the yields or total
rates of return quotations for the Vista Portfolios and classes of shares
thereof.
I. ADDITIONAL INFORMATION
Each Vista Portfolio has adopted a Code of Ethics which prohibits all
affiliated personnel from engaging in personal investment activities which
compete with or attempt to take advantage of such Vista Portfolio's planned
portfolio transactions. The objective of each Vista Portfolio's Code of
Ethics is that such Vista Portfolio's operations be carried out for the
exclusive benefit of its shareholders. Each Vista Portfolio maintains careful
monitoring of compliance with its Code of Ethics.
The Vista Equity/Bond SAI, the Vista Small Cap SAI, the Vista U.S.
Government SAI and the Vista American Value SAI contain more detailed
information about Vista and the Shares, including information related to
(i) each Vista Portfolio's investment policies and restrictions, (ii) risk
factors associated with each Vista Portfolio's policies and investments,
(iii) Vista's Trustees, officers and the Administrator and the Adviser,
(iv) portfolio transactions and brokerage allocation, (v) the Vista Portfolio's
shares, including rights and liabilities of shareholders, and (vi) additional
performance information, including the method used to calculate yield or
total rate of return quotations of such shares. The audited financial
statements for the existing Vista Portfolios for their last fiscal year end
are incorporated by reference into the Statement of Additional Information.
The Vista Equity/Bond SAI, the Vista Small Cap SAI, the Vista U.S.
Government SAI and the Vista American Value SAI each have been filed with the
Commission and are incorporated by reference into the Statement of Additional
Information. A copy of the Vista Equity/Bond SAI, the Vista Small Cap SAI,
the Vista U.S. Government SAI or the Vista American Value SAI may be obtained
without charge by writing or calling Vista at the address and telephone
number shown on the cover page of this Prospectus/Proxy Statement. These
Reports and other information filed by Vista can be inspected and copied at
the Public Reference Facilities maintained by the Securities and Exchange
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the New
York regional office
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<PAGE>
of the securities and Exchange Commission at 26 Federal Plaza, Room 1028, New
York, New York 10007. Copies of such material can also be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549 at prescribed rates.
As of January 22, 1996, the officers and Trustees of Vista as a group
owned less than 1% of any of its portfolios. As of December 19, 1995, the
officers and Directors of Hanover as a group owned less than 1% of any of its
portfolios. The tables below show the name, address and share ownership of
each person having at the record date for the Hanover Special
Meeting of Shareholders beneficial or record ownership with respect to 5% or
more of a class of a portfolio of Vista or Hanover. The tables also show the
percentage of shares of each portfolio owned by such persons at the
record date, as well as the percentage of shares that would be owned by
these persons of record or beneficially upon the consummation of the
Reorganization based on shares outstanding at the record date.
<TABLE>
<CAPTION>
VISTA
Class and Amount Percentage of Percentage of
of Shares Owned Percentage of Portfolio Shares Portfolio Shares
and Type Class Owned on Owned on Owned on
Portfolio Name and Address of Ownership Record Date Record Date Consummation
- --------- ---------------- ---------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Small Cap Charles Schwab & Co. 491,496 13% 8.8% 4.9%
Equity Fund 101 Montgomery Street Class A Shares
San Francisco, CA 94104-4122 (record ownership)
Jupiter & Co. 374,952 10% 6.7% 3.7%
P.O. Box 1537 Top 57 Class A Shares
Boston, MA 02205-1537 (record ownership)
Large Cap Penlin & Co. 260,594 5% 5% 2.7%
Equity Fund c/o Chase Lincoln First Trust Class A Shares
One Lincoln First Square (record ownership)
Rochester, NY 14643-0001
Trulin & Co, 3,934,490 78% 78% 41%
c/o Chase Lincoln First Trust Class A Shares
One Lincoln First Square (record ownership)
Rochester, NY 14643-0001
Liva & Company 288,552 5% 5% 3%
c/o Chase Lincoln First Trust Class A Shares
One Lincoln First Square (record ownership)
Rochester, NY 14643-0001
Testa and Co. 443,038 8% 8% 4.6%
c/o Chase Manhattan Bank N.A. Class A Shares
P.O. Box 1412 (record ownership)
Rochester, NY 14603-1412
Short Term Trulin & Co. 2,716,143 74% 74% 58%
Bond Fund c/o Chase Lincoln First Trust Shares
One Lincoln First Square (record ownership)
Rochester, NY 14643-0001
Testa and Co. 349,395 9% 9% 7%
c/o Chase Manhattan Bank N.A. Shares
Attn: Mutual Funds/T-C (record ownership)
P.O. Box 1412
Rochester, NY 14603-1412
61
<PAGE>
<CAPTION>
Class and Amount Percentage of Percentage of
of Shares Owned Percentage of Portfolio Shares Portfolio Shares
and Type Class Owned on Owned on Owned on
Portfolio Name and Address of Ownership Record Date Record Date Consummation
- --------- ---------------- ---------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Bond Fund Trulin & Co. 4,988,084 91% 91% 91%
c/o Chase Lincoln First Trust Class A Shares
One Lincoln First Square (record ownership)
Rochester, NY 14643-0001
U.S. Carrier ILA Container Royalty 890,092 9% 9% 9%
Government Fund Class A Shares
Income Fund One Evertrust Plaza (record & beneficial
Jersey City, NJ 03702-3051 ownership)
Carriers ILA CFS Trust Fund 1,335,139 14% 13% .03%
One Evertrust Plaza Class A Shares
Jersey City, NJ 03702-3051 (record & beneficial
ownership)
Chase Manhattan Bank N.A. 795,990 8% 8% 8%
3 Chase Metro Tech Center Class A Shares
Brooklyn, NY 11245-0002 (record ownership)
Testa and Co. 479,924 5% 5% 5%
c/o Chase Manhattan Bank N.A. Class A Shares
P.O. Box 1412 (record ownership)
Rochester, NY 14603-1412
Trulin & Co. 1,335,139 14% 13% 13%
c/o Chase Lincoln First Trust Class A Shares
One Lincoln First Square (record ownership)
Rochester, NY 14603-1412
Global Fixed Cudd & Company 112,594 48% 40% 40%
Income Fund 1211 6th Avenue Class A Shares
New York, NY 10036-8701 (record ownership)
Cudd & Company 12,945 5% 4.7% 4.7%
1211 6th Avenue 35th Floor Class A Shares
New York, NY 10036-8701 (record ownership)
NFSC FEBO #CK7-640204 2,449 5% .89% .89%
NFSC/FMTC IRA Class B Shares
2312 SW 128 Ave. (record & beneficial
Miami, FL 33175-1940 ownership)
Barbara M. Martin 23,086 9% 8% 8%
David G. Martin JTWROS Class B Shares
7637 Chancellor Way (record & beneficial
Springfield, VA 22143-2344 ownership)
BHC Securities Inc. 5,010 12% 1.8% 1.8%
One Commerce Square Class B Shares
2005 Market Street Suite 1200 (record ownership)
Philadelphia, PA 19103-7042
Smith Barney 5,442 13% 1.9% 1.9%
388 Greenwich Street Class B Shares
New York, N.Y. 10013-2375 (record ownership)
62
<PAGE>
<CAPTION>
Class and Amount Percentage of Percentage of
of Shares Owned Percentage of Portfolio Shares Portfolio Shares
and Type Class Owned on Owned on Owned on
Portfolio Name and Address of Ownership Record Date Record Date Consummation
- --------- ---------------- ---------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Balanced Trulin & Co. 253,420 8% 7.4% 7.4%
Fund Chase Lincoln First Bank Class A Shares
One Linoln First Square (record ownership)
Rochester, NY 14643-0001
Chase Manhattan Bank N/A 637,259 22% 18.8% 18.8%
3 Chase Metro Tech Center Class A Shares
Brooklyn, NY 11245-0002 (record ownership)
Testa & Co. 572,338 20% 16.9% 16.9%
c/o Chase Manhattan Bank N.A. Class A Shares
P.O. Box 1412 (record ownership)
Rochester, NY 14603-1412
Growth & CMB Thrift Incentive Plan 6,126,168 13% 11% 11%
Income Fund 3 Metrotech Center 5th Fl Class A Shares
Brooklyn, NY 11245-0001 (record ownership)
International Liva & Company 113,591 5% 4% 4%
Equity c/o Chase Manhattan Bank N.A. Class A Shares
Fund P.O. Box 1412 (record ownership)
Rochester, NY 14603-1412
Cudd & Company 251,242 11% 9% 9%
1211 6th Avenue 35th Floor Class A Shares
New York, NY 10036-8701 (record ownership)
Capital Charles Schwab & Co. Inc. 1,701,408 7% 5.8% 5.8%
Growth Fund Reinvest Account Class A Shares
Attn: Mutual Funds Dept (record ownership)
101 Montgomery Street
San Francisco, CA 94104-4122
Japan Fund Cudd & Company 78,501 21% 21% 21%
Custody Division Class A Shares
1211 6th Avenue 35th Floor (record ownership)
New York, NY 10036-8701
Cudd & Company 259,740 69% 69% 69%
Custody Division Class A Shares
1211 6th Avenue 35th Floor (record ownership)
New York, NY 10036-8701
Anh-Hoang Duong 495 12% .13% .13%
15-83 144th Street Class B Shares
Whitestone, NY 11357-3011 (record & beneficial
ownership)
BHC Securities Inc. 1,939 48% .5% .5%
84305649 Class B Shares
Attn: Mutual Funds Dept (record & beneficial
One Commerce Square ownership)
2005 Market Street Suite 1200
Philadelphia, PA 19103-7042
BHC Securities Inc. 447 11% .1% .1%
84900540 Class B Shares
Attn: Mutual Funds Dept (record & beneficial
One Commerce Square ownership)
2005 Market Street Suite 1200
Philadelphia, PA 19103-7042
63
<PAGE>
<CAPTION>
Class and Amount Percentage of Percentage of
of Shares Owned Percentage of Portfolio Shares Portfolio Shares
and Type Class Owned on Owned on Owned on
Portfolio Name and Address of Ownership Record Date Record Date Consummation
- --------- ---------------- ---------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
BHC Securities Inc. 242 6% .06% .06%
84430931 Class B Shares
Attn: Mutual Funds Dept (record & beneficial
One Commerce Square ownership)
2005 Market Street Suite 1200
Philadelphia, PA 19103-7042
European Cudd & Company 275,418 61% 61% 61%
Fund 1211 6th Avenue Class A Shares
New York, NY (record ownership)
10036-8701
Peter Quinn 247 42% .05% .05%
6667 Chester Avenue Class B Shares
Philadelphia, PA 19142-1304 (record & beneficial
ownership)
Chase Manhattan Bank Cust 30 5% .006% .006%
FBO John Dowling Class B Shares
2547 Beech Street (record & beneficial
East Meadow, NY 11554-2101 ownership)
Chase Manhattan Bank Cust 103 17% .02% .02%
FBO Joel A. Beck Class B Shares
866 Hart Street (record & beneficial
Brooklyn, NY ownership)
11237-3226
Neal Crispin TTee 117 20% .02% .02%
1440 Chapin Ave. Class B Shares
Burlingame, CA (record & beneficial
94010-4001 ownership)
Chase Manhattan Bank Cust 59 10% .01% .01%
FBO Ann S. Dowling Class B Shares
2547 Beech Street (record & beneficial
East Meadow, NY 11554-2101 ownership)
Southeast Cudd & Company 153,379 31% 30% 30%
Asian Fund 1211 6th Avenue Class A Shares
New York, NY (record ownership)
10036-8701
Cudd & Company 257,649 52% 51% 51%
1211 6th Avenue Class A Shares
New York, NY (record ownership)
10036-8701
Cudd & Company 25,058 5% 5% 5%
1211 6th Avenue Class A Shares
New York, NY (record ownership)
10036-8701
NFSC FEBO #CL5-378356 1,894 20% .37% .37%
6430 211 Street Class B Shares
Bayside, NY (record & beneficial
11364-2121 ownership)
64
<PAGE>
<CAPTION>
Class and Amount Percentge of Percentage of
of Shares Owned Percentage of Portfolio Shares Portfolio Shares
and Type Class Owned on Owned on Owned on
Portfolio Name and Address of Ownership Record Date Record Date Consummation
- --------- ---------------- ---------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
IFTC Cust IRA A/C 524 5% .10% .10%
Silvio D. Debenedetto Class B Shares
228 Ueland Road (record & beneficial
Middletown, NJ ownership)
07701-5269
Cynthia A. Kohn 1,323 14% .26% .26%
3 Lynch CT Class B Shares
Voorhees, NJ (record & beneficial
08043-4120 ownership)
Midatlantic Assoc. of 1,773 19% .35% .35%
Building Tradesmen Class B Shares
63 Steele Way (record & beneficial
Huntington Valley, PA ownership)
19006-3115
</TABLE>
65
<PAGE>
HANOVER
<TABLE>
<CAPTION>
Class and Percentage of
Amount of Percentage of Corresponding
Shares Owned Percentage of Portfolio Shares Vista Portfolio
and Type of Class Owned on Owned on Shares Owned on
Portfolio Name and Address Ownership Record Date Record Date Consummation
- ------------------- ---------------------- --------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
The Hanover Chemical Bank 118,744 15.91% 15.91% 15.91%
American 270 Park Avenue Investor Shares
Value Fund New York, NY 10017-2014 (record ownership)
Balsa and Company 340,182 45.58% 45.58% 45.58%
c/o Chemical Bank Investor Shares
PO Box 1768 (record ownership)
Grand Central Station
New York, NY 10163
John L. Hoch 69,099 9.26% 9.26% 9.26%
P.O. Box 1558 Investor Shares
Pebble Beach, CA (beneficial ownership)
93953-1558
Donald F. Brannis 49,646 6.65% 6.65% 6.65%
100 No. San Rafael Ave. Investor Shares
Pasadena, CA 91105 (beneficial ownership)
The Hanover Short Voluntary Hospitals of 163,626 13.99% 13.99% 3.07%
Term America Southwest Inc. Investor Shares
U.S. Government 14901 Quarum Dr. (record and
Fund Suite 200 beneficial ownership)
Dallas TX 75240-7558
Mass. Mutual Agents 387,173 37.70% 37.70% 8.29%
Health Benefit Trust Investor Shares
1295 State St. (record and
Springfield, MA beneficial ownership)
01111-0001
Chemical Bank 173,671 16.91% 16.91% 3.72%
Personal Custody Investor Shares
270 Park Avenue (record ownership)
New York, NY 10017-2014
The Robert Oumons 79,775 7.77% 7.77% 1.71%
Living Trust Investor Shares
270 Park Avenue (beneficial
New York, NY 10017 ownership)
Austine Realty 93,897 9.14% 9.14% 2.01%
Company Investor Shares
270 Park Avenue (beneficial
New York, NY 10017 ownership)
The Hanover Chemical Bank Global 835,962 10.40% 10.40% 10.40%
U.S. Government Securities Services Investor Shares
Securities Fund ChemTrust (record ownership)
Attn: Kurt Nuemeister
6 New York Plaza, 6th
Fl.
New York, NY 10004-2413
Chemical Bank 1,106,234 13.77% 13.77% 13.77%
270 Park Avenue Investor Shares
New York, NY 10017-2014 (record ownership)
Alleghany Corp Retire 666,713 8.30% 8.30% 8.30%
200 Jericho Quad, 2nd., Investor Shares
N.E. (beneficial
P.O. Box 2000 ownership)
Jericho, NY 11753
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Class and Percentage of Corresponding
Amount of Portfolio Vista Portfolio
and Type of Class Owned on Owned on Shares Owned on
Portfolio Name and Address Ownership Record Date Record Date Consummation
- ------------------- ---------------------- --------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
The Hanover Blue Chemical Bank Global 397,032 8.79% 8.79% 4.17%
Chip Securities Services Investor Shares
Growth Fund ChemTrust (record ownership)
Attn: Kurt Nuemeister
6 New York Plaza, 6th
Fl.
New York, NY 10004-2413
Chemical Bank FBA 683,275 15.12% 15.12% 7.16%
Jericho Investor Shares
Alleghany Corp Retire (record ownership)
200 Jericho Quad
2nd N.E. Flr. PO Box
2000
Jericho, NY 11253
Thatcher Proffitt 301,416 6.67% 6.67% 3.16%
200 Jericho Quad, 2nd. Investor Shares
N.E. (beneficial
P.O. Box 2000 ownership)
Jericho, NY 11753
The Hanover Small Robert F X Sillerman 107,155 11.72% 11.72% 1.07%
Capitalization 150 E. 58th St. Investor Shares
Growth Fund New York, NY 10155-0099 (record and
beneficial ownership)
Chemical Bank FBA 56,452 6.17% 6.17% .57%
Jericho Investor Shares
Alleghany Corp Retire (record ownership)
200 Jericho Quad 2nd
N.E. Flr
PO Box 2000
Jericho, NY 11253
Chemical Bank PBT 117,740 12.88% 12.88% 1.18%
Employee Benefits Investor Shares
270 Park Avenue (record ownership)
New York, NY 10017-2014
Savings Incentive Plan 3,521,888 100% 79.38% 35.28%
of CBC Benefit
Chemical Bank and Shares
Certain (record ownership)
Affiliated Companies
Montclair Kimberly 48,638 5.32% 5.32% .49%
270 Park Avenue Investor Shares
New York, NY 10017-2014 (beneficial
ownership)
Morristown Memorial 69,102 7.56% 7.56% .69%
Hospital I/M Investor Shares
270 Park Avenue (beneficial ownership)
New York, NY 10017-2014
</TABLE>
67
<PAGE>
INFORMATION ABOUT HANOVER
Information concerning the operations and management of Hanover is
incorporated herein by reference from its current prospectuses and its
current statement of additional information (the "Hanover SAI") each dated
March 30, 1995 (except for the prospectus for The Hanover American Value
Fund, which is dated November 1, 1994), copies of which may be obtained
without charge by writing or calling Hanover at the address and telephone
number shown on the cover page of this Prospectus/Proxy Statement. Reports
and other information filed by Hanover can be inspected and copied at the
Public Reference Facilities maintained by the Securities and Exchange
Commission, located at 450 Fifth Street, N.W., Washington, D.C., and copies
of such material can be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549 at prescribed rates.
Hanover will furnish, without charge, a copy of Hanover's Annual Report
for the fiscal year ended November 30, 1995 to a shareholder upon request.
Such requests may be made to the Secretary, The Hanover Investment Funds,
Inc., 237 Park Avenue, New York, New York 10017 (1-800-821-2371).
FINANCIAL STATEMENTS AND EXPERTS
The financial statements for Vista Short Term Bond Fund, Vista Large Cap
Equity Fund and Vista Small Cap Equity Fund incorporated by reference into
this Prospectus/Proxy Statement have been so incorporated in reliance on the
reports of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in accounting and auditing.
The financial statements of The Hanover Short Term U.S. Government Fund,
The Hanover U.S. Government Securities Fund, The Hanover Blue Chip Growth
Fund, The Hanover Small Capitalization Growth Fund and The Hanover American
Value Fund as of November 30, 1995 incorporated by reference into this
Prospectus/Proxy Statement, have been incorporated herein in reliance on the
report of KPMG Peat Marwick LLP, independent certified public accountants,
given on the authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the Vista
Portfolios will be passed upon by Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, New York, New York.
68
<PAGE>
EXHIBIT A
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
AND LIQUIDATION
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION, dated as of December
18, 1995 (this "Agreement") between THE HANOVER INVESTMENT FUNDS, INC.
("Hanover"), a Maryland corporation comprised of separate investment
portfolios which include The Hanover Short Term U.S. Government Fund, The
Hanover U.S. Government Securities Fund, The Hanover Blue Chip Growth Fund,
The Hanover Small Capitalization Growth Fund and The Hanover American Value
Fund (each, a "Hanover Portfolio") and MUTUAL FUND GROUP ("MFG"), a
Massachusetts business trust comprised of separate investment portfolios
which include Vista Short Term Bond Fund, Vista Equity Fund and Vista Small
Cap Equity Fund, and which is expected to include, at the Effective Time of
the Reorganization (as defined herein), Vista U.S. Government Securities Fund
and Vista American Value Fund (each, an "MFG Portfolio").
In consideration of the mutual promises herein contained, the parties
hereto agree as follows:
SECTION 1. SHAREHOLDER APPROVAL
(a) Hanover Meeting of Shareholders. A meeting of the shareholders of
each Hanover Portfolio shall be called and held for the purpose of acting
upon this Agreement and the transactions contemplated herein. MFG shall
furnish to Hanover such data and information relating to MFG as shall be
reasonably requested by Hanover for inclusion in the information to be
furnished to such shareholders in connection with the meeting for the
purpose of acting upon this Agreement and the transactions contemplated
herein.
(b) MFG Meeting of Shareholders. A meeting of the shareholders of MFG
shall be called and held for the purpose of all of the shareholders of MFG
acting upon the matters referred to in clause (i) of Section 7(f) of this
Agreement, the shareholders of each MFG Portfolio acting upon the matters
referred to in clauses (ii) and (v) of Section 7(f) of this Agreement, and
the shareholders (or sole shareholder, in the case of Vista American Value
Fund) of the MFG Portfolios referred to in each of clauses (iii) and/or
(iv) of this Agreement acting upon the matters referred to therein.
SECTION 2. REORGANIZATION
The transactions described in this section are hereinafter referred to as
the "Reorganization." For the avoidance of doubt, MFG's investment portfolios
other than the MFG Portfolios (consisting of Vista U.S. Government Income
Fund, Vista Balanced Fund, Vista Bond Fund, Vista Equity Income Fund, Vista
IEEE Balanced Fund, Vista Growth and Income Fund, Vista Capital Growth Fund,
Vista International Equity Fund, Vista Global Fixed Income Fund, Vista
Southeast Asian Fund, Vista European Fund and Vista Japan Fund) and Hanover's
investment portfolios other than the Hanover Portfolios (consisting of The
Tax Free Income Fund, The New York Tax Free Income Fund, The New Jersey Tax
Free Income Fund, The International Equity Fund and The International Bond
Fund, each of which has not to date commenced investment operations) are not
parties to the Reorganization.
(a) Plan of Reorganization and Liquidation.
(1) Hanover will cause each Hanover Portfolio to convey, transfer
and deliver to the MFG Portfolio set forth opposite its name in the
table attached hereto as Schedule I (each such MFG Portfolio being the
"Corresponding MFG Portfolio" of the Hanover Portfolio set forth
opposite its name, and each such Hanover Portfolio being the
"Corresponding Hanover Portfolio" of the MFG Portfolio set forth
opposite its name) at the closing provided for in Section 2(b) hereof
(the "Closing") all of the then existing assets of such Hanover
Portfolio. In consideration thereof, MFG 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
<PAGE>
connection with the Reorganization); (4) to The Hanover Small
Capitalization Growth Fund, Class A Shares and Institutional Class
shares, as described in paragraph (2) below, of Vista Small Cap Equity
Fund; and (5) to the Hanover American Value Fund, shares of Vista
American Value Fund (the shares of the MFG Portfolios to be received
by the Hanover Portfolios in connection with the Reorganization are
referred to collectively as the "MFG Portfolio Shares"), with respect
to each class of each MFG Portfolio equal to that number of full and
fractional MFG Portfolio Shares as determined in Section 2(c) hereof.
Any shares of capital stock, par value $.001 per share, of the Hanover
Portfolios ("Hanover Portfolio Shares") held in the treasury of
Hanover on the Effective Time of the Reorganization (as defined in
Section 2(b) hereof) shall thereupon be retired.
(2) At the Effective Time of the Reorganization, each Hanover
Portfolio will liquidate and distribute pro rata to its holders of
Hanover Portfolio Shares as of the Effective Time of the
Reorganization the MFG Portfolio Shares of the Corresponding MFG
Portfolio received by such Hanover Portfolio pursuant to this Section
2(a). In the case of each Hanover Portfolio other than The Hanover
Small Capitalization Growth Fund, all shareholders of such Hanover
Portfolios will receive the MFG Portfolio Shares of the Corresponding
MFG Portfolio identified in Section 2(a)(1) above. In the case of the
Hanover Small Capitalization Growth Fund, shareholders of both the
"Investor Shares" and the "Advisor Shares" thereof will receive Class
A shares of the Vista Small Cap Equity Fund and shareholders of "CBC
Benefit Shares" thereof will receive Institutional Class shares of the
Vista Small Cap Equity Fund. Such liquidation and distribution will be
accompanied by the establishment of an account on the respective share
records of each MFG Portfolio in the name of each record holder of
Hanover Portfolio Shares of the Corresponding Hanover Portfolio and
representing the respective pro rata number of MFG Portfolio Shares
due such shareholder. Fractional MFG Portfolio Shares will be carried
to the third decimal place. Simultaneously with such crediting of MFG
Portfolio Shares to the shareholders, the Hanover Portfolio Shares
held by such shareholders shall be cancelled.
(3) As soon as practicable after the Effective Time of the
Reorganization, Hanover shall take all the necessary steps under
Maryland law and Hanover's Articles of Incorporation, as amended and
supplemented, to effect a complete dissolution of Hanover and to
deregister Hanover under the Investment Company Act of 1940, as
amended (the "Act").
(b) Closing and Effective Time of the Reorganization. Subject to the
satisfaction of the conditions to the Closing specified in this Agreement,
the Closing shall occur at 4:00 p.m., New York City time, on the day which
is the later of (i) the final adjournment of the meeting of the holders of
Hanover Portfolio Shares at which this Agreement will be considered, (ii)
the declaration by the Securities and Exchange Commission (the
"Commission") of the effectiveness of the First N-1A Amendment and the
Second N-1A Amendment (each as defined in Section 5(b) hereof), (iii) March
22, 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.
2
<PAGE>
All computations of value shall be made in accordance with the regular
practice of the MFG Portfolios as of the Effective Time by the agent then
responsible for pricing shares of the MFG Portfolios.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF MFG
MFG represents and warrants to Hanover as follows:
(a) Organization, Existence, etc. MFG is a business trust duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has the power to carry on its business
as it is now being conducted, and each MFG Portfolio is a validly existing
series of shares of such business trust representing interests therein
under the laws of Massachusetts. MFG has all necessary federal, state and
local authorization to own all of its properties and assets and to carry
on its business as now being conducted.
(b) Registration as Investment Company. MFG is registered under the Act
as an open-end investment company of the management type; such
registration has not been revoked or rescinded and is in full force and
effect.
(c) Current Offering Documents. The current prospectuses and statements
of additional information of MFG, dated March 1, 1995 with respect to each
of Vista Equity Fund and Vista Short Term Bond Fund and June 19, 1995 with
respect to Vista Small Cap Equity Fund, and included in MFG's registration
statement on Form N-1A filed with Commission, comply in all material
respects with the requirements of the Securities Act of 1933, as amended
(the "Securities Act") and the Act, and do not contain an untrue statement
of a material fact or omit to state a material fact necessary to make the
statements herein, in light of the circumstances under which they were
made, not misleading.
(d) Capitalization. MFG has an unlimited number of authorized shares of
beneficial interest, currently without par value, of which as of December
15, 1995 there were outstanding the following numbers of shares of the MFG
Portfolios: 3,650,761 shares of Vista Short Term Bond Fund (consisting of
a single class of shares), 4,401,525 shares of Vista Equity Fund
(consisting of a single class of shares) and 5,006,123 shares of Vista
Small Cap Equity Fund (consisting of 3,293,243 "Class A" Shares, 1,712,880
"Class B" Shares and zero "Institutional" Shares) and no shares were held
in the treasury of MFG. There are no outstanding shares of Vista U.S.
Government Securities Fund and Vista American Value Fund. All of the
outstanding shares of MFG have been duly authorized and are validly
issued, fully paid and nonassessable. Because MFG is an open-end
investment company engaged in the continuous offering and redemption of
its shares, the number of outstanding shares may change prior to the
Effective Time of the Reorganization. All of each MFG Portfolio's issued
and outstanding shares have been offered and sold in compliance in all
material respects with applicable registration requirements of the
Securities Act and applicable state securities laws.
(e) Financial Statements. The financial statements of MFG for the
fiscal year ended October 31, 1995, which have been audited by Price
Waterhouse LLP, (the "MFG Financial Statements"), previously delivered to
Hanover, fairly present the financial position of MFG as of the dates
thereof and the results of its operations and changes in its net assets
for each of the periods indicated, in accordance with GAAP.
(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.
3
<PAGE>
(h) Liabilities. There are no liabilities of MFG or the MFG
Portfolios, whether actual or contingent and whether or not determined or
determinable, other than liabilities disclosed or provided for in the MFG
Financial Statements and liabilities incurred in the ordinary course of
business subsequent to October 31, 1995 or otherwise previously disclosed
to Hanover, none of which has been materially adverse to the business,
assets or results of operations of MFG.
(i) No Material Adverse Change. Since October 31, 1995, there has been
no material adverse change in the financial condition, results of
operations, business, properties or assets of MFG, other than those
occurring in the ordinary course of business (for these purposes, a
decline in net asset value and a decline in net assets due to redemptions
do not constitute a material adverse change).
(j) Litigation. There are no claims, actions, suits or proceedings
pending or, to the knowledge of MFG, threatened which would adversely
affect MFG or the MFG Portfolios or MFG's assets or business or which
would prevent or hinder consummation of the transactions contemplated
hereby, there are no facts which would form the basis for the institution
of administrative proceedings against MFG and, to the knowledge of MFG,
there are no regulatory investigations of MFG pending or threatened, other
than routine inspections and audits.
(k) Contracts. Except for contracts and agreements disclosed to
Hanover on Schedule II hereto under which no default exists, MFG is not a
party to or subject to any material contract, debt instrument, plan,
lease, franchise, license or permit of any kind or nature whatsoever with
respect to the MFG Portfolios. As of the Effective Time of the
Reorganization, MFG will have no liability in respect of any of the
contracts referred to in Section 5(f) with respect to which MFG is to
receive releases.
(l) Taxes. The federal income tax returns of MFG and each MFG
Portfolio, and all other income tax returns required to be filed by MFG
and any MFG Portfolio, have been filed for all taxable years to and
including October 31, 1995, and all taxes payable pursuant to such returns
have been paid. To the knowledge of MFG, no such return is under audit and
no assessment has been asserted in respect of any such return. All federal
and other taxes owed by MFG or any MFG Portfolio have been paid so far as
due. Each portfolio of MFG, other than Vista U.S. Government Securities
Fund and Vista American Value Fund, which have not yet commenced
operations, is qualified as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"), in respect of each
taxable year since commencement of its operations.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF HANOVER
Hanover represents and warrants to MFG as follows:
(a) Organization, Existence, etc. Hanover is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Maryland and has the power to carry on its business as it is now
being conducted, and each Hanover Portfolio is a validly existing series
of shares of such corporation representing interests therein under the
laws of Maryland. Hanover has all necessary federal, state and local
authorization to own all of its properties and assets and to carry on its
business as now being conducted.
(b) Registration as Investment Company. Hanover is registered under
the Act as an open-end diversified investment company of the management
type; such registration has not been revoked or rescinded and is in full
force and effect.
(c) Current Offering Documents. The current prospectuses and statement
of additional information of Hanover, each dated March 30, 1995 (except
for the current prospectus and statement of additional information of The
American Value Fund which is dated November 1, 1994) and included in
Hanover's registration statement on Form N-1A filed with the Commission,
comply in all material respects with the requirements of the Securities
Act and the Act, and do not contain an untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(d) Capitalization. The authorized capital stock of Hanover consists
of 200,000,000 shares of Common Stock, each having a par value $.001 per
share. As of December 15, 1995, there were outstanding 1,032,104 shares of
The Hanover Short Term U.S. Government Fund (consisting of 1,032,099
"Investor Shares" and 5
4
<PAGE>
"Advisor Shares"), 8,327,159 shares of The Hanover U.S. Government
Securities Fund (consisting of 8,324,278 "Investor Shares" and 2,881
"Advisor Shares"), 4,657,159 shares of The Hanover Blue Chip Growth Fund
(consisting of 4,652,389 "Investor Shares" and 5,224 "Advisor Shares"),
3,475,729 shares of The Hanover Small Capitalization Growth Fund
(consisting of 883,003 "Investor Shares," 1,002 "Advisor Shares" and
2,591,724 "CBC Benefit" Shares) and 698,326 shares of The Hanover American
Value Fund (consisting of 698,117 "Investor Shares" and 209 "Advisor
Shares"), and no shares were held in the treasury of Hanover. All of the
outstanding shares of Hanover have been duly authorized and are validly
issued, fully paid and nonassessable. Because Hanover is an open-end
investment company engaged in the continuous offering and redemption of
its shares, the number of outstanding shares may change prior to the
Effective Time of the Reorganization. All such shares will, at the time of
the Closing, be held by the shareholders of record of the Hanover
Portfolios as set forth on the books and records of Hanover's transfer
agent (and in the amounts set forth therein) and as set forth in any list
of shareholders of record provided to MFG for purposes of the Closing, and
no such shareholders of record will have any preemptive rights to purchase
any of such shares, and Hanover does not have outstanding any options,
warrants or other rights to subscribe for or purchase any shares (other
than dividend reinvestment plans of the Hanover Portfolios or as set forth
in this Agreement), nor are there outstanding any securities convertible
into any shares of the Hanover Portfolios (except pursuant to exchange
privileges described in the current Prospectus and Statement of Additional
Information of Hanover). All of each Hanover Portfolio's issued and
outstanding shares have been offered and sold in compliance in all
material respects with applicable registration requirements of the
Securities Act and applicable state securities laws.
(e) Financial Statements. The financial statements of Hanover for the
year ended November 30, 1994, which have been audited by KPMG Peat Marwick
LLP, and the unaudited financial statements of Hanover for the six months
ended May 31, 1995 (collectively, the "Hanover Financial Statements"),
previously delivered to MFG, fairly present the financial position of
Hanover as of the date thereof, and the results of its operations and
changes in its net assets for the periods indicated, in accordance with
GAAP.
(f) Authority Relative to this Agreement. Hanover has the power to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by its Board of
Directors, and, except for approval by the shareholders of Hanover, no
other proceedings by Hanover are necessary other than those contemplated
by this Agreement to authorize its officers to effectuate this Agreement
and the transactions contemplated hereby. Hanover is not a party to or
obligated under any charter, by-law, indenture or contract provision or
any other commitment or obligation, or subject to any order or decree,
which would be violated by or which would prevent its execution and
performance of this Agreement in accordance with its terms.
(g) Liabilities. There are no liabilities of Hanover, whether actual
or contingent and whether or not determined or determinable, other than
liabilities disclosed or provided for in the Hanover Financial Statements
and liabilities incurred in the ordinary course of business subsequent to
May 31, 1995 or otherwise previously disclosed to MFG, none of which has
been materially adverse to the business, assets or results of Hanover.
(h) No Material Adverse Change. Since May 31, 1995, there has been no
material adverse change in the financial condition, results of operations,
business, properties or assets of Hanover, other than those occurring in
the ordinary course of business (for these purposes, a decline in net
asset value and a decline in net assets due to redemptions do not
constitute a material adverse change).
(i) Litigation. There are no claims, actions, suits or proceedings
pending or, to the knowledge of Hanover, threatened which would adversely
affect Hanover or its assets or business or which would prevent or hinder
consummation of the transactions contemplated hereby, there are no facts
which would form the basis for the institution of administrative
proceedings against Hanover and, to the knowledge of Hanover, there are no
regulatory investigations of Hanover pending or threatened, other than
routine inspections and audits.
(j) Contracts. Except for contracts and agreements disclosed to MFG on
Schedule II hereto under which no default exists, Hanover is not a party
to or subject to any material contract, debt instrument, plan, lease,
franchise, license or permit of any kind or nature whatsoever. As of the
Effective Time of the Reorganization, Hanover will have no liability in
respect of any of the contracts referred to in Section 6(e) with respect
to which Hanover is to receive releases.
5
<PAGE>
(k) Taxes. The federal income tax returns of Hanover and each Hanover
Portfolio, and all other income tax returns required to be filed by
Hanover, have been filed for all taxable years to and including the
taxable year ended November 30, 1994, and all taxes payable pursuant to
such returns have been paid. To the knowledge of Hanover, no such return
is under audit and no assessment has been asserted in respect of any such
return. All federal and other taxes owed by Hanover or any Hanover
Portfolio have been paid so far as due. Each Hanover Portfolio has
qualified as a regulated investment company under the Code in respect of
each taxable year since commencement of its operations.
SECTION 5. COVENANTS OF MFG
MFG covenants to Hanover as follows:
(a) Portfolio Securities. All securities owned by MFG as of the
Effective Time of the Reorganization will be owned by MFG free and clear
of any liens, claims, charges, options and encumbrances, except as may be
indicated in a schedule delivered by MFG to Hanover immediately prior to
the Effective Time of the Reorganization or as may be permitted under the
Act.
(b) Formation of New Portfolios; Amendment of Registration Statement
on Form N-1A. Prior to the Effective Time of the Reorganization, MFG will
take all steps necessary to cause the formation and registration of Vista
U.S. Government Securities Fund and Vista American Value Fund, including
filing an amendment or amendments to MFG's registration statement on Form
N-1A (collectively, the "First N-1A Amendment") with the Commission
relating to the registration of shares of Vista U.S. Government Securities
Fund and Vista American Value Fund. The investment objective and policies
of Vista U.S. Government Securities Fund and Vista American Value Fund
will conform with the descriptions thereof contained in the Prospectus and
Statement of Additional Information in the form presented to the Hanover
Board of Directors. MFG will not issue any shares of Vista U.S. Government
Securities Fund and Vista American Value Fund prior to the Effective Time
of the Reorganization except as contemplated by this Agreement. Prior to
the Effective Time of the Reorganization, MFG will also file an amendment
to MFG's registration statement on Form N-1A (the "Second N-1A Amendment")
with the Commission to conform the descriptions of the MFG Portfolios in
such registration statement with the descriptions of the MFG Portfolios in
the Registration Statement (as defined in Section 5(c) hereof), as the
Registration Statement may be amended or supplemented prior to the
Effective Time of the Reorganization.
(c) Registration Statement. MFG shall file with the Commission a
Registration Statement on Form N-14 (the "Registration Statement") under
the Securities Act relating to the MFG Portfolio Shares issuable
hereunder. At the time the Registration Statement becomes effective, the
Registration Statement (i) will comply in all material respects with the
provisions of the Securities Act and the rules and regulations of the
Commission thereunder (the "Regulations") and (ii) will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; and at the time the Registration Statement becomes
effective, at the time of the shareholders' meeting referred to in Section
1(a) hereof, and at the Effective Time of the Reorganization, the
prospectus/proxy statement (the "Prospectus") and statement of additional
information included therein (the "Statement of Additional Information"),
as amended or supplemented by any amendments or supplements filed by MFG,
will not contain an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that none of the representations and warranties in this
subsection shall apply to statements in or omissions from a Registration
Statement, Prospectus or Statement of Additional Information made in
reliance upon and in conformity with information furnished by Hanover for
use in the Registration Statement, Prospectus or Statement of Additional
Information as provided in Section 6(b) hereof.
(d) Cooperation in Effecting Reorganization. MFG agrees to use all
reasonable efforts (by taking such actions as may be necessary or
advisable) to effectuate the Reorganization, to continue in operation
thereafter, and to obtain any necessary regulatory approvals. MFG will
cooperate fully with Hanover in preparing and effecting any filings with
the Federal Trade Commission required under federal antitrust laws with
respect to the proposed Reorganization.
6
<PAGE>
(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
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
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of shareholders referred to in Section 1(a) of this Agreement, and to
obtain any necessary regulatory approvals. Hanover will cooperate fully
with MFG in preparing and effecting any filings with the Federal Trade
Commission required under federal antitrust laws with respect to the
proposed Reorganization. Hanover will assist MFG in obtaining such
information as MFG reasonably requests concerning the beneficial ownership
of the shares of the Hanover Portfolios.
(d) Operations in the Ordinary Course. Except as otherwise
contemplated by this Agreement, Hanover shall conduct its business in the
ordinary course until the consummation of the Reorganization.
(e) Contract Terminations. Hanover shall, prior to the consummation of
the Reorganization, terminate its agreements with The Portfolio Group,
Inc. (with respect to The Hanover U.S. Government Securities Fund and The
Hanover Blue Chip Growth Fund), Chemical Bank New Jersey, National
Association (with respect to The Hanover Small Capitalization Growth
Fund), Texas Commerce Bank, National Association (with respect to The
Hanover Short Term U.S. Government Fund) and Van Deventer & Hoch (with
respect to The Hanover American Value Fund), Chemical Bank, Furman Selz
Incorporated, Hanover Funds Distributor, Inc., and each of the financial
institutions with whom Hanover has entered into a shareholder servicing
agreement (as set forth in Schedule II hereto) for Investment Advisory,
Administration, Administration and Fund Accounting, Custody, Distribution,
Transfer Agency, Sub-Transfer Agency and Shareholder Servicing services,
as the case may be, such terminations to be effective as of the Effective
Time of the Reorganization.
SECTION 7. CONDITIONS TO OBLIGATIONS OF HANOVER
The obligations of Hanover hereunder with respect to the consummation of
the Reorganization as it relates to each Hanover Portfolio are subject to the
satisfaction of the following conditions:
(a) Approval by Hanover Shareholders. This Agreement and the
transactions contemplated by the Reorganization, including, when
necessary, a temporary amendment of the investment restrictions that might
otherwise preclude the consummation of the Reorganization, shall have been
approved by the requisite vote of the shares of each Hanover Portfolio
entitled to vote in the matter.
(b) Covenants, Warranties and Representations. MFG shall have complied
with each of its covenants contained herein, each of the representations
and warranties contained herein shall be true in all material respects as
of the Effective Time of the Reorganization (except as otherwise
contemplated herein), there shall have been no material adverse change (as
defined in Section 3(i) in the financial condition, results of operations,
business, properties or assets of the MFG Portfolios since October 31,
1995, and Hanover shall have received a certificate of the President of
MFG satisfactory in form and substance to Hanover so stating. Hanover
shall also have received certificates of (i) The Chase Manhattan Bank,
N.A., in its capacity as investment adviser to MFG and as MFG's
administrator, and (ii) Vista Broker-Dealer Services, Inc., in its
capacity as MFG's distributor, in each case to the effect that, as of the
Effective Time of the Reorganization, such entity is not aware that any of
the representations and warranties of MFG herein is not true in all
material respects.
(c) Regulatory Approval. The Registration Statement, the First N-1A
Amendment and the Second N-1A Amendment shall each have been declared
effective by the Commission, no stop orders under the Securities Act
pertaining thereto shall have been issued and all approvals,
registrations, and exemptions under federal and state laws considered to
be necessary shall have been obtained.
(d) Tax Opinion. Hanover shall have received the opinion of Simpson
Thacher & Bartlett dated on or before the date of the Closing, addressed
to and in form and substance satisfactory to Hanover, as to certain of the
federal income tax consequences under the Code of the Reorganization,
insofar as it relates to each Hanover Portfolio and its Corresponding MFG
Portfolio, and to shareholders of each Hanover Portfolio. For purposes of
rendering their opinion, Simpson Thacher & Bartlett may rely exclusively
and without independent verification, as to factual matters, upon the
statements made in this Agreement, the prospectus/proxy statement which
will be distributed to the shareholders of the Hanover Portfolios in
connection with the Reorganization, and upon such other written
representations as the President of each of Hanover and MFG will have
verified as of the Effective Time of the Reorganization. The opinion of
Simpson Thacher & Bartlett will be to the effect that, based on the facts
and assumptions stated therein, for federal income tax purposes: (i) the
Reorganization
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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 the management type registered under the Act; (iii) this Agreement and
the Reorganization provided for herein and the execution of this Agreement
have been duly authorized and approved by all requisite action of MFG and
this Agreement has been duly executed and delivered by MFG and is a valid
and binding obligation of MFG enforceable against MFG in accordance with
its terms, except as affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing; (iv) the Registration Statement
has been declared effective under the Securities Act and to such counsel's
knowledge after reasonable investigation no stop order has been issued or
threatened suspending its effectiveness; (v) to such counsel's knowledge,
no consent, approval, order or other authorization of any federal or New
York state or Massachusetts state court or administrative or regulatory
agency is required for MFG to enter into this Agreement or carry out its
terms that has not already been obtained, other than where the failure to
obtain any such consent, approval, order or authorization would not have a
material adverse effect on the operations of MFG; (vi) to such counsel's
knowledge, MFG is not in breach or violation of any material contract
listed on Schedule II hereto to which it is a party, which breach or
violation would (a) affect the ability of MFG to enter into this Agreement
or consummate the transactions contemplated hereby, including the
Reorganization, or (b) have a material adverse effect on the business or
financial condition of MFG; (vii) to such counsel's knowledge, no federal
or New York state or Massachusetts state administrative or regulatory
proceeding is pending or threatened against MFG which would (a) affect the
ability of MFG to enter into this Agreement or consummate the transactions
contemplated hereby, including the Reorganization, or (b) have a material
adverse effect on the business or financial condition of MFG; and (viii)
the MFG Portfolio Shares to be issued in the Reorganization have been duly
authorized and upon issuance thereof in accordance with this Agreement,
will be validly issued, fully paid and nonassessable. In rendering such
opinion, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel may rely on the
opinion of Massachusetts counsel as to matters relating to Massachusetts
law and on certificates of officers and/or trustees of MFG as to factual
matters.
(f) Board of Trustees Approvals. The Board of Trustees of MFG shall
have taken the following action with respect to MFG or the MFG Portfolios,
as the case may be, at a meeting duly called for such purposes:
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(i) approval of the selection of Price Waterhouse LLP as MFG's
independent auditors for the fiscal year ending October 31, 1996, on
terms acceptable to the Hanover Board of Directors;
(ii) approval of an investment advisory agreement with The Chase
Manhattan Bank, N.A. with respect to each MFG Portfolio, in each case
in the form presented to the Hanover Board of Directors;
(iii) approval of sub-investment advisory agreements between The
Chase Manhattan Bank, N.A. and Van Deventer & Hoch with respect to
Vista American Value Fund, and between The Chase Manhattan Bank, N.A.
and Chase Asset Management, Inc., with respect to each other MFG
Portfolio, in each case in the form presented to the Hanover Board of
Directors;
(iv) approval of the application of MFG's distribution plan(s)
pursuant to Rule 12b-1 under the Act to Class A shares of Vista Short
Term Bond Fund and shares of Vista American Value Fund, to conform
with the Prospectus and Statement of Additional Information in the
form presented to the Hanover Board of Directors, as the Prospectus
and Statement of Additional Information may be amended or supplemented
at the time of the shareholders' meeting referred to in Section 1(a)
hereof;
(v) approval of the modification of certain fundamental investment
limitations of the MFG Portfolios and certain other investment
policies to conform with the descriptions thereof contained in the
Prospectus and Statement of Additional Information in the form
presented to the Hanover Board of Directors or as may be amended or
supplemented at the time of the shareholders' meeting referred to in
Section 1(a) hereof; and
(vi) creation of Class A shares in Vista Short Term Bond Fund, and
creation of Institutional Class shares in Vista U.S. Government
Securities Fund, Vista Equity Fund and Vista Small Cap Equity Fund,
and authorization of the issuance by MFG, immediately prior to the
Effective Time of the Reorganization, of one Institutional Class share
of Vista U.S. Government Securities Fund of MFG and one share of Vista
American Value Fund of MFG to Vista Broker Dealer Services ("VBDS") in
consideration for payment equal to the net asset value per Investor
Share of The Hanover U.S. Government Securities Fund and The Hanover
American Value Fund, respectively, for the purpose of enabling VBDS to
vote on the matters referred to in paragraph (g) of Section 8.
(g) Trustees and Officers Insurance. Chemical Banking Corporation
and/or The Chase Manhattan Corporation shall have purchased trustees and
officers liability insurance coverage referred to in Section 10(b) of this
Agreement.
(h) Contract Terminations. Hanover shall have terminated the
agreements referred to in Section 6(e) of this Agreement as provided
therein.
(i) Bank Holding Company Merger. The merger of The Chase Manhattan
Corporation with and into Chemical Banking Corporation shall have been
consummated.
SECTION 8. CONDITIONS TO OBLIGATIONS OF MFG
The obligations of MFG hereunder with respect to the consummation of the
Reorganization as it relates to each MFG Portfolio are subject to the
satisfaction of the following conditions:
(a) Approval by Shareholders. This Agreement and the transactions
contemplated by the Reorganization, including, when necessary, a temporary
amendment of the investment restrictions that might otherwise preclude the
consummation of the Reorganization, shall have been approved by the
requisite vote of the shares of each Hanover Portfolio entitled to vote on
the matter.
(b) Covenants, Warranties and Representations. Hanover shall have
complied with each of its covenants contained herein, each of the
representations and warranties contained herein shall be true in all
material respects as of the Effective Time of the Reorganization (except
as otherwise contemplated herein), there shall have been no material
adverse change (as defined in Section 4(h)) in the financial condition,
results of operations, business, properties or assets of the Hanover
Portfolios since November, 1995, and MFG shall have received a certificate
of the President of Hanover satisfactory in form and substance to MFG so
stating. MFG
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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.
(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,
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to the effect that (i) Hanover is a corporation duly organized and validly
existing under the laws of the State of Maryland and each Hanover
Portfolio is a validly existing series of shares of such corporation; (ii)
Hanover is an open-end investment company of the management type
registered under the Act; (iii) this Agreement and the Reorganization
provided for herein and the execution of this Agreement have been duly
authorized and approved by all requisite corporate action of Hanover and
this Agreement has been duly executed and delivered by Hanover and is a
valid and binding obligation of Hanover enforceable against Hanover in
accordance with its terms, except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing; (iv) to such counsel's
knowledge, no consent, approval, order or other authorization of any
federal or New York state or Maryland state court or administrative or
regulatory agency is required for Hanover to enter into this Agreement or
carry out its terms that has not already been obtained other than where
the failure to obtain any such consent, approval, order or authorization
would not have a material adverse effect on the operations of Hanover; (v)
to such counsel's knowledge, Hanover is not in breach or violation of any
material contract listed on Schedule II hereto to which it is a party,
which breach or violation would (a) affect the ability of Hanover to enter
into this Agreement or consummate the transactions contemplated hereby,
including the Reorganization, or (b) have a material adverse effect on the
business or financial condition of Hanover; and (vi) to such counsel's
knowledge, no federal or New York state or Maryland state administrative
or regulatory proceeding is pending or threatened against Hanover which
would (a) affect the ability of Hanover to enter into this Agreement or
consummate the transactions contemplated hereby, including the
Reorganization, or (b) have a material adverse effect on the business or
financial condition of Hanover. In rendering such opinion, Simpson Thacher
& Bartlett may rely on the opinion of Maryland counsel as to matters
relating to Maryland law, and on certificates of officers and/or trustees
of Hanover as to factual matters.
(g) Vote by the Sole Shareholder of Vista U.S. Government Securities
Fund and Vista American Value Fund. VBDS shall have voted, immediately
after becoming the sole shareholder of Institutional Class shares of Vista
U.S. Government Securities Fund of MFG, and prior to the receipt by
Hanover of any Vista U.S. Government Securities Fund shares and VBDS shall
have voted, immediately after becoming the sole shareholder of shares of
Vista American Value Fund of MFG, and prior to the receipt by Hanover of
any of Vista American Value Fund shares, to:
(i) approve the investment advisory agreement between MFG and The
Chase Manhattan Bank, N.A. with respect to Vista U.S. Government
Securities Fund and Vista American Value Fund as contemplated by
Section 7(f) hereof;
(ii) approve the investment sub-advisory agreement between The
Chase Manhattan Bank, N.A. and Van Deventer & Hoch as contemplated by
Section 7(f) hereof (to be voted on only in the case of the sole
shareholder of Vista American Value Fund) or the investment
sub-advisory agreement between The Chase Manhattan Bank, N.A. and
Chase Asset Management, Inc. as contemplated by Section 7(f) hereof
(to be voted on only in the case of the sole shareholder of Vista U.S.
Government Securities Fund);
(iii) approve MFG's distribution plan pursuant to Rule 12b-1 under
the Act for shares of Vista American Value Fund as contemplated by
Section 7(f) hereof (to be voted on only in the case of the sole
shareholder of Vista American Value Fund);
(iv) approve all persons who are to be Trustees of MFG effective
upon consummation of the Reorganization as Trustees of MFG; and
(v) approve the selection of Price Waterhouse LLP as MFG's
independent auditors for the fiscal year ending October 31, 1996.
(h) Contract Terminations. Hanover shall have terminated the
agreements referred to in Section 6(e) of this Agreement as provided
therein.
(i) Bank Holding Company Merger. The merger of The Chase Manhattan
Corporation with and into Chemical Banking Corporation shall have been
consummated.
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SECTION 9. AMENDMENTS; TERMINATIONS; NO SURVIVAL OF COVENANTS, WARRANTIES AND
REPRESENTATIONS
(a) Amendments. The parties hereto may, by agreement in writing
authorized by their respective Board of Trustees or Board of Directors,
amend this Agreement at any time before or after approval hereof by the
shareholders of Hanover or MFG or both, but after such approval, no
amendment shall be made which substantially changes the terms hereof.
(b) Waivers. At any time prior to the Effective Time of the
Reorganization, either of the parties hereto may by written instrument
signed by it (i) waive any inaccuracies in the representations and
warranties made to it contained herein and (ii) waive compliance with any
of the covenants or conditions made for its benefit contained herein,
except that neither party may waive the conditions set forth in Sections
7(c) or 8(d) hereof.
(c) Termination by Hanover. Hanover may terminate this Agreement at
any time prior to the Effective Time of the Reorganization by notice to
MFG and Chemical Banking Corporation if (i) a material condition to its
performance hereunder or a material covenant of MFG contained herein shall
not be fulfilled on or before the date specified for the fulfillment
thereof or (ii) a material default or material breach of this Agreement
shall be made by MFG.
(d) Termination by MFG. MFG may terminate this Agreement at any time
prior to the Effective Time of the Reorganization by notice to Hanover and
Chemical Banking Corporation if (i) a material condition to its
performance hereunder or a material covenant of Hanover contained herein
shall not be fulfilled on or before the date specified for the fulfillment
thereof or (ii) a material default or material breach of this Agreement
shall be made by Hanover.
(e) Termination by Either Hanover or MFG. This Agreement may be
terminated by Hanover or MFG at any time prior to the Effective Time of
the Reorganization, whether before or after approval of this Agreement by
the shareholders of Hanover, without liability on the part of either party
hereto, its respective Directors, Trustees, officers or shareholders, or
Chemical Banking Corporation, on notice to the other parties in the event
that such party's Board of Directors or Board of Trustees, as the case may
be, determines that proceeding with this Agreement is not in the best
interest of that party's shareholders. Unless the parties hereto shall
otherwise agree in writing, this Agreement shall terminate without
liability as of the close of business on July 31, 1996 if the Effective
Time of the Reorganization is not on or prior to such date.
(f) Survival. No representations, warranties or covenants in or
pursuant to this Agreement (including certificates of officers), except
for the provisions of Section 10 of this Agreement, shall survive the
Reorganization.
SECTION 10. EXPENSES; INSURANCE
(a) Except as otherwise specified in this Section 10, the expenses of
the Reorganization will be borne by Chemical Banking Corporation and/or
The Chase Manhattan Corporation. Such expenses include, without
limitation, (i) expenses incurred in connection with the entering into and
the carrying out of the provisions of this Agreement; (ii) expenses
associated with the preparation and filing of the Registration Statement
under the Securities Act covering the MFG Portfolio Shares to be issued
pursuant to the provisions of this Agreement (other than registration fees
payable to the Commission in respect of the registration of such shares,
which shall be payable by the respective MFG Portfolios in which such
shares represent interests); (iii) registration or qualification fees and
expenses of preparing and filing such forms as are necessary under
applicable state securities laws to qualify the Corresponding MFG
Portfolio Shares to be issued in connection herewith in each state in
which shareholders of the Corresponding Hanover Portfolios are resident as
of the date of the mailing of the Prospectus to such shareholders; (iv)
postage; (v) printing; (vi) accounting fees; (vii) legal fees and (viii)
solicitation costs relating to the Reorganization.
(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.
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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) 581-6091
with a copy to:
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue
New York, New York 10022
Attention: Carl Frischling, Esq.
Facsimile: (212) 715-8000
(c) if to Chemical Banking Corporation, to it at:
270 Park Avenue 48th Floor
New York, New York 10017
Attention: Gary N. Gordon
Facsimile: (212) 270-4173
with a copy to:
c/o Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Molly Sheehan, Esq.
Facsimile: (212) 270-1224
(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
with a copy to:
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
14
<PAGE>
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.
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.
MUTUAL FUND GROUP
By: /s/ Fergus Reid, III
THE HANOVER INVESTMENT FUNDS, INC.
By: /s/ W. Perry Neff
Accepted and agreed to as to Sections 8(c) and 10:
CHEMICAL BANKING CORPORATION
By: /s/ William B. Harrison, Jr.
THE CHASE MANHATTAN CORPORATION
By: /s/ Leonard M. Spalding, Jr.
15
<PAGE>
SCHEDULE I
to Agreement
CORRESPONDING PORTFOLIOS OF THE HANOVER INVESTMENT FUNDS, INC.
AND MUTUAL FUND GROUP
<TABLE>
<CAPTION>
<S> <C>
Hanover Portfolios Corresponding MFG Portfolios
- --------------------------------------------- -------------------------------------
The Hanover Short Term U.S. Government Fund Vista Short Term Bond Fund
The Hanover U.S. Government Securities Fund Vista U.S. Government Securities Fund
The Hanover Blue Chip Growth Fund Vista Equity Fund
The Hanover Small Capitalization Growth Fund Vista Small Cap Equity Fund
The Hanover American Value Fund Vista American Value Fund
</TABLE>
<PAGE>
SCHEDULE II
to Agreement
MATERIAL CONTRACTS OF MUTUAL FUND GROUP AND THE HANOVER INVESTMENT FUNDS, INC.
I. Mutual Fund Group
1. Investment Advisory Agreements between MFG and The Chase Manhattan
Bank, N.A. with respect to each of the following portfolios.
a. Vista Equity Fund, dated December 31, 1992.
b. Vista Small Cap Equity Fund, dated December 19, 1994.
c. Vista Short Term Bond Fund dated December 31, 1992.
2. Administration Agreement between MFG and The Chase Manhattan Bank,
N.A., dated as of January 1, 1989, as amended September 30, 1993.
3. Distribution and Sub-Administration Agreement dated as of August 24,
1995, between MFG and Vista Broker-Dealer Services, Inc.
4. Custodian Agreement, dated November 1, 1990, between MFG and The Chase
Manhattan Bank, N.A.
5. Transfer Agency Agreement, dated as of February 2, 1995, between MFG
and DST Systems, Inc.
6. Sub-Transfer Agency Agreement, dated as of January 1, 1995, between
Buck Consultants, Inc. and MFG (applicable with respect to Small Cap
Equity Fund only).
7. Shareholder Servicing Agreement, dated as of August 19, 1987, between
MFG and The Chase Manhattan Bank, N.A.
8. Amendment to Shareholder Servicing Agreement, dated as of April 4,
1991, between MFG and The Chase Manhattan Bank, N.A. and Chase Lincoln
First Bank, N.A.
9. Shareholder Servicing Agreement, dated as of January 1, 1995, between
Buck Consultants, Inc. and MFG (applicable with respect to Small Cap
Equity Fund only).
10. Share Purchase Agreement, dated August 28, 1987, between MFG and Vista
Financial Services, Inc.
II. The Hanover Investment Funds, Inc.
1. Investment Advisory Agreement, dated September 1, 1995, between Hanover
and Texas Commerce Bank, National Association, with respect to The
Hanover Short Term U.S. Government Fund.
2. Investment Advisory Agreements, each dated December 18, 1992, between
Hanover and The Portfolio Group, Inc. with respect to The Hanover U.S.
Government Securities Fund and The Hanover Blue Chip Growth Fund.
3. Investment Advisory Agreement, dated November 8, 1995, between Hanover
and Chemical Bank New Jersey, National Association (formerly known as
Princeton Bank and Trust Company, National Association) with respect to
The Hanover Small Capitalization Growth Fund.
4. Investment Advisory Agreement, dated October 13, 1994, between Hanover
and Van Deventer & Hoch with respect to The Hanover American Value
Fund.
5. Distribution Agreement, dated December 18, 1992, between Hanover and
Hanover Funds Distributor, Inc.
6. Custodian Agreement, dated December 17, 1992, between Hanover and
Chemical Bank.
7. Administration Agreement, dated December 18, 1992, between Hanover and
Furman Selz Incorporated.
<PAGE>
8. Accounting Services Agreement, dated February 1, 1995, between Hanover
and Furman Selz Incorporated.
9. Administration Agreement, dated December 17, 1992, and amended
February 10, 1995, between Hanover and Chemical Bank.
10. Transfer Agency Agreement, dated December 18, 1992, between Hanover
and Chemical Bank.
11. Sub-Transfer Agency Agreement, dated December 18, 1992, among Hanover,
Chemical Bank and Furman Selz Incorporated.
12. Shareholder Servicing Agreement, dated December 17, 1992, between
Hanover and Chemical Bank.
13. Shareholder Servicing Agreement, dated December 18, 1992, between
Hanover and Furman Selz Incorporated.
14. Shareholder Servicing Agreement, dated December 17, 1992, between
Hanover and Chemical Bank New Jersey, N.A.
15. Shareholder Servicing Agreement, dated July 15, 1994, between Hanover
and Chemical Investment Services Corp.
16. Shareholder Servicing Agreement, dated December 17, 1992, between
Hanover and Chemical Investor Services.
17. Shareholder Servicing Agreement, dated December 17, 1992, between
Hanover and Chemical Bank Florida.
18. Shareholder Servicing Agreement, dated December 17, 1992, between
Hanover and Chemical Trust Company of California.
19. Shareholder Servicing Agreement, dated December 17, 1992, between
Hanover and Princeton Bank and Trust Company.
20. Shareholder Servicing Agreement, dated May 10, 1995, between Hanover
and Chemical FSB.
21. Shareholder Servicing Agreement, dated December 17, 1992, between
Hanover and Texas Commerce Bank, National Association.
22. Shareholder Servicing Agreement, dated December 17, 1992, between
Hanover and Chemical Securities, Inc.
23. Shareholder Servicing Agreement, dated December 17, 1992, between
Hanover and Chemical Bank Delaware.
24. Shareholder Servicing Agreement, dated December 17, 1992, between
Hanover and Texas Commerce Brokerage Company.
25. Shareholder Servicing Agreement, dated December 17, 1992, between
Hanover and Smith Barney Shearson.
<PAGE>
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 304 of Regulation S-T, the following table presents fair
and accurate narrative descriptions of graphic and image material omitted
from this EDGAR Submission File due to ASCII-incompatibility and cross-
references this material to the location of each occurrence in the text.
DESCRIPTION OF OMITTED LOCATION OF GRAPHIC OR IMAGE
GRAPHIC OR IMAGE IN TEXT
- ------------------------ -------------------------------------------------
Gray shading in tables Page 11 of prospectus, at third and fourth
columns of table
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MUTUAL FUND GROUP
This Statement of Additional Information is not a prospectus. A
Prospectus/Proxy Statement, dated , 1996 may be obtained by
writing or calling Mutual Fund Group at 12 W. 55th Street, New York, New York
10022 (1-800-34-VISTA). Further information about Mutual Fund Group is
contained in and incorporated by reference into its Statement of Additional
Information relating to the Vista Large Cap Equity Fund and the Vista Short
Term Bond Fund, dated March 1, 1995 (the "Vista Equity/Bond SAI"), its
Statement of Additional Information relating to Class A Shares of the Vista
Small Cap Equity Fund dated June 19, 1995 and its Statement of Additional
Information relating to Institutional Shares of the Vista Small Cap Equity
Fund dated January 8, 1996 (collectively, the "Vista Small Cap SAI"), its
Statement of Additional Information relating to the Vista U.S. Government
Securities Fund, dated the date hereof, and its Statement of Additional
Information relating to the Vista American Value Fund, dated the date hereof,
each of which is incorporated herein by reference. Also incorporated herein
by reference are the audited financial statements of Mutual Fund Group
relating to the Vista Short Term Bond Fund, the Vista Large Cap Equity Fund
(currently known as the Vista Equity Fund) and the Vista Small Cap Equity
Fund included in the Annual Report to Shareholders of Mutual Fund Group for
the fiscal year ended October 31, 1995, and the audited financial statements
of The Hanover Investment Funds, Inc. relating to The Hanover U.S. Government
Securities Fund and The Hanover American Value Fund included in the Annual
Report to Shareholders of The Hanover Investment Funds, Inc. for the fiscal
year ended November 30, 1995.
, 1996
<PAGE>
Upon consummation of the Reorganization, the investment restrictions and
policies set forth in the Vista Equity/Bond SAI under the caption "Investment
Restrictions" will be revised as set forth below with respect to each of the
Vista Large Cap Equity Fund and the Vista Short Term Bond Fund, and the
investment restrictions and policies set forth in the Vista Small Cap SAI
under the caption "Investment Restrictions" will be revised as set forth below
with respect to the Vista Small Cap Equity Fund, assuming, with respect to
fundamental restrictions, that shareholder approvals of the changes thereby
effected are obtained with respect to such Vista Portfolio:
As matter of fundamental policy, each such Vista Portfolio will not be
permitted to:
(1) borrow money, except that each Vista Portfolio may borrow money for
temporary or emergency purposes, or by engaging in reverse repurchase
transactions, in an amount not exceeding 33-1/3% of the value of its total
assets at the time when the loan is made and may pledge, mortgage or
hypothecate no more than 1/3 of its net assets to secure such borrowings. Any
borrowings representing more than 5% of a Vista Portfolio's total assets must
be repaid before the Vista Portfolio may make additional investments;
(2) make loans, except that each Vista Portfolio may: (i) purchase and hold
debt instruments (including without limitation, bonds, notes, debentures or
other obligations and certificates of deposit, bankers' acceptances and fixed
time deposits) in accordance with its investment objectives and policies;
(ii) enter into repurchase agreements with respect to portfolio securities;
and (iii) lend portfolio securities with a value not in excess of one- third
of the value of its total assets;
(3) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or repurchase agreements secured thereby) if, as a result,
more than 25% of the Vista Portfolio's total assets would be invested in the
securities of companies whose principal business activities are in the same
industry. Notwithstanding the foregoing, with respect to a Vista Portfolio's
permissible futures and options transactions in U.S. government securities
positions in such options and futures shall not be subject to this
restriction;
(4) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments but this shall not prevent a
Vista Portfolio from (i) purchasing or selling options and futures contracts
or from investing in securities or other instruments backed by physical
commodities or (ii) engaging in forward purchases or sales of foreign
currencies or securities;
(5) purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent a Vista Portfolio
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business). Investments by
a Vista Portfolio in securities backed by mortgages on real estate or in
marketable securities of companies engaged in such activities are not hereby
precluded;
(6) issue any senior security (as defined in the 1940 Act), except that (a) a
Vista Portfolio may engage in transactions that may result in the issuance of
senior securities to the extent permitted under applicable regulations and
interpretations of the 1940 Act or an exemptive order; (b) a Vista Portfolio
may acquire other securities, the acquisition of which may result in the
issuance of a senior security, to the extent permitted under applicable
regulations or interpretations of the 1940 Act; and (c) subject to the
restrictions set forth above, a Vista Portfolio may borrow money as
authorized by the 1940 Act. For purposes of this restriction, collateral
arrangements with respect to a Vista Portfolio's permissible options and
futures transactions, including deposits of initial and variation margin, are
not considered to be the issuance of a senior security; or
(7) underwrite securities issued by other persons except insofar as a Vista
Portfolio may technically be deemed to be an underwriter under the
Securities Act of 1933 in selling a portfolio security.
For purposes of investment restriction (5) above, real estate includes Real
Estate Limited Partnerships. For purposes of investment restriction (3)
industrial development bonds, where the payment of principal and interest is the
ultimate responsibility of companies within the same industry, are grouped
together as an "industry."
In addition, each such Vista Portfolio will be subject to the following
nonfundamental restrictions which may be changed without shareholder
approval:
(1) Each Vista Portfolio may not, with respect to 50% (75% with respect to
the Vista Short Term Bond Fund and the Vista Large Cap Equity Fund) of its
assets, hold more than 10% of the outstanding voting securities of an issuer.
2
<PAGE>
(2) Each Vista Portfolio may not make short sales of securities, other than
short sales "against the box," or purchase securities on margin except for
short-term credits necessary for clearance of portfolio transactions,
provided that this restriction will not be applied to limit the use of
options, futures contracts and related options, in the manner otherwise
permitted by the investment restrictions, policies and investment program of
a Vista Portfolio.
(3) Each Vista Portfolio may not purchase or sell interests in oil, gas or
mineral leases.
(4) Each Vista Portfolio may not invest more than 15% of its net assets in
illiquid securities.
(5) Each Vista Portfolio may not write, purchase or sell any put or call
option or any combination thereof, provided that this shall not prevent (i)
the writing, purchasing or selling of puts, calls or combinations thereof
with respect to portfolio securities or (ii) with respect to a Vista
Portfolio's permissible futures and options transactions, the writing,
purchasing, ownership, holding or selling of futures options positions or of
puts, calls or combinations thereof with respect to futures.
(6) Each Vista Portfolio 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.
Notwithstanding any other investment policy or restriction, a Vista Portfolio
may seek to achieve its investment objective by investing all of its investable
assets in another investment company having substantially the same investment
objective and policies as the Vista Portfolio.
If a percentage or rating restriction on investment or use of assets set
forth herein or in the Prospectus is adhered to at the time a transaction is
effected, later changes in percentage or ratings resulting from any cause other
than actions by a Vista Portfolio will not be considered a violation. If the
value of a Vista Portfolio's holdings of illiquid securities at any time exceeds
the percentage limitation applicable at the time of acquisition due to
subsequent fluctuations in value or other reasons, the Board of Trustees will
consider what actions, if any, are appropriate to maintain adequate liquidity.
It is Vista's position that proprietary strips such as CATS and TIGRS are
United States Government securities. However, Vista 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.
For purposes of the Vista Portfolios' investment restrictions, the issuer of
a tax-exempt security is deemed to be the entity (public or private) ultimately
responsible for the payment of the principal of and interest on the security.
3
<PAGE>
MUTUAL FUND GROUP
PRO FORMA FINANCIAL STATEMENTS
See notes to financial statements.
PF-1
<PAGE>
VISTA SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS
October 31, 1995
Unaudited
<TABLE>
<CAPTION>
Vista Vista
Short-Term Short-Term
Bond Bond
Issuer Principal Value
- -------------------------------------- ---------------------------- ---------- -----------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS
CORPORATE BONDS AND NOTES
Financial Services--
Associates Corp., N.A. 6.000%, due 12/01/95 $1,000,000 $ 999,400
CNA Financial 8.625%, due 03/01/96 500,000 503,685
Dow Capital BV 5.750%, due 09/15/97 250,000 248,470
Dow Capital BV 8.250%, due 02/15/96 500,000 502,820
Ford Motor Credit Corp. 9.850%, due 02/27/96 1,000,000 1,011,430
General Motors Acceptance Corp. 7.750%, due 12/10/96 200,000 203,698
Household Finance Corp. 7.500%, due 03/15/97 500,000 510,160
Lehman Brothers Holdings 5.890%, due 01/12/99 1,000,000 977,290
Merrill Lynch 5.875%, due 12/01/95 900,000 899,298
Morgan Stanley Group 8.875%, due 04/01/96 475,000 480,154
PACCAR Financial Corp. 4.530%, due 10/21/96 1,400,000 1,380,750
----------
7,717,155
----------
Food and Beverage Products--
PepsiCo, Inc., 5.000%, due 02/24/97 215,000 212,439
PepsiCo, Inc. 7.875%, due 08/15/96 500,000 506,930
----------
719,369
----------
Telecommunications--
Pacific Northwest Bell Telephone Corp. 7.500%, due 12/01/96 1,000,000 1,015,160
Southwestern Bell Telephone Corp. 8.300%, due 06/01/96 500,000 506,440
----------
1,521,600
----------
TOTAL CORPORATE BONDS AND NOTES 9,958,124
----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS
U.S. Treasury Notes 4.000%, due 01/31/96 -- --
4.375%, due 08/15/96 2,000,000 1,981,240
5.375%, due 05/31/98 -- --
5.625%, due 10/31/97 500,000 500,155
5.875%, due 05/31/96 2,000,000 2,003,120
6.000%, due 11/30/97 2,000,000 2,014,680
6.000%, due 12/31/97 750,000 755,505
6.125%, due 05/31/97 -- --
6.125%, due 05/31/97 1,000,000 1,007,190
6.125%, due 05/15/98 1,000,000 1,010,470
6.250%, due 08/31/00 -- --
6.500%, due 04/30/97 -- --
6.500%, due 08/15/97 -- --
6.500%, due 08/15/97 1,400,000 1,420,342
6.750%, due 05/31/97 2,000,000 2,032,820
6.875%, due 10/31/96 -- --
7.000%, due 09/30/96 1,500,000 1,518,285
7.250%, due 02/15/98 500,000 516,560
7.375%, due 11/15/97 2,500,000 2,581,650
7.500%, due 01/31/97 1,000,000 1,022,340
8.750%, due 10/15/97 1,000,000 1,056,870
----------
19,421,227
----------
</TABLE>
See notes to financial statements.
PF-2
<PAGE>
<TABLE>
<CAPTION>
Hanover Hanover
Short-Term Short-Term Pro-Forma Pro-Forma
U.S. Gov't U.S. Gov't Combined Combined
Issuer Principal Value Principal Value
- -------------------------------------- ------------ ----------- ------- ----------
<S> <C> <C> <C> <C>
LONG-TERM INVESTMENTS
CORPORATE BONDS AND NOTES
Financial Services--
Associates Corp., N.A. $ -- $ -- $1,000,000 $ 999,400
CNA Financial -- -- 500,000 503,685
Dow Capital BV -- -- 250,000 248,470
Dow Capital BV -- -- 500,000 502,820
Ford Motor Credit Corp. -- -- 1,000,000 1,011,430
General Motors Acceptance Corp. -- -- 200,000 203,698
Household Finance Corp. -- -- 500,000 510,160
Lehman Brothers Holdings -- -- 1,000,000 977,290
Merrill Lynch -- -- 900,000 899,298
Morgan Stanley Group -- -- 475,000 480,154
PACCAR Financial Corp. -- -- 1,400,000 1,380,750
---------- --------
-- 7,717,155
---------- --------
Food and Beverage Products--
PepsiCo, Inc., -- -- 215,000 212,439
PepsiCo, Inc. -- -- 500,000 506,930
---------- --------
-- 719,369
---------- --------
Telecommunications--
Pacific Northwest Bell Telephone Corp. -- -- 1,000,000 1,015,160
Southwestern Bell Telephone Corp. -- -- 500,000 506,440
---------- --------
-- 1,521,600
---------- --------
TOTAL CORPORATE BONDS AND NOTES -- 9,958,124
---------- --------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS
U.S. Treasury Notes 722,000 719,278 722,000 719,278
-- -- 2,000,000 1,981,240
1,747,000 1,733,845 1,747,000 1,733,845
-- -- 500,000 500,155
-- -- 2,000,000 2,003,120
-- -- 2,000,000 2,014,680
-- -- 750,000 755,505
1,429,000 1,439,260 1,429,000 1,439,260
-- -- 1,000,000 1,007,190
-- -- 1,000,000 1,010,470
1,497,000 1,527,105 1,497,000 1,527,105
764,000 773,519 764,000 773,519
1,640,000 1,663,780 1,640,000 1,663,780
-- -- 1,400,000 1,420,342
-- -- 2,000,000 2,032,820
266,000 269,253 266,000 269,253
-- -- 1,500,000 1,518,285
-- -- 500,000 516,560
-- -- 2,500,000 2,581,650
-- -- 1,000,000 1,022,340
-- -- 1,000,000 1,056,870
---------- ---------- --------
8,126,040 27,547,267
---------- ---------- --------
</TABLE>
See notes to financial statements.
PF-2
<PAGE>
<TABLE>
<CAPTION>
Vista Vista
Short-Term Short-Term
Bond Bond
Issuer Principal Value
- ------------------------------------------- --------------------------------- ------------ ----------
<S> <C> <C> <C>
Federal Home Loan Bank 4.444%, due 10/22/96 $1,000,000 $ 973,740
--------
Federal National Mortgage Association 5.680%, due 10/07/96 1,000,000 999,690
("FNMA") 6.270%, due 04/03/96 1,000,000 1,002,600
--------
2,002,290
--------
Federal National Mortgage Association
Series 1991-131 Class G TAC CMO REMIC 7.600% due 10/25/98 -- --
--------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS 22,397,257
--------
TOTAL LONG-TERM INVESTMENTS 32,355,381
--------
SHORT-TERM INVESTMENTS
REPURCHASE AGREEMENT
Morgan Stanley & Co., Inc. 5.850%, due 11/01/95
Dated 10/31/95; Proceeds $3,230,525,
Secured by FNMA REMIC; $223,444 at 5.70%,
due 3/25/08; FNMA REMIC, Interest Only,
$88,398,000, due 8/25/20; Market Value
$3,534,388
TOTAL SHORT-TERM INVESTMENTS 3,230,000 3,230,000
--------
TOTAL INVESTMENTS $35,585,381
========
</TABLE>
<TABLE>
<CAPTION>
Hanover Hanover
Short-Term Short-Term Pro-Forma Pro-Forma
U.S. Gov't U.S. Gov't Combined Combined
Issuer Principal Value Principal Value
- ------------------------------------------- --------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
Federal Home Loan Bank $ -- $ -- $1,000,000 $ 973,740
---------- ------------- ------------
Federal National Mortgage Association -- -- 1,000,000 999,690
("FNMA") -- -- 1,000,000 1,002,600
---------- ------------- ------------
-- 2,002,290
------------- ------------
Federal National Mortgage Association
Series 1991-131 Class G TAC CMO REMIC 2,041,740 2,106,323 2,041,740 2,106,323
---------- ------------- ------------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS 10,232,363 32,629,620
------------- ------------
TOTAL LONG-TERM INVESTMENTS 10,232,363 42,587,744
------------- ------------
SHORT-TERM INVESTMENTS
REPURCHASE AGREEMENT
Morgan Stanley & Co., Inc.
Dated 10/31/95; Proceeds $3,230,525,
Secured by FNMA REMIC; $223,444 at 5.70%,
due 3/25/08; FNMA REMIC, Interest Only,
$88,398,000, due 8/25/20; Market Value
$3,534,388
TOTAL SHORT-TERM INVESTMENTS -- -- 3,230,000 3,230,000
------------- ------------
TOTAL INVESTMENTS $10,232,363 $45,817,744
============= ============
</TABLE>
- ------------
REMIC = Real Estate Mortgage Investment Conduit
See notes to financial statements.
PF-3
<PAGE>
VISTA SHORT TERM BOND FUND
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
10/31/95
Unaudited
<TABLE>
<CAPTION>
Vista Hanover
Short-Term Short-Term Pro Forma Pro Forma
Bond US Gov't Adjustments Combined
-------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment securities, at value $35,585,381 $ 10,232,363 $ 0 $ 45,817,744
Cash 60 14,289 0 14,349
Receivables
Interest 556,618 171,003 0 727,621
Shares of beneficial interest sold 197,584 0 0 197,584
Other receivables 0 44,989 0 44,989
Other Assets 553 0 0 553
------------ ---------- ----------- ------------
Total assets 36,340,196 10,462,644 0 46,802,840
------------ ---------- ----------- ------------
LIABILITIES:
Dividends payable 9,779 46,903 0 56,682
Other liabilities 0 904 0 904
Accrued liabilities:
Distribution fee 907 0 0 907
Fund accounting fees 0 2,747 0 2,747
Shareholder servicing fees 0 2,214 0 2,214
Sub-administration fee 1,512 0 0 1,512
Payable to custodian 0 2,106 0 2,106
Other 82,250 8,282 0 90,532
------------ ---------- ----------- ------------
Total liabilities 94,448 63,156 0 157,604
------------ ---------- ----------- ------------
NET ASSETS
Paid in capital 36,437,682 11,160,201 0 47,597,883
Accumulated undistributed net investment income 41,697 0 0 41,697
Accumulated undistributed net realized gain
(loss) on investment transactions (398,582) (834,554) 0 (1,233,136)
Net unrealized appreciation of investments 164,951 73,841 0 238,792
------------ ---------- ----------- ------------
Net assets $36,245,748 $ 10,399,488 0 $ 46,645,236
============ ========== =========== ============
Net assets by class
A $ 0 $ 10,399,488 0 $ 10,399,488
------------ ---------- ----------- ------------
I 36,245,748 0 0 36,245,748
------------ ---------- ----------- ------------
Total combined net assets by class $36,245,748 $ 10,399,488 0 $ 46,645,236
============ ========== =========== ============
Shares of beneficial interest outstanding (no par
value; unlimited number of shares authorized):
A 0 1,064,431 (32,735)(11) 1,031,695
============ ========== =========== ============
I 3,595,666 0 0 3,595,666
============ ========== =========== ============
Net asset value and redemption price per share
Class A (net assets/shares outstanding) $ 0.00 $ 9.77 $ 0.00 $ 10.08
============ ========== =========== ============
Net asset value and redemption price per share
Class I (net assets/shares outstanding) $ 10.08 $ 0.00 $ 0.00 $ 10.08
============ ========== =========== ============
Cost of Investments $35,420,430 $10,162,364 $ 0 $ 45,582,794
============ ========== =========== ============
</TABLE>
See notes to financial statements.
PF-4
<PAGE>
VISTA SHORT TERM BOND FUND
PRO FORMA STATEMENT OF OPERATIONS
For the year ended
10/31/95
Unaudited
<TABLE>
<CAPTION>
Vista Hanover
Short-Term Short-Term Pro Forma Pro Forma
Bond US Gov't Adjustments Combined
-------------- ---------------- ---------------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME $1,956,373 $783,165 $ 0 $2,739,538
------------ -------------- -------------- ---------
EXPENSES
Distribution fees
A 0 0 25,999(1),(5) 25,999
I 85,353 0 (85,353)(4) 0
Fund Accounting 0 30,602 (30,602)(8) 0
Insurance 0 581 0 581
Shareholder Servicing fees
A 0 26,198 (199)(5) 25,999
I 0 0 90,614(3) 90,614
Administration fees 34,141 5,615 4,784(1) 44,540
Advisory fees 85,353 43,674 (17,675)(1) 111,352
Sub-Administration fees 17,071 3,744 1,456(1) 22,271
Professional fees 31,804 10,450 (10,450)(8) 31,804
Custodian fees 0 7,687 48,978(6) 56,665
Printing and postage 2,646 7,305 0 9,951
Registration costs 496 14,454 0 14,950
Transfer agent fees
A 0 6,694 1,434(7) 8,128
I 37,383 0 (18,513)(7) 18,870
Trustee fees 1,874 1,047 (595)(9) 2,326
Amortization of organizational
costs 6,730 16,334 (16,334)(8) 6,730
Other 3,614 2,822 0 6,436
------------ -------------- ---------------- ---------
Total expenses 306,465 177,207 (6,457) 477,215
------------ -------------- ---------------- ---------
Less net amounts waived/borne by
the Administrator, Shareholder
Servicing
Agents, Adviser and
Distributor 197,311 87,138 (22,226)(10) 262,223
------------ -------------- ---------------- ---------
Net expenses 109,154 90,069 15,770 214,993
------------ -------------- ---------------- ---------
Net investment income 1,847,219 693,096 (15,770) 2,524,545
------------ -------------- ---------------- ---------
REALIZED AND UNREALIZED GAIN/
(LOSS) ON INVESTMENTS
Realized gain (loss) on
investment transactions (1,467) 12,101 0 10,634
Change in net unrealized
appreciation/depreciation of
investments 556,820 218,793 0 775,613
------------ -------------- ---------------- ---------
Net realized and unrealized gain
on investments 555,353 230,894 0 786,247
------------ -------------- ---------------- ---------
Net increase in net assets
from operations $2,402,572 $923,990 $ (15,770) $3,310,792
============ ============== ================ =========
</TABLE>
See notes to financial statements.
PF-5
<PAGE>
VISTA LARGE CAP EQUITY
PORTFOLIO OF INVESTMENTS
October 31, 1995
Unaudited
<TABLE>
<CAPTION>
Vista Vista Hanover Hanover Pro-Forma Pro-Forma
Equity Equity Blue Chip Blue Chip Combined Combined
Issuer Shares Value Shares Value Shares Value
- ------------------------------ ------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
LONG-TERM INVESTMENTS--
COMMON STOCK--
Advertising--
Katz Media Group, Inc.* -- $-- 28,000 $ 504,000 28,000 $ 504,000
-------- -------- ----------
Aerospace--
AlliedSignal, Inc., 9,400 399,500 -- -- 9,400 399,500
General Dynamics Corp. -- -- 20,000 1,107,500 20,000 1,107,500
General Motors Class H 14,500 609,000
Loral Corp. 16,800 497,700 -- -- 16,800 497,700
United Technologies, Corp. 4,800 426,000 -- -- 4,800 426,000
-------- -------- ----------
1,932,200 1,107,500 3,039,700
-------- -------- ----------
Agriculture--
Case Corp. 10,500 400,312 -- -- 10,500 400,312
Deere & Co 5,400 482,625 -- -- 5,400 482,625
-------- -------- ----------
882,937 -- 882,937
-------- -------- ----------
Airlines--
AMR Corp.* 4,300 283,800 -- -- 4,300 283,800
-------- -------- ----------
Automotive--
Chrysler Corp. 7,602 392,453 -- -- 7,602 392,453
Echlin, Inc. 16,300 582,725 -- -- 16,300 582,725
Ford Motor Company 16,500 474,375 -- -- 16,500 474,375
General Motors Corp. 7,300 319,375 -- -- 7,300 319,375
-------- -------- ----------
1,768,928 -- 1,768,928
-------- -------- ----------
Banking--
Bank of New York Company, Inc. 14,400 604,800 -- -- 14,400 604,800
BayBanks, Inc. -- -- 13,000 1,053,000 13,000 1,053,000
Citicorp 14,200 921,225 -- 14,200 921,225
Fifth Third Bancorp -- -- 25,000 1,681,250 25,000 1,681,250
First Bank System Inc. 7,800 388,050 -- -- 7,800 388,050
First Interstate Bankcorp 3,500 451,500 -- -- 3,500 451,500
Great Western Financial Corp. -- -- 51,200 1,158,400 51,200 1,158,400
NationsBank Corp. 5,400 355,050 -- -- 5,400 355,050
Norwest Corp. 8,500 250,750 -- -- 8,500 250,750
-------- -------- ----------
2,971,375 3,892,650 6,864,025
-------- -------- ----------
Chemicals--
Air Products & Chemicals, Inc. 10,000 516,250 -- -- 10,000 516,250
duPont (EI) deNemours and Co. 12,800 798,400 -- -- 12,800 798,400
Eastman Chemical Co. 6,700 398,650 -- -- 6,700 398,650
Union Carbide Corp. Holding Co. -- -- 44,900 1,700,588 44,900 1,700,588
-------- -------- ----------
1,713,300 1,700,588 3,413,888
-------- -------- ----------
</TABLE>
See notes to financial statements.
PF-6
<PAGE>
VISTA LARGE CAP EQUITY
PORTFOLIO OF INVESTMENTS
October 31, 1995
Unaudited -- (Continued)
<TABLE>
<CAPTION>
Vista Vista Hanover Hanover Pro-Forma Pro-Forma
Equity Equity Blue Chip Blue Chip Combined Combined
Issuer Shares Value Shares Value Shares Value
- ------------------------------------ ------- ---------- ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Computer Software--
Automatic Data Processing, Inc. -- $-- 20,000 $1,430,000 20,000 $1,430,000
Cisco Systems, Inc.* -- -- 18,100 1,402,750 18,100 1,402,750
Computer Associates International
Inc. 12,750 701,250 -- -- 12,750 701,250
First Data Corp. -- -- 17,700 1,170,412 17,700 1,170,412
General Motors Corp., Class E 10,600 499,525 -- -- 10,600 499,525
-------- ------------ -----------
1,200,775 4,003,162 5,203,937
-------- ------------ -----------
Computers/Computer Hardware--
Apple Computer Inc. 9,400 341,338 -- -- 9,400 341,338
Compaq Computer Corp.* 22,400 1,248,800 -- -- 22,400 1,248,800
Seagate Technology, Inc.* -- -- 25,800 1,154,550 25,800 1,154,550
Sun Microsystems, Inc.* 21,700 1,692,600 -- -- 21,700 1,692,600
-------- ------------ -----------
3,282,738 1,154,550 4,437,288
-------- ------------ -----------
Construction Machinery--
Caterpillar Inc. 12,500 701,563 -- -- 12,500 701,563
-------- ------------ -----------
Consumer Products--
Black & Decker Corp. 17,100 579,262 -- -- 17,100 579,262
Philip Morris Companies, Inc 5,300 447,850 -- -- 5,300 447,850
Procter & Gamble Co. 4,600 372,600 18,000 1,458,000 22,600 1,830,600
Whirlpool Corp. 8,000 424,000 -- -- 8,000 424,000
-------- ------------ -----------
1,823,712 1,458,000 3,281,712
-------- ------------ -----------
Diversified--
ITT Corp. 2,600 318,500 -- -- 2,600 318,500
Textron, Inc. 6,500 446,875 -- -- 6,500 446,875
-------- ------------ -----------
765,375 -- 765,375
-------- ------------ -----------
Electronics/Electrical Equipment--
AMP, Inc. -- -- 33,000 1,295,250 33,000 1,295,250
Eaton Corp. 5,300 271,625 -- -- 5,300 271,625
Emerson Electric Co. -- -- 18,200 1,296,750 18,200 1,296,750
General Electric Co. 5,400 341,550 22,000 1,391,500 27,400 1,733,050
Hewlett-Packard Co. 4,000 370,500 15,000 1,389,375 19,000 1,759,875
Lattice Semiconductor Corp.* -- -- 29,000 1,138,250 29,000 1,138,250
Littelfuse, Inc.* -- -- 37,000 1,202,500 37,000 1,202,500
Texas Instruments Inc. 16,300 1,112,475 -- -- 16,300 1,112,475
-------- ------------ -----------
2,096,150 7,713,625 9,809,775
-------- ------------ -----------
Environmental Services--
Browning-Ferris Industries, Inc. 12,800 372,800 -- -- 12,800 372,800
WMX Technologies, Inc. -- -- 34,000 956,250 34,000 956,250
-------- ------------ -----------
372,800 956,250 1,329,050
-------- ------------ -----------
Entertainment--
Time Warner, Inc. -- -- 30,000 1,095,000 30,000 1,095,000
-------- ------------ -----------
Federal Credit Agencies--
Federal National Mortgage
Association -- -- 10,000 1,048,750 10,000 1,048,750
-------- ------------ -----------
</TABLE>
See notes to financial statements.
PF-7
<PAGE>
VISTA LARGE CAP EQUITY
PORTFOLIO OF INVESTMENTS
October 31, 1995
Unaudited -- (Continued)
<TABLE>
<CAPTION>
Vista Vista Hanover Hanover Pro-Forma Pro-Forma
Equity Equity Blue Chip Blue Chip Combined Combined
Issuer Shares Value Shares Value Shares Value
- --------------------------------- ------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Financial Services--
American General Delaware 17,000 $ 558,875 -- $ -- 17,000 $ 558,875
Countrywide Credit Industries,
Inc. -- -- 45,000 995,625 45,000 995,625
Dean Witter, Discover & Co. 9,300 462,675 -- -- 9,300 462,675
Donaldson Lufkin & Jenrette Inc.* 10,000 297,500 -- -- 10,000 297,500
Federal Home Loan Mortgage Corp. 5,000 346,250 -- -- 5,000 346,250
Federal National Mortgage Assoc. 6,900 723,638 -- -- 6,900 723,638
-------- -------- -----------
2,388,938 995,625 3,384,563
-------- -------- -----------
Food/Beverages--
Anheuser-Busch Companies, Inc. 5,000 330,000 -- -- 5,000 330,000
Archer Daniels-Midland Corp. 16,275 262,434 -- -- 16,275 262,434
Coca-Cola Co. 4,800 345,000 -- -- 4,800 345,000
Coca-Cola Enterprises, Inc. 11,000 292,875 -- -- 11,000 292,875
ConAgra, Inc. 11,500 444,188 -- -- 11,500 444,188
PepsiCo., Inc. 9,200 485,300 25,000 1,318,750 34,200 1,804,050
Quaker Oats Co 8,300 283,238 -- -- 8,300 283,238
Sara Lee Corp. 10,700 314,313 -- -- 10,700 314,313
-------- -------- -----------
2,757,348 1,318,750 4,076,098
-------- -------- -----------
Health Care--
Abbott Laboratories -- -- 26,000 1,033,500 26,000 1,033,500
Amgen, Inc.* -- -- 20,000 960,000 20,000 960,000
Baxter International Inc. 14,000 540,750 -- -- 14,000 540,750
Bristol-Myers Squibb Co. -- -- 15,000 1,143,750 15,000 1,143,750
Columbia/HCA Healthcare Corp. 9,000 442,125 16,000 786,000 25,000 1,228,125
Elan Corp. PLC Sponsored ADR* -- -- 24,000 963,000 24,000 963,000
Genzyme Corp.* -- -- 21,600 1,258,200 21,600 1,258,200
Johnson & Johnson -- -- 8,000 652,000 8,000 652,000
Manor Care, Inc. 12,600 412,650 -- -- 12,600 412,650
Medaphis Corp.* -- -- 30,000 952,500 30,000 952,500
Pfizer, Inc. -- -- 16,000 918,000 16,000 918,000
Tenet Healthcare Corp.,* 27,000 482,625 -- -- 27,000 482,625
-------- -------- -----------
1,878,150 8,666,950 10,545,100
-------- -------- -----------
Insurance--
Allstate Corp. 8,806 323,621 -- -- 8,806 323,621
American International Group Inc. 7,650 645,469 -- -- 7,650 645,469
American Re Corp. -- -- 28,200 1,078,650 28,200 1,078,650
Chubb Corp. 5,300 476,337 -- -- 5,300 476,337
Exel Ltd. -- -- 19,400 1,037,900 19,400 1,037,900
Selective Insurance Group -- -- 35,000 1,303,750 35,000 1,303,750
St. Paul Companies, Inc. 9,600 487,200 -- -- 9,600 487,200
Transamerica Corp. 5,000 338,750 -- -- 5,000 338,750
-------- -------- -----------
2,271,377 3,420,300 5,691,677
-------- -------- -----------
Machinery--
Veeco Instruments, Inc.* -- -- 13,700 328,800 13,700 328,800
-------- -------- -----------
</TABLE>
See notes to financial statements.
PF-8
<PAGE>
VISTA LARGE CAP EQUITY
PORTFOLIO OF INVESTMENTS
October 31, 1995
Unaudited -- (Continued)
<TABLE>
<CAPTION>
Vista Vista Hanover Hanover Pro-Forma Pro-Forma
Equity Equity Blue Chip Blue Chip Combined Combined
Issuer Shares Value Shares Value Shares Value
- -------------------------------- ------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mainfold Business Forms--
New England Business Service,
Inc. -- $ -- 43,000 $ 827,750 43,000 $ 827,750
-------- -------- ----------
Manufacturing--
Johnson Controls Inc. 13,600 792,200 -- -- 13,600 792,200
Kennametal Inc. 8,200 255,225 -- -- 8,200 255,225
Tyco International Ltd. -- -- 23,900 1,451,925 23,900 1,451,925
Varity Corp.* 18,500 670,625 -- -- 18,500 670,625
-------- -------- ----------
1,718,050 1,451,925 3,169,975
-------- -------- ----------
Medical Products--
Medtronic, Inc. -- -- 40,000 2,310,000 40,000 2,310,000
-------- -------- ----------
Metals/Mining--
Aluminum Co. of America (ALCOA) 14,400 734,400 -- -- 14,400 734,400
Inco, Ltd. 20,100 690,938 -- -- 20,100 690,938
Phelps Dodge Corp. 5,000 316,875 -- -- 5,000 316,875
-------- -------- ----------
1,742,213 -- 1,742,213
-------- -------- ----------
Oil & Gas--
Amoco Corp. 6,800 434,350 -- -- 6,800 434,350
British Petroleum PLC, ADR 5,000 441,250 -- -- 5,000 441,250
Halliburton Company 19,600 813,400 -- -- 19,600 813,400
Mobil Corp. 7,600 765,700 -- -- 7,600 765,700
Panhandle Eastern Corp. 34,100 861,025 -- -- 34,100 861,025
Phillips Petroleum Co. 8,500 274,125 -- -- 8,500 274,125
Unocal Corp. 14,800 388,500 -- -- 14,800 388,500
Williams Companies, Inc. 9,100 351,487 -- -- 9,100 351,487
-------- -------- ----------
4,329,837 -- 4,329,837
-------- -------- ----------
Paper/Forest Products--
Champion International Corp. 15,900 850,650 -- -- 15,900 850,650
Mead Corp. 9,100 524,387 -- -- 9,100 524,387
Willamette Industries Inc. 10,700 620,600 -- -- 10,700 620,600
-------- -------- ----------
1,995,637 -- 1,995,637
-------- -------- ----------
Pharmaceuticals--
Abbot Laboratories, 7,500 298,125 -- -- 7,500 298,125
Allergan, Inc. 18,000 528,750 -- -- 18,000 528,750
Schering-Plough Corp. 8,000 429,000 -- -- 8,000 429,000
Upjohn Company 6,200 314,650 -- -- 6,200 314,650
Warner-Lambert Co. 3,800 323,475 -- -- 3,800 323,475
-------- -------- ----------
1,894,000 -- 1,894,000
-------- -------- ----------
Printing & Publishing--
Harcourt General, Inc. 14,200 562,675 -- -- 14,200 562,675
-------- -------- ----------
Restaurants/Food Service--
McDonald's Corp. 9,100 373,100 -- -- 9,100 373,100
-------- -------- ----------
</TABLE>
See notes to financial statements.
PF-9
<PAGE>
VISTA LARGE CAP EQUITY
PORTFOLIO OF INVESTMENTS
October 31, 1995
Unaudited -- (Continued)
<TABLE>
<CAPTION>
Vista Vista Hanover Hanover Pro-Forma Pro-Forma
Equity Equity Blue Chip Blue Chip Combined Combined
Issuer Shares Value Shares Value Shares Value
- ---------------------------------------- ------- ---------- ---------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Retailing--
American Stores Co. 14,300 $ 427,212 -- $ -- 14,300 $ 427,212
Barnes & Noble Inc.* -- -- 37,300 1,361,450 37,300 1,361,450
Circuit City Stores, Inc. 19,000 634,125 -- -- 19,000 634,125
CompUSA, Inc.* -- -- 34,000 1,300,500 34,000 1,300,500
Dayton-Hudson Corp. 9,700 666,875 -- -- 9,700 666,875
J.C. Penney Company, Inc. 6,500 273,812 -- -- 6,500 273,812
Kroger Co.* 21,000 700,875 -- -- 21,000 700,875
May Department Stores Inc. 13,000 510,250 -- -- 13,000 510,250
Mercantile Stores Inc. 5,500 246,812 -- -- 5,500 246,812
Sears Roebuck & Co. 9,500 323,000 -- -- 9,500 323,000
-------- -------- -----------
3,782,961 2,661,950 6,444,911
-------- -------- -----------
Shipping/Transportation--
Conrail Inc. 8,300 570,625 -- -- 8,300 570,625
CSX Corp. 7,400 619,750 -- -- 7,400 619,750
Ryder System, Inc. 12,000 289,500 -- -- 12,000 289,500
-------- -------- -----------
1,479,875 -- 1,479,875
-------- -------- -----------
Steel--
USX-US Steel Group, Inc. 14,000 418,250 -- -- 14,000 418,250
-------- -------- -----------
Telecommunications--
AirTouch Communications, Inc.* -- -- 55,000 1,567,500 55,000 1,567,500
A T & T Corp., 7,400 473,600 20,000 1,280,000 27,400 1,753,600
Ameritech Corp. 5,500 297,000 -- -- 5,500 297,000
Frontier Corp. 12,500 337,500 -- -- 12,500 337,500
GTE Corp. 14,000 577,500 -- -- 14,000 577,500
Lin Television Corp.* -- -- 20,000 572,500 20,000 572,500
L.M. Ericsson Telephone Co. Sponsored
ADR -- -- 77,000 1,644,672 77,000 1,644,672
MCI Communications Corp. 17,000 423,938 -- -- 17,000 423,938
Motorola, Inc. -- -- 15,700 1,030,312 15,700 1,030,312
NYNEX Corp. 6,800 319,600 -- -- 6,800 319,600
Tele-Communications Inc., Class A* 14,200 241,400 59,500 1,011,500 73,700 1,252,900
U S West, Inc. 7,000 333,375 -- -- 7,000 333,375
WorldCom, Inc.* -- -- 30,000 978,750 30,000 978,750
-------- -------- -----------
3,003,913 8,085,234 11,089,147
-------- -------- -----------
Tire & Rubber--
Goodyear Tire & Rubber, Inc 7,800 296,400 -- -- 7,800 296,400
-------- -------- -----------
Toys & Games--
Mattel, Inc. 17,000 488,750 -- -- 17,000 488,750
-------- -------- -----------
</TABLE>
See notes to financial statements.
PF-10
<PAGE>
VISTA LARGE CAP EQUITY
PORTFOLIO OF INVESTMENTS
October 31, 1995
Unaudited -- (Continued)
<TABLE>
<CAPTION>
Hanover
Vista Vista Blue Hanover Pro-Forma Pro-Forma
Equity Equity Chip Blue Chip Combined Combined
Issuer Shares Value Shares Value Shares Value
- -------------------------------------------- ----- ---------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Utilities--
Arakis Energy Corp.* -- $ -- 48,000 $ 252,000 48,000 $ 252,000
CINergy Corp. 11,500 326,312 -- -- 11,500 326,312
CMS Energy Corp. 17,000 469,625 -- -- 17,000 469,625
FPL Group Inc. 16,900 707,688 -- -- 16,900 707,688
Nipsco Industries Inc. 11,900 434,350 -- -- 11,900 434,350
Pinnacle West Capital Corp. 23,000 632,500 -- -- 23,000 632,500
Southern Co. 15,000 358,125 -- -- 15,000 358,125
-------- -------- ----------
2,928,600 252,000 3,180,600
-------- -------- ----------
TOTAL COMMON STOCK 54,105,727 54,953,358 109,059,085
-------- -------- ----------
SHORT-TERM INVESTMENTS
U.S. Government Agency Obligation--
Federal Home Loan Bank Discount Note
11/01/95. -- -- 1,725,000 1,725,000 1,725,000 1,725,000
-------- -------- ----------
TOTAL INVESTMENTS $54,105,727 $56,678,358 $110,784,085
-------- -------- ----------
</TABLE>
- ------------
* = Non-income producing security.
ADR = American Depository Receipts.
See notes to financial statements.
PF-11
<PAGE>
VISTA LARGE CAP EQUITY FUND
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
10/31/95
Unaudited
<TABLE>
<CAPTION>
Hanover
Vista Blue Chip Pro Forma Pro Forma
Equity Growth Adjustments Combined
---------- ---------- -------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment securities, at value $54,105,727 $56,678,358 $ 0 $110,784,085
Cash 0 2,158 27,454 (8) 29,612
Receivables
Investment securities sold 1,269,841 1,738,112 0 3,007,953
Interest 80,241 42,890 0 123,131
Shares of beneficial interest sold 102,781 0 0 102,781
Other receivables 603 0 0 603
Unamortized organizational expenses 0 27,454 (27,454) (8) 0
Other Assets 0 14,646 0 14,646
-------- -------- ------------ -----------
Total assets 55,559,193 58,503,618 0 114,062,811
-------- -------- ------------ -----------
LIABILITIES:
Payable for shares of beneficial interest redeemed 20,212 0 0 20,212
Payable to Custodian 10,997 0 0 10,997
Accrued liabilities:
Advisory fee 0 29,557 0 29,557
Custodian fees 0 (3,746) 0 (3,746)
Distribution fee 8,653 0 0 8,653
Fund servicing fees 0 12,975 0 12,975
Shareholder servicing fees 0 12,315 0 12,315
Sub-administration fee 2,399 0 0 2,399
Other 99,709 6,522 0 106,231
-------- -------- ------------ -----------
Total liabilities 141,970 57,623 0 199,593
-------- -------- ------------ -----------
NET ASSETS
Paid in capital 37,490,294 47,331,150 0 84,821,444
Accumulated undistributed net investment income 154,831 151,692 0 306,523
Accumulated undistributed net realized gain (loss) on investment
transactions 6,886,647 4,700,731 0 11,587,378
Net Unrealized Appreciation/Depreciation 10,885,451 6,262,422 0 17,147,873
-------- -------- ------------ -----------
Net assets $55,417,223 $58,445,995 $ 0 $113,863,218
======== ======== ============ ===========
Net assets by class
Class A $ 0 $ 0 $ 0 $ 0
-------- ======== ============ ===========
Class B 0 0 0 0
-------- ======== ============ ===========
Class I 55,417,223 58,445,995 0 113,863,218
-------- ======== ============ ===========
Total combined net assets by class $55,417,223 $58,445,995 $ 0 $113,863,218
-------- ======== ============ ===========
Shares of beneficial interest outstanding (no par value;
unlimited number of shares authorized):
A 0 0 0 0
-------- ======== ============ ===========
B 0 0 0 0
-------- ======== ============ ===========
I 4,528,446 4,668,210 105,894(11) 9,302,550
-------- ======== ============ ===========
Net asset value and redemption price per share Class A (net
assets/shares outstanding) $ 0.00 $ 0.00 0.00 $ 0.00
-------- ======== ============ ===========
Net asset value and redemption price per share Class B (net
assets/shares outstanding) $ 0.00 $ 0.00 0.00 $ 0.00
-------- ======== ============ ===========
Net asset value and redemption price per share Class I (net
assets/shares outstanding) $ 12.24 $ 12.52 0.00 $ 12.24
-------- ======== ============ ===========
Cost of Investments $43,220,276 $50,415,937 0 $ 93,636,213
-------- ======== ============ ===========
</TABLE>
See notes to financial statements.
PF-12
<PAGE>
VISTA LARGE CAP EQUITY FUND
PRO FORMA STATEMENT OF OPERATIONS
For the year ended 10/31/95
Unaudited
<TABLE>
<CAPTION>
Hanover Blue Pro Forma Pro Forma
Vista Equity Chip Growth Adjustments Combined
-------------- -------------- ------------------- --------------
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME $ 1,703,444 $ 1,030,246 $ 0 $ 2,733,690
------------ ------------ ----------------- ------------
EXPENSES
Distribution fees
Class A 0 0 0 0
Class B 0 0 0 0
Class I 156,533 0 (156,533)(4) 0
Fund Servicing
Class A 0 0 0 0
Class B 0 0 0 0
Class I 0 32,488 (32,488)(2) 0
Shareholder Servicing fees
Class A 0 0 0 0
Class B 0 0 0 0
Class I 0 125,486 140,852(1),(3) 266,338
Administration fees 62,613 22,737 28,381(1) 113,731
Advisory fees 250,452 353,685 (149,212)(1) 454,925
Sub-Administration fees 31,306 15,156 10,403(1) 56,865
Professional fees 33,546 22,604 (22,604)(8) 33,546
Custodian fees 0 15,317 73,069(6) 88,386
Interest Expense 0 0 0 0
Printing and postage 1,885 12,745 0 14,630
Registration costs 4,117 17,437 0 21,554
Transfer agent fees
Class A 0 0 0 0
Class B 0 0 0 0
Class I 14,577 11,282 16,393(7) 42,252
Trustee fees 3,444 2,482 (249)(9) 5,677
Amortization of organizational costs 3,716 11,913 (11,913)(8) 3,716
Other 1,973 7,101 0 9,074
------------ ------------ ----------------- ------------
Total expenses 564,162 650,433 (103,901) 1,110,694
------------ ------------ ----------------- ------------
Less amounts waived by the
Administrator, Shareholder Servicing
Agents, Adviser and Distributor 368,986 149,028 (62,561)(10) 455,453
------------ ------------ ----------------- ------------
Net expenses 195,176 501,405 (41,339) 655,242
------------ ------------ ----------------- ------------
Net investment income 1,508,268 528,841 41,339 2,078,448
------------ ------------ ----------------- ------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS
Realized gain (loss) on investment
transactions 6,905,243 5,323,276 0 12,228,519
Change in net Unrealized appreciation/
depreciation of Investments 3,304,651 4,824,963 0 8,129,614
------------ ------------ ----------------- ------------
Net Realized and Unrealized gain on
Investments 10,209,894 10,148,239 0 20,358,133
------------ ------------ ----------------- ------------
Net increase in net assets from
operations $11,718,162 $10,677,080 $ 41,339 $22,436,581
============ ============ ================= ============
</TABLE>
See notes to financial statements.
PF-13
<PAGE>
VISTA SMALL CAP EQUITY
PORTFOLIO OF INVESTMENTS
October 31, 1995
Unaudited
<TABLE>
<CAPTION>
Vista
Vista Small Hanover Hanover Pro-Forma Pro-Forma
Small Cap Cap Small Cap Small Cap Combined Combined
Issuer Shares Value Shares Value Shares Value
- ------------------------------------ ---------- -------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
LONG-TERM INVESTMENTS
COMMON STOCK
Advertising --
Catalina Marketing Corp.* -- $ -- 10,000 $ 505,000 10,000 $ 505,000
------ -------- ----------
Agricultural Products/Services --
AGCO Corp. 15,000 671,250 -- -- 15,000 671,250
Arcadian Corp.* 45,000 928,125 -- -- 45,000 928,125
------ -------- ----------
1,599,375 -- 1,599,375
------ -------- ----------
Airlines --
America West Airlines, Inc., Class
B* 40,000 545,000 -- -- 40,000 545,000
------ -------- ----------
Automotive --
Masland Corp. 20,000 280,000 -- -- 20,000 280,000
Wabash National Corp. -- -- 80,000 2,030,000 80,000 2,030,000
------ -------- ----------
280,000 2,030,000 2,310,000
------ -------- ----------
Banking --
Mountain Parks Financial Corp.* 20,000 465,000 -- -- 20,000 465,000
Zions Bancorporation 17,000 1,177,250 -- -- 17,000 1,177,250
------ -------- ----------
1,642,250 -- 1,642,250
------ -------- ----------
Business Services --
ITT Educational Services, Inc.* 20,000 470,000 -- -- 20,000 470,000
Sitel Corp.* 15000 341,250 -- -- 15,000 341,250
------ -------- ----------
811,250 -- 811,250
------ -------- ----------
Chemicals --
Applied Extrusion Technologies,
Inc.* 40,000 615,000 -- -- 40,000 615,000
Material Sciences Corp.* 6,500 108,062 -- -- 6,500 108,062
Mississippi Chemical 25,000 603,125 -- -- 25,000 603,125
The Geon Company 6,000 149,250 -- -- 6,000 149,250
------ -------- ----------
1,475,437 -- 1,475,437
------ -------- ----------
Computer Software --
American Management Systems, Inc.* 6,000 173,250 -- -- 6,000 173,250
Arc Systems, Inc.* 8,000 336,000 -- -- 8,000 336,000
Baan Company, N.V.* 4,400 187,000 -- -- 4,400 187,000
Computervision Corp.* 65,000 763,750 -- -- 65,000 763,750
Datastream Systems, Inc.* 10,000 222,500 -- -- 10,000 222,500
Desktop Data, Inc.* 2,000 71,500 -- -- 2,000 71,500
Discreet Logic, Inc.* 7,000 399,000 -- -- 7,000 399,000
Eagle Point Software Corp.* 12,000 231,000 -- -- 12,000 231,000
Expert Software, Inc.* 10,000 207,500 -- -- 10,000 207,500
Hummingbird Communications Ltd.* 17,000 731,000 -- -- 17,000 731,000
Legato Systems, Inc.* 5,000 182,500 -- -- 5,000 182,500
Maxis, Inc.* 11,000 486,750 -- -- 11,000 486,750
National Instruments Corp.* 17,000 318,750 -- -- 17,000 318,750
Netscape Communications Corp.* 2,500 220,000 -- -- 2,500 220,000
Novadigm, Inc.* 3,200 65,600 -- -- 3,200 65,600
Smith Micro Software, Inc.* 6,000 73,500 -- -- 6,000 73,500
Softkey International, Inc.* 12,000 378,000 -- -- 12,000 378,000
Wind River Systems* 25,000 675,000 -- -- 25,000 675,000
------ -------- ----------
5,722,600 -- 5,722,600
------ -------- ----------
Commercial Services --
Franklin Quest Co.* -- -- 70,000 1,671,250 70,000 1,671,250
------ -------- ----------
</TABLE>
See notes to financial statements.
PF-14
<PAGE>
VISTA SMALL CAP EQUITY
PORTFOLIO OF INVESTMENTS
October 31, 1995
Unaudited -- (Continued)
<TABLE>
<CAPTION>
Vista Vista Hanover Hanover Pro-Forma Pro-Forma
Small Cap Small Cap Small Cap Small Cap Combined Combined
Issuer Shares Value Shares Value Shares Value
- ---------------------------------- ---------- ---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Computers/Computer Hardware --
Applied Magnetics Corp.* 25,000 $ 384,375 -- $ -- 25,000 $ 384,375
Cornerstone Imaging, Inc.* 22,500 506,250 -- -- 22,500 506,250
Hyperion Software -- -- 25,000 1,231,250 25,000 1,231,250
Micros Systems, Inc.* 13,000 484,250 -- -- 13,000 484,250
-------- --------- -----------
1,374,875 1,231,250 2,606,125
-------- --------- -----------
Construction Materials --
Texas Industries Inc. 14,000 736,750 -- -- 14,000 736,750
-------- --------- -----------
Diversified --
Albany International Corp., Class A 20,000 415,000 -- -- 20,000 415,000
-------- --------- -----------
Electronics/Electrical Equipment --
California Amplifier, Inc.* 23,000 621,000 -- -- 23,000 621,000
Charter Power Systems, Inc. -- -- 27,200 680,000 27,200 680,000
C.P. Clare Corp.* 25,700 664,988 -- -- 25,700 664,988
Dallas Semiconductor Corp. -- -- 85,000 1,806,250 85,000 1,806,250
Digi Intl Inc. -- -- 95,000 2,541,250 95,000 2,541,250
ESS Technology, Inc.* 11,100 333,000 -- -- 11,100 333,000
Etec Systems, Inc.* 17,000 187,000 -- -- 17,000 187,000
First Alert, Inc.* -- -- 70,000 1,085,000 70,000 1,085,000
Gemstar International Group Ltd.* -- -- 55,000 1,148,125 55,000 1,148,125
Information Storage Devices, Inc.* 29,150 634,012 -- -- 29,150 634,012
ITI Technologies, Inc.* 35,000 883,750 -- -- 35,000 883,750
Kulicke & Soffa Industries, Inc.* 15,000 525,000 -- -- 15,000 525,000
Micro Linear Corp.* 25,000 384,375 -- -- 25,000 384,375
Micros Systems, Inc. -- -- 10,000 372,500 10,000 372,500
Microchip Technology, Inc.* 23,000 912,813 -- -- 23,000 912,813
Octel Comm Corp. -- -- 35,000 1,194,375 35,000 1,194,375
Recoton Corp.* -- -- 90,000 2,002,500 90,000 2,002,500
Smartflex Systems, Inc.* 7,000 102,375 -- -- 7,000 102,375
Tegal Corp.* 54,000 688,500 -- -- 54,000 688,500
Tencor Instruments* 5,000 213,125 -- -- 5,000 213,125
-------- --------- -----------
6,149,938 10,830,000 16,979,938
-------- --------- -----------
Entertainment --
Westcott Commission -- -- 55,000 756,250 55,000 756,250
Cinar Films, Inc., Class B* 45,000 534,375 -- -- 45,000 534,375
Hollywood Entertainment Corp. -- -- 75,000 2,006,250 75,000 2,006,250
-------- --------- -----------
534,375 2,762,500 3,296,875
-------- --------- -----------
Environmental Services --
Newpark Resources, Inc.* 21,000 333,375 -- -- 21,000 333,375
Sanifill, Inc.* 12,000 378,000 -- -- 12,000 378,000
United Waste Systems, Inc.* 15,000 592,500 -- -- 15,000 592,500
-------- --------- -----------
1,303,875 -- 1,303,875
-------- --------- -----------
Financial Services --
Aames Financial Corp. 10,000 250,000 -- -- 10,000 250,000
Alex. Brown, Inc. 2,000 97,750 -- -- 2,000 97,750
Charter One Financial, Inc. -- -- 20,000 567,500 20,000 567,500
Irwin Financial Corp. -- -- 12,000 456,000 12,000 456,000
MS Financial, Inc.* 25,000 281,250 -- -- 25,000 281,250
Olympic Financing Ltd.* 5,000 91,250 -- -- 5,000 91,250
SEI Corp. 12,800 272,000 -- -- 12,800 272,000
SPS Transaction SVCS -- -- 30,000 791,250 30,000 791,250
WFS Financial, Inc.* 21,300 354,112 -- -- 21,300 354,112
-------- --------- -----------
1,346,362 1,814,750 3,161,112
-------- --------- -----------
</TABLE>
See notes to financial statements.
PF-15
<PAGE>
VISTA SMALL CAP EQUITY
PORTFOLIO OF INVESTMENTS
October 31, 1995
Unaudited -- (Continued)
<TABLE>
<CAPTION>
Vista Vista Hanover Hanover Pro-Forma Pro-Forma
Small Cap Small Cap Small Cap Small Cap Combined Combined
Issuer Shares Value Shares Value Shares Value
- ----------------------------------------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Health Care --
Enterprise Systems, Inc.* 5,000 $ 116,875 -- $ -- 5,000 $ 116,875
Gelman Sciences, Inc.* 25,000 534,375 -- -- 25,000 534,375
OrNda Healthcorp* 20,000 352,500 -- -- 20,000 352,500
Sterling House Corp.* 42,000 519,750 -- -- 42,000 519,750
Universal Health Services, Inc., Class B* 17,500 656,250 -- -- 17,500 656,250
-------- -------- ----------
2,179,750 -- 2,179,750
-------- -------- ----------
Home Builders --
Southern Energy Homes, Inc.* -- -- 25,000 368,750 25,000 368,750
-------- -------- ----------
Hotels/Other Lodging --
Renaissance Hotel Group N.V.* 25,000 487,500 -- -- 25,000 487,500
--------
Doubletree Inc. -- -- 42,000 924,000 42,000 924,000
-------- -------- ----------
487,500 924,000 1,411,500
-------- -------- ----------
Insurance --
American Travellers Corp.* 25,000 559,375 -- -- 25,000 559,375
CMAC Investment Corp. -- -- 40,000 1,900,000 40,000 1,900,000
Life Partners Group, Inc. 5,000 90,625 -- -- 5,000 90,625
Mutual Risk Management Ltd. -- -- 30,000 1,106,250 30,000 1,106,250
Prudential Reinsurance Holdings, Inc.* 26,000 529,750 -- -- 26,000 529,750
PXRE Corp. 25,000 637,500 -- -- 25,000 637,500
Renaissancere Holdings Ltd.* 30,000 813,750 -- -- 30,000 813,750
Transnational Re Corp. Class A* -- -- 35,000 783,125 35,000 783,125
United Dental Care, Inc.* 2,000 61,000 -- -- 2,000 61,000
-------- -------- ----------
2,692,000 3,789,375 6,481,375
-------- -------- ----------
Leisure --
Anthony Industries, Inc. 25,000 465,625 -- -- 25,000 465,625
Oakley, Inc.* 24,100 831,450 -- -- 24,100 831,450
Recoton Corp.* 30,000 667,500 -- -- 30,000 667,500
-------- ----------
1,964,575 -- 1,964,575
-------- -------- ----------
Machinery & Engineering Equipment --
Applied Power, Inc., Class A 25,000 759,375 -- -- 25,000 759,375
Blount Inc., Class A 10,000 433,750 -- -- 10,000 433,750
Computational Systems, Inc.* 11,450 170,319 -- -- 11,450 170,319
Precision Castparts Corp. 7,500 268,125 -- -- 7,500 268,125
Valmont Industries 20,000 490,000 -- -- 20,000 490,000
-------- -------- ----------
2,121,569 -- 2,121,569
-------- -------- ----------
Manufacturing --
Elsag Bailey Process Automation N.V.,
ADR* 8,000 218,000 -- -- 8,000 218,000
-------- -------- ----------
Medical Hosp. Management & Services --
Sierra Health Services, Inc.* -- -- 50,000 1,431,250 50,000 1,431,250
-------- ----------
Medical Supplies --
Haemonetics Corp* -- -- 20,000 377,500 20,000 377,500
Paterson Dental Co.* -- -- 5,000 125,000 5,000 125,000
-------- ----------
-- 502,500 502,500
-------- ----------
Metals/Mining --
Commonwealth Aluminum Corp. 11,000 177,375 -- -- 11,000 177,375
Sinter Metals, Inc. Class A* -- -- 30,000 311,250 30,000 311,250
-------- -------- ----------
177,375 311,250 488,625
-------- -------- ----------
</TABLE>
See notes to financial statements.
PF-16
<PAGE>
VISTA SMALL CAP EQUITY
PORTFOLIO OF INVESTMENTS
October 31, 1995
Unaudited -- (Continued)
<TABLE>
<CAPTION>
Vista Vista Hanover Hanover Pro-Forma Pro-Forma
Small Cap Small Cap Small Cap Small Cap Combined Combined
Issuer Shares Value Shares Value Shares Value
- ------------------------------- ---------- ---------- --------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Oil & Gas --
NGC Corp. 20,000 $ 180,000 -- $ -- 20,000 $ 180,000
Nowsco Well Service, Ltd. 10,000 113,750 -- -- 10,000 113,750
Smith International* 30,000 480,000 -- -- 30,000 480,000
Total Petroleum of North
America 17,000 172,125 -- -- 17,000 172,125
Weatherford Enterra, Inc. 13,000 313,625 -- -- 13,000 313,625
Nabors Industries, Inc.* -- -- 50,000 431,250 50,000 431,250
-------- -------- ----------
1,259,500 431,250 1,690,750
-------- -------- ----------
Printing & Publishing --
Pulitzer Publishing 15,000 678,750 -- -- 15,000 678,750
-------- -------- ----------
Real Estate --
NHP, Inc.* 25,000 356,250 -- -- 25,000 356,250
-------- -------- ----------
Real Estate Investment Trust --
Oasis Residential, Inc. 12,000 261,000 -- -- 12,000 261,000
-------- -------- ----------
Restaurants/Food Services --
Daka International, Inc.* 20,000 607,500 -- -- 20,000 607,500
The Cheesecake Factory* -- -- 35,000 761,250 35,000 761,250
Ihop Corp.* -- -- 35,000 752,500 35,000 752,500
Papa John's International,
Inc.* -- -- 15,000 577,500 15,000 577,500
Rock Bottom Rest., Inc.* -- -- 55,000 880,000 55,000 880,000
Sonic Corp.* -- -- 30,000 660,000 30,000 660,000
-------- -------- ----------
607,500 3,631,250 4,238,750
-------- -------- ----------
Retailing --
Big B Inc. 18,000 265,500 -- -- 18,000 265,500
Books-A-Million -- -- 27,000 340,875 27,000 340,875
Casey's General Stores, Inc. 15,000 345,000 -- -- 15,000 345,000
Consolidated Stores Corp.* 23,000 531,875 -- -- 23,000 531,875
Discount Auto Parts, Inc. -- -- 35,000 936,250 35,000 936,250
Ethan Allen Interiors, Inc.* 4,800 94,800 -- -- 4,800 94,800
Finish Line -- -- 50,000 443,750 50,000 443,750
FTPS Software -- -- 54,000 1,458,000 54,000 1,458,000
Gucci Group NV* 17,800 534,000 -- -- 17,800 534,000
Gymboree Corp* -- -- 65,000 1,470,625 65,000 1,470,625
Jones Apparel Group -- -- 25,000 856,250 25,000 856,250
Nieman-Marcus Group, Inc.* 40,000 685,000 -- -- 40,000 685,000
Tractor Supply Co. -- -- 30,000 472,500 30,000 472,500
Trend Lines, Inc. -- -- 35,000 459,375 35,000 459,375
West Marine, Inc. -- -- 13,000 396,500 13,000 396,500
-------- -------- ----------
2,456,175 6,834,125 9,290,300
-------- -------- ----------
Shipping/Transportation --
Arnold Ind. -- -- 10,000 162,500 10,000 162,500
Heartland Express Inc. -- -- 15,000 406,875 15,000 406,875
Landstar System, Inc.* 12,000 315,000 -- -- 12,000 315,000
Mark VII, Inc.* 25,000 446,875 -- -- 25,000 446,875
-------- -------- ----------
761,875 569,375 1,331,250
-------- -------- ----------
Steel --
Northwestern Steel & Wire Co.* 40,000 300,000 -- -- 40,000 300,000
-------- -------- ----------
Telecommunications --
Aspect Telecommunications
Corp.* 25,000 859,375 -- -- 25,000 859,375
-------- -------- ----------
Textile Mill Products --
St. John Knits, Inc. 17,500 837,812 -- -- 17,500 837,812
-------- -------- ----------
</TABLE>
See notes to financial statements.
PF-17
<PAGE>
VISTA SMALL CAP EQUITY
PORTFOLIO OF INVESTMENTS
October 31, 1995
Unaudited -- (Continued)
<TABLE>
<CAPTION>
Vista Vista Hanover Hanover Pr-Forma Pro-Forma
Small Cap Small Cap Small Cap Small Cap Combined Combined
Issuer Shares Value Shares Value Shares Value
- -------------------------------- ---------- ------------ ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Utilities --
Oklahoma Gas & Electric Co. 17,500 $ 700,000 -- $ -- 17,500 $ 700,000
---------- -------- ----------
Wholesaling --
Brightpoint Inc. -- -- 25,000 475,000 25,000 475,000
US Office Products Co.* 7,500 128,438 -- -- 7,500 128,438
---------- -------- ----------
128,438 475,000 603,438
---------- -------- ----------
TOTAL COMMON STOCK 42,984,531 40,112,875 83,097,406
---------- -------- ----------
CONVERTIBLE CORPORATE BONDS &
NOTES
Computer Software --
Softkey International Inc.# 5.500% 500,000 421,020 -- -- 500,000 421,020
Spectrum Holobyte, Inc.# 6.500% 250,000 239,228 -- -- 250,000 239,228
---------- -------- ----------
660,248 -- 660,248
---------- -------- ----------
Electronics/Electrical
Equipment --
Sanmina Corp.# 5.500% 300,000 333,666 -- -- 300,000 333,666
---------- -------- ----------
Health Care --
Assisted Living Concepts# 7.000% 250,000 274,167 -- -- 250,000 274,167
---------- -------- ----------
Insurance --
American Travellers Corp. 6.500% 500,000 593,750 -- -- 500,000 593,750
---------- -------- ----------
TOTAL CONVERTIBLE CORPORATE
BONDS & NOTES 1,861,831 -- 1,861,831
---------- -------- ----------
TOTAL LONG-TERM INVESTMENTS 44,846,362 40,112,875 84,959,237
---------- -------- ----------
SHORT-TERM INVESTMENTS
U.S. Government Obligations -- 5.150% 10,000 9,949 -- -- 10,000 9,949
U.S. Treasury Bills -- 5.300% 54,000 53,723 -- -- 54,000 53,723
---------- -------- ----------
Total U.S. Government
Obligations 63,672 -- 63,672
---------- -------- ----------
Commercial Paper --
Financial Services --
Broadway Capital Corp. 5.750% 2,000,000 1,996,167 -- -- 2,000,000 1,996,167
Ciesco LP, 5.730% 2,000,000 1,995,862 -- -- 2,000,000 1,995,862
Household Finance Corp. 5.800% 7,258,000 7,258,000 -- -- 7,258,000 7,258,000
Sony Capital Corp. 5.710% 2,000,000 1,988,263 -- -- 2,000,000 1,988,263
---------- -------- ----------
13,238,292 -- 13,238,292
---------- -------- ----------
Oil & Gas --
Questar Corp., 5.820% 2,000,000 1,999,353 -- -- 2,000,000 1,999,353
---------- -------- ----------
Packaging --
Rexam PLC, 5.730% 2,000,000 1,997,135 -- -- 2,000,000 1,997,135
---------- -------- ----------
Total Commercial Paper 17,234,780 -- -- 17,234,780
---------- -------- ----------
TOTAL SHORT-TERM INVESTMENTS 17,298,452 -- -- 17,298,452
---------- -------- ----------
Repurchase Agreement
Barclays Repo -- -- 1,511,000 1,511,000 1,511,000 1,511,000
-------- ----------
TOTAL INVESTMENTS $62,144,814 $41,623,875 $103,768,689
========== ======== ==========
</TABLE>
- ------------
ADR = American Depository Receipt.
# = Security may only be sold to qualified institutional buyers.
* = Non-Income producing.
See notes to financial statements.
PF-18
<PAGE>
VISTA SMALL CAP EQUITY
PORTFOLIO OF INVESTMENTS
October 31, 1995
Unaudited -- (Continued)
Purchased Index Futures Outstanding
<TABLE>
<CAPTION>
Number Original Nominal Unrealized
Expiration of Nominal Value at Appreciation
Description Date Contracts Value 10/31/95 (Depreciation)
----------------------- -------- -------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Russell 2000 Future 12/14/95 30 $4,717,742 $4,440,000 ($277,742)
</TABLE>
See notes to financial statements.
PF-19
<PAGE>
VISTA SMALL CAP EQUITY FUND
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
10/31/95
Unaudited
<TABLE>
<CAPTION>
Vista Small Cap Hanover Small Pro Forma Pro Forma
Equity Cap Growth Adjustments Combined
--------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
ASSETS:
Investment securities, at value $62,144,814 $41,623,875 $ 0 $103,768,689
Cash 6,326 6,763 28,434(8) 41,523
Receivables
Investment securities sold 2,509,999 439,290 0 2,949,289
Interest 13,742 239 0 13,981
Dividends 6,350 4,000 0 10,350
Trust shares sold 1,000,096 0 0 1,000,096
Other receivables 0 4,903 0 4,903
Unamortized organizational expenses 30,051 28,434 (28,434)(8) 30,051
------------- ----------- ------------ -------------
Total assets 65,711,378 42,107,504 0 107,818,882
------------- ----------- ------------ -------------
LIABILITIES:
Payable for investment securities purchased 0 1,121,625 0 1,121,625
Payable for Trust shares redeemed 84,869 0 0 84,869
Printing exp payable 0 1,602 0 1,602
Variation margin payable on futures contracts 16,500 0 0 16,500
Other liabilities 0 600 0 600
Accrued liabilities:
Advisory fee 0 51,033 0 51,033
Custodian fees 16,597 0 0 16,597
Distribution fee 19,964 0 0 19,964
Shareholder servicing fees 4,235 2,700 0 6,935
Sub-administration fee 1,764 0 0 1,764
Organizational costs payable 36,343 0 0 36,343
Fund accounting 0 13,066 0 13,066
Other 167,812 10,166 0 177,978
------------- ----------- ------------ -------------
Total liabilities 348,084 1,200,792 0 1,548,876
------------- ----------- ------------ -------------
NET ASSETS
Paid in capital 57,768,327 36,989,686 0 94,758,013
Accumulated undistributed net investment income 0 (225,799) 0 (225,799)
Accumulated undistributed net realized gain (loss) on
investment transactions 996,627 3,346,655 0 4,343,282
Net unrealized appreciation of investments 6,598,340 796,170 0 7,394,510
------------- ----------- ------------ -------------
Net assets $65,363,294 $40,906,712 $ 0 $106,270,006
============= =========== ============ =============
Net assets by class
A $43,739,400 $13,056,843 $ 0 $ 56,796,243
------------- ----------- ------------ -------------
B 21,623,894 0 0 21,623,894
------------- ----------- ------------ -------------
I 0 27,849,869 0 27,849,869
------------- ----------- ------------ -------------
Total combined net assets by class $65,363,294 $40,906,712 $ 0 $106,270,006
============= =========== ============ =============
Shares of beneficial interest outstanding (no par
value; unlimited number of shares authorized):
A 2,902,211 1,170,183 (303,566)(11) 3,768,828
============= =========== ============ =============
B 1,440,738 0 0 1,440,738
============= =========== ============ =============
I 0 2,495,961 (647,927)(11) 1,848,034
============= =========== ============ =============
Net asset value and redemption price per share Class A
(net assets/shares outstanding) $ 15.07 $ 11.16 $ 0.00 $ 15.07
============= =========== ============ =============
Net asset value and redemption price per share Class B
(net assets/shares outstanding) $ 15.01 $ 0.00 $ 0.00 $ 15.01
============= =========== ============ =============
Net asset value and redemption price per share Class I
(net assets/shares outstanding) $ 0.00 $ 11.16 $ 0.00 $ 15.07
============= =========== ============ =============
Cost of Investments $55,268,732 $40,827,707 $ 0 $ 96,096,439
============= =========== ============ =============
</TABLE>
See notes to financial statements.
PF-20
<PAGE>
VISTA SMALL CAP EQUITY FUND
PRO FORMA STATEMENT OF OPERATIONS
For the year ended 10/31/95
Unaudited
<TABLE>
<CAPTION>
Vista
Small Hanover
Cap Small Pro Forma Pro Forma
Equity Cap Growth Adjustments Combined
--------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
INTEREST INCOME $407,650 $ 180,919 $ 0 $ 588,569
------- --------- ---------- --------
EXPENSES
Distribution fees
A 35,265 0 32,642(1) 67,907
B 44,661 0 0 44,661
I 0 0 0 0
Shareholder Servicing fees
A 0 33,181 (33,181)(4) 0
B 14,887 0 0 14,887
I 0 0 69,625(1),(5) 69,625
Administration fees 20,040 15,064 25,843(1) 60,947
Advisory fees 130,401 251,060 14,834(1) 396,295
Sub-Administration fees 10,030 10,043 10,410(1) 30,483
Professional fees 33,922 15,658 (15,658)(8) 33,922
Custodian fees 38,556 18,402 32,269(6) 89,227
Printing and postage 5,195 8,609 0 13,804
Registration costs 59,579 14,300 0 73,879
Transfer agent fees
A 100,958 3,456 18,267(7) 122,681
B 49,912 0 10,152(7) 60,064
I 0 7,371 (2,553)(7) 4,818
Insurance 0 536 0 536
Fund accounting 0 32,665 (32,665)(8) 0
Trustee fees 1,021 1,654 2,623(9) 5,298
Amortization of organizational costs 6,292 11,768 (11,768)(8) 6,292
Other 22,753 3,319 0 26,072
------- --------- ---------- --------
Total expenses 573,472 427,086 120,840 1,121,398
------- --------- ---------- --------
Less amounts waived by
the Administrator, Shareholder
Servicing Agents, Adviser and
Distributor 162,875 48,147 (141,397)(10) 69,625
Less expenses borne by Distributor 61,166 0 (61,166)(10) 0
------- --------- ---------- --------
Net expenses 349,431 378,939 323,403 1,051,773
------- --------- ---------- --------
Net investment income 58,219 (198,020) (323,403) (463,204)
------- --------- ---------- --------
</TABLE>
See notes to financial statements.
PF-21
<PAGE>
VISTA SMALL CAP EQUITY FUND
PRO FORMA STATEMENT OF OPERATIONS
For the year ended 10/31/95
Unaudited -- Continued
<TABLE>
<CAPTION>
Vista Small Hanover Small Pro Forma Pro Forma
Cap Equity Cap Growth Adjustments Combined
------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
REALIZED AND UNREALIZED GAIN/
(LOSS) ON INVESTMENTS
Realized gain (loss) on investment
transactions $1,003,383 $4,194,823 $ 0 $ 5,198,206
---------- ----------- ---------- ------------
Net realized gain (loss) 1,003,383 4,194,823 0 5,198,206
---------- ----------- ---------- ------------
Change in net unrealized
appreciation/depreciation on:
Investments 6,876,082 580,192 0 7,456,274
Futures transactions (277,742) 0 0 (277,742)
---------- ----------- ---------- ------------
Change in net unrealized appreciation/
depreciation 6,598,340 580,192 0 7,178,532
---------- ----------- ---------- ------------
Net realized and unrealized gain (loss) 7,601,723 4,775,015 0 12,376,738
---------- ----------- ---------- ------------
Net increase in net assets from
operations $ 7,659,942 $4,576,995 $(323,403) $11,913,534
========== =========== ========== ============
</TABLE>
See notes to financial statements.
PF-22
<PAGE>
MUTUAL FUND GROUP
Notes to the Pro-Forma Financial Statements
1. Basis of Combination
The Pro Forma Combining Portfolio of Investments, Statement of Assets and
Liabilities and Statement of Operations ("Pro Forma Statements") reflect the
accounts of the Vista Portfolios and the Hanover Portfolios at October 31,
1995 and for the year then ended.
The Pro Forma Statements give effect to the proposed transfer of all
assets and liabilities of each portfolio of Hanover to the corresponding
portfolio of Vista in exchange for shares of such Vista Portfolio.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of each Portfolio included in their respective
Statements of Additional Information.
The expenses of the Reorganization will be borne by Chemical Banking
Corporation and/or The Chase Manhattan Corporation.
2. Shares of Beneficial Interest
The pro forma net asset value per share and shares outstanding assume the
issuance of additional shares of the Vista Portfolios would have occurred on
October 31, 1995 in connection with the proposed reorganization. The
additional shares to be issued for each Vista Portfolio were based on the
October 31, 1995 net assets of the Hanover Portfolio and the net asset value
per share of the corresponding Vista Portfolio and are as follows:
<TABLE>
<CAPTION>
Hanover Net NAV per share Additional
Hanover Assets at of Vista Vista
Portfolio October 31, 1995 Portfolio shares
- -------------- ----------------- ------------- --------------
<S> <C> <C> <C>
Small Cap A $13,056,843 $15.07 866,413
Small Cap I $27,849,869 $15.07 1,848,034
Short-term Bond $10,399,486 $10.08 1,031,695
Blue Chip $58,445,995 $12.24 4,775,000
</TABLE>
3. Pro Forma Operating Expenses
The Pro Forma Combining Statement of Operations assumes similar rates of
gross investment income for the investments of each Portfolio. Accordingly,
the combined gross investment income is equal to the sum of each Portfolio's
gross investment income. Certain expenses have been adjusted to reflect the
expected expenses of the combined entities more closely. Pro forma operating
expenses include the actual expenses of the Vista and Hanover Portfolio and
the combined Portfolio adjusted for certain items which are factually
supportable. For some of the combined Portfolios certain expenses are
expected to be waived by the Shareholder Servicing Agent, the Distributor,
the Adviser and the Administrator, and those Portfolios' expenses are
adjusted to reflect expected waivers. It is intended that the other
Portfolios will bear their expenses without waivers.
PF-23
<PAGE>
MUTUAL FUND GROUP
Explanation of Note References:
(1) Reflects adjustment of additional Hanover assets at the Vista
contractual rate.
(2) Reflects new contractual percentages, which have grouped shareholder and
fund servicing together, therefore eliminating the current fund
servicing line items.
(3) Reflects adjustment to amounts based on a new contractual rate or
combination of rates as stated in (2) above.
(4) Reflects adjustment for fees which were previously being charged and are
no longer being charged.
(5) Reflects adjustment for Hanover assets being placed into a newly formed
class of shares.
(6) Reflects adjustment to the fees based on the newly combined assets of
the portfolios at a new contractual rate and a change in the funds fee
structure.
(7) Reflects adjustment to the fees based on the newly contracted fees plus
out of pocket expenses.
(8) Reflects elimination of duplicative services, fees or organizational
costs.
(9) Reflects the new structure of the board of the surviving fund, the
elimination of duplicative expenses and the allocation of complex-wide
fees based on the relative net assets of the newly combined fund.
(10) Adjustment to reflect the elimination or addition of expense waivers and
expenses borne.
(11) Adjustment to reflect number of shares for the Hanover net assets, based
upon the Vista funds 10/31/95 ending NAV.
PF-24
<PAGE>
MUTUAL FUND GROUP
PART C
OTHER INFORMATION
Item 15. Indemnification.
The response to this item is incorporated by reference to Item 27 of Part C
of Post-Effective Amendment No. 32, filed December 28, 1995 ("Amendment No.
32"), to the Registrant's Registration Statement on Form N-1A, filed May 11,
1987, Registration No. 33-14196 (the "Registration Statement").
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
- --------- ------------------------------------------------------------------------------------------
<S> <C>
1 (a) Declaration of Trust, as amended. (1)
1 (b) Certificate of Amendment to Declaration of Trust dated December 14, 1995. (12)
1 (c) Certificate of Amendment to Declaration of Trust dated October 19, 1995. (12)
1 (d) Certificate of Amendment to Declaration of Trust dated July 25, 1993. (12)
2 By-laws, as amended. (1)
3 None
4 Agreement and Plan of Reorganization and Liquidation between Registrant and The Hanover
Investment Funds, Inc. (filed herewith as Exhibit A to the Prospectus/Proxy Statement).
5 Specimen share certificate. (1)
6 (a) Investment Advisory Agreements and Sub-Advisory Agreements. (6)
6 (b) Form of Investment Advisory Agreement for Vista Small Cap Equity Fund. (9)
6 (c) Form of Interim Investment Advisory Agreement. (12)
6 (d) Form of Proposed Investment Advisory Agreement. (12)
6 (e) Form of Proposed Investment Sub-Advisory Agreement between The Chase Manhattan Bank and
Chase Asset Management, Inc. (12)
6 (f) Form of Proposed Investment Sub-Advisory Agreement between The Chase Manhattan Bank and
Van Deventer & Hoch. (12)
7 (a) Distribution and Sub-Administration Agreement. (6)
7 (b) Distribution and Sub-Administration Agreement dated August 21, 1995. (12)
8 (a) Retirement Plan for Eligible Trustees.
8 (b) Deferred Compensation Plan for Eligible Trustees. (12)
9 (a) Custodian Agreement. (1)
9 (b) Sub-Custodian Agreement. (1)
10 (a) Rule 12b-1 Distribution Plan of Vista Mutual Funds including Selected Dealer Agreement
and Shareholder Service Agreement. (1)
10 (b) Rule 12b-1 Distribution Plan of Vista Premier Funds including Selected Dealer Agreement
and Shareholder Service Agreement. (1)
10 (c) Rule 12b-1 Distribution Plan for each of Vista Bond Fund, Vista Short-Term Bond Fund,
Vista Equity Fund and Vista U.S. Government Money Market Fund including Selected Dealer
Agreement and Shareholder Service Agreement. (3)
10 (d) Form of Rule 12b-1 Distribution Plan for Class B shares of the Vista Prime Money Market
Fund. (8)
10 (e) Form of Rule 12b-1 Distribution Plan for Vista Asian Oceanic Shares Fund, Vista Japan
Pacific Shares Fund, Vista U.S. Government Securities Fund and Vista European Shares
Fund. (8)
10 (f) Form of Rule 12b-1 Distribution Plan for Vista Small Cap Equity Fund. (9)
10 (g) Proposed Rule 12b-1 Distribution Plan--Class A Shares--Vista American Value Fund
(including forms of Selected Dealer Agreement and Shareholder Servicing Agreement). (12)
C-1
<PAGE>
10 (h) Rule 12b-1 Distribution Plan--Class B Shares (including forms of Selected Dealer
Agreement and Shareholder Servicing Agreement). (12)
10 (i) Form of Rule 18f-3 Multi-Class Plan. (12)
11 Opinion of Counsel regarding legality of issuance of shares and other matters. (13)
12 Opinion of Counsel on tax matters. (14)
13 (a) Transfer Agency Agreement. (1)
13 (b) Administrative Services Plan. (1)
13 (c) Shareholder Servicing Agreement of Vista Mutual Funds. (1)
13 (d) Form of Shareholder Servicing Agreement of Vista Premier Funds. (1)
13 (e) Form of Shareholder Servicing Agreement. (12)
13 (f) Administration Agreement. (6)
13 (g) Form of Administration Agreement. (12)
14 (a) Consent of Price Waterhouse LLP, Independent Accountants. (14)
14 (b) Consent of KPMG Peat Marwick LLP, Independent Auditors. (14)
14 (c) Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (included in Exhibit 11 hereto).
14 (d) Consent of Simpson Thacher & Bartlett (included in Exhibit 12 hereto).
15 Inapplicable.
16 Powers of Attorney. (14)
17 (a) Copy of Registrant's Declaration pursuant to Rule 24f-2 under the Investment Company Act of 1940. (13)
17 (b) Form of Proxy. (13)
</TABLE>
(1) Filed as an exhibit to Amendment No. 6 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) as filed with the
Securities and Exchange 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 an Exhibit to Amendment No. 27 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on October 3, 1994.
(10) Filed as an Exhibit to Amendment No. 30 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on July 19, 1995.
(11) Filed as an exhibit to Amendment No. 31 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on November 13, 1995.
C-2
<PAGE>
(12) Filed as an exhibit to Amendment No. 32.
(13) Previously filed.
(14) Filed herewith.
Item 17. Undertakings.
(a) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a
part of this Registration Statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act, the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(b) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (a) above will be filed as part of an amendment to the
Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed on behalf of the
registrant, in the City of New York and State of New York on the 7th day of
February, 1996.
MUTUAL FUND GROUP
By:/s/ H. Richard Vartabedian
---------------------------
H. Richard Vartabedian,
President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed below by the
following persons in the capacities indicated on the 7th day of February,
1996.
<TABLE>
<CAPTION>
<S> <C>
Signature Title
--------- -----
*
- ------------------------------------ Chairman and Trustee
Fergus Reid, III
*
- ------------------------------------ Trustee
William J. Armstrong
*
- ------------------------------------ Trustee
John R.H. Blum
*
- ------------------------------------ Trustee
Joseph J. Harkins
*
- ------------------------------------ Trustee
Richard E. Ten Haken
*
- ------------------------------------ Trustee
Stuart W. Cragin, Jr.
*
- ------------------------------------ Trustee
Irving L. Thode
/s/ H. Richard Vartabedian President and Trustee and Principal
- ------------------------------------ Executive Officer
H. Richard Vartabedian
*
- ------------------------------------ Treasurer and Principal Financial Officer
Martin R. Dean
*By: /s/ H. Richard Vartabedian
- ------------------------------------
Attorney-In-Fact
</TABLE>
C-4
<PAGE>
MUTUAL FUND GROUP
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
- ---------- -----------------------------------------------------------
12 Opinion of Counsel on tax matters
14(a) Consent of Price Waterhouse LLP, Independent Accountants
14(b) Consent of KPMG Peat Marwick LLP, Independent Auditors
16 Powers of Attorney
EXHIBIT 12
[Simpson Thacher & Bartlett]
February 6, 1996
Re:Agreement and Plan of Reorganization and Liquidation dated as of December
15, 1995 between The Hanover Investment Funds, Inc. and Mutual Fund Group
The Hanover Investment Funds, Inc.
237 Park Avenue
New York, New York 10017
Mutual Fund Group
125 West 55th Street
New York, New York 10019
Ladies and Gentlemen:
You have requested our opinion with respect to the federal income tax
consequences of certain aspects of the proposed transfer by each Hanover
Portfolio(1) of all of its assets to its Corresponding MFG Portfolio solely
in exchange for MFG Portfolio Shares of the Corresponding MFG Portfolio and
the assumption of all its obligations and liabilities by the Corresponding
MFG Portfolio (as described in Section 2(a)(1) of the Reorganization
Agreement) followed by the liquidation of the Hanover Portfolio and the
distribution pro rata of such MFG Portfolio Shares to the shareholders of the
Corresponding Hanover Portfolio. The series of steps that will occur to
effect such transaction are hereinafter referred to as the "Reorganization."
This opinion is being delivered pursuant to Sections 7(d) and 8(e) of the
Reorganization Agreement.
Hanover is a Maryland corporation registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end investment company of the
management type and is comprised of separate investment portfolios which
include The Hanover Short Term U.S. Government Fund, The Hanover U.S.
Government Securities Fund, The Hanover Blue Chip Growth Fund, The Hanover
Small Capitalization Growth Fund and The Hanover American Value Fund (each, a
"Hanover Portfolio"). Hanover's investment portfolios other than the Hanover
Portfolios (consisting of The Tax Free Income Fund, The New York Tax Free
Income Fund, The New Jersey Tax Free Income Fund, The International Equity
Fund and The International Bond Fund, each of which has not to date commenced
investment operations) are not parties to the Reorganization.
The authorized capital stock of Hanover consists of 200,000,000 shares of
Common Stock, each having a par value $.001 per share. As of December 15,
1995, there were outstanding 1,032,104 shares of The Hanover Short Term U.S.
Government Fund (consisting of 1,032,099 "Investor Shares" and 5 "Advisor
Shares"), 8,327,159 shares of The Hanover U.S. Government Securities Fund
(consisting of 8,324,278 "Investor Shares" and 2,881 "Advisor Shares"),
4,657,613 shares of The Hanover Blue Chip Growth Fund (consisting of
4,652,389 "Investor Shares" and 5,224 "Advisor Shares"), 3,475,729 shares of
The Hanover Small Capitalization Growth Fund (consisting of 883,003 "Investor
Shares," 1,002 "Advisor Shares" and 2,591,724 "CBC Benefit" Shares) and
698,326 shares of The Hanover American Value Fund (consisting of 698,117
"Investor Shares" and 209 "Advisor Shares"), and no shares were held in the
treasury of Hanover.
MFG is registered under the Act as an open-end diversified investment
company of the management type and is organized as a Massachusetts business
trust comprised of separate investment portfolios, which include Vista Short
Term Bond Fund, Vista Equity Fund and Vista Small Cap Equity Fund, and which
is expected to include, at the Effective Time of the Reorganization, Vista
U.S. Government Securities Fund and Vista American Value Fund (each, an "MFG
Portfolio"). MFG's investment portfolios other than the MFG Portfolios
(consisting of Vista U.S. Government Income Fund, Vista Balanced Fund, Vista
Bond Fund, Vista Equity Income Fund, Vista IEEE Balanced Fund, Vista Growth
and Income Fund, Vista Capital Growth Fund, Vista International Equity Fund,
Vista Global Fixed Income Fund, Vista Southeast Asian Fund, Vista European
Fund and Vista Japan Fund) are not parties to the Reorganization.
(1) Where relevant, capitalized terms not otherwise defined herein have the
meanings they have for the purposes of the Agreement and Plan of
Reorganization and Liquidation, dated as of December 29, 1995, between
Hanover and MFG (the "Reorganization Agreement").
<PAGE>
MFG has an unlimited number of authorized shares of beneficial interest,
currently without par value, of which as of December 15, 1995 there were
outstanding the following numbers of shares of the MFG Portfolios: 3,650,761
shares of Vista Short Term Bond Fund (consisting of a single class of
shares), 4,401,525 shares of Vista Equity Fund (consisting of a single class
of shares) and 5,006,123 shares of Vista Small Cap Equity Fund (consisting of
3,293,243 "Class A" shares, 1,712,880 "Class B" Shares and zero
"Institutional" Shares) and no shares were held in the treasury of MFG. There
are no outstanding shares of Vista U.S. Government Securities Fund and Vista
American Value Fund.
The Reorganization Agreement was approved by the Board of Trustees of MFG
on December 14, 1995 and by the Board of Directors of Hanover on December 13,
1995.
Upon satisfaction of all conditions precedent set forth in the
Reorganization Agreement, the Reorganization will be effected as set forth in
the following summary:
1. Pursuant to the Reorganization Agreement, Hanover will cause each
Hanover Portfolio to convey, transfer and deliver at the Closing to the
MFG Portfolio set forth opposite its name in the table attached to the
Reorganization Agreement 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) all of the
then existing assets of such Hanover Portfolio. In consideration thereof,
MFG agrees at the Closing to cause each MFG Portfolio (i) to assume and
pay, to the extent that they exist on or after the Effective Time of the
Reorganization, all of the obligations and liabilities of its
Corresponding Hanover Portfolio and (ii) to issue and deliver to the
Corresponding Hanover Portfolio full and fractional shares of beneficial
interest of the Corresponding MFG Portfolio as follows: (1) to The Hanover
Short Term U.S. Government Fund, Class A shares of Vista Short Term Bond
Fund; (2) to The Hanover U.S. Government Fund, Institutional Class shares
of Vista U.S. Government Fund; (3) to The Hanover Blue Chip Growth Fund,
Institutional Class shares of Vista Equity Fund (to be renamed Vista Large
Cap Equity Fund in connection with the Reorganization); (4) to The Hanover
Small Capitalization Growth Fund, Class A Shares and Institutional Class
shares, as described in paragraph (2) below, of Vista Small Cap Equity
Fund; and (5) to The Hanover American Value Fund, shares of Vista American
Value Fund (the shares of the MFG Portfolios to be received by the Hanover
Portfolios in connection with the Reorganization are referred to
collectively as the "MFG Portfolio Shares"), with respect to each class of
each MFG Portfolio equal to that number of full and fractional MFG
Portfolio Shares as determined in Section 2(c) of the Reorganization
Agreement. Any shares of capital stock, par value $.001 per share, of the
Hanover Portfolios ("Hanover Portfolio Shares") held in the treasury of
Hanover on the Effective Time of the Reorganization shall thereupon be
retired.
2. At the Effective Time of the Reorganization, each Hanover Portfolio
will liquidate and distribute pro rata to its holders of Hanover Portfolio
Shares as of the Effective Time of the Reorganization the MFG Portfolio
Shares of the Corresponding MFG Portfolio received by such Hanover
Portfolio pursuant to Section 2(a) of the Reorganization Agreement. In the
case of each Hanover Portfolio other than The Hanover Small Capitalization
Growth Fund, all shareholders of such Hanover Portfolios will receive the
MFG Portfolio Shares of the Corresponding MFG Portfolio identified in
Section 2(a)(1) above. In the case of the Hanover Small Capitalization
Growth Fund, shareholders of both the "Investor Shares" and the "Advisor
Shares" thereof will receive Class A shares of the Vista Small Cap Equity
Fund and shareholders of "CBC Benefit Shares" thereof will receive
Institutional Class shares of the Vista Small Cap Equity Fund. Such
liquidation and distribution will be accompanied by the establishment of
an account on the respective share records of each MFG Portfolio in the
name of each record holder of Hanover Portfolio Shares of the
Corresponding Hanover Portfolio and representing the respective pro rata
number of MFG Portfolio Shares of the Corresponding MFG Portfolio due such
shareholder. Fractional Corresponding MFG Portfolio Shares will be carried
to the third decimal place. Simultaneously with such crediting of MFG
Portfolio Shares to the shareholders, the Hanover Portfolio Shares held by
such shareholders shall be cancelled.
3. As soon as practicable after the Effective Time of the
Reorganization, Hanover shall take all the necessary steps under Maryland
law and Hanover's Articles of Incorporation, as amended and supplemented,
to effect a complete dissolution of Hanover and to deregister Hanover
under the Act.
In acting as special counsel to MFG and Hanover with respect to the
Reorganization, we have, among other things, reviewed the following
documents:
<PAGE>
1. The Reorganization Agreement;
2. The proxy statement of MFG as filed with the Securities and Exchange
Commission; and
3. MFG's Registration Statement on Form N-14 under the Securities Act
of 1933, as filed with the Securities and Exchange Commission (the
"Registration Statement on Form N-14").
For purposes of this opinion, as hereinafter set forth, we have reviewed
such other documents relating to the Reorganization as we have deemed
relevant under the circumstances and have relied upon representations
contained in certain certificates (the "Certificates") provided to us by
Hanover, MFG, Chemical Banking Corporation and The Chase Manhattan
Corporation.
If the merger is effected on a factual basis different from that
contemplated above, any or all of the opinions expressed herein may be
inapplicable. Further, our opinion is based on (i) the Internal Revenue Code
of 1986, as amended (the "Code"), (ii) Treasury Regulations, (iii) judicial
precedents and (iv) administrative interpretations (including the current
ruling practice of the Internal Revenue Service) as of the date hereof. If
there is any subsequent change in the applicable law or regulations, or if
there are subsequently any new administrative or judicial interpretations of
the law or regulations, any or all of the individual opinions expressed
herein may become inapplicable
Based on the foregoing, and assuming that the Reorganization is effected
in accordance with the terms of the Reorganization Agreement (and exhibits
thereto) and that the statements set forth in the Certificates are true as of
the Effective Time, it is our opinion that for federal income tax purposes:
(i) the Reorganization will constitute a reorganization within the
meaning of section 368(a)(1) of 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 certain expenses of Hanover and MFG which are directly related
to the Reorganization (referred to in section 10 of the Reorganization
Agreement) will not affect the opinions set forth above regarding the federal
income tax consequences of the exchanges by Hanover and the shareholders of
Hanover. However, no opinion is expressed as to any other federal income tax
consequences to any of the parties of the payment of such expenses by
Chemical Banking Corporation and/or The Chase Manhattan Corporation.
<PAGE>
We express our opinion herein only as to those matters specifically set
forth above and such opinion may be relied upon solely by you for the
exclusive purpose of ascertaining the federal income tax consequences of the
Reorganization contemplated in the Reorganization Agreement to the Hanover
Portfolios, the MFG Portfolios and the shareholders of the Corresponding
Hanover Portfolios on their receipt of the MFG Portfolio Shares pursuant to
the Reorganization Agreement. We hereby consent to the filing of this opinion
as an exhibit to the Registration Statement on Form N-14 and to the use of
our name therein.
Very truly yours,
/s/ Simpson Thacher & Bartlett
SIMPSON THACHER & BARTLETT
Exhibit 14(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information and Combined Proxy Statement/Prospectus constituting
parts of this registration statement on Form N-14 (the "N-14 Registration
Statement") of our reports dated December 11, 1995, relating to the financial
statements of Vista Short-Term Bond Fund, Vista Equity Fund (subsequently
renamed Vista Large Cap Equity Fund) and Vista Small Cap Equity Fund
(separately managed portfolios of Mutual Fund Group), appearing in the Annual
Report to Shareholders for the fiscal year ended October 31, 1995, which is
incorporated by reference in such Combined Proxy Statement/ Prospectus and
Statement of Additional Information. We also consent to the incorporation by
reference in the Statement of Additional Information of Post Effective
Amendment No. 29 of Mutual Fund Group (the "N-1A Registration Statement") of
our reports dated December 19, 1994, relating to the financial statements of
Vista Short-Term Bond Fund and Vista Equity Fund (subsequently renamed Vista
Large Cap Equity Fund), appearing in the Annual Report to Shareholders for
the fiscal year ended October 31, 1994, which is incorporated by reference in
such Combined Proxy Statement/Prospectus and Statement of Additional
Information. We also consent to the references to us under the heading
"Financial Statements and Experts" in the N-14 Registration Statement, and
under the headings "Condensed Financial Information--Per Share Data and
Capital Changes" in the Prospectuses and "Independent Accountants" in the
Statement of Additional Information, of the N-1A Registration Statement.
/s/ PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
February 2, 1996
Exhibit 14(b)
Independent Auditors' Consent
To the Shareholders and Board of Directors
The Hanover Investment Funds, Inc.
We consent to the use of our report dated January 19, 1996 with respect to
the financial statements and financial highlights of the following portfolios
of The Hanover Investment Funds, Inc. incorporated herein by reference:
(bullet) The Short Term U.S. Government Fund--the statement of assets and
liabilities as of November 30, 1995 and the related statements of
operations for the year then ended, changes in net assets for the two
years then ended and financial highlights for the two years then ended
and for the period from February 25, 1993 (commencement of operations)
to November 30,1993;
(bullet) The U.S. Government Securities Fund--the statement of assets and
liabilities as of November 30, 1995 and the related statements of
operations for the year then ended, changes in net assets for the two
years then ended and financial highlights for the two years then ended
and for the period from February 19, 1993 (commencement of operations)
to November 30, 1993;
(bullet) The Blue Chip Growth Fund--the statement of assets and liabilities as
of November 30, 1995 and the related statements of operations for the
year then ended, changes in net assets for the two years then ended and
financial highlights for the two years then ended and for the period
from February 19, 1993 (commencement of operations) to November 30,
1993;
(bullet) The Small Capitalization Growth Fund--the statement of assets and
liabilities as of November 30, 1995 and the related statements of
operations for the year then ended, changes in net assets for the two
years then ended and financial highlights for the two years then ended
and for the period from April 1, 1993 (commencement of operations)
to November 30, 1993;
(bullet) The American Value Fund--the statement of assets and liabilities as of
November 30, 1995 and the related statement of operations, changes in
net assets and the financial highlights for the period from February 3,
1995 (commencement of operations) to November 30, 1995.
We also consent to the references to our firm under the headings "Financial
Highlights" and "Financial Statements and Experts" in the Prospectus.
/s/ KPMG PEAT MARWICK LLP
New York, New York
February 7, 1996
Exhibit 16
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that, the undersigned Trustee of Mutual
Fund Group, a Massachusetts business trust, (the "Fund") constitutes and
appoints H. Richard Vartabedian and Fergus Reid, III as my and lawful
attorneys-in-fact, with full power of substitution and resubstitution, for me
and in my name, place and stead, in any and all capacities as a Trustee of
the Fund, to sign for me and in my name in the appropriate capacity, any and
all Registration Statement on Form N-14 of the Fund, any and all Amendments
to said Registration Statement and any supplements or other instruments in
connection therewith, and generally to do all such things in my name and
behalf in connection therewith as said attorneys-in-fact deem necessary or
appropriate, to comply with the provisions of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, and all related
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact or their substitutes may do or
cause to be done by virtue hereof.
Witness my hand on this 15th day of January, 1996.
/s/ Fergus Reid, III
Fergus Reid, III
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that, the undersigned Trustee of Mutual
Fund Group, a Massachusetts business trust, (the "Fund") constitutes and
appoints H. Richard Vartabedian and Fergus Reid, III as my and lawful
attorneys-in-fact, with full power of substitution and resubstitution, for me
and in my name, place and stead, in any and all capacities as a Trustee of
the Fund, to sign for me and in my name in the appropriate capacity, any and
all Registration Statement on Form N-14 of the Fund, any and all Amendments
to said Registration Statement and any supplements or other instruments in
connection therewith, and generally to do all such things in my name and
behalf in connection therewith as said attorneys-in-fact deem necessary or
appropriate, to comply with the provisions of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, and all related
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact or their substitutes may do or
cause to be done by virtue hereof.
Witness my hand on this 17th day of January, 1996.
/s/ William J. Armstrong
William J. Armstrong
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that, the undersigned Trustee of Mutual
Fund Group, a Massachusetts business trust, (the "Fund") constitutes and
appoints H. Richard Vartabedian and Fergus Reid, III as my and lawful
attorneys-in-fact, with full power of substitution and resubstitution, for me
and in my name, place and stead, in any and all capacities as a Trustee of
the Fund, to sign for me and in my name in the appropriate capacity, any and
all Registration Statement on Form N-14 of the Fund, any and all Amendments
to said Registration Statement and any supplements or other instruments in
connection therewith, and generally to do all such things in my name and
behalf in connection therewith as said attorneys-in-fact deem necessary or
appropriate, to comply with the provisions of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, and all related
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact or their substitutes may do or
cause to be done by virtue hereof.
Witness my hand on this 15th day of January, 1996.
/s/ John R.H. Blum
John R.H. Blum
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that, the undersigned Trustee of Mutual
Fund Group, a Massachusetts business trust, (the "Fund") constitutes and
appoints H. Richard Vartabedian and Fergus Reid, III as my and lawful
attorneys-in-fact, with full power of substitution and resubstitution, for me
and in my name, place and stead, in any and all capacities as a Trustee of
the Fund, to sign for me and in my name in the appropriate capacity, any and
all Registration Statement on Form N-14 of the Fund, any and all Amendments
to said Registration Statement and any supplements or other instruments in
connection therewith, and generally to do all such things in my name and
behalf in connection therewith as said attorneys-in-fact deem necessary or
appropriate, to comply with the provisions of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, and all related
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact or their substitutes may do or
cause to be done by virtue hereof.
Witness my hand on this 15th day of January, 1996.
/s/ Joseph J. Harkins
Joseph J. Harkins
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that, the undersigned Trustee of Mutual
Fund Group, a Massachusetts business trust, (the "Fund") constitutes and
appoints H. Richard Vartabedian and Fergus Reid, III as my and lawful
attorneys-in-fact, with full power of substitution and resubstitution, for me
and in my name, place and stead, in any and all capacities as a Trustee of
the Fund, to sign for me and in my name in the appropriate capacity, any and
all Registration Statement on Form N-14 of the Fund, any and all Amendments
to said Registration Statement and any supplements or other instruments in
connection therewith, and generally to do all such things in my name and
behalf in connection therewith as said attorneys-in-fact deem necessary or
appropriate, to comply with the provisions of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, and all related
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact or their substitutes may do or
cause to be done by virtue hereof.
Witness my hand on this 15th day of January, 1996.
/s/ Richard E. Ten Haken
Richard E. Ten Haken
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that, the undersigned Trustee of Mutual
Fund Group, a Massachusetts business trust, (the "Fund") constitutes and
appoints H. Richard Vartabedian and Fergus Reid, III as my and lawful
attorneys-in-fact, with full power of substitution and resubstitution, for me
and in my name, place and stead, in any and all capacities as a Trustee of
the Fund, to sign for me and in my name in the appropriate capacity, any and
all Registration Statement on Form N-14 of the Fund, any and all Amendments
to said Registration Statement and any supplements or other instruments in
connection therewith, and generally to do all such things in my name and
behalf in connection therewith as said attorneys-in-fact deem necessary or
appropriate, to comply with the provisions of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, and all related
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact or their substitutes may do or
cause to be done by virtue hereof.
Witness my hand on this 14th day of January, 1996.
/s/ Stuart W. Cragin, Jr.
Stuart W. Cragin, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that, the undersigned Trustee of Mutual
Fund Group, a Massachusetts business trust, (the "Fund") constitutes and
appoints H. Richard Vartabedian and Fergus Reid, III as my and lawful
attorneys-in-fact, with full power of substitution and resubstitution, for me
and in my name, place and stead, in any and all capacities as a Trustee of
the Fund, to sign for me and in my name in the appropriate capacity, any and
all Registration Statement on Form N-14 of the Fund, any and all Amendments
to said Registration Statement and any supplements or other instruments in
connection therewith, and generally to do all such things in my name and
behalf in connection therewith as said attorneys-in-fact deem necessary or
appropriate, to comply with the provisions of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, and all related
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact or their substitutes may do or
cause to be done by virtue hereof.
Witness my hand on this 15th day of January, 1996.
/s/ Irving L. Thode
Irving L. Thode
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that, the undersigned Officer of Mutual
Fund Group, a Massachusetts business trust, (the "Fund") constitutes and
appoints H. Richard Vartabedian and Fergus Reid, III as my true and lawful
attorneys-in-fact, with full power of substitution and resubstitution, for me
and in my name, place and stead, in any and all capacities as an officer of
the Fund, to sign for me and in my name in the appropriate capacity, any and
all Registration Statement on Form N-14 of the Fund, any and all Amendments
to said Registration Statement and any supplements or other instruments in
connection therewith, and generally to do all such things in my name and
behalf in connection therewith as said attorneys-in-fact deem necessary or
appropriate, to comply with the provisions of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, and all related
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact or their substitutes may do or
cause to be done by virtue hereof.
Witness my hand on this 30th day of January, 1996.
/s/ Martin R. Dean
Martin R. Dean
